Great Western Bancorp, Inc. Announces Earnings for the Quarter Ending on December 31, 2021

Rhea-AI Summary

Great Western Bancorp reported a net income of $39.2 million, or $0.71 per diluted share, for Q4 2021, down from $51.9 million or $0.93 per share in Q3 2021. Net interest income was $95.3 million, with a net interest margin of 3.05%. Total loans decreased to $8.13 billion, impacted by a reduction in PPP loans. However, total deposits increased to $11.76 billion. The company has improved asset quality with a 12.8% decrease in nonperforming assets. A merger with First Interstate Bancorp is anticipated to close around February 1, 2022.

Positive

• Net income of $39.2 million, down from $51.9 million.
• Total deposits increased by $450.4 million to $11.76 billion.
• Nonperforming assets decreased by 12.8%.
• Merger with First Interstate Bancorp expected to close on February 1, 2022.

Negative

• Net income decreased from $51.9 million to $39.2 million.
• Total loans decreased by $50.8 million.
• Net charge-offs increased to $9.7 million.
• Net interest margin decreased to 3.05% from 3.10%.

Highlights for the Quarter Ending on December 31, 2021 (all quarterly comparisons in this document refer to the quarter ending on September 30, 2021, except as noted)

• Net income of $39.2 million, or $0.71 per diluted share, down from $51.9 million, or $0.93 per diluted share
• Net interest income¹ of $95.3 million, up from $95.1 million, with net interest margin¹ of 3.05%, down from 3.10%
• Total loans of $8.13 billion, down $50.8 million, including a reduction of $121.9 million in Paycheck Protection Program ("PPP") loans
  • $75.1 million of criticized loans secured by hotels, including $69.4 million substandard, were written down to $65.8 million and transferred to held for sale after becoming subject to a sale agreement that closed in January
• Total deposits of $11.76 billion, up $450.4 million
• Allowance for credit losses ("ACL") of $236.3 million, down from $246.0 million, and a ratio of ACL to total loans of 2.91%, down from 3.01%
• Net charge-offs of $9.7 million, or 0.47% of average total loans (annualized), up from $4.1 million and 0.20%, respectively
  • Excluding the impact from the sale of loans secured by hotels, net charge-offs were $0.4 million
• Nonperforming assets of $176.5 million, down $25.9 million, or 12.8%
• Total capital ratio of 16.5%, up from 16.3%; tier 1 capital ratio of 15.3%, up from 15.1%; common equity tier 1 capital ratio of 14.5%, up from 14.3%
• Return on average common equity of 12.9%

SIOUX FALLS, S.D.--(BUSINESS WIRE)-- Great Western Bancorp, Inc. (NYSE: GWB) ("GWBI" or the "Company") today reported net income of $39.2 million, or $0.71 per diluted share, for the quarter ending on December 31, 2021, compared to net income of $51.9 million, or $0.93 per diluted share, for the previous quarter.

"We had a great start to the new fiscal year with continued asset quality improvement punctuated by core loan growth," said Mark Borrecco, President and Chief Executive Officer. "Asset quality improved further with a 12.8% reduction in nonperforming assets and an 8.7% reduction in criticized loans held for investment, and loans excluding PPP grew $71.1 million, or $190.0 million when excluding criticized loan repayments and reduced mortgage warehouse line balances.

Our recent performance positions us well as we approach the consummation of our partnership with First Interstate. We look forward to being able to better support our customers and communities."

Pending Merger of First Interstate Bancorp and Great Western Bancorp

On September 16, 2021, First Interstate BancSystem, Inc. (NASDAQ: FIBK) (“FIBK”), parent company of First Interstate Bank, and GWBI, parent company of Great Western Bank, announced they had entered into a definitive agreement under which the companies will combine in an all‐stock transaction. Under the terms of the agreement, which was unanimously approved by both companies’ Boards of Directors, GWBI will merge into FIBK and the combined holding company and bank will operate under the First Interstate name and brand with the company’s headquarters remaining in Billings, Montana. With regulatory and stockholder approvals having been obtained, and subject to satisfaction of the closing conditions set forth in the agreement, the transaction is expected to close on or around February 1, 2022.

Net Interest Income and Net Interest Margin¹

Net interest income was $95.3 million for the quarter, up $0.2 million, while net interest margin was 3.05%, a 5 basis point decrease from 3.10%. Adjusted net interest income², which includes derivative interest expense recognized in noninterest income, was $92.4 million, up $0.4 million, and adjusted net interest margin² was 2.95%, a 5 basis point decrease from 3.00%. Loan interest reflects a $1.0 million net decrease largely related to lower loan yields, partially offset by a $0.3 million increase in recoveries of interest on nonaccrual loans, all partially offset with a $0.9 million increase in securities and other interest driven largely by increased volumes. The increase in interest income was partially offset by a $0.1 million decrease in time deposit interest combined with a net $0.1 million decrease in interest on other interest bearing deposits. The decrease in time deposit interest resulted from a decrease in volumes and a 4 basis point decrease in yield to 0.33%, while the decrease in interest on other interest bearing deposits was driven primarily by a 1 basis point decrease in yield to 0.10%. The 5 basis point decrease in adjusted net interest margin² was driven by a 5 basis point decrease from excess liquidity and a 4 basis point net decrease from lower loan yields, partially offset by a 4 basis point increase from the impact of PPP fee amortization and recovery of interest on nonaccrual loans.

Noninterest Income

Noninterest income was $19.4 million for the quarter, up $3.5 million from the prior quarter. This increase includes a net $0.4 million increase in adjustments for loans and derivatives accounted for at fair value. The remaining increase was driven by a $2.4 million increase from swap fee revenue sharing and a $1.0 million increase in service charges from seasonal crop insurance premiums and new revenue from redesigned deposit products, partially offset by a $0.3 million combined decrease from slightly lower wealth management fees, mortgage income and other income.

Noninterest Expense

Noninterest expense was $62.2 million for the quarter, down $1.5 million from the prior quarter. The decrease was driven by $6.2 million decrease in professional fees due to lower merger-related consulting costs and lower examination accruals, a $0.5 million decrease in advertising costs due to lower spend ahead of the merger, and a $0.4 million decrease in occupancy and equipment costs related to rent and utilities. These were partially offset by a $1.8 million increase in other repossessed property expenses driven primarily by lower gains on sale and a $3.7 million increase in salaries and benefits driven largely by retention costs and share-based compensation.

The efficiency ratio² was 54.0% for the quarter, compared to 57.2% for the prior quarter.

Provision for Income Taxes

Income tax expense was $10.8 million for the quarter, down $3.9 million from the prior quarter, yielding an effective rate of 21.6% compared to 22.1%.

Loans and Deposits

Total loans outstanding were $8.13 billion as of December 31, 2021, down $50.8 million from the prior quarter. The decrease in loans during the quarter was driven by a $121.9 million decrease in PPP loans, an $85.4 million decrease from repayments on several criticized loans, and a $33.5 million net decrease in warehouse lines of credit, all partially offset by $190.0 million net increase from increased agricultural loan volumes related to end of year tax planning and increased commercial and construction loan originations. Total loans outstanding include loans secured by hotels with a principal balance of $75.1 million, of which $69.4 million were substandard and $4.5 million were special mention, that were subject to an agreement to sell. These loans were transferred to held for sale and written down to their estimated fair value of $65.8 million at December 31, 2021, representing the proceeds expected to be received in January 2022. The outstanding PPP loan balance was $90.1 million as of December 31, 2021, down from $212.0 million in the prior quarter.

Total deposits were $11.76 billion as of December 31, 2021, up $450.4 million from the prior quarter, driven by a $235.0 million increase in noninterest-bearing deposits and a $215.4 million increase in interest-bearing deposits.

Asset Quality

The ACL was $236.3 million as of December 31, 2021, down $9.7 million from $246.0 million in the prior quarter. The provision for credit losses on loans was $1.0 million for the quarter, compared to a $20.9 million benefit in the prior quarter.

The ratio of ACL to total loans was 2.91% as of December 31, 2021, down from 3.01% in the prior quarter. Excluding PPP loans, the ratio was 2.94% for the current quarter, down from 3.09% in the prior quarter.

Net charge-offs were $9.7 million, or 0.47% of average total loans (annualized) for the quarter, up $5.6 million and 27 basis points from the prior quarter, respectively. Excluding the impact from the sale of loans secured by hotels, net charge-offs were $0.4 million, or 0.02% of average total loans (annualized).

Included within total loans are approximately $505.1 million of loans with long-term, fixed rate structures for which management has elected the fair value accounting option, down from $524.5 million in the prior quarter. These loans are excluded from CECL and the ACL, but management has estimated that approximately $22.1 million of the fair value adjustment for these loans relates to credit risk, compared to $22.3 million in the prior quarter.

Nonaccrual loans were $158.7 million as of December 31, 2021, down $39.2 million from $197.9 million in the prior quarter, largely driven by repayments on multiple agricultural and commercial nonaccrual loans along with the transfer of one agricultural relationship to OREO.

Classified loans were $551.9 million as of December 31, 2021, down $53.0 million from $604.9 million in the prior quarter, and special mention loans were $321.3 million as of December 31, 2021, down $30.2 million. Included in the classified loan balance is $65.8 million of loans secured by hotels that were held for sale as of December 31, 2021, the sale of which closed in January 2022.

Total other repossessed property balances were $17.8 million as of December 31, 2021, up $13.4 million from the prior quarter due largely to the transfer of an agricultural relationship from nonaccrual to OREO.

A summary of total credit-related charges incurred during the current, previous and comparable three month periods is presented below:

GREAT WESTERN BANCORP, INC.
Summary of Credit-Related Charges (Unaudited)
		For the three months ended:
Item	Included within F/S Line Item(s):	December 31, 2021			September 30, 2021			December 31, 2020
		(dollars in thousands)
Provision for (reversal of) credit losses	Provision for credit losses	$	988		$	(20,934	)	$	11,899
Net other repossessed property charges (income)	Net loss on repossessed property and other related expenses		464			(1,313	)		345
Net recovery of interest income on nonaccrual loans	Interest income on loans		(1,811	)		(1,526	)		(2,913	)
Net realized credit loss on derivatives	Change in fair value of FVO loans and related derivatives		—			—			210
Loan fair value adjustment related to credit	Change in fair value of FVO loans and related derivatives		(255	)		(990	)		1,464
Total credit-related charges		$	(614	)	$	(24,763	)	$	11,005

We continue to evaluate the impact of the COVID-19 pandemic on our loan portfolio. Industries such as hotels & resorts (excluding casino hotels), casino hotels, restaurants, arts and entertainment, oil & energy, retail malls, airlines and healthcare have experienced varied business disruptions due to COVID-19. Since the beginning of the pandemic we have been closely monitoring the following loan segments (excluding PPP and held for sale loans) given elevated industry risk from COVID-19: hotels & resorts (excluding casino hotels) with $539.5 million, or 6.7% of total loans, restaurants with $141.7 million, or 1.8% of total loans, arts and entertainment with $149.3 million, or 1.9% of total loans, senior care with $340.7 million, or 4.2% of total loans, and skilled nursing with $198.3 million, or 2.5% of total loans, all as of December 31, 2021, with $192.1 million, or 2.4%, of these loans being classified as of December 31, 2021 and loan exposure in other segments of the identified industries being either immaterial or having not shown general distress thus far.

Capital

Total capital and tier 1 capital ratios were 16.5% and 15.3%, respectively, as of December 31, 2021, compared to 16.3% and 15.1% as of September 30, 2021. The common equity tier 1 capital and tier 1 leverage ratios were 14.5% and 10.7%, respectively, as of December 31, 2021, compared to 14.3% and 10.6% as of September 30, 2021. All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized."

At the time of the anticipated February 1, 2022 merger closing, GWBI shares will be exchanged for shares of FIBK Class A common stock and accordingly will be eligible to receive any dividends on FIBK Class A common stock that are declared by the FIBK board of directors with a record date after the effective date of the merger.

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 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, which involve inherent risks and uncertainties. Statements about GWBI’s, FIBK's or the combined company'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 GWBI’s expected performance and strategy, strategies for managing troubled loans, the appropriateness of the ACL, the impact on the business arising from the COVID-19 pandemic, the interest rate environment and the business combination transaction between GWBI and FIBK (the "Transaction") 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. In addition to factors previously disclosed in GWBI's and FIBK's reports filed with the U.S. Securities and Exchange Commission (the "SEC") and those identified elsewhere in this press release, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: the occurrence of any event, change or other circumstance that could give rise to the right of one or both of the parties to terminate the definitive merger agreement between GWBI and FIBK; the outcome of any legal proceedings that may be instituted against GWBI or FIBK; the possibility that the Transaction does not close when expected, or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the risk that the benefits from the Transaction may not be fully realized or may take longer to realize than expected, including as a result of changes in, or problems arising from, general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which GWBI and FIBK operate; the ability to promptly and effectively integrate the businesses of GWBI and FIBK; the possibility that the Transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; reputational risk and potential adverse reactions of GWBI's or FIBK's customers, employees or other business partners, including those resulting from the announcement or completion of the Transaction; the dilution caused by FIBK's issuance of additional shares of its capital stock in connection with the Transaction; the diversion of management's attention and time from ongoing business operations and opportunities on merger-related matters; and the impact of the global COVID-19 pandemic on GWBI's and FIBK's businesses, the ability to complete the Transaction or any of the other foregoing risks. These factors are not necessarily all of the factors that could cause GWBI's, FIBK's or the combined company's actual results, performance, or achievements to differ materially from those expressed in or implied by any of the forward-looking statements. Other unknown or unpredictable factors also could harm GWBI's, FIBK's or the combined company's results.

All forward-looking statements attributable to GWBI, FIBK or the combined company, or persons acting on GWBI's or FIBK's behalf, are expressly qualified in their entirety by the cautionary statements set forth above. Forward-looking statements speak only as of the date they are made and GWBI and FIBK do not undertake or assume any obligation to update publicly any of these statements to reflect actual results, new information or future events, changes in assumptions, or changes in other factors affecting forward-looking statements, except to the extent required by applicable law. If GWBI or FIBK update one or more forward-looking statements, no inference should be drawn that GWBI or FIBK will make additional updates with respect to those or other forward-looking statements. Further information regarding GWBI, FIBK and the factors which could affect the forward-looking statements contained herein can be found in GWBI's Annual Report on Form 10-K for the fiscal year ended September 30, 2021, and in other filings with the SEC and in FIBK's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, Form 10-Q for the quarters ended March 31, 2021, June 30, 2021, and September 30, 2021, and its other filings with the SEC.

GREAT WESTERN BANCORP, INC.
Consolidated Financial Data (Unaudited)
	At and for the three months ended:
	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
	(dollars in thousands, except share and per share amounts)
Operating Data:
Interest income (FTE)	$	99,563		$	99,500		$	104,219		$	110,574		$	117,195
Interest expense	$	4,243		$	4,440		$	5,161		$	6,127		$	7,689
Noninterest income	$	19,389		$	15,852		$	19,371		$	17,193		$	14,148
Noninterest expense	$	62,169		$	63,699		$	60,505		$	59,103		$	57,449
Provision for (reversal of) credit losses	$	988		$	(20,934	)	$	(20,699	)	$	(5,000	)	$	11,899
Net income	$	39,221		$	51,891		$	58,749		$	51,299		$	41,319
Adjusted net income ¹	$	39,221		$	51,891		$	58,749		$	51,299		$	41,319
Common shares outstanding		55,199,193			55,116,503			55,116,095			55,111,403			55,105,105
Weighted average diluted common shares outstanding		55,538,895			55,546,917			55,524,979			55,456,399			55,247,343
Earnings per common share - diluted	$	0.71		$	0.93		$	1.06		$	0.93		$	0.75
Adjusted earnings per common share - diluted ¹	$	0.71		$	0.93		$	1.06		$	0.93		$	0.75
Performance Ratios:
Net interest margin (FTE) ¹ ²		3.05	%		3.10	%		3.23	%		3.51	%		3.63	%
Adjusted net interest margin (FTE) ¹ ²		2.95	%		3.00	%		3.13	%		3.40	%		3.52	%
Return on average total assets ²		1.19	%		1.59	%		1.81	%		1.64	%		1.30	%
Return on average common equity ²		12.9	%		17.5	%		21.2	%		19.8	%		15.2	%
Return on average tangible common equity ¹ ²		13.0	%		17.7	%		21.4	%		20.0	%		15.3	%
Efficiency ratio ¹		54.0	%		57.2	%		50.9	%		48.4	%		46.2	%
Capital:
Tier 1 capital ratio		15.3	%		15.1	%		14.5	%		13.5	%		12.7	%
Total capital ratio		16.5	%		16.3	%		16.0	%		15.1	%		14.3	%
Tier 1 leverage ratio		10.7	%		10.6	%		10.1	%		10.0	%		9.7	%
Common equity tier 1 ratio		14.5	%		14.3	%		13.7	%		12.8	%		12.0	%
Tangible common equity / tangible assets ¹		9.1	%		9.3	%		8.8	%		8.4	%		8.3	%
Book value per share - GAAP	$	22.15		$	21.80		$	21.07		$	19.85		$	19.39
Tangible book value per share ¹	$	22.07		$	21.71		$	20.97		$	19.75		$	19.28
Asset Quality:
Nonaccrual loans	$	158,651		$	197,936		$	210,083		$	284,541		$	292,357
Other repossessed property	$	17,840		$	4,479		$	11,498		$	17,529		$	18,086
Nonaccrual loans / total loans		1.95	%		2.42	%		2.48	%		3.16	%		3.07	%
Net charge-offs (recoveries)	$	9,718		$	4,140		$	5,211		$	7,841		$	30,358
Net charge-offs (recoveries) / average total loans ²		0.47	%		0.20	%		0.24	%		0.34	%		1.22	%
Allowance for credit losses / total loans		2.91	%		3.01	%		3.19	%		3.28	%		3.24	%
Special mention loans	$	321,292		$	351,499		$	374,782		$	512,320		$	453,484
Classified loans (substandard or worse) ³	$	551,935		$	604,877		$	612,175		$	673,854		$	716,948
Criticized loans (special mention or worse) ³	$	873,227		$	956,376		$	986,957		$	1,186,174		$	1,170,432
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.
3 Includes $65.8 million, $0.0 million and $0.0 million of loans held for sale at December 31, 2021 , September 30, 2021 and December 31, 2020, respectively.

GREAT WESTERN BANCORP, INC.
Consolidated Income Statement (Unaudited)
	At and for the three months ended:
	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
	(dollars in thousands)
Interest income
Loans	$	87,236		$	88,052		$	93,328		$	100,274		$	107,323
Investment securities		9,843			8,916			8,642			8,318			8,119
Federal funds sold and other		970			958			654			405			155
Total interest income		98,049			97,926			102,624			108,997			115,597
Interest expense
Deposits		2,580			2,778			3,505			4,479			5,992
FHLB advances and other borrowings		877			878			867			856			880
Subordinated debentures and subordinated notes payable		786			784			789			792			817
Total interest expense		4,243			4,440			5,161			6,127			7,689
Net interest income		93,806			93,486			97,463			102,870			107,908
Provision for (reversal of) credit losses ¹		988			(20,934	)		(20,699	)		(5,000	)		11,899
Net interest income after provision for loan and lease losses		92,818			114,420			118,162			107,870			96,009
Noninterest income
Service charges and other fees		10,922			9,901			9,005			8,599			9,624
Wealth management fees		3,541			3,659			3,477			3,182			3,029
Mortgage banking income, net		1,297			1,400			2,157			3,690			4,090
Net gain (loss) on sale of securities and other assets		6			2			—			(1	)		248
Derivative interest expense		(2,939	)		(3,035	)		(3,117	)		(3,182	)		(3,393	)
Change in fair value of FVO loans and related derivatives		254			988			4,110			42			(1,672	)
Other derivative income		4,312			817			1,530			3,255			898
Other		1,996			2,120			2,209			1,608			1,324
Total noninterest income		19,389			15,852			19,371			17,193			14,148
Noninterest expense
Salaries and employee benefits		41,116			37,370			40,239			39,125			37,554
Data processing and communication		7,273			7,701			7,054			6,545			6,226
Occupancy and equipment		5,080			5,441			5,105			5,511			5,213
Professional fees		2,857			9,039			4,644			3,734			3,915
Advertising		645			1,121			602			477			556
Net loss (gain) on repossessed property and other related expenses		464			(1,313	)		(760	)		(54	)		345
Goodwill and intangible assets impairment		—			—			—			—			—
Other		4,734			4,340			3,621			3,765			3,640
Total noninterest expense		62,169			63,699			60,505			59,103			57,449
Income before income taxes		50,038			66,573			77,028			65,960			52,708
Provision for income taxes		10,817			14,682			18,279			14,661			11,389
Net income	$	39,221		$	51,891		$	58,749		$	51,299		$	41,319
1 For the three months ended December 31, 2021, this line includes a $1.0 million increase in provision for unfunded commitments reserve. For the three months ended December 31, 2020, this line includes a $0.1 million reversal of provision for unfunded commitments reserve.

GREAT WESTERN BANCORP, INC.
Summarized Consolidated Balance Sheet (Unaudited)
	As of
	December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021				December 31, 2020
	(dollars in thousands)
Assets
Cash and cash equivalents	$	1,936,768			$	1,552,260			$	1,756,345			$	1,383,071			$	1,061,796
Investment securities		2,798,855				2,710,953				2,383,959				2,265,261				2,059,615
Total loans ¹		8,134,243				8,185,053				8,477,783				9,011,352				9,517,876
Allowance for credit losses		(236,320	)			(246,038	)			(270,298	)			(295,953	)			(308,794	)
Loans, net		7,897,923				7,939,015				8,207,485				8,715,399				9,209,082
Other assets		718,014				709,240				722,440				650,008				483,890
Total assets	$	13,351,560			$	12,911,468			$	13,070,229			$	13,013,739			$	12,814,383
Liabilities and stockholders' equity
Noninterest-bearing deposits	$	2,843,561			$	2,608,579			$	2,958,488			$	2,845,309			$	2,858,455
Interest-bearing deposits		8,917,314				8,701,887				8,579,289				8,718,745				8,514,863
Total deposits		11,760,875				11,310,466				11,537,777				11,564,054				11,373,318
Securities sold under agreements to repurchase		72,444				91,289				80,167				63,153				80,355
FHLB advances and other borrowings		120,000				120,000				120,000				120,000				120,000
Other liabilities		175,345				188,234				171,216				172,613				172,209
Total liabilities		12,128,664				11,709,989				11,909,160				11,919,820				11,745,882
Stockholders' equity		1,222,896				1,201,479				1,161,069				1,093,919				1,068,501
Total liabilities and stockholders' equity	$	13,351,560			$	12,911,468			$	13,070,229			$	13,013,739			$	12,814,383
1 Total loans includes $67.6 million, $2.9 million and $11.6 million of loans held for sale at December 31, 2021, September 30, 2021 and December 31, 2020, respectively

GREAT WESTERN BANCORP, INC.
Loan Portfolio Summary (Unaudited)
	As of						Fiscal year-to-date:
	December 31, 2021			September 30, 2021			Change ($)			Change (%)
	(dollars in thousands)
Construction and development	$	468,590		$	394,712		$	73,878		18.7	%
Owner-occupied CRE		1,353,872			1,357,715			(3,843	)	(0.3	) %
Non-owner-occupied CRE ¹		2,246,597			2,191,848			54,749		2.5	%
Multifamily residential real estate		511,851			539,063			(27,212	)	(5.0	) %
Total commercial real estate		4,580,910			4,483,338			97,572		2.2	%
Agriculture		1,484,201			1,428,614			55,587		3.9	%
Commercial non-real estate		1,335,920			1,535,394			(199,474	)	(13.0	) %
Residential real estate ²		637,629			628,098			9,531		1.5	%
Consumer and other ³		95,583			109,609			(14,026	)	(12.8	) %
Total loans	$	8,134,243		$	8,185,053		$	(50,810	)	(0.6	) %
1 Non-owner-occupied CRE includes $65.8 million and $0.0 million of loans held for sale at December 31, 2021 and September 30, 2021, respectively.
2 Residential real estate includes $1.8 million and $2.9 million of loans held for sale at December 31, 2021 and September 30, 2021, respectively.
3 Other loans primarily include consumer and commercial credit cards, customer deposit account overdrafts, leases and loans in process.

GREAT WESTERN BANCORP, INC.
Net Interest Margin (FTE) (Unaudited)
	Three Months Ended
	December 31, 2021							September 30, 2021							December 31, 2020
	Average Balance		Interest (FTE)		Yield / Cost ¹			Average Balance		Interest (FTE)		Yield / Cost ¹			Average Balance		Interest (FTE)		Yield / Cost ¹
	(dollars in thousands)
Assets
Interest-bearing bank deposits	$	1,586,681	$	639	0.16	%		$	1,466,674	$	607	0.16	%		$	492,105	$	155	0.12	%
Other interest-earning assets		131,069		331	1.00	%			127,321		351	1.09	%			—		—	—	%
Investment securities		2,758,162		9,843	1.42	%			2,531,714		8,916	1.40	%			1,905,771		8,119	1.69	%
Non-ASC 310-30 loans, net		7,931,967		88,750	4.44	%			8,053,490		89,626	4.42	%			9,567,679		108,921	4.52	%
Loans, net		7,931,967		88,750	4.44	%			8,053,490		89,626	4.42	%			9,567,679		108,921	4.52	%
Total interest-earning assets		12,407,879		99,563	3.18	%			12,179,199		99,500	3.24	%			11,965,555		117,195	3.89	%
Noninterest-earning assets		721,290							741,138							614,946
Total assets	$	13,129,169	$	99,563	3.01	%		$	12,920,337	$	99,500	3.05	%		$	12,580,501	$	117,195	3.70	%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	2,715,486						$	2,898,276						$	2,664,117
Interest-bearing deposits		8,104,781	$	1,979	0.10	%			7,696,542	$	2,066	0.11	%			7,278,073	$	3,966	0.22	%
Time deposits		713,736		601	0.33	%			759,420		712	0.37	%			1,187,148		2,026	0.68	%
Total deposits		11,534,003		2,580	0.09	%			11,354,238		2,778	0.10	%			11,129,338		5,992	0.21	%
Securities sold under agreements to repurchase		81,739		15	0.07	%			88,511		17	0.08	%			78,639		18	0.09	%
FHLB advances and other borrowings		120,000		862	2.85	%			120,032		861	2.85	%			120,000		862	2.85	%
Subordinated debentures and subordinated notes payable		108,981		786	2.86	%			108,947		784	2.85	%			108,846		817	2.98	%
Total borrowings		310,720		1,663	2.12	%			317,490		1,662	2.08	%			307,485		1,697	2.19	%
Total interest-bearing liabilities		11,844,723	$	4,243	0.14	%			11,671,728	$	4,440	0.15	%			11,436,823	$	7,689	0.27	%
Noninterest-bearing liabilities		77,517							71,844							61,601
Stockholders' equity		1,206,929							1,176,765							1,082,077
Total liabilities and stockholders' equity	$	13,129,169						$	12,920,337						$	12,580,501
Net interest spread					2.87	%						2.90	%						3.43	%
Net interest income and net interest margin (FTE)			$	95,320	3.05	%				$	95,060	3.10	%				$	109,506	3.63	%
Less: Tax equivalent adjustment				1,514							1,574							1,598
Net interest income and net interest margin - ties to Statements of Comprehensive Income			$	93,806	3.00	%				$	93,486	3.05	%				$	107,908	3.58	%
1 Annualized for all partial-year periods.

Non-GAAP Financial Measures and Reconciliation

We rely on certain non-GAAP financial measures in making financial and operational decisions about our business. We believe that each of the non-GAAP financial measures presented is helpful in highlighting trends in our business, financial condition and results of operations which might not otherwise be apparent when relying solely on our financial results calculated in accordance with 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, pre-tax pre-provision income ("PTPP"), tangible net income and return on average tangible common equity. Our adjusted net income and adjusted earnings per common share exclude the after-tax effect of items with a significant impact to net income that we do not believe to be recurring in nature, (e.g., one-time acquisition expenses as well as the second quarter of fiscal year 2020 COVID-19 impact on credit and other related charges and the impairment of goodwill and certain intangible assets). Our PTPP income excludes total provision for credit losses, credit gains/losses on loans held for investment measured at fair value and goodwill impairment. Our tangible net income and return on average tangible common equity exclude the effects of amortization expense relating to intangible assets and our acquisitions of other institutions. We believe these measures help highlight trends associated with our financial condition and results of operations by providing net income and return information excluding significant nonrecurring items (for adjusted net income and adjusted earnings per common share), measure our ability to generate capital by providing net income excluding credit losses (for PTPP income) and measure net income 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 loans and adjusted yield on loans. We adjust each of these four measures to include the derivative interest expense we use to manage interest rate risk on certain of our loans, which we believe economically offsets the interest income earned on the loans. Similarly, we evaluate our operational efficiency based on our efficiency ratio, which excludes the effect of amortization of core deposit and other intangibles (a non-cash expense item) and includes the tax benefit associated with our tax-advantaged loans.

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

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

GREAT WESTERN BANCORP, INC.
Reconciliation of Non-GAAP Measures (Unaudited)
	At and for the three months ended:
	December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020
	(dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income (loss) - GAAP	$	39,221		$	51,891		$	58,749		$	51,299		$	41,319
Weighted average diluted common shares outstanding		55,538,895			55,546,917			55,524,979			55,456,399			55,247,343
Earnings per common share - diluted	$	0.71		$	0.93		$	1.06		$	0.93		$	0.75
Pre-tax pre-provision income ("PTPP"):
Income before income taxes - GAAP	$	50,038		$	66,573		$	77,028		$	65,960		$	52,708
Add: Provision for (reversal of) credit losses - GAAP		988			(20,934	)		(20,699	)		(5,000	)		11,899
Add: Change in fair value of FVO loans and related derivatives - GAAP		(254	)		(988	)		(4,110	)		(42	)		1,672
Pre-tax pre-provision income	$	50,772		$	44,651		$	52,219		$	60,918		$	66,279
Tangible net income and return on average tangible common equity:
Net income (loss) - GAAP	$	39,221		$	51,891		$	58,749		$	51,299		$	41,319
Add: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets, net of tax		239			239			253			261			261
Tangible net income	$	39,460		$	52,130		$	59,002		$	51,560		$	41,580
Average common equity	$	1,206,929		$	1,176,765		$	1,113,791		$	1,049,388		$	1,082,077
Less: Average goodwill and other intangible assets		5,004			5,244			5,485			5,742			6,004
Average tangible common equity	$	1,201,925		$	1,171,521		$	1,108,306		$	1,043,646		$	1,076,073
Return on average common equity *		12.9	%		17.5	%		21.2	%		19.8	%		15.2	%
Return on average tangible common equity **		13.0	%		17.7	%		21.4	%		20.0	%		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), on non-ASC 310-30 loans:
Net interest income - GAAP	$	93,806		$	93,486		$	97,463		$	102,870		$	107,908
Add: Tax equivalent adjustment		1,514			1,574			1,595			1,577			1,598
Net interest income (FTE)		95,320			95,060			99,058			104,447			109,506
Add: Derivative interest expense		(2,939	)		(3,035	)		(3,117	)		(3,182	)		(3,393	)
Adjusted net interest income (FTE)	$	92,381		$	92,025		$	95,941		$	101,265		$	106,113
Average interest-earning assets	$	12,407,879		$	12,179,199		$	12,299,046		$	12,073,497		$	11,965,555
Net interest margin (FTE) *		3.05	%		3.10	%		3.23	%		3.51	%		3.63	%
Adjusted net interest margin (FTE) **		2.95	%		3.00	%		3.13	%		3.40	%		3.52	%
* Calculated as net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.
** Calculated as adjusted net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.
Adjusted interest income and adjusted yield (fully-tax equivalent basis), on non-ASC 310-30 loans:
Interest income - GAAP	$	87,236		$	88,052		$	93,328		$	100,274		$	107,323
Add: Tax equivalent adjustment		1,514			1,574			1,595			1,577			1,598
Interest income (FTE)		88,750			89,626			94,923			101,851			108,921
Add: Derivative interest expense		(2,939	)		(3,035	)		(3,117	)		(3,182	)		(3,393	)
Adjusted interest income (FTE)	$	85,811		$	86,591		$	91,806		$	98,669		$	105,528
Average non-ASC310-30 loans	$	7,931,967		$	8,053,490		$	8,500,919		$	9,016,221		$	9,567,679
Yield (FTE) *		4.44	%		4.42	%		4.48	%		4.58	%		4.52	%
Adjusted yield (FTE) **		4.29	%		4.27	%		4.33	%		4.44	%		4.38	%
* 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	$	113,195		$	109,338		$	116,834		$	120,063		$	122,056
Add: Tax equivalent adjustment		1,514			1,574			1,595			1,577			1,598
Total revenue (FTE)	$	114,709		$	110,912		$	118,429		$	121,640		$	123,654
Noninterest expense	$	62,169		$	63,699		$	60,505		$	59,103		$	57,449
Less: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets		239			239			253			261			261
Tangible noninterest expense	$	61,930		$	63,460		$	60,252		$	58,842		$	57,188
Efficiency ratio *		54.0	%		57.2	%		50.9	%		48.4	%		46.2	%
* 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	$	1,222,896		$	1,201,479		$	1,161,069		$	1,093,919		$	1,068,501
Less: Goodwill and other intangible assets		4,912			5,151			5,390			5,643			5,904
Tangible common equity	$	1,217,984		$	1,196,328		$	1,155,679		$	1,088,276		$	1,062,597
Total assets	$	13,351,560		$	12,911,468		$	13,070,229		$	13,013,739		$	12,814,383
Less: Goodwill and other intangible assets		4,912			5,151			5,390			5,643			5,904
Tangible assets	$	13,346,648		$	12,906,317		$	13,064,839		$	13,008,096		$	12,808,479
Tangible common equity to tangible assets		9.1	%		9.3	%		8.8	%		8.4	%		8.3	%
Tangible book value per share:
Total stockholders' equity	$	1,222,896		$	1,201,479		$	1,161,069		$	1,093,919		$	1,068,501
Less: Goodwill and other intangible assets		4,912			5,151			5,390			5,643			5,904
Tangible common equity	$	1,217,984		$	1,196,328		$	1,155,679		$	1,088,276		$	1,062,597
Common shares outstanding		55,199,193			55,116,503			55,116,095			55,111,403			55,105,105
Book value per share - GAAP	$	22.15		$	21.80		$	21.07		$	19.85		$	19.39
Tangible book value per share	$	22.07		$	21.71		$	20.97		$	19.75		$	19.28

¹ All references to net interest income and net interest margin are presented on a fully-tax equivalent basis unless otherwise noted.

² This is a non-GAAP financial measure management believes is helpful to understanding trends in our 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220127005764/en/

GREAT WESTERN BANCORP, INC.

Investor Relations Contact:

Seth Artz, 605.988.9253

seth.artz@greatwesternbank.com



Media Contact:

Lexie Feterl, 605.978.5829

alexis.feterl@greatwesternbank.com

Source: Great Western Bancorp, Inc.

FAQ

What was Great Western Bancorp's net income for the fourth quarter of 2021?

Great Western Bancorp reported a net income of $39.2 million, or $0.71 per diluted share, for Q4 2021.

How did Great Western Bancorp's total loans change in Q4 2021?

Total loans decreased by $50.8 million to $8.13 billion in Q4 2021.

What is the expected closing date for the merger between Great Western Bancorp and First Interstate Bancorp?

The merger is anticipated to close around February 1, 2022.

What was the status of Great Western Bancorp's net interest margin in Q4 2021?

The net interest margin decreased to 3.05% in Q4 2021, down from 3.10% in Q3 2021.

How much did total deposits increase for Great Western Bancorp in Q4 2021?

Total deposits increased by $450.4 million to $11.76 billion in Q4 2021.