Market Overview

Great Western Bancorp, Inc. Announces Fiscal Year 2017 Fourth Quarter Financial Results; Strong Net Income Growth in Fiscal Year 2017

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Highlights for the Fourth Quarter and Full Fiscal Year 2017 (all
comparisons in this document refer to the third quarter of fiscal year
2017, except as noted)

  • Fourth quarter net income was $37.7 million, or $0.64 per diluted
    share, compared to $33.8 million, or $0.57 per diluted share, for the
    same period in fiscal year 2016, an 11.6% increase
  • Net income for fiscal year 2017 was $144.8 million, or $2.45 per
    diluted share, compared to $121.3 million, or $2.14 per diluted share
    for fiscal year 2016, a 14.5% increase
  • Net interest margin and adjusted net interest margin1, 2
    were 4.00% and 3.90%, respectively, for the fourth quarter of fiscal
    year 2017 compared to 4.00% and 3.87%, respectively, for the prior
    quarter
  • The efficiency ratio1 remains attractive at 47.1% for the
    quarter compared to 46.7%
  • Approximately 200 thousand shares of common stock were repurchased and
    retired during the quarter under the authorized stock repurchase
    program
  • Total loans grew $176.7 million, or 2.0%, during the fourth quarter of
    fiscal year 2017

Great Western Bancorp, Inc. (NYSE:
GWB
) today reported net income of $37.7 million, or $0.64 per
diluted share, for the fourth quarter of fiscal year 2017, compared to
net income of $35.1 million, or $0.59 per diluted share, for the third
quarter of fiscal year 2017. Net income for fiscal year 2017 was $144.8
million, or $2.45 per diluted share, compared to $121.3 million, or
$2.14 per diluted share, for fiscal year 2016.

"I am glad to report today that we continued our long-standing trend of
growing annual net income and earnings per share again in fiscal year
2017," said Ken Karels, Chairman, President and Chief Executive Officer.
"We were able to deliver significant year-over-year growth including a
19.4% increase in net income, a 14.5% increase in diluted earnings per
share and 10.0% increase in tangible book value per share while
maintaining a peer-leading efficiency ratio. These financial outcomes
are the result of the hard work of all of our employees to do what is
right for our customers and the organization and I want to thank
everyone for that hard work and dedication throughout the year."

Net Interest Income and Net Interest Margin2

Net interest income was $103.7 million for the fourth quarter of fiscal
year 2017, compared to $100.9 million, an increase of $2.8 million, or
2.8%. The increase was primarily attributable to higher loan interest
income driven by growth of 1.9% in average loans outstanding between the
periods combined with a 7 basis point increase in the yield on total
loans, partially offset by a 5 basis point increase in the cost of
deposits. The yield on non-ASC 310-30 loans increased by 4 basis points
between the two periods, while the yield on ASC 310-30 loans, which are
purchased credit impaired loans with a different income recognition
model, increased as a result of accelerated accretion on an acquired
loan pool.

Net interest margin was 4.00% for each of the quarters ended
September 30, 2017 and June 30, 2017. Adjusted net interest margin1,
which adjusts for the realized gain (loss) on interest rate swaps, was
3.90% and 3.87%, respectively, for the same periods, representing a 3
basis point increase. Net interest margin remained stable primarily due
to a 6 basis point rise in the yield on interest-earning assets, offset
by a 6 basis point rise in the cost of interest-bearing liabilities. The
growth in the adjusted net interest margin1 was driven by a
reduction in the cost of interest rate swaps of $0.6 million, as a
result of increases in short-term LIBOR rates.

Total loan growth during the fourth quarter of fiscal year 2017 was
$176.7 million, or 2.0%. The net growth during the quarter was primarily
driven by $159.2 million of commercial real estate ("CRE") loan growth
and $35.0 million of agriculture loan growth, partially offset by a
$20.4 million reduction in residential real estate loans outstanding.

Total loans increased by $285.9 million compared to September 30, 2016.
Loan growth for the year was impacted by a $64.3 million reduction to
the fair value of the $1.02 billion segment of the loan portfolio
carried at fair value resulting from changes in market interest rates,
which primarily occurred in our first fiscal quarter. Aside from this
change, which was offset by the changes in the fair value of the related
derivatives hedging the interest rate risk in this portfolio, and which
had no impact to net income, customer loan balances increased by $350.2
million, or 4.1%.

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

Total deposits were $8.98 billion as of September 30, 2017, a slight
increase over the quarter, bringing deposit growth for the full year to
$372.8 million, or 4.3%. Noninterest-bearing deposits were $1.86
billion, a 3.1% reduction, for the quarter and interest-bearing deposits
were $7.12 billion, a 1.1% increase for the quarter. FHLB and other
borrowings increased by $172.5 million, or 36.6%, as a result of loan
growth during the quarter exceeding net deposit growth.

Provision for Loan and Lease Losses and Asset Quality

Provision for loan and lease losses was $4.7 million for the fourth
quarter of fiscal year 2017, a decrease of $1.1 million, or 19.2%. Net
charge-offs for the fourth quarter were $5.4 million, or 24 basis points
of average total loans on an annualized basis, an increase of $1.1
million, or 4 basis points of average total loans on an annualized
basis. The higher level of net charge-offs recognized during the fourth
quarter were concentrated in the commercial and industrial ("C&I")
segment of the loan portfolio. The majority of the increase was driven
by charge-offs related to loans for which a specific allowance for loan
and lease loss had previously been recorded. The ratio of allowance for
loan and lease losses ("ALLL") to total loans was 0.71% at September 30,
2017, a decrease from 0.73%. The balance of the ALLL decreased to $63.5
million from $64.2 million.

Included within total loans are approximately $1.02 billion of loans for
which management has elected the fair value option. These loans are
excluded from the ALLL process, but management has estimated that $8.3
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 0.32% of total loans.

At September 30, 2017, loans graded "Watch" were $311.6 million, an
increase of $12.6 million, or 4.2%, and loans graded "Substandard" were
$232.8 million, a decrease of $17.8 million, or 7.1%.

Nonaccrual loans were $138.3 million as of September 30, 2017, with $4.9
million of the balance covered by FDIC loss-sharing agreements. Total
nonaccrual loans increased by $14.7 million during the quarter. The
increase in nonaccrual loans during the quarter was primarily driven by
the deterioration of a small number of relationships that have been
closely monitored for a number of quarters. Total OREO balances were
$9.0 million as of September 30, 2017, a decrease of $0.1 million, or
0.7%.

Total credit-related charges for the current quarter increased $0.9
million compared to the third quarter of fiscal year 2017 and increased
$3.9 million for the current year compared to fiscal year 2016. The
year-over-year increase in total credit-related charges was primarily
driven by increased net charge-offs driving higher required provision
for loan and lease losses. A summary of total credit-related charges
incurred during the current and prior quarters and fiscal years is
presented below:

               
GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges (Unaudited)
    For the twelve months ended: For the three months ended:

September 30,

September 30,

September 30,

June 30,

Item Included within F/S Line Item(s):

2017

2016

2017

2017

(dollars in thousands)
Provision for loan and lease losses Provision for loan and lease losses $ 21,539 $ 16,955 $ 4,685 $ 5,796
Net OREO charges Net loss on repossessed property and other related expenses 1,749 1,263 541 152
Reversal of interest income on nonaccrual loans Interest income on loans 930 1,433 697 332
Loan fair value adjustment related to credit Net increase (decrease) in fair value of loans at fair value 936   1,618   940   (293 )
Total $ 25,154   $ 21,269   $ 6,863   $ 5,987  
 

Noninterest Income

Noninterest income was $12.8 million for the fourth quarter of fiscal
year 2017, a decrease of $2.6 million, or 17.1%. Of this movement, $2.0
million is due to a decrease in product and service fees primarily
driven by a $0.9 million decrease in service charges and other fees
reflecting lower interchange income under the "Durbin Amendment," as
expected. Management expects a further quarter-over-quarter reduction of
approximately $1.5 million in interchange income for the quarter ending
December 31, 2017. Other noninterest income and wealth management fees
also declined by $0.7 million and $0.4 million, respectively. The
remaining $0.6 million is attributable to the net effect of the change
in fair value of 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.

Noninterest Expense

Total noninterest expense was $55.3 million for the fourth quarter of
fiscal year 2017, an increase of $0.4 million, or 0.7%. The increase in
noninterest expense was driven by a $1.4 million increase in other
noninterest expense and a $0.4 million increase in net loss on
repossessed property and other related expenses (i.e., "OREO"),
partially offset by a decrease of $1.6 million in salaries and employee
benefits. Included within the overall increase to noninterest expense
was approximately $0.8 million of fixed asset write-offs and associated
costs to upgrade our teller capture system, as disclosed last quarter
which is not considered to be recurring, and a higher OREO charge this
quarter.

The efficiency ratio1 was 47.1% for the fourth quarter, a
slight increase compared to 46.7%.

Provision for Income Taxes

The provision for income taxes for the fourth quarter of fiscal year
2017 was $16.7 million, reflecting an effective tax rate of 30.8% of
income before income taxes, compared to an effective tax rate of 34.5%.
The lower effective tax rate for the quarter was driven, in part, by tax
benefits related to the vesting of shares of company stock.
Approximately $1.4 million of this benefit related to shares granted to
certain employees concurrent with the company's Initial Public Offering
that vested during the quarter and were one-time in nature.

Capital

Tier 1 and total capital ratios were 11.4% and 12.5%, respectively, as
of September 30, 2017, compared to 11.5% and 12.6%, respectively. The
common equity tier 1 capital ratio was 10.7% as of September 30, 2017,
compared to 10.7%. The tier 1 leverage ratio was 10.3% as of
September 30, 2017, compared to 10.3%. All regulatory capital ratios
remain above regulatory minimums to be considered "well capitalized."

During the quarter $5.6 million was deployed to repurchase and retire
approximately 200 thousand shares of the Company's common stock under
the repurchase program authorized by the Board of Directors at an
average price of $34.46.

On October 26, 2017, the Company's Board of Directors declared a
dividend of $0.20 per common share payable on November 22, 2017 to
stockholders of record as of close of business on November 10, 2017. The
aggregate dividend payment will be approximately $11.8 million.

Fiscal Year 2017 Highlights (all comparisons refer to the
fiscal year
2016, except as noted)

  • Net interest income for fiscal year 2017 was $404.9 million, an
    increase of $35.2 million, or 9.5%. The increase was primarily
    attributable to higher loan interest income driven by 10.8% growth in
    average loans outstanding between the periods combined with a 5 basis
    point increase in the yield on total loans, partially offset by an 8
    basis point increase in the cost of deposits.
  • Customer loan balances increased by $350.2 million, or 4.1%, during
    fiscal year 2017. The net fiscal year-to-date growth was primarily
    driven by $370.7 million of CRE loan growth and more modest C&I
    growth, partially offset by reductions in residential real estate and
    agriculture loans.
  • Average total deposit growth was $897.0 million, or 11.3% for fiscal
    year 2017. Average noninterest-bearing deposits were $1.81 billion
    while interest-bearing deposits averaged $7.01 billion for the same
    period. Total deposit balances for fiscal year 2017 increased by
    $372.8 million, or 4.3%.
  • Provision for loan and lease losses was $21.5 million for fiscal year
    2017, an increase of $4.6 million, or 27.0%. Net charge-offs for
    fiscal year 2017 were $22.7 million, or 26 basis points of average
    total loans, an increase of $13.2 million, or 14 basis points of
    average total loans, driving the majority of the increase in provision
    for loan and lease losses. Net charge-offs were primarily concentrated
    in the C&I and agriculture loan portfolios.
  • Asset quality metrics remained stable as loans graded "Watch"
    decreased $16.0 million, or 4.9% to $311.6 million while loans graded
    "Substandard" decreased $8.8 million, or 3.6% to $232.8 million and
    total nonaccrual loans increased by $11.9 million, or 9.4% to $138.3
    million at September 30, 2017.
  • Noninterest income for fiscal year 2017 was $56.1 million, an increase
    of $13.5 million, or 31.8%. Of this movement, $7.0 million is
    attributable to the net effect of the change in fair value of 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. The remaining $6.5
    million increase in noninterest income was primarily due to a $2.4
    million increase in service charges and other fees, a $1.8 million
    increase in wealth management fees and a $1.7 million increase in
    other income.
  • Noninterest expense for fiscal year 2017 was $216.6 million, an
    increase of $9.0 million, or 4.3%. The increase was due to a $19.1
    million increase in salaries and employee benefits, a $2.8 million
    increase in data processing, a $1.5 million increase in professional
    fees, partially offset by a $15.0 million decrease in acquisition
    expenses.
  • The efficiency ratio1 was 46.5% for fiscal year 2017,
    compared to 49.6%, with a large portion of the decrease driven by the
    absence of one-time acquisition costs in fiscal year 2017.
  • The effective tax rate for fiscal years 2017 and 2016 was 32.4% and
    32.7%, respectively.

Business Outlook

"We are proud to report another year of strong financial results to our
stockholders," added Karels. "I am also very pleased with the progress
we made during the year related to a number of projects and initiatives
that we believe will allow us to continue to grow profitably into the
future. We invested in enhancements to a number of our products and
services that will directly benefit our customers through enhanced
efficiencies and service levels. We also continued to enhance a number
of support capabilities that will allow us to better assess and manage
risk and advance our analytical capabilities. I continue to be very
excited about our strategic direction for the year to come and beyond."

Conference Call

Great Western Bancorp, Inc. will host a conference call to discuss its
financial results for the fourth quarter of fiscal year 2017 on
Thursday, October 26, 2017 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 November 9, 2017. To access the replay, dial
(877) 344-7529 (U.S.) and use conference ID 10112351. 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 for Thursday, February 22, 2018. The meeting
will commence at 9:00 AM Mountain Standard Time at The Phoenician
Scottsdale, 6000 East Camelback Road, Scottsdale, Arizona. The record
date for determination of stockholders entitled to notice of, and to
vote at, the Annual Stockholder Meeting is December 28, 2017.

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, beyond
fiscal year 2017 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, 2016.
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 twelve months ended: At or for the three months ended:

September 30,

September 30,

September 30,

    June 30,     March 31,    

December 31,

   

September 30,

2017

2016

2017

2017 2017

2016

2016

(dollars in thousands except share and per share amounts)
Operating Data:
Interest and dividend income (FTE) $ 450,266 $ 403,232 $ 117,089 $ 112,555 $ 110,075 $ 110,548 $ 109,730
Interest expense 45,320 33,524 13,391 11,671 10,494 9,764 9,491
Noninterest income 56,062 42,537 12,836 15,485 13,834 13,907 15,798
Noninterest expense 216,643 207,640 55,332 54,922 53,852 52,537 57,342
Provision for loan and lease losses 21,539 16,955 4,685 5,796 4,009 7,049 5,063
Net income 144,786 121,253 37,662 35,060 35,162 36,903 33,758
Adjusted net income 1 $ 145,226 $ 130,982 $ 37,662 $ 35,060 $ 35,162 $ 37,343 $ 35,458
Common shares outstanding 58,834,066 58,693,304 58,834,066 58,761,597 58,760,517 58,755,989 58,693,304
Weighted average diluted common shares outstanding 59,029,382 56,729,350 58,914,144 59,130,632 59,073,669 58,991,905 58,938,367
Earnings per common share - diluted $ 2.45 $ 2.14 $ 0.64 $ 0.59 $ 0.60 $ 0.63 $ 0.57
Adjusted earnings per common share - diluted 1 $ 2.46 $ 2.31 $ 0.64 $ 0.59 $ 0.60 $ 0.63 $ 0.60
 
Performance Ratios:
Net interest margin (FTE) 2 3.97 % 3.96 % 4.00 % 4.00 % 3.98 % 3.89 % 3.92 %
Adjusted net interest margin (FTE) 1 2 3.83 % 3.74 % 3.90 % 3.87 % 3.83 % 3.71 % 3.73 %
Return on average total assets 2 1.27 % 1.16 % 1.30 % 1.25 % 1.26 % 1.28 % 1.19 %
Return on average common equity 2 8.5 % 7.9 % 8.6 % 8.2 % 8.5 % 8.8 % 8.2 %
Return on average tangible common equity 1 2 15.4 % 15.1 % 15.2 % 14.8 % 15.4 % 16.3 % 15.3 %
Efficiency ratio 1 46.5 % 49.6 % 47.1 % 46.7 % 47.0 % 45.1 % 48.5 %
 
Capital:
Tier 1 capital ratio 11.4 % 11.1 % 11.4 % 11.5 % 11.6 % 11.2 % 11.1 %
Total capital ratio 12.5 % 12.2 % 12.5 % 12.6 % 12.7 % 12.3 % 12.2 %
Tier 1 leverage ratio 10.3 % 9.5 % 10.3 % 10.3 % 10.0 % 9.7 % 9.5 %
Common equity tier 1 ratio 10.7 % 10.2 % 10.7 % 10.7 % 10.8 % 10.4 % 10.2 %
Tangible common equity / tangible assets1 9.2 % 8.5 % 9.2 % 9.2 % 9.0 % 8.7 % 8.5 %
Book value per share - GAAP $ 29.83 $ 28.34 $ 29.83 $ 29.49 $ 29.05 $ 28.57 $ 28.34
Tangible book value per share1 $ 17.11 $ 15.55 $ 17.11 $ 16.75 $ 16.29 $ 15.81 $ 15.55
 
Asset Quality:
Nonaccrual loans $ 138,312 $ 126,395 $ 138,312 $ 123,641 $ 127,675 $ 124,178 $ 126,395
OREO $ 8,985 $ 10,282 $ 8,985 $ 9,051 $ 6,994 $ 8,093 $ 10,282
Nonaccrual loans / total loans 1.54 % 1.46 % 1.54 % 1.41 % 1.47 % 1.41 % 1.46 %
Net charge-offs (recoveries) $ 22,678 $ 9,513 $ 5,394 $ 4,267 $ 8,091 $ 4,924 $ 4,654
Net charge-offs (recoveries) / average total loans 2 0.26 % 0.12 % 0.24 % 0.20 % 0.38 % 0.22 % 0.21 %
Allowance for loan and lease losses / total loans 0.71 % 0.74 % 0.71 % 0.73 % 0.72 % 0.76 % 0.74 %
Watch-rated loans $ 311,611 $ 327,608 $ 311,611 $ 298,963 $ 324,457 $ 334,673 $ 327,608
 
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 twelve months ended: At or for the three months ended:
September 30, September 30,

September 30,

    June 30,     March 31,    

December 31,

   

September 30,

2017 2016

2017

2017 2017

2016

2016

(dollars in thousands)
Interest and dividend income
Loans $ 414,434 $ 370,444 $ 108,181 $ 103,435 $ 101,136 $ 101,683 $ 101,307
Taxable securities 24,262 23,249 6,092 6,238 6,055 5,878 5,649
Nontaxable securities 978 230 268 269 241 199 145
Dividends on securities 1,071 1,201 232 296 242 300 369
Federal funds sold and other   922     574     194     163     219     346     248  
Total interest and dividend income 441,667 395,698 114,967 110,401 107,893 108,406 107,718
Interest expense
Deposits 35,035 25,114 10,439 9,478 7,829 7,290 6,968
Securities sold under agreements to repurchase 384 519 85 86 98 115 125
FHLB advances and other borrowings 5,437 4,154 1,702 994 1,469 1,271 1,323
Subordinated debentures and subordinated notes payable   4,464     3,737     1,165     1,113     1,098     1,088     1,075  
Total interest expense   45,320     33,524     13,391     11,671     10,494     9,764     9,491  
Net interest income 396,347 362,174 101,576 98,730 97,399 98,642 98,227
Provision for loan and lease losses   21,539     16,955     4,685     5,796     4,009     7,049     5,063  
Net interest income after provision for loan and lease losses   374,808     345,219     96,891     92,934     93,390     91,593     93,164  
Noninterest income
Service charges and other fees 48,573 46,209 11,838 12,730 11,919 12,086 13,111
Wealth management fees 9,118 7,283 2,002 2,433 2,429 2,254 2,196
Mortgage banking income, net 7,928 7,261 1,798 1,828 1,640 2,662 3,119
Net gain (loss) on sale of securities 75 160 32 44 356
Net increase (decrease) in fair value of loans at fair value (65,231 ) 26,314 (2,073 ) 6,060 (5,216 ) (64,001 ) (8,939 )
Net realized and unrealized gain (loss) on derivatives 49,900 (48,658 ) (1,581 ) (9,088 ) 1,592 58,976 4,721
Other   5,699     3,968     820     1,522     1,426     1,930     1,234  
Total noninterest income 56,062 42,537 12,836 15,485 13,834 13,907 15,798
Noninterest expense
Salaries and employee benefits 128,135 109,055 31,263 32,868 32,370 31,634 30,638
Data processing 24,514 21,719 6,494 6,378 5,965 5,677 5,896
Occupancy expenses 16,470 15,759 4,033 4,057 4,355 4,024 4,323
Professional fees 15,038 13,572 4,503 4,141 3,559 2,835 4,485
Communication expenses 3,774 3,721 830 992 914 1,040 1,072
Advertising 3,983 4,267 954 1,059 995 975 1,252
Equipment expenses 3,347 3,795 973 809 768 798 1,001
Net loss (gain) on repossessed property and other related expenses 1,749 1,263 541 152 397 658 784
Amortization of core deposits and other intangibles 2,358 3,264 430 538 550 839 1,024
Acquisition expenses 710 15,692 710 2,742
Other   16,565     15,533     5,311     3,928     3,979     3,347     4,125  
Total noninterest expense   216,643     207,640     55,332     54,922     53,852     52,537     57,342  
Income before income taxes 214,227 180,116 54,395 53,497 53,372 52,963 51,620
Provision for income taxes   69,441     58,863     16,733     18,437     18,210     16,060     17,862  
Net income $ 144,786   $ 121,253   $ 37,662   $ 35,060   $ 35,162   $ 36,903   $ 33,758  
 
 
GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet (Unaudited)
   
As of

September 30,

    June 30,     March 31,     December 31,    

September 30,

2017

2017 2017 2016

2016

(dollars in thousands)
Assets
Cash and cash equivalents $ 360,396 $ 327,901 $ 335,929 $ 270,168 $ 524,611
Securities 1,367,960 1,366,442 1,350,893 1,371,558 1,315,860
Total loans 8,968,553 8,791,852 8,697,426 8,779,107 8,682,644
Allowance for loan and lease losses   (63,503 )   (64,214 )   (62,685 )   (66,767 )   (64,642 )
Loans, net 8,905,050 8,727,638 8,634,741 8,712,340 8,618,002
Goodwill and other intangible assets 748,397 748,828 749,366 749,916 750,755
Other assets   308,208     295,375     285,912     318,635     321,952  
Total assets $ 11,690,011   $ 11,466,184   $ 11,356,841   $ 11,422,617   $ 11,531,180  
 
Liabilities and stockholders' equity
Noninterest-bearing deposits $ 1,856,126 $ 1,915,560 $ 2,026,627 $ 1,954,881 $ 1,880,512
Interest-bearing deposits   7,121,487     7,043,542     7,065,291     6,751,366     6,724,278  
Total deposits 8,977,613 8,959,102 9,091,918 8,706,247 8,604,790
Securities sold under agreements to repurchase 132,636 123,851 124,472 142,741 141,688
FHLB advances and other borrowings 644,214 471,719 264,624 711,029 871,037
Other liabilities   180,548     178,529     168,966     183,962     250,274  
Total liabilities 9,935,011 9,733,201 9,649,980 9,743,979 9,867,789
Stockholders' equity   1,755,000     1,732,983     1,706,861     1,678,638     1,663,391  
Total liabilities and stockholders' equity $ 11,690,011   $ 11,466,184   $ 11,356,841   $ 11,422,617   $ 11,531,180  
 
 
GREAT WESTERN BANCORP, INC.
Loan Portfolio Summary (Unaudited)
                           
As of Fiscal year-to-date:

September 30,

June 30, March 31,

December 31,

September 30,

Change Change

2017

2017 2017

2016

2016

($) (%)
(dollars in thousands)
Construction and development $ 538,736 $ 490,025 $ 450,419 $ 423,864 $ 469,968 $ 68,768 14.6 %
Owner-occupied CRE 1,219,523 1,232,488 1,191,348 1,197,253 1,167,265 52,258 4.5 %
Non-owner-occupied CRE 2,025,326 1,881,726 1,754,631 1,775,107 1,678,007 347,319 20.7 %
Multifamily residential real estate   341,220     361,360     454,437     455,880     438,867     (97,647 ) (22.2 )%
Commercial real estate 4,124,805 3,965,599 3,850,835 3,852,104 3,754,107 370,698 9.9 %
Agriculture 2,122,138 2,087,113 2,114,287 2,206,263 2,168,937 (46,799 ) (2.2 )%
Commercial non-real estate 1,718,914 1,715,630 1,690,149 1,643,986 1,673,166 45,748 2.7 %
Residential real estate 932,892 953,340 971,374 1,008,325 1,020,958 (88,066 ) (8.6 )%
Consumer 66,559 70,028 74,718 71,795 76,273 (9,714 ) (12.7 )%
Other 1   43,207     44,111     39,976     47,569     42,477     730   1.7 %
Total unpaid principal balance 9,008,515 8,835,821 8,741,339 8,830,042 8,735,918 272,597 3.1 %
Less: Unamortized discount on acquired loans and unearned net
deferred fees and costs and loans in process
  (39,962 )   (43,969 )   (43,913 )   (50,935 )   (53,274 )   13,312   (25.0 )%
Total loans $ 8,968,553   $ 8,791,852   $ 8,697,426   $ 8,779,107   $ 8,682,644   $ 285,909   3.3 %
 
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)
                       
For the three months ended:
September 30, 2017     June 30, 2017 September 30, 2016
Average     Interest    

Yield /

Average Interest

Yield /

Average Interest

Yield /

Balance (FTE)

Cost 1

Balance (FTE)

Cost 1

Balance (FTE)

Cost 1

(dollars in thousands)
Assets
Interest-bearing bank deposits $ 55,834 $ 194 1.38 % $ 62,187 $ 163 1.05 % $ 183,985 $ 248 0.54 %
Investment securities 1,403,240 6,592 1.86 % 1,398,370 6,803 1.95 % 1,379,971 6,163 1.78 %
Non ASC 310-30 loans, net 2 8,728,514 107,024 4.86 % 8,550,349 102,720 4.82 % 8,477,214 101,070 4.74 %
ASC 310-30 loans, net   95,813   3,279 13.58 %   113,498   2,869 10.14 %   132,573   2,249 6.75 %
Loans, net   8,824,327   110,303 4.96 %   8,663,847   105,589 4.89 %   8,609,787   103,319 4.77 %
Total interest-earning assets 10,283,401 117,089 4.52 % 10,124,404 112,555 4.46 % 10,173,743 109,730 4.29 %
Noninterest-earning assets   1,166,931   1,154,295   1,152,995
Total assets $ 11,450,332 $ 117,089 4.06 % $ 11,278,699 $ 112,555 4.00 % $ 11,326,738 $ 109,730 3.85 %
 
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,793,321 $ 1,815,407 $ 1,710,901
NOW, money market and savings deposits 5,817,665 $ 7,909 0.54 % 5,849,998 $ 7,172 0.49 % 5,405,798 $ 4,709 0.35 %
CDs   1,280,226   2,530 0.78 %   1,289,402   2,306 0.72 %   1,402,427   2,259 0.64 %
Total deposits 8,891,212 10,439 0.47 % 8,954,807 9,478 0.42 % 8,519,126 6,968 0.33 %
Securities sold under agreements to repurchase 116,004 85 0.29 % 118,373 86 0.29 % 152,412 125 0.33 %
FHLB advances and other borrowings 509,959 1,702 1.32 % 303,846 994 1.31 % 749,122 1,323 0.70 %
Subordinated debentures and subordinated notes payable   108,275   1,165 4.27 %   108,234   1,113 4.13 %   111,840   1,075 3.82 %
Total borrowings   734,238   2,952 1.60 %   530,453   2,193 1.66 %   1,013,374   2,523 0.99 %
Total interest-bearing liabilities 9,625,450 $ 13,391 0.55 % 9,485,260 $ 11,671 0.49 % 9,532,500 $ 9,491 0.39 %
Noninterest-bearing liabilities 84,453 77,979 147,083
Stockholders' equity   1,740,429   1,715,460   1,647,155
Total liabilities and stockholders' equity $ 11,450,332 $ 11,278,699 $ 11,326,738
Net interest spread 3.51 % 3.51 % 3.46 %
Net interest income and net interest margin (FTE) $ 103,698 4.00 % $ 100,884 4.00 % $ 100,239 3.92 %
Less: Tax equivalent adjustment   2,122   2,154   2,012
Net interest income and net interest margin - ties to Statements of
Comprehensive Income
$ 101,576 3.92 % $ 98,730 3.91 % $ 98,227 3.84 %
 
1 Annualized for all partial-year periods.
2 Interest income includes $0.8 million and $1.7 million
for the fourth quarter of fiscal year 2017 and 2016, respectively,
resulting from accretion of purchase accounting discount associated
with acquired loans.
 
 
GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
               
For the twelve months ended:
September 30, 2017 September 30, 2016

 

    Interest    

 

 

Interest

 

Average Balance

(FTE)

Yield / Cost 1

Average Balance

(FTE)

Yield / Cost 1

(dollars in thousands)
Assets
Interest-bearing bank deposits $ 123,616 $ 922 0.75 % $ 122,651 $ 574 0.47 %
Investment securities 1,390,453 26,311 1.89 % 1,366,925 24,680 1.81 %
Non ASC 310-30 loans, net 2 8,581,615 412,232 4.80 % 7,736,454 370,521 4.79 %
ASC 310-30 loans, net   114,057   10,801 9.47 %   113,828   7,457 6.55 %
Loans, net   8,695,672   423,033 4.86 %   7,850,282   377,978 4.81 %
Total interest-earning assets 10,209,741 450,266 4.41 % 9,339,858 403,232 4.32 %
Noninterest-earning assets   1,154,861   1,079,503
Total assets $ 11,364,602 $ 450,266 3.96 % $ 10,419,361 $ 403,232 3.87 %
 
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,806,491 $ 1,493,287
NOW, money market and savings deposits 5,709,863 $ 25,969 0.45 % 5,081,401 $ 16,206 0.32 %
CDs   1,300,987   9,066 0.70 %   1,345,693   8,908 0.66 %
Total deposits 8,817,341 35,035 0.40 % 7,920,381 25,114 0.32 %
Securities sold under agreements to repurchase 122,188 384 0.31 % 160,820 519 0.32 %
FHLB advances and other borrowings 525,491 5,437 1.03 % 580,283 4,154 0.72 %
Subordinated debentures and subordinated notes payable   108,917   4,464 4.10 %   98,689   3,737 3.79 %
Total borrowings   756,596   10,285 1.36 %   839,792   8,410 1.00 %
Total interest-bearing liabilities 9,573,937 $ 45,320 0.47 % 8,760,173 $ 33,524 0.38 %
Noninterest-bearing liabilities 88,440 117,344
Stockholders' equity   1,702,225   1,541,844
Total liabilities and stockholders' equity $ 11,364,602 $ 10,419,361
Net interest spread 3.49 % 3.49 %
Net interest income and net interest margin (FTE) $ 404,946 3.97 % $ 369,708 3.96 %
Less: Tax equivalent adjustment   8,599   7,534
Net interest income and net interest margin - ties to Statements of
Comprehensive Income
$ 396,347 3.88 % $ 362,174 3.88 %
 
1 Annualized for all partial-year periods.
2 Interest income includes $4.1 million and $3.6 million
for the twelve months ended 2017 and 2016, respectively, resulting
from accretion of purchase accounting discount associated with
acquired loans.
 

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.
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). 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 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 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 twelve months ended: At or for the three months ended:
September 30,

September 30,

September 30,

June 30,

March 31, December 31, September 30,
2017

2016

2017

2017

2017 2016 2016
(dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP $ 144,786 $ 121,253 $ 37,662 $ 35,060 $ 35,162 $ 36,903 $ 33,758
Add: Acquisition expenses, net of tax   440     9,729                 440     1,700  
Adjusted net income $ 145,226   $ 130,982   $ 37,662   $ 35,060   $ 35,162   $ 37,343   $ 35,458  
 
Weighted average diluted common shares outstanding 59,029,382 56,729,350 58,914,144 59,130,632 59,073,669 58,991,905 58,938,367
Earnings per common share - diluted $ 2.45 $ 2.14 $ 0.64 $ 0.59 $ 0.60 $ 0.63 $ 0.57
Adjusted earnings per common share - diluted $ 2.46 $ 2.31 $ 0.64 $ 0.59 $ 0.60 $ 0.63 $ 0.60
 
Tangible net income and return on average tangible common equity:
Net income - GAAP $ 144,786 $ 121,253 $ 37,662 $ 35,060 $ 35,162 $ 36,903 $ 33,758
Add: Amortization of intangible assets, net of tax   2,044     2,384     380     488     500     676     804  
Tangible net income $ 146,830   $ 123,637   $ 38,042   $ 35,548   $ 35,662   $ 37,579   $ 34,562  
 
Average common equity $ 1,702,225 $ 1,541,844 $ 1,740,429 $ 1,715,460 $ 1,686,770 $ 1,666,243 $ 1,647,155
Less: Average goodwill and other intangible assets   749,393     721,726     748,571     749,074     749,638     750,290     750,756  
Average tangible common equity $ 952,832   $ 820,118   $ 991,858   $ 966,386   $ 937,132   $ 915,953   $ 896,399  
Return on average common equity * 8.5 % 7.9 % 8.6 % 8.2 % 8.5 % 8.8 % 8.2 %
Return on average tangible common equity ** 15.4 % 15.1 % 15.2 % 14.8 % 15.4 % 16.3 % 15.3 %
 
* Calculated as net income - GAAP divided by average common equity.
Annualized for partial-year periods.
** Calculated as tangible net income divided by average tangible
common equity. Annualized for partial-year periods.
 
Adjusted net interest income and adjusted net interest margin
(fully-tax equivalent basis):
Net interest income - GAAP $ 396,347 $ 362,174 $ 101,576 $ 98,730 $ 97,399 $ 98,642 $ 98,227
Add: Tax equivalent adjustment   8,599     7,534     2,122     2,154     2,182     2,142     2,012  
Net interest income (FTE) 404,946 369,708 103,698 100,884 99,581 100,784 100,239
Add: Current realized derivative gain (loss)   (14,395 )   (20,727 )   (2,714 )   (3,320 )   (3,875 )   (4,486 )   (4,895 )
Adjusted net interest income (FTE) $ 390,551   $ 348,981   $ 100,984   $ 97,564   $ 95,706   $ 96,298   $ 95,344  
 
Average interest-earning assets $ 10,209,741 $ 9,339,858 $ 10,283,401 $ 10,124,404 $ 10,144,875 $ 10,286,284 $ 10,173,743
Net interest margin (FTE) * 3.97 % 3.96 % 4.00 % 4.00 % 3.98 % 3.89 % 3.92 %
Adjusted net interest margin (FTE) ** 3.83 % 3.74 % 3.90 % 3.87 % 3.83 % 3.71 % 3.73 %
 
* 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:
Net interest income - GAAP $ 403,633 $ 362,987 $ 104,902 $ 100,566 $ 98,825 $ 99,339 $ 99,058
Add: Tax equivalent adjustment   8,599     7,534     2,122     2,154     2,182     2,142     2,012  
Interest income (FTE) 412,232 370,521 107,024 102,720 101,007 101,481 101,070
Add: Current realized derivative gain (loss)   (14,395 )   (20,727 )   (2,714 )   (3,320 )   (3,875 )   (4,486 )   (4,895 )
Adjusted interest income (FTE) $ 397,837   $ 349,794   $ 104,310   $ 99,400   $ 97,132   $ 96,995   $ 96,175  
 
Average non ASC 310-30 loans $ 8,581,615 $ 7,736,454 $ 8,728,514 $ 8,550,349 $ 8,531,652 $ 8,515,947 $ 8,477,214
Yield (FTE) * 4.80 % 4.79 % 4.86 % 4.82 % 4.80 % 4.73 % 4.74 %
Adjusted yield (FTE) ** 4.64 % 4.52 % 4.74 % 4.66 % 4.62 % 4.52 % 4.51 %
 
* 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 $ 452,409 $ 404,711 $ 114,412 $ 114,215 $ 111,233 $ 112,549 $ 114,025
Add: Tax equivalent adjustment   8,599     7,534     2,122     2,154     2,182     2,142     2,012  
Total revenue (FTE) $ 461,008   $ 412,245   $ 116,534   $ 116,369   $ 113,415   $ 114,691   $ 116,037  
 
Noninterest expense $ 216,643 $ 207,640 $ 55,332 $ 54,922 $ 53,852 $ 52,537 $ 57,342
Less: Amortization of intangible assets   2,358     3,264     430     538     550     839     1,024  
Tangible noninterest expense $ 214,285   $ 204,376   $ 54,902   $ 54,384   $ 53,302   $ 51,698   $ 56,318  
Efficiency ratio * 46.5 % 49.6 % 47.1 % 46.7 % 47.0 % 45.1 % 48.5 %
 
* Calculated as the ratio of tangible noninterest expense to total
revenue (FTE).
 
Tangible common equity and tangible common equity to tangible
assets:
Total stockholders' equity $ 1,755,000 $ 1,663,391 $ 1,755,000 $ 1,732,983 $ 1,706,861 $ 1,678,638 $ 1,663,391
Less: Goodwill and other intangible assets   748,397     750,755     748,397     748,828     749,366     749,916     750,755  
Tangible common equity $ 1,006,603   $ 912,636   $ 1,006,603   $ 984,155   $ 957,495   $ 928,722   $ 912,636  
 
Total assets $ 11,690,011 $ 11,531,180 $ 11,690,011 $ 11,466,184 $ 11,356,841 $ 11,422,617 $ 11,531,180
Less: Goodwill and other intangible assets   748,397     750,755     748,397     748,828     749,366     749,916     750,755  
Tangible assets $ 10,941,614   $ 10,780,425   $ 10,941,614   $ 10,717,356   $ 10,607,475   $ 10,672,701   $ 10,780,425  
Tangible common equity to tangible assets 9.2 % 8.5 % 9.2 % 9.2 % 9.0 % 8.7 % 8.5 %
 
Tangible book value per share:
Total stockholders' equity $ 1,755,000 $ 1,663,391 $ 1,755,000 $ 1,732,983 $ 1,706,861 $ 1,678,638 $ 1,663,391
Less: Goodwill and other intangible assets   748,397     750,755     748,397     748,828     749,366     749,916     750,755  
Tangible common equity $ 1,006,603   $ 912,636   $ 1,006,603   $ 984,155   $ 957,495   $ 928,722   $ 912,636  
 
Common shares outstanding 58,834,066 58,693,304 58,834,066 58,761,597 58,760,517 58,755,989 58,693,304
Book value per share - GAAP $ 29.83 $ 28.34 $ 29.83 $ 29.49 $ 29.05 $ 28.57 $ 28.34
Tangible book value per share $ 17.11 $ 15.55 $ 17.11 $ 16.75 $ 16.29 $ 15.81 $ 15.55
 

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