Great Western Bancorp, Inc. Announces Earnings for Second Quarter Fiscal Year 2020
Highlights for the Second Quarter of Fiscal Year 2020 (all quarterly comparisons in this document refer to the first quarter of fiscal year 2020, except as noted)
•Net loss of $740.6 million, or $(13.25) per diluted share, compared to net income of $43.3 million, or $0.77 per diluted share
•Adjusted net income1, which excludes the nonrecurring COVID-19 pandemic impact on goodwill, certain intangible assets and credit and other related charges, was $29.1 million, or $0.52 per diluted share, for the quarter and $72.4 million, or $1.29 per diluted share, for the first six months of 2020
•Capital ratios remain strong with Tier 1 and total capital being 11.3% and 12.9%, respectively, as of March 31, 2020, compared to 12.0% and 13.0% as of December 31, 2019
•With the many uncertainties of the COVID-19 pandemic, the Board of Directors has determined to reduce the regular quarterly dividend for March 31, 2020 to $0.15 per share
•Net interest margin decreased 9 basis points to 3.59% while adjusted net interest margin1, 2 decreased 10 basis points to 3.55%
•Credit quality metrics remained mostly stable as substandard loans decreased $12.4 million, watch loans increased $4.0 million, and net charge-offs were 0.36% of average total loans on an annualized basis
Sioux Falls, SD - April 30, 2020 - Great Western Bancorp, Inc. (NYSE: GWB) today reported net loss of $740.6 million, or $(13.25) per diluted share, for the second quarter of fiscal year 2020, compared to net income of $43.3 million, or $0.77 per diluted share, for the first quarter of fiscal year 2020. Adjusted net income1 which excludes the COVID-19 pandemic impact on goodwill, intangible assets and credit and other related charges, was $29.1 million, or $0.52 per diluted share, compared to $43.3 million, or $0.77 per diluted share.
"While my first few weeks have coincided with the COVID-19 pandemic, I am excited to be a part of Great Western Bank. This unprecedented time has allowed me the opportunity to see the organization's strength and the team's commitment to supporting our customer base as well as ensuring the wellness and safety of our employees," said Mark Borrecco, President and Chief Executive Officer. "We believe our stable capital position along with specific actions to address the COVID-19 impact to goodwill valuation as well as our loan loss reserves appropriately reflect the current environment."
Impact and Response to COVID-19 Pandemic
Through this time of disruption we have remained open for business supporting our customers while implementing our business continuity plan to mitigate the risks of the spread of COVID-19 to our employees and customers. As of April 24th, we have more than 750 employees working remotely from home with those still in the office appropriately spaced, 97% of our branches open with limited access, increased functionality of ATM, online banking and mobile channels, and processed 2,300 applications approved for Paycheck Protection Program loans totaling over $600.0 million. We have also taken such other actions as social distancing, restrictions on in-person meetings and conferences, Company travel restrictions and increased sanitary protocols. We believe these actions offer the best protection for our employees and customers, an enhance our ability to continue providing our banking services.
Financial results this quarter included several items linked to the impact of the COVID-19 pandemic. Most significantly, we recognized an impairment included in noninterest expense of $742.4 million, of which $622.4 million stemmed from goodwill related to the acquisition of Great Western Bank in 2008 by National Australia Bank, $118.2 million from goodwill related to subsequent acquisitions and $1.8 million from certain intangible assets, which were considered impaired given the market and valuation disruption during the quarter. The expense was offset in part by a related benefit from income taxes of $29.3 million.
In addition, the COVID-19 impacts included $73.8 million in several credit and other related charges for loan and other real estate reserves, including a $59.7 million charge for collectively evaluated allowance increases in provision expense under the incurred loss model, $7.1 million and $3.3 million of charges for fair value credit risk and derivative reserves in noninterest income, respectively, a $3.3 million write down on an OREO hotel property negatively impacted by COVID-19 pandemic travel restrictions, and $0.4 million of charges for the reserve on unfunded commitments in noninterest expenses. All of these pretax expenses are offset in part by a related benefit from income taxes of $17.2 million. See also the "Non-GAAP Financial Measures and Reconciliation" section in this document for further discussion of the above items.
————————————————————————————————————————————————————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 Thursday, April 30, 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.