Great Western Bancorp, Inc. Announces Earnings of $43.3 Million for First Quarter Fiscal Year 2020 and Dividends of $0.30 Per Share
Highlights for the First Quarter of Fiscal Year 2020 (all quarterly comparisons in this document refer to the fourth quarter of fiscal year 2019, except as noted)
•Net income was $43.3 million, or $0.77 per diluted share, compared to $50.3 million, or $0.89 per diluted share
•Net interest margin decreased 2 basis points to 3.68% while adjusted net interest margin1, 2 decreased 4 basis points to 3.65%
•Expense control remained strong with an efficiency ratio1 of 46.2%
•Total loans were $9.63 billion, a decline of $80.5 million, or 0.8%
•Total deposits were $10.09 billion, a decrease of $211.8 million, or 2.1%
•Net charge-offs recognized were 0.25% of average total loans on an annualized basis, down from 0.31% of average total loans on an annualized basis, while other key asset quality metrics including nonaccrual loans, watch loans, substandard loans and other repossessed property deteriorated during the quarter due to downgrades on a small number of agriculture and agriculture-related exposures
•The Company's Board of Directors declared a quarterly dividend of $0.30 per share
Sioux Falls, SD - January 28, 2020 - Great Western Bancorp, Inc. (NYSE: GWB) today reported net income of $43.3 million, or $0.77 per diluted share, for the first quarter of fiscal year 2020, compared to net income of $50.3 million, or $0.89 per diluted share, for the fourth quarter of fiscal year 2019.
"We are pleased with the start to our 2020 fiscal year with good earnings underpinned by us managing the cost of our deposits and expenses well," said Ken Karels, Chairperson of the Board, President and Chief Executive Officer. "While we have seen substandard loan balances increase through the quarter due to the migration of a small number of individual exposures, we feel comfortable with our strategies of working with customers to rehabilitate or exit many of these relationships."
Net Interest Income and Net Interest Margin2
Net interest income was $106.7 million, a decrease of $1.5 million, or 1.4%. The decrease was due to lower loan interest income as a result of a decrease in average loans outstanding, combined with a $2.0 million net reversal of interest income on loans moved to nonaccrual during the quarter, partially offset by a 20 basis point decrease in the cost of deposits.
Net interest margin was 3.68% and 3.70% for the quarters ended December 31, 2019 and September 30, 2019, respectively. Adjusted net interest margin1, which adjusts for the realized gain (loss) on interest rate swaps, was 3.65% and 3.69%, respectively, for the same periods. The lower margins were primarily driven by the yield on loans, which included a 7 basis point reduction in net interest margin due to the net reversal of interest income noted above, partially offset by a 20 basis point decrease in the cost of deposits to 0.86%.
Total loans outstanding were $9.63 billion as of December 31, 2019, a decrease of $80.5 million, or 0.8%. The decline in loans during the quarter was mainly attributable to the commercial non-real estate segment of the portfolio, which decreased by $43.5 million, or 2.5%, due to disbursement transaction timing within our mortgage warehouse lending, a reduction in the agriculture segment of $28.0 million, or 1.4%, primarily due to the workout of a small number of large relationships and a decrease of $7.7 million, or 0.2%, in CRE impacted by a number of loans refinancing with other institutions due to lower rates.
Total deposits were $10.09 billion as of December 31, 2019, a decrease of $211.8 million, or 2.1%, due to a reduction in the use of brokered deposits offset by increases in both consumer and business deposits. Interest-bearing deposits were $8.06 billion, a 3.4% decrease, and noninterest-bearing deposits were $2.03 billion, a 3.8% increase. FHLB and other borrowings increased by $235.0 million, or 69.1%, due to favorable rates making them a more cost-effective source of funding.
Provision for Loan and Lease Losses and Asset Quality
Provision for loan and lease losses was $8.1 million, an increase of $6.1 million. Net charge-offs were $6.1 million, or 0.25% 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. The ratio of allowance for loan and lease losses ("ALLL") to total loans increased to 0.76% as of December 31, 2019 from 0.73% as of September 30, 2019.
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.
The following information was filed by Great Western Bancorp, Inc. (GWB) on Tuesday, January 28, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.