Market Overview

Great Western Bancorp, Inc. Announces Fiscal Year 2015 Third Quarter Financial Results

Share:
SIOUX FALLS, S.D.--(BUSINESS WIRE)--

Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $28.8 million, or $0.50 per share, for the quarter ended June 30, 2015, compared to net income of $22.5 million, or $0.39 per share, for the same quarter of fiscal year 2014. The results for the quarter included a $1.6 million nonrecurring net gain realized on the sale of a closed branch location and other branch closure related activities, which contributed approximately $0.02 per share after tax. Net interest income and noninterest expense each improved compared to the same quarter in fiscal year 2014, partially offset by higher provision for loan losses. Fiscal year-to-date net income was $75.3 million, or $1.30 per share, compared to $77.1 million, or $1.33 per share, for the same period of fiscal year 2014.

"Great Western Bank had a very strong quarter," said Ken Karels, President and Chief Executive Officer. "We delivered solid loan growth, our net interest margin stabilized compared to the previous quarter and we experienced a more normalized quarter from a credit-quality perspective coming off elevated credit-related charges in the March 2015 quarter."

Net Interest Income and Net Interest Margin2

Net interest income increased $4.9 million, or 6%, from $81.3 million for the third quarter of fiscal year 2014 to $86.2 million for the third quarter of fiscal year 2015. Loan interest income drove the majority of the increase, while lower deposit interest expense offset a reduction in interest income from the investment portfolio.

Net interest margin was 3.95%, 3.89% and 4.03%, respectively, for the quarters ended June 30, 2015, March 31, 2015 and June 30, 2014 and 3.92 % and 3.99%, respectively, for the nine months ended June 30, 2015 and June 30, 2014. Adjusted net interest margin1, which adjusts for the realized gain (loss) on interest rate swaps, was 3.70%, 3.64% and 3.80%, respectively, and 3.67% and 3.77%, respectively, for the same periods.

Net interest margin and adjusted net interest margin1 declined compared to the third quarter of fiscal year 2014 primarily due to lower asset yields, partially offset by a continued reduction in cost of deposits. The yield on loans, excluding loans acquired with deteriorated credit quality, was 21 basis points lower in the current quarter compared to the same quarter in fiscal year 2014, while the investment portfolio yield decreased by 15 basis points over the same period. Total cost of deposits decreased by 5 basis points. On a sequential quarter basis, the increase in net interest margin and adjusted net interest margin1 was primarily due to a higher investment portfolio yield, a stabilized loan yield and a reduction in the cost of deposits. A portion of the stabilization in loan yield was due to $0.4 million of incremental interest income recognized on the workout of two acquired loans in the current quarter and $0.5 million of interest income reversed in the previous quarter when loans were placed on nonaccrual status.

Loan growth for the quarter ended June 30, 2015 was $172.8 million, bringing fiscal year-to-date growth to $457.8 million, an increase of 6.7% compared to September 30, 2014. Year-to-date growth remains balanced across the business and agriculture lending components of the portfolio including commercial non-real estate, commercial real estate and agriculture.

Total deposits contracted by $130.0 million during the quarter, reducing year-to-date growth to $305.5 million, an increase of 4.3% compared to September 30, 2014. Net deposit outflows are typical for Great Western Bank in the third fiscal quarter reflecting seasonal outflows as noted during the last earnings release conference call. FHLB borrowings increased by $115.5 million during the quarter to offset deposit outflows and fund loan growth. The average cost of deposits for the quarter was 0.31%, down 5 basis points compared to the same quarter in fiscal year 2014, driven in part by a continuing change in deposit mix.

Provision for Loan Losses and Asset Quality

Provision for loan losses was $4.4 million for the quarter ended June 30, 2015, compared to $1.5 million in the same quarter of fiscal year 2014. Net charge-offs for the quarter were $0.9 million, or 0.05% of total loans on an annualized basis, bringing fiscal year-to-date net charge-offs to $9.0 million, or 0.17% of total loans on an annualized basis. For the comparable periods in fiscal year 2014, net charge-offs were $1.6 million, or 0.10% of total loans on an annualized basis, and $6.8 million, or 0.14% of loans on an annualized basis, respectively. The ratio of allowance for loan losses to total loans increased from 0.74% at March 31, 2015 to 0.77% at June 30, 2015.

At June 30, 2015, nonperforming loans were $68.1 million, with $8.3 million of the balance covered by FDIC loss-sharing arrangements. Total nonperforming loans decreased by $6.2 million, or 8%, during the quarter, while non-covered nonaccrual loans increased by $13.3 million, or 29%. The majority of the increase in non-covered nonaccrual loans was driven by loans whose loss-sharing coverage expired during the quarter where management has a workout plan in place and does not currently expect to incur credit losses in the future. OREO balances declined by $21.6 million, or 50%, during the quarter, driven primarily by the liquidation of one longstanding problem asset.

Loans on "Watch" status were $322.3 million as of June 30, 2015, a decrease of $62.2 million, or 16%, during the quarter. The majority of the decrease occurred in the commercial non-real estate segment, with smaller decreases in the commercial real estate and agriculture segments. While it is too early to project grain farmers' yields and market conditions resulting from the fall harvest, management is not aware of any notable deterioration in borrowers' financial condition or outlook for their 2015 financial performance but will continue to monitor closely.

Total credit-related charges declined significantly compared to the elevated levels incurred in the March 2015 quarter. A summary of total credit-related charges incurred during the current, prior and comparable quarters is presented below:

GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges (Unaudited)    
(Dollars in thousands)   For the three months ended:
Item Included within F/S Line Item(s): June 30, 2015   March 31, 2015 June 30, 2014
Provision for loan losses Provision for loan losses $ 4,410 $ 9,679 ` $ 1,500
Net OREO charges 1) Net (gain) loss from sale of repossessed property and other assets

2) Other noninterest expense

1,067 2,634 6,267
Reversal of interest income on nonaccrual loans Interest income on loans (100 ) 517 (98 )
Loan fair value adjustment related to credit Net increase (decrease) in fair value of loans at fair value 31   1,184   (689 )
Total $ 5,408 $ 14,014 $ 6,980

Noninterest Income

Noninterest income was $10.0 million for the quarter ended June 30, 2015, a decrease of $0.3 million, or 3%, compared to the third quarter of fiscal year 2014. Included within noninterest income are the changes in fair value of certain loans for which the Company has elected the fair value option and the net gain (loss), realized and unrealized, of the related derivatives used to manage the interest rate risk on these loans. On a net basis, these two components of noninterest income represented a $1.5 million decrease, meaning product and service fees included in noninterest income increased $1.2 million, or 9%, compared to the same quarter in fiscal year 2014. This increase was primarily attributable to increases in net gain on sale of loans (i.e., the mortgage origination business), which increased by $0.6 million, or 44%, and other noninterest income, which also increased by $0.6 million, or 43%, primarily driven by the Company's portion of recoveries related to acquired loans.

Noninterest Expense

Total noninterest expense was $46.4 million for the quarter ended June 30, 2015, a decrease of $7.8 million, or 14%, compared to the same quarter in fiscal year 2014. The decrease in noninterest expense was primarily driven by:

  • a $6.4 million reduction in other noninterest expense, which included a $5.2 million reduction in net OREO costs and a net nonrecurring gain in the current quarter of approximately $1.6 million related to branch closure activities;
  • a $2.3 million reduction in amortization of intangible assets; and
  • a $1.7 million reduction in net occupancy expenses stemming from a significant fluctuation in real estate taxes incurred between the two periods; partially offset by
  • a $2.5 million increase in salaries and employee benefits, which includes increases in salaries and health insurance costs.

The efficiency ratio1 was 46.4% for the quarter, compared to 54.8% for the same quarter of fiscal year 2014, and was 48.8% for the first nine months of fiscal year 2015, compared to 50.9% for the same period in the previous year.

Capital

Capital levels remained consistent throughout the quarter. Tier 1 and total capital ratios were 11.5% and 12.5%, respectively, as of June 30, 2015, compared to 11.6% and 12.6%, respectively, as of March 31, 2015. The common equity tier 1 capital ratio was 10.8% as of June 30, 2015 and as of March 31, 2015. The tier 1 leverage ratio was 9.4% as of June 30, 2015 and 9.3% as of March 31, 2015.

This morning, the Company's board of directors declared a dividend of $0.12 per common share payable on August 28, 2015 to owners of record as of close of business on August 14, 2015. The aggregate dividend payment will be $6.9 million.

Business Outlook

"We remain positive about Great Western's momentum and direction," added Karels. "We completed the first follow-on offering of our stock subsequent to our October 2014 initial public offering during the June quarter and continue to refine our processes and add key people to allow us to operate successfully as a public company. Our loan and deposit pipelines remain strong and we are excited about the business conditions in the markets we serve."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its financial results for the third quarter of fiscal year 2015 on Monday, July 27, 2015 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 10, 2015. To access the replay, dial (877) 344-7529 (U.S.) and use conference ID #10069219. 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 158 branches in seven states: South Dakota, Iowa, Nebraska, Colorado, Arizona, Kansas and Missouri. 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, 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," "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, and the interest rate environment, in fiscal year 2015 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 fiscal year ended September 30, 2014 and Quarterly Report on Form 10-Q for the period ended March 31, 2015. Further, any forward-looking statement speaks only as of the date on which it is made, and Great Western 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.

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

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

GREAT WESTERN BANCORP, INC.
Consolidated Financial Data (Unaudited)
(Dollars in thousands except per share amounts)
   
At or for the nine months ended   At or for the three months ended
June 30, 2015   June 30, 2014 June 30, 2015   March 31, 2015   December 31, 2014   September 30, 2014   June 30,

2014

Operating Data:
Interest and dividend income (FTE) $ 275,458 $ 264,874 $ 93,582 $ 89,794 $ 92,082 $ 92,265 $ 89,078
Interest expense 22,588 24,337 7,340 7,579 7,669 7,715 7,778
Noninterest income 24,841 31,280 10,005 6,936 7,900 8,501 10,314
Noninterest expense 141,959 151,904 46,430 48,438 47,091 48,318 54,278
Provision for loan losses 17,408 (2,065 ) 4,410 9,679 3,319 2,749 1,500
Net income 75,253 77,077 28,832 19,724 26,697 27,875 22,502
Earnings per common share2 $ 1.30 $ 1.33 $ 0.50 $ 0.34 $ 0.46 $ 0.48 $ 0.39
 
Performance Ratios:
Net interest margin (FTE)3 3.92 % 3.99 % 3.95 % 3.89 % 3.91 % 4.10 % 4.03 %
Adjusted net interest margin (FTE)1 3 3.67 % 3.77 % 3.70 % 3.64 % 3.67 % 3.86 % 3.80 %
Return on average total assets3 1.04 % 1.12 % 1.18 % 0.83 % 1.10 % 1.19 % 0.98 %
Return on average common equity3 6.91 % 7.30 % 7.83 % 5.49 % 7.39 % 7.68 % 6.24 %
Return on average tangible common equity1 3 14.5 % 17.1 % 15.8 % 11.8 % 15.8 % 16.3 % 14.2 %
Efficiency ratio1 48.8 % 50.9 % 46.4 % 51.7 % 48.5 % 49.0 % 54.8 %
 
Capital:
Tier 1 capital ratio 11.5 % 12.1 % 11.5 % 11.6 % 11.8 % 11.8 % 12.1 %
Total capital ratio 12.5 % 13.1 % 12.5 % 12.6 % 12.9 % 12.9 % 13.1 %
Tier 1 leverage ratio 9.4 % 9.3 % 9.4 % 9.3 % 9.1 % 9.1 % 9.3 %
Common equity tier 1 ratio 10.8 % * 10.8 % 10.8 % * * *
Tangible common equity / tangible assets1 8.6 % 8.3 % 8.6 % 8.4 % 8.3 % 8.2 % 8.3 %
 
Asset Quality:
Nonperforming loans $ 68,117 $ 80,838 $ 68,117 $ 74,332 $ 68,454 $ 78,905 $ 80,838
OREO $ 21,969 $ 54,190 $ 21,969 $ 43,565 $ 43,442 $ 49,580 $ 54,190
Nonperforming loans / total loans 0.94 % 1.21 % 0.94 % 1.05 % 0.98 % 1.16 % 1.21 %
Net charge-offs (recoveries) $ 8,996 $ 6,761 $ 906 $ 9,073 $ (983 ) $ 2,269 $ 1,615
Net charge-offs (recoveries) / average total loans3 0.17 % 0.14 % 0.05 % 0.52 % (0.06 )% 0.13 % 0.10 %
Allowance for loan losses / total loans 0.77 % 0.70 % 0.77 % 0.74 % 0.74 % 0.70 % 0.70 %
Watch-rated loans $ 322,256 $ 266,416 $ 322,256 $ 384,448 $ 275,473 $ 287,723 $ 266,416
 

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 Share dilution calculated for the quarter and fiscal year-to-date periods was minimal and, as such, diluted EPS equals EPS for all periods presented.

3 Annualized for all partial-year periods.

* Not applicable for period presented.
 
GREAT WESTERN BANCORP, INC.
Consolidated Income Statement (Unaudited)
(Dollars in thousands)
   
For the nine months ended   For the three months ended
June 30, 2015   June 30, 2014 June 30, 2015   March 31, 2015   December 31, 2014   September 30, 2014   June 30,

2014

Interest and dividend income
Loans $ 251,978 $ 240,133 $ 85,240 $ 82,394 $ 84,344 $ 84,477 $ 80,797
Taxable securities 17,050 20,190 5,984 5,379 5,687 6,173 6,598
Nontaxable securities 36 61 10 13 13 19 33
Dividends on securities 997 751 489 258 250 217 351
Federal funds sold and other 599   400   155   160   284   55   99  
Total interest and dividend income 270,660 261,535 91,878 88,204 90,578 90,941 87,878
Interest expense
Deposits 17,775 19,629 5,776 5,984 6,015 6,135 6,319
Securities sold under agreements to repurchase 430 442 134 150 146 158 153
FHLB advances and other borrowings 2,706 2,591 867 893 946 861 751
Related party notes payable 692 690 233 227 232 231 230
Subordinated debentures and other 985   985   330   325   330   330   325  
Total interest expense 22,588   24,337   7,340   7,579   7,669   7,715   7,778  
Net interest income 248,072 237,198 84,538 80,625 82,909 83,226 80,100
Provision for loan losses 17,408   (2,065 ) 4,410   9,679   3,319   2,749   1,500  
Net interest income after provision for loan losses 230,664   239,263   80,128   70,946   79,590   80,477   78,600  
Noninterest income
Service charges and other fees 28,896 29,728 9,627 8,871 10,398 10,476 9,695
Net gain on sale of loans 5,027 3,885 1,903 1,580 1,544 1,654 1,322
Casualty insurance commissions 882 877 333 233 316 196 320
Investment center income 1,969 1,757 742 654 573 660 578
Net gain on sale of securities 51 6 51 84
Trust department income 2,903 2,847 897 938 1,068 891 942
Net increase (decrease) in fair value of loans at fair value 7,914 13,506 (24,394 ) 15,208 17,100 (1,602 ) 13,886
Net realized and unrealized gain (loss) on derivatives (27,357 ) (25,396 ) 18,946 (21,698 ) (24,605 ) (4,781 ) (17,797 )
Other 4,556   4,070   1,951   1,150   1,455   923   1,368  
Total noninterest income 24,841 31,280 10,005 6,936 7,900 8,501 10,314
Noninterest expense
Salaries and employee benefits 75,373 71,176 26,612 24,673 24,088 23,929 24,126
Occupancy expenses, net 11,169 13,613 3,161 3,984 4,024 3,913 4,894
Data processing 14,193 14,105 4,657 4,708 4,828 5,443 4,354
Equipment expenses 2,956 3,099 1,075 925 956 1,251 1,077
Advertising 2,870 3,385 1,196 946 728 1,361 1,213
Communication expenses 3,429 3,402 1,031 1,225 1,173 1,108 1,046
Professional fees 10,464 9,623 3,289 3,603 3,572 2,610 3,620
Net (gain) loss from sale of repossessed property and other assets (1,836 ) (2,413 ) (1,452 ) (16 ) (368 ) (38 ) (1,564 )
Amortization of core deposits and other intangibles 6,402 13,448 1,776 2,313 2,313 2,767 4,069
Other 16,939   22,466   5,085   6,077   5,777   5,974   11,443  
Total noninterest expense 141,959   151,904   46,430   48,438   47,091   48,318   54,278  
Income before income taxes 113,546 118,639 43,703 29,444 40,399 40,660 34,636
Provision for income taxes 38,293   41,562   14,871   9,720   13,702   12,785   12,134  
Net income $ 75,253   $ 77,077   $ 28,832   $ 19,724   $ 26,697   $ 27,875   $ 22,502  
 
GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet (Unaudited)
(Dollars in thousands)
   
As of
June 30, 2015   March 31, 2015   December 31, 2014   September 30, 2014   June 30,

2014

Assets
Cash and due from banks $ 187,171 $ 358,440 $ 428,186 $ 256,639 $ 235,077
Securities 1,410,475 1,402,508 1,263,983 1,341,242 1,395,768
Total loans 7,245,239 7,072,465 6,986,765 6,787,467 6,678,501
Allowance for loan losses (55,930 ) (52,426 ) (51,820 ) (47,518 ) (47,038 )
Loans, net 7,189,309 7,020,039 6,934,945 6,739,949 6,631,463
Goodwill and other intangible assets 705,634 707,410 709,723 712,036 714,803
Other assets 271,570   293,248   304,424   321,563   315,172  
Total assets $ 9,764,159   $ 9,781,645   $ 9,641,261   $ 9,371,429   $ 9,292,283  
 
Liabilities and stockholders' equity
Noninterest-bearing deposits $ 1,360,722 $ 1,374,589 $ 1,381,887 $ 1,303,015 $ 1,294,131
Interest-bearing deposits 5,996,966   6,113,109   5,857,319   5,749,165   5,772,981  
Total deposits 7,357,688 7,487,698 7,239,206 7,052,180 7,067,112
Securities sold under agreements to repurchase 161,559 163,343 190,585 161,687 185,620
FHLB advances and other borrowings 590,520 475,019 575,085 575,094 435,097
Other liabilities 166,541   186,033   185,015   161,378   173,490  
Total liabilities 8,276,308 8,312,093 8,189,891 7,950,339 7,861,319
Stockholders' equity 1,487,851   1,469,552   1,451,370   1,421,090   1,430,964  
Total liabilities and stockholders' equity $ 9,764,159   $ 9,781,645   $ 9,641,261   $ 9,371,429   $ 9,292,283  
 
GREAT WESTERN BANCORP, INC.
Loan Portfolio Summary (Unaudited)
(Dollars in thousands)
 
As of   Fiscal year-to-date:
June 30, 2015   March 31, 2015   December 31, 2014   September 30, 2014 Change

($)

  Change

(%)

Commercial non-real estate $ 1,701,024 $ 1,657,856 $ 1,551,607 $ 1,571,640 $ 129,384 8.2 %
Agriculture 1,813,330 1,748,366 1,788,028 1,681,209 132,121 7.9 %
Construction and development 290,525 310,011 285,366 314,000 (23,475 ) (7.5 )%
Owner-occupied CRE 1,128,536 1,110,074 1,146,670 1,151,868 (23,332 ) (2.0 )%
Non-owner-occupied CRE 1,046,392 1,011,274 1,033,481 922,395 123,997 13.4 %
Multifamily residential real estate 255,540   241,896   180,204   152,931   102,609   67.1 %
Commercial real estate 2,720,993 2,673,255 2,645,721 2,541,194 179,799 7.1 %
Residential real estate 922,481 905,114 910,406 901,605 20,876 2.3 %
Consumer 75,311 80,036 85,822 90,086 (14,775 ) (16.4 )%
Other1 38,901   35,433   35,311   34,243   4,658   13.6 %
Total unpaid principal balance 7,272,040 7,100,060 7,016,895 6,819,977 452,063 6.6 %
Less: Unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process (26,801 ) (27,595 ) (30,130 ) (32,510 ) 5,709   (17.6 )%
Total loans $ 7,245,239   $ 7,072,465   $ 6,986,765   $ 6,787,467   $ 457,772   6.7 %
 
1 Other loans primarily include consumer and commercial credit cards and customer deposit account overdrafts.
 
GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
(Dollars in thousands)
   
For the three months ended
June 30, 2015   March 31, 2015   June 30, 2014
Average Balance   Interest (FTE)1   Yield / Cost2 Average Balance   Interest (FTE)1   Yield / Cost2 Average Balance   Interest (FTE)1   Yield / Cost2
Assets
Cash and due from banks $ 198,517 $ 155

0.31

% $ 265,929 $ 160 0.24 % $ 119,970 $ 99 0.33 %
Investment securities 1,439,690 6,483 1.81 % 1,334,460 5,650 1.72 % 1,428,407 6,982 1.96 %
Loans, other than loans acquired with deteriorated credit quality, net 6,995,340 84,798 4.86 % 6,828,510 81,907 4.86 % 6,362,850 80,445 5.07 %
Loans acquired with deteriorated credit quality, net 122,697   2,146   7.02 % 131,578   2,077   6.40 % 186,825   1,552   3.33 %
Loans, net 7,118,037   86,944   4.90 % 6,960,088   83,984   4.89 % 6,549,675   81,997   5.02 %
Total interest-earning assets 8,756,244 93,582 4.29 % 8,560,477 89,794 4.25 % 8,098,052 89,078 4.41 %
Noninterest-earning assets 1,065,347   1,093,229   1,143,845  
Total assets $ 9,821,591   $ 93,582   3.82 % $ 9,653,706   $ 89,794   3.77 % $ 9,241,897   $ 89,078   3.87 %
 
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,312,859 $ 1,282,530 $ 1,227,420
NOW, MMDA and savings deposits 4,665,101 $ 3,272 0.28 % 4,447,606 $ 3,266 0.30 % 4,048,428 $ 2,376 0.24 %
CDs 1,499,667   2,504   0.67 % 1,567,763   2,718   0.70 % 1,860,094   3,943   0.85 %
Total deposits 7,477,627 5,776 0.31 % 7,297,899 5,984 0.33 % 7,135,942 6,319 0.36 %
Securities sold under agreements to repurchase 158,758 134 0.34 % 182,386 150 0.33 % 192,579 153 0.32 %
FHLB advances and other borrowings 523,839 867 0.66 % 528,571 893 0.69 % 311,528 751 0.97 %
Related party notes payable 41,295 233 2.26 % 41,295 227 2.23 % 41,295 230 2.23 %
Subordinated debentures and other 56,083   330   2.36 % 56,083   325   2.35 % 56,083   325   2.32 %
Total borrowings 779,975   1,564   0.80 % 808,335   1,595   0.80 % 601,485   1,459   0.97 %
Total interest-bearing liabilities 8,257,602 $ 7,340 0.36 % 8,106,234 $ 7,579 0.38 % 7,737,427 $ 7,778 0.40 %
Noninterest-bearing liabilities 87,433 89,341 58,657
Stockholders' equity 1,476,556   1,458,131   1,445,813  
Total liabilities and stockholders' equity $ 9,821,591   $ 9,653,706   $ 9,241,897  
Net interest spread 3.46 % 3.39 % 3.47 %
Net interest income and net interest margin (FTE)1 $ 86,242   3.95 % $ 82,215   3.89 % $ 81,300   4.03 %
Less: Tax equivalent adjustment 1,704   1,590   1,200  
Net interest income and net interest margin - ties to Statements of Comprehensive Income $ 84,538   3.87 % $ 80,625   3.82 % $ 80,100   3.97 %
 

1 These are non-GAAP financial measures management believes are helpful to interpreting our financial results. See the tables at the end of this document for the calculation of the measures and reconciliation to the most comparable GAAP measure.

2 Annualized for all partial-year periods.
 
GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
(Dollars in thousands)
   
For the nine months ended
June 30, 2015   June 30, 2014
Average Balance   Interest (FTE)1   Yield / Cost2 Average Balance   Interest (FTE)1   Yield / Cost2
Assets
Cash and due from banks $ 302,449 $ 599 0.26 % $ 197,450 $ 400 0.27 %
Investment securities 1,370,129 18,083 1.76 % 1,427,707 21,002 1.97 %
Loans, other than loans acquired with deteriorated credit quality, net 6,816,785 249,581 4.90 % 6,239,191 239,146 5.12 %
Loans acquired with deteriorated credit quality, net 135,106   7,195   7.12 % 203,196   4,326   2.85 %
Loans, net 6,951,891   256,776   4.94 % 6,442,387   243,472   5.05 %
Total interest-earning assets 8,624,469 275,458 4.27 % 8,067,544 264,874 4.39 %
Noninterest-earning assets 1,089,322   1,155,291  
Total assets $ 9,713,791   $ 275,458   3.79 % $ 9,222,835   $ 264,874   3.84 %
 
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,362,551 $ 1,232,354
NOW, MMDA and savings deposits 4,420,859 $ 9,190 0.28 % 3,943,543 $ 6,942 0.24 %
CDs 1,583,765   8,585   0.72 % 1,952,901   12,687   0.87 %
Total deposits 7,367,175 17,775 0.32 % 7,128,798 19,629 0.37 %
Securities sold under agreements to repurchase 169,660 430 0.34 % 196,371 442 0.30 %
FHLB advances and other borrowings 539,632 2,706 0.67 % 312,011 2,591 1.11 %
Related party notes payable 41,295 692 2.24 % 41,295 690 2.23 %
Subordinated debentures and other 56,083   985   2.35 % 56,083   985   2.35 %
Total borrowings 806,670   4,813   0.80 % 605,760   4,708   1.04 %
Total interest-bearing liabilities 8,173,845 $ 22,588 0.37 % 7,734,558 $ 24,337 0.42 %
Noninterest-bearing liabilities 83,772 77,140
Stockholders' equity 1,456,174   1,411,137  
Total liabilities and stockholders' equity $ 9,713,791   $ 9,222,835  
Net interest spread 3.42 % 3.42 %
Net interest income and net interest margin (FTE)1 $ 252,870   3.92 % $ 240,537   3.99 %
Less: Tax equivalent adjustment 4,798   3,339  
Net interest income and net interest margin - ties to Statements of Comprehensive Income $ 248,072   3.85 % $ 237,198   3.93 %
 

1 These are non-GAAP financial measures management believes are helpful to interpreting our financial results. See the tables at the end of this document for the calculation of the measures and reconciliation to the most comparable GAAP measure.

2 Annualized for all partial-year periods.

Non-GAAP Measures and Reconciliation

We rely on certain non-GAAP measures in making financial and operational decisions about our business. We believe that each of the non-GAAP 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. generally accepted accounting principles, or GAAP.

In particular, we evaluate our profitability and performance based on our cash net income and return on average tangible common equity, each of which excludes the effects of amortization expense relating to intangible assets and related tax effects from the acquisition of us by National Australia Bank Limited 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 based on our cash payments and receipts during the applicable period.

We also evaluate our profitability and performance based on our adjusted net interest income, adjusted net interest margin, adjusted interest income on loans other than loans acquired with deteriorated credit quality and adjusted yield on loans other than loans acquired with deteriorated credit quality. 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. 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.

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 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)
(Dollars in thousands)
           
At or for the nine months ended   At or for the three months ended
June 30, 2015   June 30, 2014 June 30, 2015   March 31, 2015   December 31, 2014   September 30, 2014   June 30,

2014

Cash net income and return on average tangible common equity:
Net income $ 75,253 $ 77,077 $ 28,832 $ 19,724 $ 26,697 $ 27,875 $ 22,502
Add: Amortization of intangible assets 6,402 13,448 1,776 2,313 2,313 2,767 4,069
Add: Tax on amortization of intangible assets (660 ) (2,433 ) (220 ) (220 ) (220 ) (811 ) (811 )
Cash net income $ 80,995   $ 88,092   $ 30,388   $ 21,817   $ 28,790   $ 29,831   $ 25,760  
 
Average common equity $ 1,456,174 $ 1,411,137 $ 1,476,556 $ 1,458,131 $ 1,433,837 $ 1,439,117 $ 1,445,813
Less: Average goodwill and other intangible assets 708,799   721,630   706,526   708,782   711,088   713,462   717,104  
Average tangible common equity $ 747,375   $ 689,507   $ 770,030   $ 749,349   $ 722,749   $ 725,655   $ 728,709  
Return on average common equity * 6.91 % 7.30 % 7.83 % 5.49 % 7.39 % 7.68 % 6.24 %
Return on average tangible common equity * 14.5 % 17.1 % 15.8 % 11.8 % 15.8 % 16.3 % 14.2 %
 
* Calculated as net income divided by average common equity and cash net income divided by average tangible common equity, respectively. Annualized for partial-year periods.
 
Adjusted net interest income and adjusted net interest margin (fully-tax equivalent basis):
Net interest income $ 248,072 $ 237,198 $ 84,538 $ 80,625 $ 82,909 $ 83,226 $ 80,100
Add: Tax equivalent adjustment 4,798   3,339   1,704   1,590   1,504   1,324   1,200  
Net interest income (FTE) 252,870 240,537 86,242 82,215 84,413 84,550 81,300
Add: Current realized derivative gain (loss) (16,005 ) (13,277 ) (5,416 ) (5,307 ) (5,282 ) (4,978 ) (4,600 )
Adjusted net interest income (FTE) $ 236,865   $ 227,260   $ 80,826   $ 76,908   $ 79,131   $ 79,572   $ 76,700  
 
Average interest earning assets $ 8,624,469 $ 8,067,544 $ 8,756,244 $ 8,560,477 $ 8,556,688 $ 8,181,194 $ 8,098,052
Net interest margin (FTE) * 3.92 % 3.99 % 3.95 % 3.89 % 3.91 % 4.10 % 4.03 %
Adjusted net interest margin (FTE) ** 3.67 % 3.77 % 3.70 % 3.64 % 3.67 % 3.86 % 3.80 %
 
* 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 loans other than loans acquired with deteriorated credit quality:
Interest income $ 244,783 $ 235,807 $ 83,094 $ 80,317 $ 81,372 $ 82,968 $ 79,245
Add: Tax equivalent adjustment 4,798   3,339   1,704   1,590   1,504   1,324   1,200  
Interest income (FTE) 249,581 239,146 84,798 81,907 82,876 84,292 80,445
Add: Current realized derivative gain (loss) (16,005 ) (13,277 ) (5,416 ) (5,307 ) (5,282 ) (4,978 ) (4,600 )
Adjusted interest income (FTE) $ 233,576   $ 225,869   $ 79,382   $ 76,600   $ 77,594   $ 79,314   $ 75,845  
 
Average loans other than loans acquired with deteriorated credit quality $ 6,816,785 $ 6,239,191 $ 6,995,340 $ 6,828,510 $ 6,626,507 $ 6,527,721 $ 6,362,850
Yield (FTE) * 4.90 % 5.12 % 4.86 % 4.86 % 4.96 % 5.12 % 5.07 %
Adjusted yield (FTE) ** 4.58 % 4.84 % 4.55 % 4.55 % 4.65 % 4.82 % 4.78 %
 
* 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 $ 272,913 $ 268,477 $ 94,543 $ 87,561 $ 90,809 $ 91,727 $ 90,414
Add: Tax equivalent adjustment 4,798   3,339   1,704   1,590   1,504   1,324   1,200  
Total revenue (FTE) $ 277,711   $ 271,816   $ 96,247   $ 89,151   $ 92,313   $ 93,051   $ 91,614  
 
Noninterest expense $ 141,959 $ 151,904 $ 46,430 $ 48,438 $ 47,091 $ 48,318 $ 54,278
Less: Amortization of intangible assets 6,402   13,448   1,776   2,313   2,313   2,767   4,069  
Tangible noninterest expense $ 135,557   $ 138,456   $ 44,654   $ 46,125   $ 44,778   $ 45,551   $ 50,209  
Efficiency ratio * 48.8 % 50.9 % 46.4 % 51.7 % 48.5 % 49.0 % 54.8 %
 
* 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 $ 1,487,851 $ 1,430,964 $ 1,487,851 $ 1,469,552 $ 1,451,370 $ 1,421,090 $ 1,430,964
Less: Goodwill and other intangible assets 705,634   714,803   705,634   707,410   709,723   712,036   714,803  
Tangible common equity $ 782,217   $ 716,161   $ 782,217   $ 762,142   $ 741,647   $ 709,054   $ 716,161  
 
Total assets $ 9,764,159 $ 9,292,283 $ 9,764,159 $ 9,781,645 $ 9,641,261 $ 9,371,429 $ 9,292,283
Less: Goodwill and other intangible assets 705,634   714,803   705,634   707,410   709,723   712,036   714,803  
Tangible assets $ 9,058,525   $ 8,577,480   $ 9,058,525   $ 9,074,235   $ 8,931,538   $ 8,659,393   $ 8,577,480  
Tangible common equity to tangible assets 8.6 % 8.3 % 8.6 % 8.4 % 8.3 % 8.2 % 8.3 %

Great Western Bancorp, Inc.
Media Contact:
Ann Nachtigal, 605-988-9217
ann.nachtigal@greatwesternbank.com
or
Investor Relations Contact:
David Hinderaker, 605-988-9253
david.hinderaker@greatwesternbank.com

View Comments and Join the Discussion!