Great Western Bancorp, Inc. Announces Earnings of $26.8 million for Third Quarter Fiscal Year 2019 and Dividends of $0.30 Per Share

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

• Net income was $26.8 million, or $0.47 per diluted share, compared to $44.5 million, or $0.78 per diluted share, for the prior quarter and $45.9 million, or $0.78 per diluted share, for the third quarter of fiscal year 2018
• Net interest margin and adjusted net interest margin^{1, 2} were 3.70% and 3.71%, respectively, a decrease of 5 basis points each
• Expense control remained strong with the efficiency ratio¹ at 47.2% for the quarter and 46.3% for fiscal year-to-date
• Total loans grew to $9.89 billion, an increase of $116.1 million, or 1.2%, with fiscal year-to-date growth of $471.0 million, or 5.0%
• Total deposits were $10.24 billion, a decrease of $232.4 million, or 2.2%, for the quarter due to a reduction in brokered deposits and seasonal outflows consistent with prior years. Fiscal year-to-date growth remained solid at $502.4 million, or 5.2%, with cost of deposit increases beginning to level off
• Profitability remains strong with return on tangible common equity¹ of 14.5% for the fiscal year-to-date
• Key asset quality metrics have deteriorated during the quarter, however this was mainly due to the dairy loan portfolio; the asset quality for the remainder of the portfolio remains stable
• The Company's Board of Directors declared a quarterly dividend of $0.30 per share

Great Western Bancorp, Inc. GWB today reported net income of $26.8 million, or $0.47 per diluted share, for the third quarter of fiscal year 2019, compared to net income of $44.5 million, or $0.78 per diluted share, for the second quarter of fiscal year 2019 and $45.9 million, or $0.78 per diluted share, for the third quarter of fiscal year 2018.

"We are pleased with the loan growth, expense control and how we have managed our net interest margin during the quarter," said Ken Karels, Chief Executive Officer and Chairperson of the Board. "The recent deterioration in our asset quality metrics has been disappointing, but this is limited mainly to the dairy loan portfolio, and a couple of instances of customer fraud. We believe the overall asset quality within the remainder of the portfolio remains stable."

Net Interest Income and Net Interest Margin²

Net interest income was $107.1 million for the quarter, an increase of $2.1 million, or 2.0%. The increase was primarily attributable to higher loan interest income driven by increases in average loans and investments outstanding between the periods, partially offset by the cost of deposits. The cost of deposits modestly increased 3 basis points during the quarter, compared to an increase of 13 basis points in the previous quarter.

Net interest margin was 3.70% and 3.75%, respectively, for the quarters ended June 30, 2019 and March 31, 2019. Adjusted net interest margin¹, which adjusts for the realized gain (loss) on interest rate swaps, was 3.71% and 3.76%, respectively, for the same periods. The lower margins were primarily driven by the cost of deposits, which had a moderate increase of 3 basis points to 1.11%, partially offset by the yield on loans, which increased 2 basis points to 5.25%, and the yield on the investment portfolio, which increased 2 basis points to 2.54%.

Total loans outstanding were $9.89 billion as of June 30, 2019, an increase of $116.1 million, or 1.2%, during the quarter, and growth of $471.0 million, or 5.0%, for fiscal year-to-date. During the quarter the commercial real estate ("CRE") segment of the portfolio grew by $150.0 million, or 3.0%, mainly in the non-owner-occupied category, commercial non-real estate grew by $26.4 million, or 1.5%, and the agriculture segment was reduced by $72.5 million, or 3.4%.

Total deposits were $10.24 billion as of June 30, 2019, a decrease of $232.4 million, or 2.2%, for the quarter with growth of $502.4 million, or 5.2%, for fiscal year-to-date. During the quarter, deposit decreases were driven by a reduction in brokered deposits and seasonal outflows consistent with prior years. Interest-bearing deposits were $8.30 billion, a 4.0% decrease for the quarter, and noninterest-bearing deposits were $1.94 billion, a 6.2% increase for the quarter. FHLB and other borrowings increased by $330.0 million, or 120.0%, for the quarter due to more favorable FHLB short term rates.

¹ This is a non-GAAP financial measure management believes is helpful to understanding trends in the business that may not be fully apparent based only on the most comparable GAAP financial measure. Further information on this financial measure and a reconciliation to the most comparable GAAP financial measure is provided at the end of this release.

² All references to net interest income and net interest margin are presented on a fully-tax equivalent basis unless otherwise noted.

Provision for Loan and Lease Losses and Asset Quality

Provision for loan and lease losses was $26.1 million for the quarter, an increase of $18.4 million. Net charge-offs for the quarter were $17.5 million, or 0.72% of average total loans on an annualized basis, with the majority of net charge-offs concentrated in the agriculture and commercial non-real estate segments of the loan portfolio. Charge-offs in the current quarter included $10.0 million which related to the cattle industry which were based upon new and/or updated information received during the quarter, of which $4.0 million was to a cattle feed operator in which the Company believed involved borrower fraud, and $3.0 million related to loans in the grain industry. These relationships had been classified as substandard for a number of previous quarters. This quarter's charge-offs also included approximately $4.0 million to a retailer which the Company believed involved borrower fraud and the remaining $1.0 million related to another commercial exposure. The ratio of allowance for loan and lease losses ("ALLL") to total loans increased to 0.77% as of June 30, 2019 from 0.70% as of the prior quarter.

Included within total loans are approximately $816.9 million of loans for which management has elected the fair value option. These loans are excluded from the ALLL process, but management has estimated that approximately $8.7 million of the fair value adjustment for these loans relates to credit risk, or 0.09% of total loans. Finally, total purchase discount remaining on all acquired loans equates to 0.16% of total loans.

Nonaccrual loans were $118.1 million as of June 30, 2019, representing a decrease of $3.6 million for the quarter. Loans graded "Watch" decreased $80.2 million, or 26.6%, to $220.9 million for the quarter, while loans graded "Substandard" increased $217.1 million, or 83.8%, to $476.0 million for the quarter. The increase in substandard balances was primarily a result of new and/or updated information resulting in downgrades within the dairy loan portfolio. For the relationships moved to substandard, the Company believes it remains well collateralized on these lending relationships. Total other repossessed property balances were $36.4 million as of June 30, 2019, an increase of $3.9 million, or 12.2%.

Total credit-related charges increased compared to the first nine months of fiscal year 2018, the previous quarter and the comparable quarter. A summary of total credit-related charges incurred during the current and comparable nine month periods and current, previous and comparable quarters is presented below:

GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges (Unaudited)
				For the nine months ended:								For the three months ended:
Item		Included within F/S Line Item(s):		June 30, 2019				June 30, 2018				June 30, 2019				March 31, 2019				June 30, 2018
				(dollars in thousands)
Provision for loan and lease losses		Provision for loan and lease losses		$	38,965			$	12,972			$	26,077			$	7,673			$	3,515
Net other repossessed property charges		Net loss on repossessed property and other related expenses		4,062				1,519				595				404				305
Reversal of interest income on nonaccrual loans		Interest income on loans		469				1,126				173				337				216
Loan fair value adjustment related to credit		Net increase (decrease) in fair value of loans at fair value		5,579				197				4,817				(422		)		(123		)
Total				$	49,075			$	15,814			$	31,662			$	7,992			$	3,913

Noninterest Income

Noninterest income was $10.8 million, a decrease of $7.5 million, or 40.9%, for the quarter. Included within noninterest income is the net change in fair value of loans for which the Company has elected the fair value option and the net realized and unrealized gain (loss) of the related derivatives which generated a $7.5 million unfavorable change over the prior quarter. The decrease in this line item was due to $5.2 million in credit charges on loans held at fair value and a $1.3 million increase in the counterparty credit valuation adjustment on the derivative portfolio.

Noninterest Expense

Total noninterest expense was $56.0 million, a decrease of $0.6 million, or 1.0%, for the quarter. Substantially all of the decrease was driven by a $0.6 million decrease in salaries and employee benefits due to a decrease in health insurance expense during the quarter.

The efficiency ratio¹ was 47.2% for the quarter, an increase from 45.6%, mainly due to a decrease in noninterest income discussed above.

Provision for Income Taxes

The provision for income taxes for the quarter ended June 30, 2019 was $7.5 million, reflecting an effective tax rate of 22.0%, compared to an effective tax rate of 22.5% in the prior quarter.

Capital

Tier 1 and total capital ratios were 11.3% and 12.4%, respectively, as of June 30, 2019, compared to 11.4% and 12.4%. The common equity tier 1 capital ratio and tier 1 leverage ratio were 10.6% and 10.0%, respectively, as of June 30, 2019 compared to 10.7% and 10.2%. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized."

On July 25, 2019, the Company's Board of Directors declared a dividend of $0.30 per common share payable on August 23, 2019 to stockholders of record as of close of business on August 9, 2019. The aggregate dividend payment will be approximately $17.1 million.

Business Outlook

"We are pleased that we remain solidly profitable and have made good progress on managing the cost of our deposits during the quarter," added Karels. "Loan growth was good and well diversified across the footprint and we continue to manage our expense base well. We are disappointed with the level of charge-offs, provisioning and movements into substandard loans during the quarter but we expect to work these asset quality metrics to levels that are more acceptable over the coming quarters."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the third quarter of fiscal year 2019 on Thursday, July 25, 2019 at 7:30 AM (CT). The call can be accessed by dialing (855) 238-8837 approximately 10 minutes prior to the start time. Please ask to be joined into the Great Western Bancorp, Inc. (GWB) call. International callers should dial (412) 542-4114. The call will also be broadcast live over the Internet and can be accessed in the Investor Relations section of Great Western's website at www.greatwesternbank.com. A replay will be available beginning one hour following the conference call and ending on August 8, 2019. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID 10132862. International callers should dial (412) 317-0088 and enter the same conference ID number.

About Great Western Bancorp, Inc.

Great Western Bancorp, Inc. is the holding company for Great Western Bank, a full-service regional bank focused on relationship-based business and agribusiness banking. Great Western Bank offers small and mid-sized businesses a focused suite of financial products and a range of deposit and loan products to retail customers through several channels, including the branch network, online banking system, mobile banking applications and customer care centers. The bank services its customers through more than 170 branches in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. To learn more about Great Western Bank visit www.greatwesternbank.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements about Great Western Bancorp, Inc.'s expectations, beliefs, plans, strategies, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "views," "intends" and similar words or phrases. In particular, the statements included in this press release concerning Great Western Bancorp, Inc.'s expected performance and strategy, the outlook for its agricultural lending segment 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 or for the nine months ended:							At or for the three months ended:
		June 30, 2019			June 30, 2018				June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
		(dollars in thousands, except share and per share amounts)
Operating Data:
Interest income (FTE)		$	408,503		$	361,514			$	139,623		$	135,328		$	133,551		$	126,921		$	126,146
Interest expense		90,148			50,756				32,570			30,411			27,167			23,244			19,745
Noninterest income		45,709			54,355				10,766			18,223			16,720			19,255			18,939
Noninterest expense		169,686			171,875				56,000			56,580			57,106			59,550			57,863
Provision for loan and lease losses		38,965			12,972				26,077			7,673			5,215			5,015			3,515
Net income		117,080			115,636				26,783			44,511			45,786			42,281			45,874
Adjusted net income ¹		$	117,080		$	129,222			$	26,783		$	44,511		$	45,786		$	42,281		$	45,874
Common shares outstanding		56,939,032			58,911,563				56,939,032			56,938,435			56,938,435			58,917,147			58,911,563
Weighted average diluted common shares outstanding		57,408,023			59,134,635				57,110,103			57,074,674			58,039,292			59,122,699			59,170,058
Earnings per common share - diluted		$	2.04		$	1.96			$	0.47		$	0.78		$	0.79		$	0.72		$	0.78
Adjusted earnings per common share - diluted ¹		$	2.04		$	2.19			$	0.47		$	0.78		$	0.79		$	0.72		$	0.78
Performance Ratios:
Net interest margin (FTE) ¹ ²		3.75		%	3.93		%		3.70		%	3.75		%	3.81		%	3.79		%	3.97		%
Adjusted net interest margin (FTE) ¹ ²		3.76		%	3.87		%		3.71		%	3.76		%	3.81		%	3.77		%	3.94		%
Return on average total assets ²		1.25		%	1.32		%		0.84		%	1.44		%	1.48		%	1.40		%	1.55		%
Return on average common equity ²		8.5		%	8.7		%		5.8		%	9.9		%	10.0		%	9.2		%	10.2		%
Return on average tangible common equity ¹ ²		14.5		%	15.2		%		9.7		%	16.9		%	17.1		%	15.7		%	17.7		%
Efficiency ratio ¹		46.3		%	46.7		%		47.2		%	45.6		%	46.1		%	48.1		%	45.8		%
Capital:
Tier 1 capital ratio		11.3		%	11.8		%		11.3		%	11.4		%	11.1		%	12.0		%	11.8		%
Total capital ratio		12.4		%	12.8		%		12.4		%	12.4		%	12.1		%	13.0		%	12.8		%
Tier 1 leverage ratio		10.0		%	10.6		%		10.0		%	10.2		%	10.1		%	10.7		%	10.6		%
Common equity tier 1 ratio		10.6		%	11.0		%		10.6		%	10.7		%	10.4		%	11.3		%	11.0		%
Tangible common equity / tangible assets ¹		9.3		%	9.5		%		9.3		%	9.2		%	9.0		%	9.6		%	9.5		%
Book value per share - GAAP		$	33.04		$	30.84			$	33.04		$	32.53		$	31.82		$	31.24		$	30.84
Tangible book value per share ¹		$	19.94		$	18.16			$	19.94		$	19.43		$	18.72		$	18.57		$	18.16
Asset Quality:
Nonaccrual loans		$	118,060		$	127,315			$	118,060		$	121,616		$	138,944		$	143,206		$	127,315
Other repossessed property		$	36,393		$	10,221			$	36,393		$	32,450		$	22,224		$	23,074		$	10,221
Nonaccrual loans / total loans		1.19		%	1.36		%		1.19		%	1.24		%	1.42		%	1.52		%	1.36		%
Net charge-offs (recoveries)		$	26,959		$	11,787			$	17,534		$	5,863		$	3,562		$	5,163		$	3,966
Net charge-offs (recoveries) / average total loans ²		0.37		%	0.17		%		0.72		%	0.25		%	0.15		%	0.22		%	0.17		%
Allowance for loan and lease losses / total loans		0.77		%	0.69		%		0.77		%	0.70		%	0.68		%	0.69		%	0.69		%
Watch-rated loans		$	220,883		$	276,001			$	220,883		$	301,099		$	321,593		$	343,288		$	276,001
Substandard loans		$	475,999		$	268,017			$	475,999		$	258,946		$	252,521		$	252,660		$	268,017
1 This is a non-GAAP financial measure management believes is helpful to interpreting our financial results. See the tables at the end of this document for the calculation of the measure and reconciliation to the most comparable GAAP measure.
2 Annualized for all partial-year periods.

GREAT WESTERN BANCORP, INC.
Consolidated Income Statement (Unaudited)
		At or for the nine months ended:							At or for the three months ended:
		June 30, 2019			June 30, 2018				June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
		(dollars in thousands)
Interest income
Loans		$	372,156		$	334,196			$	126,392		$	123,432		$	122,331		$	117,095		$	116,522
Investment securities		30,575			21,526				11,430			9,957			9,189			7,645			7,471
Federal funds sold and other		1,416			882				377			497			541			494			424
Total interest income		404,147			356,604				138,199			133,886			132,061			125,234			124,417
Interest expense
Deposits		79,507			40,116				28,615			27,098			23,794			19,996			16,460
FHLB advances and other borrowings		6,464			6,941				2,538			1,923			2,003			1,907			1,963
Subordinated debentures and subordinated notes payable		4,177			3,699				1,417			1,390			1,370			1,341			1,322
Total interest expense		90,148			50,756				32,570			30,411			27,167			23,244			19,745
Net interest income		313,999			305,848				105,629			103,475			104,894			101,990			104,672
Provision for loan and lease losses		38,965			12,972				26,077			7,673			5,215			5,015			3,515
Net interest income after provision for loan and lease losses		275,034			292,876				79,552			95,802			99,679			96,975			101,157
Noninterest income
Service charges and other fees		32,219			37,879				10,321			10,209			11,689			13,198			12,655
Wealth management fees		6,592			6,761				2,234			2,117			2,241			2,458			2,242
Mortgage banking income, net		3,366			4,178				1,055			991			1,320			1,664			1,352
Net (loss) gain on sale of securities		(191		)	6				322			—			(513		)	—			15
Net increase (decrease) in fair value of loans at fair value		49,662			(30,872		)		16,429			14,018			19,216			(14,534		)	(7,370		)
Net realized and unrealized (loss) gain on derivatives		(50,252		)	29,602				(20,904		)	(11,032		)	(18,317		)	14,994			8,093
Other		4,313			6,801				1,309			1,920			1,084			1,475			1,952
Total noninterest income		45,709			54,355				10,766			18,223			16,720			19,255			18,939
Noninterest expense
Salaries and employee benefits		103,206			101,661				33,899			34,537			34,770			33,691			35,122
Data processing and communication		17,475			23,251				6,234			5,964			5,278			6,554			7,177
Occupancy and equipment		15,599			15,112				4,934			5,539			5,126			5,219			4,974
Professional fees		11,181			12,564				3,923			3,970			3,288			5,326			4,297
Advertising		3,299			3,441				1,145			1,216			938			1,066			1,260
Net loss on repossessed property and other related expenses		4,062			1,519				595			404			3,063			2,850			305
Other		14,864			14,327				5,270			4,950			4,643			4,844			4,728
Total noninterest expense		169,686			171,875				56,000			56,580			57,106			59,550			57,863
Income before income taxes		151,057			175,356				34,318			57,445			59,293			56,680			62,233
Provision for income taxes		33,977			59,720				7,535			12,934			13,507			14,399			16,359
Net income		$	117,080		$	115,636			$	26,783		$	44,511		$	45,786		$	42,281		$	45,874

GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet (Unaudited)
		As of
		June 30, 2019				March 31, 2019				December 31, 2018				September 30, 2018				June 30, 2018
		(dollars in thousands)
Assets
Cash and cash equivalents		$	225,356			$	282,638			$	276,760			$	298,696			$	294,614
Investment securities		1,799,430				1,763,305				1,531,916				1,385,650				1,372,711
Total loans		9,886,971				9,770,911				9,767,476				9,415,924				9,379,819
Allowance for loan and lease losses		(76,546		)		(68,003		)		(66,193		)		(64,540		)		(64,688		)
Loans, net		9,810,425				9,702,908				9,701,283				9,351,384				9,315,131
Goodwill		739,023				739,023				739,023				739,023				739,023
Other assets		380,662				342,288				324,659				342,055				287,569
Total assets		$	12,954,896			$	12,830,162			$	12,573,641			$	12,116,808			$	12,009,048
Liabilities and stockholders' equity
Noninterest-bearing deposits		$	1,936,986			$	1,824,507			$	1,879,883			$	1,842,704			$	1,793,293
Interest-bearing deposits		8,298,958				8,643,876				8,233,364				7,890,795				7,792,025
Total deposits		10,235,944				10,468,383				10,113,247				9,733,499				9,585,318
Securities sold under agreements to repurchase		56,925				62,537				56,649				90,907				105,478
FHLB advances and other borrowings		605,000				275,000				410,000				275,000				335,000
Other liabilities		175,899				171,848				181,737				176,851				166,511
Total liabilities		11,073,768				10,977,768				10,761,633				10,276,257				10,192,307
Stockholders' equity		1,881,128				1,852,394				1,812,008				1,840,551				1,816,741
Total liabilities and stockholders' equity		$	12,954,896			$	12,830,162			$	12,573,641			$	12,116,808			$	12,009,048

GREAT WESTERN BANCORP, INC.
Loan Portfolio Summary (Unaudited)
		As of																Fiscal year-to-date:
		June 30, 2019				March 31, 2019				December 31, 2018				September 30, 2018				Change ($)				Change (%)
		(dollars in thousands)
Construction and development		$	626,671			$	607,757			$	579,941			$	637,693			$	(11,022	)		(1.7	)%
Owner-occupied CRE		1,375,235				1,366,844				1,359,979				1,334,480				40,755				3.1	%
Non-owner-occupied CRE		2,784,030				2,681,686				2,577,158				2,347,237				436,793				18.6	%
Multifamily residential real estate		413,806				393,505				393,223				309,920				103,886				33.5	%
Commercial real estate		5,199,742				5,049,792				4,910,301				4,629,330				570,412				12.3	%
Agriculture		2,049,395				2,121,872				2,234,735				2,182,688				(133,293		)		(6.1	)%
Commercial non-real estate		1,747,501				1,721,095				1,713,760				1,699,987				47,514				2.8	%
Residential real estate		816,751				815,212				845,262				837,569				(20,818		)		(2.5	)%
Consumer		53,277				44,504				47,704				49,689				3,588				7.2	%
Other ¹		48,406				46,163				44,130				46,487				1,919				4.1	%
Total unpaid principal balance		9,915,072				9,798,638				9,795,892				9,445,750				469,322				5.0	%
Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process		(28,101		)		(27,727		)		(28,416		)		(29,826		)		1,725				(5.8	)%
Total loans		$	9,886,971			$	9,770,911			$	9,767,476			$	9,415,924			$	471,047			5.0	%
1 Other loans primarily include consumer and commercial credit cards, customer deposit account overdrafts, and lease receivables.

GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
		Three Months Ended
		June 30, 2019									March 31, 2019									June 30, 2018
		Average Balance			Interest (FTE)			Yield / Cost¹			Average Balance			Interest (FTE)			Yield / Cost¹			Average Balance			Interest (FTE)			Yield / Cost¹
		(dollars in thousands)
Assets
Interest-bearing bank deposits		$	51,640		$	377		2.93	%		$	63,546		$	497		3.17	%		$	90,868		$	424		1.87	%
Investment securities		1,807,747			11,430			2.54	%		1,603,038			9,957			2.52	%		1,357,808			7,471			2.21	%
Non-ASC 310-30 loans, net ²		9,699,433			125,522			5.19	%		9,615,096			122,970			5.19	%		9,220,931			114,489			4.98	%
ASC 310-30 loans, net		58,701			2,294			15.67	%		63,879			1,904			12.09	%		78,471			3,762			19.23	%
Loans, net		9,758,134			127,816			5.25	%		9,678,975			124,874			5.23	%		9,299,402			118,251			5.10	%
Total interest-earning assets		11,617,521			139,623			4.82	%		11,345,559			135,328			4.84	%		10,748,078			126,146			4.71	%
Noninterest-earning assets		1,213,087									1,186,286									1,152,724
Total assets		$	12,830,608		$	139,623		4.36	%		$	12,531,845		$	135,328		4.38	%		$	11,900,802		$	126,146		4.25	%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits		$	1,875,649								$	1,800,307								$	1,793,784
Interest-bearing deposits		6,391,396			$	18,493		1.16	%		6,363,730			$	17,865		1.14	%		6,101,679			$	11,705		0.77	%
Time deposits		2,091,603			10,122			1.94	%		2,039,208			9,233			1.84	%		1,578,253			4,755			1.21	%
Total deposits		10,358,648			28,615			1.11	%		10,203,245			27,098			1.08	%		9,473,716			16,460			0.70	%
Securities sold under agreements to repurchase		60,551			41			0.27	%		63,237			43			0.28	%		99,897			80			0.32	%
FHLB advances and other borrowings		361,736			2,497			2.77	%		264,347			1,880			2.88	%		357,102			1,883			2.11	%
Subordinated debentures and subordinated notes payable		108,584			1,417			5.23	%		108,522			1,390			5.19	%		108,398			1,322			4.89	%
Total borrowings		530,871			3,955			2.99	%		436,106			3,313			3.08	%		565,397			3,285			2.33	%
Total interest-bearing liabilities		10,889,519			$	32,570		1.20	%		10,639,351			$	30,411		1.16	%		10,039,113			$	19,745		0.79	%
Noninterest-bearing liabilities		76,957									69,554									65,623
Stockholders' equity		1,864,132									1,822,940									1,796,066
Total liabilities and stockholders' equity		$	12,830,608								$	12,531,845								$	11,900,802
Net interest spread								3.16	%								3.22	%								3.46	%
Net interest income and net interest margin (FTE)					$	107,053		3.70	%					$	104,917		3.75	%					$	106,401		3.97	%
Less: Tax equivalent adjustment					1,424									1,442									1,729
Net interest income and net interest margin - ties to Statements of Comprehensive Income					$	105,629		3.65	%					$	103,475		3.70	%					$	104,672		3.91	%
1 Annualized for all partial-year periods.
2 Interest income includes $0.3 million and $0.9 million for the third quarter of fiscal years 2019 and 2018, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
		Nine Months Ended
		June 30, 2019									June 30, 2018
		Average Balance			Interest (FTE)			Yield / Cost ¹			Average Balance			Interest (FTE)			Yield / Cost ¹
		(dollars in thousands)
Assets
Interest-bearing bank deposits		$	68,989		$	1,416		2.74	%		$	71,915		$	882		1.64	%
Investment securities		1,634,023			30,575			2.50	%		1,379,713			21,526			2.09	%
Non-ASC 310-30 loans, net ²		9,583,477			370,343			5.17	%		9,042,253			329,416			4.87	%
ASC 310-30 loans, net		63,471			6,169			12.99	%		83,539			9,690			15.51	%
Loans, net		9,646,948			376,512			5.22	%		9,125,792			339,106			4.97	%
Total interest-earning assets		11,349,960			408,503			4.81	%		10,577,420			361,514			4.57	%
Noninterest-earning assets		1,195,398									1,161,618
Total assets		$	12,545,358		$	408,503		4.35	%		$	11,739,038		$	361,514		4.12	%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits		$	1,846,467								$	1,808,110
Interest-bearing deposits		6,301,910			$	52,094		1.11	%		5,972,877			$	29,486		0.66	%
Time deposits		2,022,702			27,413			1.81	%		1,386,921			10,630			1.02	%
Total deposits		10,171,079			79,507			1.05	%		9,167,908			40,116			0.59	%
Securities sold under agreements to repurchase		67,879			140			0.28	%		110,959			259			0.31	%
FHLB advances and other borrowings		289,526			6,324			2.92	%		509,822			6,682			1.75	%
Subordinated debentures and subordinated notes payable		108,530			4,177			5.15	%		108,357			3,699			4.56	%
Total borrowings		465,935			10,641			3.05	%		729,138			10,640			1.95	%
Total interest-bearing liabilities		10,637,014			$	90,148		1.13	%		9,897,046			$	50,756		0.69	%
Noninterest-bearing liabilities		73,636									66,225
Stockholders' equity		1,834,708									1,775,767
Total liabilities and stockholders' equity		$	12,545,358								$	11,739,038
Net interest spread								3.22	%								3.43	%
Net interest income and net interest margin (FTE) ¹					$	318,355		3.75	%					$	310,758		3.93	%
Less: Tax equivalent adjustment					4,356									4,910
Net interest income and net interest margin - ties to Statements of Comprehensive Income					$	313,999		3.70	%					$	305,848		3.87	%
1 Annualized for all partial-year periods.
2 Interest income includes $1.0 million and $2.1 million for the first nine months of fiscal years 2019 and 2018, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

Non-GAAP Financial Measures and Reconciliation

We rely on certain non-GAAP financial measures in making financial and operational decisions about our business. We believe that each of the non-GAAP financial measures presented is helpful in highlighting trends in our business, financial condition and results of operations which might not otherwise be apparent when relying solely on our financial results calculated in accordance with U.S. GAAP. We disclose net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. We believe this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

In particular, we evaluate our profitability and performance based on our adjusted net income, adjusted earnings per common share, tangible net income and return on average tangible common equity. Our adjusted net income and adjusted earnings per common share exclude the after-tax effect of items with a significant impact to net income that we do not believe to be recurring in nature, (e.g., one-time acquisition expenses as well as the effect of revaluation of deferred taxes). Our tangible net income and return on average tangible common equity exclude the effects of amortization expense relating to intangible assets and related tax effects from the acquisition of us by National Australia Bank Limited ("NAB") and our acquisitions of other institutions. We believe these measures help highlight trends associated with our financial condition and results of operations by providing net income and return information excluding significant nonrecurring items (for adjusted net income and adjusted earnings per common share) and based on our cash payments and receipts during the applicable period (for tangible net income and return on average tangible common equity).

We also evaluate our profitability and performance based on our adjusted net interest income, adjusted net interest margin, adjusted interest income on non-ASC 310-30 loans and adjusted yield on non-ASC 310-30 loans. We adjust each of these four measures to include the current realized gain (loss) of derivatives we use to manage interest rate risk on certain of our loans, which we believe economically offsets the interest income earned on the loans. Similarly, we evaluate our operational efficiency based on our efficiency ratio, which excludes the effect of amortization of core deposit and other intangibles (a non-cash expense item) and includes the tax benefit associated with our tax-advantaged loans.

We evaluate our financial condition based on the ratio of our tangible common equity to our tangible assets and the ratio of our tangible common equity to common shares outstanding. Our calculation of this ratio excludes the effect of our goodwill and other intangible assets. We believe this measure is helpful in highlighting the common equity component of our capital and because of its focus by federal bank regulators when reviewing the health and strength of financial institutions in recent years and when considering regulatory approvals for certain actions, including capital actions. We also believe the ratio of our tangible common equity to common shares outstanding is helpful in understanding our stockholders' relative ownership position as we undertake various actions to issue and retire common shares outstanding.

Reconciliations for each of these non-GAAP financial measures to the closest GAAP financial measures are included in the tables below. Each of the non-GAAP financial measures presented should be considered in context with our GAAP financial results included in this release.

GREAT WESTERN BANCORP, INC.
Reconciliation of Non-GAAP Measures (Unaudited)
		At or for the nine months ended:							At or for the three months ended:
		June 30, 2019			June 30, 2018				June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018
		(dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP		$	117,080		$	115,636			$	26,783		$	44,511		$	45,786		$	42,281		$	45,874
Add: Deferred taxes revaluation due to Tax Reform Act		—			13,586				—			—			—			—			—
Adjusted net income		$	117,080		$	129,222			$	26,783		$	44,511		$	45,786		$	42,281		$	45,874
Weighted average diluted common shares outstanding		57,408,023			59,134,635				57,110,103			57,074,674			58,039,292			59,122,699			59,170,058
Earnings per common share - diluted		$	2.04		$	1.96			$	0.47		$	0.78		$	0.79		$	0.72		$	0.78
Adjusted earnings per common share - diluted		$	2.04		$	2.19			$	0.47		$	0.78		$	0.79		$	0.72		$	0.78
Tangible net income and return on average tangible common equity:
Net income - GAAP		$	117,080		$	115,636			$	26,783		$	44,511		$	45,786		$	42,281		$	45,874
Add: Amortization of intangible assets, net of tax		1,022			1,117				335			343			344			343			366
Tangible net income		$	118,102		$	116,753			$	27,118		$	44,854		$	46,130		$	42,624		$	46,240
Average common equity		$	1,834,708		$	1,775,767			$	1,864,132		$	1,822,940		$	1,817,052		$	1,825,312		$	1,796,066
Less: Average goodwill and other intangible assets		746,110			747,718				745,718			746,107			746,503			746,900			747,294
Average tangible common equity		$	1,088,598		$	1,028,049			$	1,118,414		$	1,076,833		$	1,070,549		$	1,078,412		$	1,048,772
Return on average common equity *		8.5		%	8.7		%		5.8		%	9.9		%	10.0		%	9.2		%	10.2		%
Return on average tangible common equity **		14.5		%	15.2		%		9.7		%	16.9		%	17.1		%	15.7		%	17.7		%
* 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		$	313,999		$	305,848			$	105,629		$	103,475		$	104,894		$	101,990		$	104,672
Add: Tax equivalent adjustment		4,356			4,910				1,424			1,442			1,490			1,687			1,729
Net interest income (FTE)		318,355			310,758				107,053			104,917			106,384			103,677			106,401
Add: Current realized derivative gain (loss)		746			(4,946		)		321			405			21			(419		)	(830		)
Adjusted net interest income (FTE)		$	319,101		$	305,812			$	107,374		$	105,322		$	106,405		$	103,258		$	105,571
Average interest-earning assets		$	11,349,960		$	10,577,420			$	11,617,521		$	11,345,559		$	11,086,800		$	10,857,168		$	10,748,078
Net interest margin (FTE) *		3.75		%	3.93		%		3.70		%	3.75		%	3.81		%	3.79		%	3.97		%
Adjusted net interest margin (FTE) **		3.76		%	3.87		%		3.71		%	3.76		%	3.81		%	3.77		%	3.94		%
* 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		$	365,987		$	324,506			$	124,098		$	121,528		$	120,361		$	115,284		$	112,760
Add: Tax equivalent adjustment		4,356			4,910				1,424			1,442			1,490			1,687			1,729
Interest income (FTE)		370,343			329,416				125,522			122,970			121,851			116,971			114,489
Add: Current realized derivative gain (loss)		746			(4,946		)		321			405			21			(419		)	(830		)
Adjusted interest income (FTE)		$	371,089		$	324,470			$	125,843		$	123,375		$	121,872		$	116,552		$	113,659
Average non-ASC 310-30 loans		$9,583,477			$9,042,253				$	9,699,433		$	9,615,096		$	9,435,901		$	9,299,318		$	9,220,931
Yield (FTE) *		5.17		%	4.87		%		5.19		%	5.19		%	5.12		%	4.99		%	4.98		%
Adjusted yield (FTE) **		5.18		%	4.80		%		5.20		%	5.20		%	5.12		%	4.97		%	4.94		%
* 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		$	359,708		$	360,203			$	116,395		$	121,698		$	121,614		$	121,245		$	123,611
Add: Tax equivalent adjustment		4,356			4,910				1,424			1,442			1,490			1,687			1,729
Total revenue (FTE)		$	364,064		$	365,113			$	117,819		$	123,140		$	123,104		$	122,932		$	125,340
Noninterest expense		$	169,686		$	171,875			$	56,000		$	56,580		$	57,106		$	59,550		$	57,863
Less: Amortization of intangible assets		1,173			1,268				385			394			394			394			416
Tangible noninterest expense		$	168,513		$	170,607			$	55,615		$	56,186		$	56,712		$	59,156		$	57,447
Efficiency ratio *		46.3		%	46.7		%		47.2		%	45.6		%	46.1		%	48.1		%	45.8		%
* 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		$	1,881,128		$	1,816,741			$	1,881,128		$	1,852,394		$	1,812,008		$	1,840,551		$	1,816,741
Less: Goodwill and other intangible assets		745,563			747,129				745,563			745,947			746,341			746,735			747,129
Tangible common equity		$	1,135,565		$	1,069,612			$	1,135,565		$	1,106,447		$	1,065,667		$	1,093,816		$	1,069,612
Total assets		$	12,954,896		$	12,009,048			$	12,954,896		$	12,830,162		$	12,573,641		$	12,116,808		$	12,009,048
Less: Goodwill and other intangible assets		745,563			747,129				745,563			745,947			746,341			746,735			747,129
Tangible assets		$	12,209,333		$	11,261,919			$	12,209,333		$	12,084,215		$	11,827,300		$	11,370,073		$	11,261,919
Tangible common equity to tangible assets		9.3		%	9.5		%		9.3		%	9.2		%	9.0		%	9.6		%	9.5		%
Tangible book value per share:
Total stockholders' equity		$	1,881,128		$	1,816,741			$	1,881,128		$	1,852,394		$	1,812,008		$	1,840,551		$	1,816,741
Less: Goodwill and other intangible assets		745,563			747,129				745,563			745,947			746,341			746,735			747,129
Tangible common equity		$	1,135,565		$	1,069,612			$	1,135,565		$	1,106,447		$	1,065,667		$	1,093,816		$	1,069,612
Common shares outstanding		56,939,032			58,911,563				56,939,032			56,938,435			56,938,435			58,917,147			58,911,563
Book value per share - GAAP		$	33.04		$	30.84			$	33.04		$	32.53		$	31.82		$	31.24		$	30.84
Tangible book value per share		$	19.94		$	18.16			$	19.94		$	19.43		$	18.72		$	18.57		$	18.16

 

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