UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q




(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended ~~June 30,~~December 31, 2017
		Or
¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 001-36688

Great Western Bancorp, Inc.

(Exact name of registrant as specified in its charter)



Delaware		47-1308512
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

225 South Main Avenue Sioux Falls, South Dakota		57104
(Address of principal executive offices)		(Zip Code)

(605) 334-2548

Registrant’s telephone number, including area code

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer x	Accelerated filer o	Non-accelerated filer o (Do not check if a smaller reporting company)
Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of ~~August~~February 1, ~~2017,~~2018, the number of shares of the registrant’s Common Stock outstanding was ~~58,761,597.~~58,896,189.

GREAT WESTERN BANCORP, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

EXPLANATORY NOTE

Except as otherwise stated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to:

“we,” “our,” “us” and our “company” refers to Great Western Bancorp, Inc., a Delaware corporation, and its consolidated subsidiaries.

"our bank” refers to Great Western Bank, a South Dakota banking corporation;

“NAB” refers to National Australia Bank Limited, an Australian public company that was our ultimate parent company prior to our initial public offering in October 2014 and, until July 31,2015, was our principal stockholder;

our “states” refers to the nine states (Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) in which we currently conduct our business; and

our “footprint” refers to the geographic markets within our states in which we currently conduct our business.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. 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. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in “Item 1A. Risk Factors” or “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report or the following:

current and future economic and market conditions in the United States generally or in our states in particular, including the rate of growth and employment levels;

~~the effect of the current low~~our ability to anticipate interest rate ~~environment or~~ changes ~~in market~~and manage interest ~~rates;~~rate risk;

~~the geographic concentration of~~ our ~~operations,~~ability to achieve loan and ~~our concentration on originating business and agribusiness loans;~~deposit growth;

the relative strength or weakness of the commercial, agricultural and ~~commercial credit sectors and of the~~ real estate markets ~~in the markets in which~~where our borrowers are ~~located;~~located, including without limitation related asset and market prices;

declines in asset prices and the market prices for agricultural ~~products;~~products or changes in governmental support programs for the agricultural sector;

our ability to effectively execute our strategic plan and manage our growth;

our ability to successfully manage our credit risk and the sufficiency of our allowance for loan and lease loss;

our ability to ~~attract~~develop and ~~retain skilled employees or changes~~effectively use the quantitative models we rely upon in our ~~management personnel;~~business;

our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;

~~changes in the demand for our products and services;~~

~~the effectiveness of our~~operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cyber-security, technological changes, vendor problems, business interruption and ~~internal disclosure controls and procedures;~~fraud risks;

fluctuations in the values of our assets and liabilities and off-balance sheet exposures;

unanticipated changes in our ~~ability~~liquidity position, including but not limited to ~~attract and retain customer deposits;~~

changes in our access to sources of liquidity and capital to address our liquidity needs;

possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations;

~~our ability to identify and address cyber-security risks;~~

~~any failure or interruption of our information and communications systems;~~

~~our ability to keep pace with technological changes;~~

~~our ability to successfully develop and commercialize new or enhanced products and services;~~

possible impairment of our goodwill and other intangible assets, or any adjustment of the valuation of our deferred tax assets;

the effects of ~~problems encountered by other financial institutions;~~

~~the effects of~~ geopolitical instability, including war, terrorist attacks, and man-made and natural disasters;

~~the effects of the failure of any component of our business infrastructure provided by a third party;~~

the impact of, and changes in applicable laws, regulations and accounting standards, policies and ~~policies;~~

~~our likelihood of success in, and~~interpretations, including the impact of the Tax Cuts and Jobs Act of 2017;

legal, compliance and reputational risks, including litigation orand regulatory ~~actions;~~risks;

our inability to receive dividends from our bank and to service debt, pay dividends to our common stockholders and satisfy obligations as they become due;

expected cost savings in connection with the consolidation of recent acquisitions may not be fully realized or realized within the expected time frames, and deposit attrition, customer loss and revenue loss following completed acquisitions may be greater than expected;

our ability to meet our obligations as a public company, including our obligations under Section 404 of the Sarbanes-Oxley Act of 2002 to maintain an effective system of internal control over financial reporting;

~~damage to our reputation from any of the factors described above;~~ and

other risks and uncertainties inherent to our business, including those discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016.~~2017.

The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016.~~2017. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement to reflect events or circumstances occurring after the date on which the statement is made or to reflect the occurrence of unanticipated events.

PART I. FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)

GREAT WESTERN BANCORP, INC.

Consolidated Balance Sheets

(Dollars in Thousands, Except Share and Per Share Data)


	(Unaudited)						(Unaudited)
	June 30, 2017			September 30, 2016			December 31, 2017			September 30, 2017
Assets
Cash and due from banks	$	172,924		$	142,152		$	189,907		$	170,657
Interest-bearing bank deposits	154,977			382,459			107,689			189,739
Cash and cash equivalents	327,901			524,611			297,596			360,396
Securities available for sale	1,366,442			1,317,386			1,366,641			1,367,960
Loans, net of unearned discounts and deferred fees, including $61,789 and $73,272 of loans covered by FDIC loss share agreements at June 30, 2017 and September 30, 2016, respectively, and $1,049,548 and $1,131,111 of loans and written loan commitments at fair value under the fair value option at June 30, 2017 and September 30, 2016, respectively, and $11,504 and $12,918 of loans held for sale at June 30, 2017 and September 30, 2016, respectively	8,791,852			8,682,644
Loans, net of unearned discounts and deferred fees, including $53,388 and $57,537 of loans covered by FDIC loss share agreements at December 31, 2017 and September 30, 2017, respectively, and $980,144 and $1,016,576 of loans at fair value under the fair value option at December 31, 2017 and September 30, 2017, respectively, and $5,757 and $7,456 of loans held for sale at December 31, 2017 and September 30, 2017, respectively							9,165,373			8,968,553
Allowance for loan and lease losses	(64,214		)	(64,642		)	(64,023		)	(63,503		)
Net loans	8,727,638			8,618,002			9,101,350			8,905,050
Premises and equipment, including $5,074 and $8,112 of property held for sale at June 30, 2017 and September 30, 2016, respectively	114,219			118,506
Premises and equipment, including $1,111 and $5,147 of property held for sale at December 31, 2017 and September 30, 2017, respectively							107,731			112,209
Accrued interest receivable	45,478			49,531			54,817			53,176
Other repossessed property, including $0 and $106 of property covered by FDIC loss share agreements at June 30, 2017 and September 30, 2016, respectively	9,051			10,282
FDIC indemnification asset	6,985			10,777
Other repossessed property, including $86 and $0 of property covered by FDIC loss share agreements at December 31, 2017 and September 30, 2017, respectively							10,486			8,985
Goodwill	739,023			739,023			739,023			739,023
Core deposits and other intangibles	9,805			11,732
Loan servicing rights	4,530			5,781
Cash surrender value of life insurance policies	29,403			29,166			29,823			29,619
Net deferred tax assets	44,918			38,346			28,548			42,400
Other assets	40,791			58,037			70,566			71,193
Total assets	$	11,466,184		$	11,531,180		$	11,806,581		$	11,690,011
Liabilities and stockholders’ equity
Deposits
Noninterest-bearing	$	1,915,560		$	1,880,512		$	1,932,080		$	1,856,126
Interest-bearing	7,043,542			6,724,278			7,092,105			7,121,487
Total deposits	8,959,102			8,604,790			9,024,185			8,977,613
Securities sold under agreements to repurchase	123,851			141,688			116,884			132,636
FHLB advances and other borrowings	471,719			871,037			721,009			643,214
Subordinated debentures and subordinated notes payable	108,261			111,873			108,343			108,302
Fair value of derivatives	18,232			81,515
Accrued interest payable	5,006			4,074
Accrued expenses and other liabilities	47,030			52,812			68,287			73,246
Total liabilities	9,733,201			9,867,789			10,038,708			9,935,011
Stockholders’ equity
Common stock, $0.01 par value, authorized 500,000,000 shares; 58,761,597 shares issued and outstanding at June 30, 2017 and 58,693,304 shares issued and outstanding at September 30, 2016	587			587
Common stock, $0.01 par value, authorized 500,000,000 shares; 58,896,189 shares issued and outstanding at December 31, 2017 and 58,834,066 shares issued and outstanding at September 30, 2017							588			588
Additional paid-in capital	1,318,061			1,312,347			1,314,723			1,314,039
Retained earnings	419,838			344,923			463,207			445,747
Accumulated other comprehensive income (loss)	(5,503		)	5,534
Accumulated other comprehensive (loss)							(10,645		)	(5,374		)
Total stockholders' equity	1,732,983			1,663,391			1,767,873			1,755,000
Total liabilities and stockholders' equity	$	11,466,184		$	11,531,180		$	11,806,581		$	11,690,011

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Income (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)



	Three Months Ended
	December 31, 2017			December 31, 2016
Interest and dividend income
Loans	$	107,680		$	99,932
Taxable securities	6,494			5,878
Nontaxable securities	260			199
Dividends on securities	289			300
Federal funds sold and other	231			346
Total interest and dividend income	114,954			106,655
Interest expense
Deposits	10,998			7,290
Securities sold under agreements to repurchase	95			115
FHLB advances and other borrowings	2,069			1,271
Subordinated debentures and subordinated notes payable	1,170			1,088
Total interest expense	14,332			9,764
Net interest income	100,622			96,891
Provision for loan and lease losses	4,557			7,049
Net interest income after provision for loan and lease losses	96,065			89,842
Noninterest income
Service charges and other fees	13,178			13,837
Wealth management fees	2,185			2,254
Mortgage banking income, net	1,660			2,662
Net (loss) on sale of securities	(1		)	—
Net (decrease) in fair value of loans at fair value	(8,665		)	(64,001		)
Net realized and unrealized gain on derivatives	7,227			58,976
Other	1,090			1,930
Total noninterest income	16,674			15,658
Noninterest expense
Salaries and employee benefits	32,868			31,634
Data processing	5,896			5,677
Occupancy expenses	4,002			4,024
Professional fees	4,240			2,835
Communication expenses	988			1,040
Advertising	1,059			975
Equipment expense	846			798
Net loss recognized on repossessed property and other related expenses	214			658
Amortization of core deposits and other intangibles	426			839
Acquisition expenses	—			710
Other	4,329			3,347
Total noninterest expense	54,868			52,537
Income before income taxes	57,871			52,963
Provision for income taxes	28,641			16,060
Net income	$	29,230		$	36,903
Basic earnings per common share
Weighted average shares outstanding	58,902,629			58,750,522
Basic earnings per share	$	0.50		$	0.63
Diluted earnings per common share
Weighted average shares outstanding	59,087,729			58,991,905
Diluted earnings per share	$	0.49		$	0.63
Dividends per share
Dividends paid	$	11,770		$	9,981
Dividends per share	$	0.20		$	0.17

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in ~~Thousands, Except Share and Per Share Data)~~

Thousands)

Three Months Ended Nine Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Interest and dividend income
Loans $ 103,435
$ 93,749
$ 306,253
$ 269,137
Taxable securities 6,238
5,826
18,170
17,600
Nontaxable securities 269
61
710
85
Dividends on securities 296
396
839
832
Federal funds sold and other 163
157
728
326
Total interest and dividend income 110,401
100,189
326,700
287,980

Interest expense
Deposits 9,478
6,451
24,596
18,145
Securities sold under agreements to repurchase 86
124
298
395
FHLB advances and other borrowings 994
986
3,735
2,831
Subordinated debentures and subordinated notes payable 1,113
976
3,299
2,662
Total interest expense 11,671
8,537
31,928
24,033

Net interest income 98,730
91,652
294,772
263,947

Provision for loan and lease losses 5,796
5,372
16,854
11,892

Net interest income after provision for loan and lease losses 92,934
86,280
277,918
252,055

Noninterest income
Service charges and other fees 12,730
12,316
36,735
33,098
Wealth management fees 2,433
1,807
7,116
5,087
Mortgage banking income, net 1,828
1,669
6,130
4,143
Net gain (loss) on sale of securities —
134
44
(196 )
Net increase (decrease) in fair value of loans at fair value 6,060
14,198
(63,158 ) 35,253
Net realized and unrealized gain on derivatives (9,088 ) (21,925 ) 51,481
(53,379 )
Other 1,522
898
4,878
2,733
Total noninterest income 15,485
9,097
43,226
26,739

Noninterest expense
Salaries and employee benefits 32,868
28,352
96,872
78,417
Data processing 6,378
5,625
18,020
15,822
Occupancy expenses 4,057
4,002
12,437
11,436
Professional fees 4,141
3,327
10,535
9,087
Communication expenses 992
788
2,945
2,650
Advertising 1,059
1,047
3,029
3,015
Equipment expense 809
959
2,375
2,794
Net loss recognized on repossessed property and other related expenses 152
379
1,208
479
Amortization of core deposits and other intangibles 538
822
1,927
2,239
Acquisition expenses —
12,179
710
12,950
Other 3,928
3,742
11,254
11,408
Total noninterest expense 54,922
61,222
161,312
150,297
Income before income taxes 53,497
34,155
159,832
128,497
Provision for income taxes 18,437
7,795
52,707
41,002
Net income $ 35,060
$ 26,360
$ 107,125
$ 87,495

Other comprehensive income (loss) - change in net unrealized gain (loss) on securities available for sale (net of deferred income tax (expense) benefit of $(721) and $(2,649) for the three months ended June 30, 2017 and 2016, respectively and $6,764 and $(4,115) for the nine months ended June 30, 2017 and 2016, respectively) 1,175
4,322
(11,037 ) 6,713
Comprehensive income $ 36,235
$ 30,682
$ 96,088
$ 94,208

Basic earnings per common share
Weighted average shares outstanding 58,790,314
57,012,698
58,776,546
55,845,322
Basic earnings per share $ 0.60
$ 0.46
$ 1.82
$ 1.57

Diluted earnings per common share
Weighted average shares outstanding 59,130,632
57,176,705
59,065,402
55,993,011
Diluted earnings per share $ 0.59
$ 0.46
$ 1.81
$ 1.56

Dividends per share
Dividends paid $ 11,752
$ 7,734
$ 31,722
$ 23,201
Dividends per share $ 0.20
$ 0.14
$ 0.54
$ 0.42



	Three Months Ended
	December 31, 2017			December 31, 2016
Net income	$	29,230		$	36,903
Other comprehensive (loss), net of tax:
Securities available for sale:
Net unrealized holding (loss) arising during the year	(8,645		)	(21,468		)
Reclassification adjustment for net loss realized in net income	1			—
Income tax benefit	3,283			8,158
Net change in unrealized (losses) on securities available for sale	(5,361		)	(13,310		)

Defined benefit pension plan obligation:
Net unrealized holding gain arising during the year	145			—
Income tax (expense)	(55		)	—
Net change in defined benefit pension plan obligation	90			—
Other comprehensive (loss), net of tax	(5,271		)	(13,310		)
Comprehensive income	23,959			23,593

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statement of Stockholders' Equity (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

Comprehensive Income Common Stock Par Value Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total
Balance, September 30, 2015 $ 552
$ 1,201,387
$ 255,089
$ 2,318
$ 1,459,346
Net income $ 87,495
—
—
87,495
—
87,495
Other comprehensive income, net of tax:
Net change in net unrealized gain on securities available for sale 6,713
—
—
—
6,713
6,713
Total comprehensive income $ 94,208

Common stock issued in business acquisition 35
107,443
—
—
107,478
Stock-based compensation, net of tax —
2,680
—
—
2,680
Cash dividends:
Common stock, $0.42 per share —
—
(23,201 ) —
(23,201 )
Balance, June 30, 2016 $ 587
$ 1,311,510
$ 319,383
$ 9,031
$ 1,640,511

Balance, September 30, 2016 $ 587
$ 1,312,347
$ 344,923
$ 5,534
$ 1,663,391
Net income $ 107,125
—
—
107,125
—
107,125
Other comprehensive income, net of tax:
Net change in net unrealized (loss) on securities available for sale (11,037 ) —
—
—
(11,037 ) (11,037 )
Total comprehensive income $ 96,088

Cumulative effect adjustment ⁽¹⁾
—
751
(488 ) —
263
Stock-based compensation, net of tax —
4,963
—
—
4,963
Cash dividends:
Common stock, $0.54 per share —
—
(31,722 ) —
(31,722 )
Balance, June 30, 2017 $ 587
$ 1,318,061
$ 419,838
$ (5,503 ) $ 1,732,983

⁽¹⁾Cumulative effect adjustment relates to adoption of ASU 2016-09.



	Comprehensive Income			Common Stock Par Value		Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, September 30, 2016				$	587	$	1,312,347	$	344,923		$	5,534		$	1,663,391
Net income	$	36,903		—		—		36,903			—			36,903
Other comprehensive (loss), net of tax	(13,310		)	—		—		—			(13,310		)	(13,310		)
Total comprehensive income	$	23,593
Stock-based compensation, net of tax				—		1,635		—			—			1,635
Cash dividends:
Common stock, $0.17 per share				—		—		(9,981		)	—			(9,981		)
Balance, December 31, 2016				$	587	$	1,313,982	$	371,845		$	(7,776	)	$	1,678,638

Balance, September 30, 2017				$	588	$	1,314,039	$	445,747		$	(5,374	)	$	1,755,000
Net income	$	29,230		—		—		29,230			—			29,230
Other comprehensive (loss), net of tax	(5,271		)	—		—		—			(5,271		)	(5,271		)
Total comprehensive income	$	23,959
Stock-based compensation, net of tax				—		684		—			—			684
Cash dividends:
Common stock, $0.20 per share				—		—		(11,770		)	—			(11,770		)
Balance, December 31, 2017				$	588	$	1,314,723	$	463,207		$	(10,645	)	$	1,767,873

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Nine months ended						Three months ended
	June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
Operating activities
Net income	$	107,125		$	87,495		$	29,230		$	36,903
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	12,562			11,827			3,514			3,990
Amortization of FDIC indemnification asset	3,473			2,886			1,018			867
Net (gain) loss on sale of securities	(44		)	196
Net loss on sale of securities							1			—
Gain on redemption of subordinated debentures	(111		)	—			—			(111		)
Net gain on sale of loans	(7,381		)	(4,485		)	(1,935		)	(3,165		)
Net loss on FDIC indemnification asset	890			836			224			211
Net gain on sale of premises and equipment	(589		)	(32		)
Net loss on sale of premises and equipment							79			9
Net loss from sale/writedowns of repossessed property	1,208			479			214			658
Provision for loan and lease losses	16,854			11,892			4,557			7,049
(Reversal of) provision for loan servicing rights loss	(6		)	176
Reversal of provision for loan servicing rights loss							(38		)	(5		)
Stock-based compensation	5,226			2,680			684			1,635
Originations of residential real estate loans held for sale	(209,695		)	(184,255		)	(48,476		)	(87,868		)
Proceeds from sales of residential real estate loans held for sale	218,491			172,821			52,110			94,866
Deferred income taxes	192			(7,458		)
Net deferred income taxes							17,226			(817		)
Changes in:
Accrued interest receivable	4,053			4,647			(1,641		)	174
Other assets	737			4,576			2,574			(524		)
FDIC clawback liability	1,096			801			206			267
Accrued interest payable, fair value of derivatives and other liabilities	(68,846		)	31,619
Net cash provided by operating activities	85,235			136,701
Accrued interest payable and other liabilities							(2,212		)	(62,884		)
Net cash provided by (used in) operating activities							57,335			(8,745		)
Investing activities
Purchase of securities available for sale	(255,014		)	(195,042		)	(55,865		)	(144,530		)
Proceeds from sales of securities available for sale	5,042			145,934			164			—
Proceeds from maturities of securities available for sale	179,160			186,483			47,125			67,468
Net increase in loans	(130,643		)	(408,571		)	(205,929		)	(105,771		)
Payment of covered losses from FDIC indemnification claims	(571		)	(706		)	(230		)	(188		)
Purchase of premises and equipment	(4,979		)	(6,660		)	(1,469		)	(940		)
Proceeds from sale of premises and equipment	4,024			641			3,993			1
Proceeds from sale of repossessed property	4,205			4,693			1,956			2,641
Purchase of FHLB stock	(22,945		)	(34,495		)	(17,020		)	(3,000		)
Proceeds from redemption of FHLB stock	39,217			27,471			13,969			9,512
Net cash paid in business acquisition	—			(15,669		)
Net cash used in investing activities	(182,504		)	(295,921		)	(213,306		)	(174,807		)
Financing activities
Net increase in deposits	354,801			230,191			46,659			101,663
Net decrease in securities sold under agreements to repurchase	(17,837		)	(131,910		)
Proceeds from FHLB advances and other borrowings	375,700			668,155
Repayments on FHLB advances and other borrowings	(775,000		)	(346,000		)
Net (decrease) increase in securities sold under agreements to repurchase and other short-term borrowings							(15,752		)	1,053
Proceeds from FHLB advances and other long-term borrowings							665,000			24,999
Repayments on FHLB advances and other long-term borrowings							(587,200		)	(185,000		)
Redemption of subordinated debentures	(5,000		)	—			—			(3,625		)
Taxes paid related to net share settlement of equity awards ⁽¹⁾	(383		)	—
Taxes paid related to net share settlement of equity awards							(3,766		)	—
Dividends paid	(31,722		)	(23,201		)	(11,770		)	(9,981		)
Net cash (used in) provided by financing activities	(99,441		)	397,235
Net cash provided by (used in) financing activities							93,171			(70,891		)
Net decrease in cash and cash equivalents	(196,710		)	238,015			(62,800		)	(254,443		)
Cash and cash equivalents, beginning of period	524,611			237,770			360,396			524,611
Cash and cash equivalents, end of period	$	327,901		$	475,785		$	297,596		$	270,168
Supplemental disclosure of cash flow information
Cash payments for interest	$	30,996		$	22,652		$	12,599		$	9,246
Cash payments for income taxes	$	52,796		$	44,476		$	1,117		$	10,574
Supplemental disclosure of noncash investing and financing activities
Loans transferred to repossessed properties	$	(4,182	)	$	(1,817	)	$	(3,671	)	$	(1,110	)
Repossessed property transferred to premises and equipment	$	—		$	(840	)

(1) Related to the Company's early adoption of ASU 2016-09, certain prior period amounts have been retrospectively reclassified between operating activities and financing activities. See Note 1, Nature of Operations and Summary of Significant Policies, for additional information.

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

1. Nature of Operations and Summary of Significant Policies

Nature of Operations

Great Western Bancorp, Inc. (the “Company”) is a bank holding company organized under the laws of Delaware and is listed on the New York Stock Exchange ("NYSE") under the symbol GWB. The primary business of the Company is ownership of its wholly owned subsidiary, Great Western Bank (the “Bank”). The Bank is a full-service regional bank focused on relationship-based business and agri-business banking in Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. The Company and the Bank are subject to the regulation of certain federal and/or state agencies and undergo periodic examinations by those regulatory authorities. Substantially all of the Company’s income is generated from banking operations.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature.

Certain previously reported amounts have been reclassified to conform to the current presentation.

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended September 30, ~~2016,~~2017, which includes a description of significant accounting policies. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the year or any other period.

The accompanying unaudited consolidated financial statements include the accounts and results of operations of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions. The preparation of unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported inon the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

~~Business Combinations~~

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations” (“ASC 805”). The Company recognizes the fair value of the assets acquired and liabilities assumed, immediately expenses transaction costs and accounts for restructuring plans separately from the business combination. There is no separate recognition of the acquired allowance for loan and lease losses on the acquirer’s balance sheet as credit related factors are incorporated directly into the fair value of the loans recorded at the acquisition date. The excess of the cost of the acquisition over the fair value of the net tangible and intangible assets acquired is recorded as goodwill. Alternatively, a bargain purchase gain is recorded equal to the amount by which the fair value of assets purchased exceeds the fair value of liabilities assumed and consideration paid.

~~Results of operations of the acquired business are included in the consolidated statements of comprehensive income from the effective date of acquisition.~~

~~Use of Estimates~~

U.S. GAAP requires management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

~~Securities~~

The Company classifies securities upon purchase in one of three categories: trading, held to maturity, or available for sale. Debt and equity securities held for resale are classified as trading. Debt securities for which the Company has the ability and positive intent to hold until maturity are classified as held to maturity. All other securities are classified as available for sale as they may be sold prior to maturity in response to changes in the Company’s interest rate risk profile, funding needs, demand for collateralized deposits by public entities or other reasons.

Held to maturity securities are stated at amortized cost, which represents actual cost adjusted for premium amortization and discount accretion. Available for sale securities are stated at fair value, with unrealized gains and losses, net of related taxes, included in stockholders’ equity as a component of accumulated other comprehensive income (loss).

~~10-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Trading securities are stated at fair value. Realized and unrealized gains and losses from sales and fair value adjustments of trading securities are included in other noninterest income in the consolidated statements of comprehensive income.

~~Purchases and sales of securities are recognized on a trade date basis. The cost of securities sold is based on the specific identification method.~~

Declines in the fair value of investment securities available for sale (with certain exceptions for debt securities noted below) that are deemed to be other-than-temporary are recognized in earnings as a realized loss, and a new cost basis for the securities is established. In evaluating other-than-temporary impairment, management considers the length of time and extent to which the fair value has been less than amortized cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Declines in the fair value of debt securities below amortized cost are deemed to be other-than-temporary in circumstances where: (1) the Company has the intent to sell a security; (2) it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis; or (3) the Company does not expect to recover the entire amortized cost basis of the security. If the Company intends to sell a security or if it is more likely than not that the Company will be required to sell the security before recovery, an other-than-temporary impairment loss is recognized in earnings equal to the difference between the security’s amortized cost basis and its fair value. If the Company does not intend to sell the security or it is not more likely than not that it will be required to sell the security before recovery, the other-than-temporary impairment write-down is separated into an amount representing credit loss, which is recognized in earnings, and an amount related to all other factors, which is recognized in accumulated other comprehensive income (loss).

Interest and dividends, including amortization of premiums and accretion of discounts, are recognized as interest or dividend income when earned. Realized gains and losses on sales (using the specific identification method) and declines in value judged to be other-than-temporary are included in noninterest income in the consolidated statements of comprehensive income.

~~Loans~~

The Company’s accounting method for loans differs depending on whether the loans were originated or purchased and, for purchased loans, whether the loans were acquired at a discount related to evidence of credit deterioration since date of origination.

~~Originated Loans~~

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, generally are reported at their outstanding principal balance, adjusted for charge-offs, the allowance for loan and lease losses, and any unamortized deferred fees or costs. Other fees not associated with originating a loan are recognized as fee income when earned.

Interest income on loans is accrued daily on the outstanding balances. Accrual of interest is discontinued when management believes, after considering collection efforts and other factors, the borrower’s financial condition is such that collection of interest is doubtful, which is generally at 90 days past due. Generally, when loans are placed on nonaccrual status, interest receivable is reversed against interest income in the current period. Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal. Loans are removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest.

The Company has elected to measure certain long-term loans and written loan commitments at fair value to assist in managing interest rate risk for longer-term loans. Fair value loans are fixed-rate loans having original maturities of 5 years or greater (typically between 5 and 15 years) to our business and agribusiness banking customers to assist them in facilitating their risk management strategies. The fair value option was elected upon the origination or acquisition of these loans and written loan commitments. Interest income is recognized in the same manner on loans reported at fair value as on non-fair value loans, except in regard to origination fees and costs which are recognized immediately upon closing. The changes in fair value of long-term loans and written loan commitments at fair value are reported in noninterest income.

For loans held for sale, loan fees charged or received on origination, net of certain direct loan origination costs, are recognized in income when the related loan is sold. For loans held for investment, loan fees, net of certain direct loan origination costs, are deferred and the net amount is amortized as an adjustment of the related loan’s yield. The Company is generally amortizing these amounts over the contractual lives of the loans. Commitment fees are recognized as income when received.

The Company grants commercial, agricultural, consumer, residential real estate, and other loans to customers primarily in Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation of the borrower. Collateral held varies but includes

~~11-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

accounts receivable, inventory, property and equipment, residential real estate, and income-producing commercial and agricultural properties. Government guarantees are also obtained for some loans, which reduces the Company’s risk of loss.

Loans originated and intended for sale in the secondary market are carried at the lower of cost or fair value. Loans held for sale include fixed rate single-family residential mortgage loans under contract to be sold in the secondary market. In most cases, loans are carried at cost and sold within 45 days. These loans are sold with the mortgage servicing rights released. Under limited circumstances, buyers may have recourse to return a purchased loan to the Company. Recourse conditions may include early payment default, breach of representation or warranties, or documentation deficiencies.

Fair value of loans held for sale is determined based on prevailing market prices for loans with similar characteristics, sale contract prices, or, for certain portfolios, discounted cash flow analysis. Declines in fair value below cost (and subsequent recoveries) are recognized in net gain on sale of loans. Deferred fees and costs related to these loans are not amortized but are recognized as part of the cost basis of the loan at the time it is sold. Gains or losses on sales are recognized upon delivery and included in net gain on sale of loans.

~~Purchased Loans~~

Loans acquired (non-impaired and impaired) in a business acquisition are recorded at their fair value at the acquisition date. Credit discounts are included in the determination of fair value; therefore, an allowance for loan and lease losses is not recorded at the acquisition date.

In determining the acquisition date fair value of purchased loans with evidence of credit deterioration (“purchased impaired loans”), and in subsequent accounting, the Company generally aggregates impaired purchased consumer and certain smaller balance impaired commercial loans into pools of loans with common risk characteristics, while accounting for larger-balance impaired commercial loans individually. Expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level-yield method.

Management estimates the cash flows expected to be collected at acquisition and at subsequent measurement dates using internal risk models, which incorporate the estimate of key assumptions, such as default rates, loss severity, and prepayment speeds. Subsequent to the acquisition date, decreases in cash flows over those expected at the acquisition date are recognized by recording an allowance for loan and lease losses. Subsequent increases in cash flow over those expected at the acquisition date are recognized as reductions to allowance for loan and lease losses to the extent impairment was previously recognized and thereafter as interest income prospectively.

For purchased loans not deemed impaired at the acquisition date, the difference between the fair value and the unpaid principal balance of the loan at acquisition date is amortized or accreted to interest income using the effective interest method over the remaining period to contractual maturity.

~~Credit Risk Management~~

The Company’s strategy for credit risk management includes well-defined, centralized credit policies, uniform underwriting criteria and ongoing risk monitoring and review processes for all credit exposures. The strategy also emphasizes diversification on a geographic, industry, and customer level; regular credit examinations; and management reviews of loans exhibiting deterioration of credit quality. The credit risk management strategy also includes a credit risk assessment process that performs assessments of compliance with commercial and consumer credit policies, risk ratings, and other critical credit information. Loan decisions are documented with respect to the borrower’s business, purpose of the loan, evaluation of the repayment sources, and the associated risks, evaluation of collateral, covenants and monitoring requirements, and risk rating rationale.

The Company categorizes its loan portfolio into six classes, which is the level at which it develops and documents a systematic methodology to determine the allowance for loan and lease losses. The Company’s six loan portfolio classes are residential real estate, commercial real estate, commercial non real estate, agriculture, consumer and other lending.

The residential real estate lending class includes loans made to consumer customers including residential mortgages, residential construction loans and home equity loans and lines. These loans are typically fixed rate loans secured by residential real estate. Home equity lines are revolving accounts giving the borrower the ability to draw and repay balances repeatedly, up to a maximum commitment, and are secured by residential real estate. Home equity lines typically have variable rate terms which are benchmarked to a prime rate. Historical loss history is the primary factor in determining the allowance for loan and lease losses for the residential real estate lending class. Key risk characteristics relevant to residential real estate lending class loans primarily relate to the borrower’s capacity and willingness to repay and include unemployment rates and other economic factors, and customer payment

~~12-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~history. These risk characteristics, among others, are reflected in the environmental factors considered in determining the allowance for loan and lease losses.~~

The commercial real estate lending class includes loans made to small and middle market businesses, including multifamily properties. Loans in this class are generally secured by commercial real estate with cash flows generally being the primary source of repayment. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in determining the allowance for loan and lease losses for the commercial real estate lending class. Key risk characteristics relevant to the commercial real estate lending class include the industry and geography of the borrower’s business, purpose of the loan, repayment sources, borrower’s debt capacity and financial performance, loan covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors considered in determining the allowance for loan and lease losses.

The commercial non real estate lending class includes loans made to small and middle market businesses, and loans made to public sector customers. Loans in this class are generally secured by business assets and guaranteed by owners; cashflows are most often our primary source of repayment. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in determining the allowance for loan and lease losses for the commercial non real estate lending class. Key risk characteristics relevant to the commercial non real estate lending class include the industry and geography of the borrower’s business, purpose of the loan, repayment sources, borrower’s debt capacity and financial performance, loan covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors considered in determining the allowance for loan and lease losses.

The agriculture lending class includes loans made to agricultural individuals and businesses. Loans in this class are generally secured by operating assets and guaranteed by owners; cashflows are most often our primary source of repayment. Historical loss history and updated loan-to-value information on collateral-dependent loans are the primary factors in determining the allowance for loan and lease losses for the agriculture lending class. Key risk characteristics relevant to the agriculture lending class include the geography of the borrower’s operations, commodity prices and weather patterns, purpose of the loan, repayment sources, borrower’s debt capacity and financial performance, loan covenants, and nature of pledged collateral. We consider these risk characteristics in assigning risk ratings and estimating environmental factors considered in determining the allowance for loan and lease losses.

The consumer lending class includes loans made to consumer customers including loans secured by automobiles and other installment loans, and the other lending class includes credit card loans and unsecured revolving credit lines. Historical loss history is the primary factor in determining the allowance for loan and lease losses for the consumer and other lending classes. Key risk characteristics relevant to loans in the consumer and other lending classes primarily relate to the borrower’s capacity and willingness to repay and include unemployment rates and other economic factors, and customer payment and overall credit history. These risk characteristics, among others, are reflected in the environmental factors considered in determining the allowance for loan and lease losses.

The other lending class includes all other loan relationships that do not fit within the categories above, primarily consumer and commercial credit cards, customer deposit account overdrafts, and lease receivables.

The Company assigns all non-consumer loans a credit quality risk rating. These ratings are Pass, Watch, Substandard, Doubtful, and Loss. Loans with a Pass and Watch rating represent those loans not classified on the Company’s rating scale for problem credits, with loans with a Watch rating being monitored and updated at least quarterly by management. Substandard loans are those where a well-defined weakness has been identified that may put full collection of contractual debt at risk. Doubtful loans are those where a well-defined weakness has been identified and a loss of contractual debt is probable. Substandard and doubtful loans are monitored and updated monthly. All loan risk ratings are updated and monitored on a continuous basis. The Company generally does not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of consumer loans.

~~Troubled Debt Restructurings (“TDRs”)~~

Loans modified under troubled debt restructurings involve granting a concession to a borrower who is experiencing financial difficulty. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection, which generally would not otherwise be considered. Our TDRs include performing and nonperforming TDRs, which consist of loans that continue to accrue interest at the loan's original interest rate as we expect to collect the remaining principal and interest on the loan, and nonaccrual TDRs, which include loans that are in a nonaccrual status and are no longer accruing interest, as we do not expect to collect the full amount of principal and interest owed from the borrower on these loans. At the time of modification (except for loans on nonaccrual status), a TDR is classified as nonperforming

~~13-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

TDR until a six-month payment history of principal and interest payments, in accordance with the terms of the loan modification, is sustained, at which time we move the loan to a performing status (performing TDR). If we do not expect to collect all principal and interest on the loan, the modified loan is classified as a nonaccrual TDR. All TDRs are accounted for as impaired loans and are included in our analysis of the allowance for loan and lease losses. A TDR that has been renewed for a borrower who is no longer experiencing financial difficulty and which yields a market rate of interest at the time of a renewal is no longer considered a TDR.

~~Allowance for Loan and Lease Losses (“ALLL”) and Unfunded Commitments~~

The Company maintains an allowance for loan and lease losses at a level management believes is appropriate to reserve for credit losses inherent in our loan portfolio. The allowance for loan and lease losses is determined based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies, and other credit risk indicators, which is inherently subjective.

The Company considers the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. In addition, consideration is given to concentration risks associated with the various loan portfolios and current economic conditions that might impact the portfolio. The Company also considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry, or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and macroeconomic factors, such as changes in unemployment rates, gross domestic product, and consumer bankruptcy filings.

All of these estimates are susceptible to significant change. Changes to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses, which is reflected in the consolidated statements of comprehensive income. Past due status is monitored as an indicator of credit deterioration. Loans that are 90 days or more past due are put on nonaccrual status unless a repayment is eminent. Loans deemed to be uncollectible are charged off against the allowance for loan and lease losses. Recoveries of amounts previously charged-off are credited to the allowance for loan and lease losses.

The allowance for loan and lease losses consist of reserves for probable losses that have been identified related to specific borrowing relationships that are individually evaluated for impairment (“specific reserve”), as well as probable losses inherent in our loan portfolio that are not specifically identified (“collective reserve”).

The specific reserve relates to impaired loans. A loan is impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due (interest as well as principal) according to the contractual terms of the loan agreement. Specific reserves are determined on a loan-by-loan basis based on management’s best estimate of the Company's exposure, given the current payment status of the loan, the present value of expected payments, and the value of any underlying collateral. Impaired loans also include loans modified in troubled debt restructurings. Generally, the impairment related to troubled debt restructurings is measured based on the fair value of the collateral, less cost to sell, or the present value of expected payments relative to the unpaid principal balance. If the impaired loan is identified as collateral dependent, then the fair value of the collateral method of measuring the amount of the impairment is utilized. This method requires obtaining an independent appraisal of the collateral and applying a discount factor to the appraised value, if necessary, and including costs to sell.

Management’s estimate for collective reserves reflects losses incurred in the loan portfolio as of the consolidated balance sheet reporting date. Incurred loss estimates primarily are based on historical loss experience and portfolio mix. Incurred loss estimates may be adjusted for qualitative factors such as current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and/or significant policy and underwriting changes.

The Company maintains an ALLL for acquired impaired loans accounted for under ASC 310-30, resulting from decreases in expected cash flows arising from the periodic revaluation of these loans. Any decrease in expected cash flows in the individual loan pool is generally recognized in the current provision for loan and lease losses. Any increase in expected cash flows is generally not recognized immediately but is instead reflected as an adjustment to the related loan or pool's yield on a prospective basis once any previously recorded provision for loan and lease loss has been recognized.

For acquired nonimpaired loans accounted for under ASC 310-20, the Company utilizes methods to estimate the required allowance for loan and lease losses similar to originated loans; the required reserve is compared to the net carrying value of each acquired nonimpaired loan (by class) to determine if a provision is required.

Unfunded residential mortgage loan commitments entered into in connection with mortgage loans to be held for sale are considered derivatives and are recorded at fair value and included in other liabilities on the consolidated balance sheets with changes in fair value recorded in other interest income. All other unfunded loan commitments are generally related to providing credit facilities to customers and are not considered derivatives. For purchased loans, the fair value of the unfunded credit commitments is considered

~~14-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

in determination of the fair value of the loans recorded at the date of acquisition. Reserves for credit exposure on all other unfunded credit commitments are recorded in other liabilities on the consolidated balance sheets. We maintain a reserve for unfunded commitments at a level we believe to be sufficient to absorb estimated probable losses related to unfunded credit facilities.

FDIC Indemnification Asset and Clawback Liability

~~In conjunction with a Federal Deposit Insurance Corporation (“FDIC”) assisted transaction of TierOne Bank~~FDIC Indemnification assets are included in 2010, the Company entered into two loss share agreements with the FDIC, one covering certain single family residential mortgage loans with the claim period ending June 2020 and one covering commercial loans and other ~~assets, in which the claim period ended in June 2015. The agreements cover a portion of realized losses on loans, foreclosed real estate and certain other assets. The Company has recorded~~ assets on the consolidated balance ~~sheets (i.e. indemnification assets) representing estimated future amounts recoverable from the FDIC.~~

Fair values of loans covered by the loss sharing agreements at the acquisition date were estimated based on projected cash flows available based on the expected probability of default, default timing and loss given default, the expected reimbursement rates (generally 80%) from the FDIC and other relevant terms of the loss sharing agreements. The initial fair value was established by discounting these expected cash flows with a market discount rate for instruments with like maturity and risk characteristics.

The loss share assets are measured separately from the related loans and foreclosed real estate and recorded as an FDIC indemnification asset on the consolidated balance sheets because they are not contractually embedded in the loans and are not transferable with the loans should the Company choose to dispose of them. Subsequent to the acquisition date, reimbursements received from the FDIC for actual incurred losses reduce the carrying amount of the loss share assets. Reductions to expected losses on covered assets, to the extent such reductions to expected losses are the result of an improvement to the actual or expected cash flows from the covered assets, also reduce the carrying amount of the loss share assets. The rate of accretion of the indemnification asset discount included in interest income slows to mirror the accelerated accretion of the loan discount. Additional expected losses on covered assets, to the extent such expected losses result in the recognition of an allowance for loan and lease losses, increase the carrying amount of the loss share assets. A related increase in the value of the indemnification asset up to the amount covered by the FDIC is calculated based on the reimbursement rates from the FDIC and is included in other noninterest income. The corresponding loan accretion or amortization is recorded as a component of interest income on the consolidated statements of comprehensive income. Although these assets are contractual receivables from the FDIC, there are no contractual interest rates.

As part of the loss sharing agreements, the Company also assumed a liability (“FDIC Clawback Liability”) to be paid within 45 days subsequent to the maturity or termination of the loss sharing agreements that is contingent upon actual losses incurred over the life of the agreements relative to expected losses considered in the consideration paid at acquisition date and the amount of losses reimbursed to the Company under the loss sharing agreements. The liability was recorded at fair value as of the acquisition date. The fair value was based on a discounted cash flow calculation that considered the formula defined in the loss sharing agreements and projected losses. The difference between the fair value at acquisition date and the projected losses is amortized through other noninterest expense. As projected losses and reimbursements are updated, as described above, the FDIC Clawback Liability is adjusted and a gain or loss is recorded in other noninterest expense.

~~Goodwill~~

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business acquisitions. Goodwill is evaluated annually for impairment. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. Subsequent increases in goodwill are not recognized in the consolidated financial statements.sheets.

The Company historically performed its impairment evaluation as of June 30 of each fiscal year. During the third quarter of fiscal year 2017, the Company voluntarily changed its annual impairment assessment date from June 30 to July 1. The change in evaluation date will better align with the Company's budget and strategic planning cycle. This voluntary change in accounting principle was not made to delay, accelerate or avoid an impairment charge. The change is not applied retrospectively as it is impracticable to do so because retrospective application would require the application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively. This change has no direct or indirect financial statement impact to the three and nine months ended June 30, 2017. No goodwill impairment was recognized during the three and nine months ended June 30, 2017 and 2016.

~~15-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Core Deposits and Other Intangibles

~~Intangible assets consist of core~~Core deposits ~~brand intangible, customer relationships,~~ and other ~~intangibles. Core deposits represent~~intangibles are included in other assets in the identifiable intangible value assigned to core deposit bases arising from purchase acquisitions. Brand intangible represents the value associated with the Bank charter. Customer relationships intangible represents the identifiable intangible value assigned to customer relationships arising from a purchase acquisition. Other intangibles represent contractual franchise arrangements under which the franchiser grants the franchisee the right to perform certain functions within a designated geographical area.consolidated balance sheets.

~~The methods and lives used to amortize intangible assets are as follows:~~



~~Intangible~~	~~Method~~	~~Years~~
~~Core deposit~~	~~Straight-line or effective yield~~	~~5 - 10~~
~~Brand intangible~~	~~Straight-line~~	15
~~Customer relationships~~	~~Straight-line~~	~~8.5~~
~~Other intangibles~~	~~Straight-line~~	~~1.25 - 9.33~~

Intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. No intangible asset impairments were recognized during the three and nine month periods ended June 30, 2017 and 2016.

Loan Servicing Rights

The loan servicing rights asset recognized as part of the HF Financial acquisition was initially recorded at fair value. These servicing rights have subsequently been accounted for using the lower of cost or fair value method. Fair value is based on a valuation model that calculates the present value of estimated future net servicing income using key assumptions such as prepayment speeds and discount rate. The asset is amortized into mortgage banking income, net on the consolidated statements of comprehensive income in proportion to and over the period of estimated net servicing income.

Loan servicing rights are evaluated for impairment based upon the fair value of the rights as compared to the carrying amount. Impairment is determined by stratifying rights into groupings based on characteristics, such as interest rate, loan type and investor type. Impairment is recognized through a valuation allowance, to the extent that fair value is less than the carrying amount. If the Company later determines that all or a portion of the impairment no longer exists, a reduction of the allowance may be recorded as an increase to noninterest income. If the Company determines the impairment to be permanent, the valuation is written off against the loan servicing rights, which resultsincluded in ~~a new amortized balance. Changes in the valuation allowance are reported in mortgage banking income, net~~other assets in the consolidated statements of comprehensive income. The fair value of loan servicing rights is subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses. Estimating future cash flows on the underlying mortgages is a difficult analysis and requires judgment based on the best information available. Based on the Company's analysis of loan servicing rights, a valuation allowance of $0.0 million was recorded during the three and nine month periods ended June 30, 2017 and $0.2 million for the three and nine month periods ended June 30, 2016.

~~Servicing fee income, which is reported in noninterest income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding~~ balance or a fixed amount per loan and are recorded as income as earned. The amortization of loan servicing rights is netted against mortgage banking income, net in the consolidated statements of comprehensive income.

~~Bank Owned Life Insurance (“BOLI”)~~

BOLI represents life insurance policies on the lives of certain Company officers or former officers for which the Company is the beneficiary. The carrying amount of bank owned life insurance consists of the initial premium paid plus increases in cash value less the carrying amount associated with any death benefits received. Death benefits paid in excess of the applicable carrying amount are recognized as income, which is exempt from income taxes.sheets.

Derivatives

The Company maintains an overall interest rate risk management strategy that permits the use of derivative instruments to modify exposure to interest rate risk. The Company enters into interest rate swap contracts to offset the interest rate risk associated with borrowers who lock in long-term fixed rates (greater than or equal to 5 years to maturity) through a fixed rate loan. Generally,

~~16-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

under these swaps, the Company agrees with various swap counterparties to exchange the difference between fixed-rate and floating-rate interest amounts based upon notional principal amounts. These contracts do not qualify for hedge accounting. These interest rate derivative instruments are recognized as other assets ~~and~~or other liabilities on the consolidated balance sheets and measured at fair value, with changes in fair value reported in net realized and unrealized gain (loss) on ~~derivatives.~~derivatives on the consolidated statements of income. Since each fixed rate loan is paired with an offsetting derivative contract, the impact to net income is minimized. The Company also has ~~back to back~~back-to-back swaps with loan customers where the Company enters into an interest rate swap with loan customers to provide a facility to mitigate the interest rate risk associated with offering a fixed rate and simultaneously enters into a swap with an outside third party that is matched in exact offsetting terms. The ~~back to back~~back-to-back swaps are recorded at fair value and recognized as other assets ~~and~~or other liabilities, depending on the rights or obligations under the contract, ~~in fair value of derivatives~~ on the consolidated balance sheet, with changes in fair value reported in net realized and unrealized gain (loss) on ~~derivatives.~~derivatives on the consolidated statements of income.

10-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The Company enters into forward interest rate lock commitments on mortgage loans to be held for sale, which are commitments to originate loans whereby the interest rate on the loan is determined prior to funding. The Company also has corresponding forward sales contracts related to these interest rate lock commitments. Both the mortgage loan commitments and the related sales contracts are considered derivatives and are recorded at fair value and included in other assets or other liabilities on the consolidated balance sheets with changes in fair value ~~recorded~~offsetting each other in ~~noninterest income.~~

~~Stock Based Compensation~~

~~Restricted~~net realized and ~~performance-based stock units/awards are classified as equity awards and accounted for under the treasury stock method. Compensation expense for non-vested stock units/awards is based~~unrealized gain (loss) on derivatives on the ~~fair value~~consolidated statements of the award on the measurement date, which, for the Company, is the date of the grant and is recognized ratably over the vesting or performance period of the award. The fair value of non-vested stock units/awards is generally the market price of the Company's stock on the date of grant.

~~In the third quarter of fiscal year 2017, the Company elected to early adopt ASU No. 2016-09,~~ ~~Compensation - Stock Compensation (Topic 718): Improvements to Employees Share Based Payments Accounting~~. The Company had no previously unrecognized excess tax benefits, therefore there was no impact to the consolidated financial statements as it related to the elimination of the requirement that excess tax benefits be realized before recognition. The Company's consolidated financial statements are presented as if ASU 2016-09 was adopted as of the beginning of the fiscal year, which resulted in a reclassification from additional paid-in capital to provision for income taxes of $0.0 million and $0.3 million for the three and nine months ended June 30, 2017, respectively. This change had an immaterial impact on diluted earnings per common share for the three and nine months ended June 30, 2017. Prior period financial statement presentation of equity and tax expense as of and for the three month and fiscal year to date periods ended December 31, 2016 and March 31, 2017 will be recast when presented in future filings.income.

ASU 2016-09 also requires that all income tax related cash flows resulting from share-based payments be reported as operating activities in the statement of cash flows. Previously, income tax benefits at settlement of an award were reported as a reduction to operating cash flows and an increase to financing cash flows to the extent that those benefits exceeded the income tax benefits reported in earnings during the award's vesting period. The Company has not previously reported any excess tax benefits from stock-based compensation in the financing activities section of the consolidated statement of cash flows. ASU 2016-09 also requires an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows (current guidance did not specify how these cash flows should be classified). The Company has elected to apply these changes in cash flow classification on a prospective basis.

As part of the adoption of ASU 2016-09, the Company made an accounting policy election to account for forfeitures on an actual basis and discontinue the use of an estimated forfeiture approach. The impact of this change was a cumulative effect adjustment of $0.3 million as an increase to the opening balance of total equity and an increase to deferred tax assets.

~~Income Taxes~~

Income taxes are allocated pursuant to a tax-sharing arrangement, whereby the Company will pay federal and state income taxes as if it were filing on a stand-alone basis. Income tax expense includes two components: current and deferred. Current income tax expense reflects taxes to be paid or refunded for the current period by applying the provisions of the enacted tax law to the taxable income or excess of deductions over income. The Company determines deferred income taxes using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is based on the tax effects of the differences between the book and tax basis of assets and liabilities, and enacted changes in tax rates and laws are recognized in the period in which they occur. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods.

~~17-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Deferred tax assets are reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Tax benefits related to uncertain tax positions are recognized if it is more likely than not, based on the technical merits, that the tax position will be realized or sustained upon examination. The term "more likely than not" means a likelihood of more than 50 percent; the terms "examined" and "upon examination" also include resolution of the related appeals or litigation processes, if any. A tax position that meets the more-likely-than-not recognition threshold is initially and subsequently measured as the largest amount of tax benefit that has a greater than 50 percent likelihood of being realized upon settlement with a taxing authority that has full knowledge of all relevant information.

The determination of whether or not a tax position has met the more-likely-than-not recognition threshold considers the facts, circumstances, and information available at the reporting date and is subject to management’s judgment.

~~Transfers of Financial Assets~~

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company-put presumptively beyond reach of the Company and its creditors, even in bankruptcy or other receivership, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets.

~~Securities sold under agreements to repurchase are accounted for as collateralized financing transactions and are recorded at amounts at which the securities were financed, plus accrued interest.~~

~~Defined Benefit Plan~~

The Company assumed plan sponsorship of the HF Financial Corp. Pension Plan as part of the HF Financial acquisition. Defined benefit pension obligation and related costs are calculated using actuarial concepts and measurements. Three critical assumptions, the discount rate, the expected long-term rate of return on plan assets, and mortality rates are important elements of expense and/or benefit obligation measurements. Other assumptions involve employee demographic factors such as retirement patterns and turnover. The Company evaluates all assumptions annually. For the pension valuation performed as of September 30, 2016, mortality assumptions were based on the RP-2014 mortality tables and the MP 2015 projection scales.

The discount rate enables the Company to state expected future benefit payments as a present value on the measurement date. The Company determined the discount rate for the pension valuation as of September 30, 2016 by utilizing the standard duration index from the Citi Pension Discount Curve and Liability Index. A lower discount rate increases the present value of benefit obligations and increases pension expense.

To determine expected long-term rate of return on defined benefit pension plan assets, the Company considers the current asset allocation of the defined benefit pension plan, as well as historical and expected returns on each asset class. A lower expected rate of return on defined pension plan assets will increase pension expense.

The Company recognizes the over- or under-funded status of a plan as an other asset or other liability in the consolidated balance sheets as measured by the difference between the fair value of the plan assets and the projected benefit obligation. When recorded, unrecognized prior service costs and actuarial gains and losses are recognized as a component of accumulated other comprehensive income (loss).

~~Revenue Recognition~~

The Company recognizes revenue as it is earned based on contractual terms, as transactions occur, or as services are provided and collectability is reasonably assured. Certain specific policies related to service charges and other fees include the following:

~~Deposit Service Charges~~

Service charges on deposit accounts are primarily fees related to customer overdraft events and not sufficient funds fees, net of any refunded fees, and are recognized as transactions occur and services are provided. Service charges on deposit accounts also relate to monthly fees based on minimum balances, and are earned as transactions occur and services are provided.

~~18-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~Interchange Fees~~

Interchange fees include interchange income from consumer debit card transactions processed through card association networks. Interchange income is a fee paid by a merchant bank to the card-issuing bank through the interchange network. Interchange fees are set by the card association networks and are based on cardholder purchase volumes.

~~Wealth Management Fees~~

~~Wealth management fees include commission income from financial planning, investment management and insurance operations.~~

~~Comprehensive Income~~

Comprehensive income consists of net income and other comprehensive income, net of applicable income taxes. Other comprehensive income (loss) consists entirely of unrealized appreciation (depreciation) on available for sale securities.

Subsequent Events

The Company has evaluated all events or transactions that occurred through the date the Company issued these financial statements. Other than those events described below, there were no other material events that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

On ~~July 27, 2017,~~January 25, 2018, the ~~board~~Board of ~~directors~~Directors of the Company declared a dividend of $0.20 per common share payable on ~~August 23, 2017~~February 21, 2018 to stockholders of record as of close of business on ~~August 11, 2017.~~February 9, 2018.

Correction of Prior Period Balances

The consolidated statements of income for the quarter ended December 31, 2016 has been revised to correct an immaterial classification error in interest income and noninterest income related to credit card interchange income. As a result, the consolidated statements of income has been revised to reflect these changes, as follows:



	As originally reported		Adjustments			As revised
	(dollars in thousands)
Three months ended December 31, 2016
Interest income - loans	$	101,683	$	(1,751	)	$	99,932
Noninterest income - service charges and other fees	12,086		1,751			13,837

Twelve months ended September 30, 2017
Interest income - loans	$	414,434	$	(7,152	)	$	407,282
Noninterest income - service charges and other fees	48,573		7,152			55,725

Twelve months ended September 30, 2016
Interest income - loans	$	370,444	$	(6,716	)	$	363,728
Noninterest income - service charges and other fees	46,209		6,716			52,925

The above revision had no effect on net income, earnings per share, retained earnings or capital ratios. Periods not presented herein will be revised, as applicable, as they are included in future filings.

2. New Accounting Pronouncements

In ~~May~~August 2017, the Financial Accounting Standards Board ~~(FASB)~~("FASB") issued ASU ~~2017-09,~~2017-12, ~~Compensation - Stock Compensation~~Derivatives and Hedging (Topic ~~718)~~815): ~~Scope~~Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of ~~Modification Accounting,~~ ~~which provides guidance~~information conveyed to financial statement users about ~~which changes~~an entity’s risk management activities to better align the ~~terms or conditions~~entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of ~~a share-based payment award require an entity to apply modification~~and simplify the application of hedge accounting. ~~Under~~ ASU 2017-09, an entity will not apply modification accounting to a share-based payment award if all of the following are the same immediately before and after the change: (i) the award's fair value, (ii) the award's vesting conditions and (iii) the award's classification as an equity or liability instrument. ASU 2017-092017-12 is to be applied ~~prospectively~~ to ~~an award modified~~all existing hedging relationships on ~~or after~~ the date of adoption ~~date~~ and will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2017.~~2018. Early adoption is ~~permitted.~~permitted in any interim period, with the effect of adoption reflected as of the beginning of the fiscal year of adoption. The Company ~~does not believe~~is currently evaluating the potential impact of ASU ~~2017-09 will have a material impact~~2017-12 on our consolidated financial statements.

In March 2017, ~~the Financial Accounting Standards Board (FASB)~~FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for certain callable debt securities held at a premium to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortize premiums on individual, non-pooled callable debt securities as a yield adjustment over the contractual life of the security. There is no accounting change for debt securities held at a discount. ASU 2017-08 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2018, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2017-08 on our consolidated financial statements.~~

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost,~~ which requires an employer to report the service cost component in the same line item as other compensation costs arising from services rendered by employees in the income statement with the other components of the net benefit cost presented below the income from operations line in the income statement. ASU 2017-07 will be effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, with early adoption permitted as of the beginning of the annual period. The Company is currently evaluating the potential impact of ASU 2017-07 on our consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,~~ which eliminates Step 2 from the goodwill impairment test. Under this ASU, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of the reporting unit with its carrying amount, and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value with the loss not exceeding the total amount of goodwill allocated to that reporting unit. ASU 2017-04 will be effective for fiscal years, and interim

~~19-~~11-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

~~periods within those fiscal years, beginning after December 15, 2019,~~2018, with early adoption permitted. The Company ~~is currently evaluating~~early adopted ASU 2017-08 during the ~~potential impact~~first quarter of ~~ASU 2017-04 on our~~fiscal year 2018. There was no cumulative effect adjustment necessary to the Company's consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations (Topic 805): Clarifying the Definition of a Business,~~ with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment provides a screen to determine when an integrated set of assets and activities (a "set") is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. The amendment also provides a more robust framework to use in determining when a set of assets and activities is a business. ASU 2017-01 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the potential impact of ASU 2017-01 on our consolidated financial statements.

~~In October 2016, the FASB issued ASU 2016-17,~~ ~~Consolidation (Topic 810): Interests held through Related Parties that are under Common Control~~, which alters how a decision maker needs to consider indirect interests in a variable interest entity held through an entity under common control and simplifies that analysis to require consideration of only an entity’s proportionate indirect interest in a VIE held through a common control party. ASU 2016-17 amends ASU 2015-02, ~~Consolidations (Topic 810): Amendments to the Consolidation Analysis~~, which was not effective for the Company in the current fiscal year. ASU 2016-17 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluating the potential impact of ASU 2016-17 on our consolidated financial statements.

~~In October 2016, the FASB issued ASU No. 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Equity Transfers of Assets Other Than Inventory,~~ which addresses improvement in accounting for income tax consequences of intra-equity transfers of assets other than inventory. This update requires that an entity recognize the income tax consequences of the intra-equity transfer of an asset other than inventory when the transfer occurs. The update eliminates the exception for an intra-equity transfer for assets other than inventory. ASU 2016-16 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendment requires the use of a modified retrospective transaction approach through a cumulative effect adjustment directly to retained earnings as of the beginning of adoption. The Company is currently evaluating the potential impact of ASU 2016-16 on our consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force),~~ which addresses eight specific cash flow issues with the objective of reducing the existing diversity in presentations and classification in the statement of cash flows. The eight specific cash flow issues addressed include: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. ASU 2016-15 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The amendment requires the use of the retrospective transaction approach for adoption. The Company is currently evaluating the potential impact of ASU 2016-15 on our consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which addresses timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires institutions to measure all expected credit losses related to financial assets measured at amortized costs with an expected loss model based on historical experience, current conditions and reasonable and supportable forecasts relevant to affect the collectability of the financial assets, which is referred to as the current expected credit loss ~~("CECL")~~(CECL) model. The ASU requires enhanced disclosures, including qualitative and quantitative requirements, to help understand significant estimates and judgments used in estimating credit losses, as well as provide additional information about the amounts recorded in the financial statements. ASU 2016-13 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The amendment requires the use of the modified retrospective approach for adoption.The Company has formed a project team to work on the implementation of ASU 2016-13 and is currently evaluating the potential impact ~~of ASU 2016-13~~ on our consolidated financial statements.

~~In March 2016, the FASB issued ASU No. 2016-09,~~ ~~Compensation - Stock Based Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which includes provisions intended to simplify various aspects related to how share-~~

~~20-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

based payments are accounted for and presented in the financial statements. Some of the key provisions of this new ASU include: (1) companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement, and APIC pools will be eliminated. The guidance also eliminates the requirement that excess tax benefits be realized before companies can recognize them. In addition, the guidance requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity; (2) increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. The new guidance will also require an employer to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on its statement of cash flows (current guidance did not specify how these cash flows should be classified); and (3) permit companies to make an accounting policy election for the impact of forfeitures on the recognition of expense for share-based payment awards. Forfeitures can be estimated, as required today, or recognized when they occur. ASU 2016-09 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. ~~Earlier~~ application is permitted. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. We elected to adopt the provisions of ASU 2016-09 in the third quarter of fiscal year 2017 in advance of the required application date. See Note 1 - Nature of Operations and Summary of Significant Policies.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires that lessees recognize ~~most~~the assets and liabilities arising from leases on the balance ~~sheet. This will increase reported assets~~sheet and ~~liabilities, as lessees~~disclosing key information about leasing arrangements. Lessees will be required to recognize ~~a right-of-use asset along with a~~an obligation for future lease ~~liability,~~payments measured on a discounted ~~basis. Lessees are allowed~~basis and a related right-of-use asset. ASU 2016-02 does not significantly change lease accounting requirements applicable to ~~account for short-term leases (those~~lessors; however, certain changes were made to align, where necessary, lessor accounting with ~~a term of twelve months or less) off-balance sheet.~~the lessee accounting model and ASC Topic 606, "Revenue from Contracts with Customers." ASU 2016-02 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently evaluating the potential impact of ASU 2016-02 on our consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10) - Recognition and Measurement of Financial Assets and Financial Liabilities, which ~~addresses certain aspects~~requires equity investments, in general, to be measured at fair value with changes in fair value recognized in earnings. It also eliminates the requirement to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost, requires entities to use the exit price notion when measuring fair value, requires an entity to present separately in other comprehensive income the portion of ~~recognition,~~the total change in fair value of a liability resulting from a change in the measurement ~~presentation~~category and ~~disclosure~~form on the balance sheet or accompanying notes, clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available for sale securities in combination with the entity's other deferred tax assets, and simplifies the impairment assessment of ~~financial instruments.~~equity investments without readily determinable fair values. ASU 2016-01 will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. The Company ~~is currently evaluating the potential impact of~~does not believe ASU 2016-01 will have a material impact on our consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which implements a ~~common revenue standard~~more robust framework that clarifies the principles for recognizing ~~revenue. The core principle of~~revenue and gives greater consistency and comparability in revenue recognition practices. In the ~~guidance is that~~new framework, an entity ~~should recognize~~recognizes revenue ~~to depict the transfer of promised goods or services to customers~~ in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services. The new model requires the identification of performance obligations included in the contract with customers, a determination of the transaction price and an allocation of the price to those ~~goods and services.~~performance obligations. The entity recognizes revenue when performance obligations are satisfied. In August 2015, the FASB issued ASU No. 2015-14, which deferred the effective date of ASU No. 2014-09 to annual reporting periods beginning after December 15, 2017. In March 2016, the FASB issued ASU No. 2016-08, which intends to improve the operability and understandability of the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10, which clarifies guidance pertaining to the identification of performance obligations and the licensing implementation. In May 2016, the FASB issued ASU Nos. 2016-11 and 2016-12, which further clarify guidance and provide practical expedients related to the adoption of ASU No. 2014-09. ~~In December 2016, the FASB issued ASU 2016-19,~~ ~~Technical Corrections and Improvements to Topic 606,~~ which provides additional clarification and improvements for the following areas: loan guarantee fees, contract costs-impairment testing, provision for losses on construction-type and production-type contracts, cost capitalization guidance, and disclosure requirements. The standard permits the use of either the retrospective or cumulative effect transition method. The standard, along with subsequent guidance from FASB, lists several items that are specifically out of scope for ASU 2014-09, including but not limited to: core interest income, derivative instruments, investments, and loan origination fees.~~In March 2017,~~

To address the ~~FASB issued ASU No. 2017-05,~~ Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. The Company is currently evaluating the potential impact of these standards on our consolidated financial statements.

~~3. Acquisition Activity~~

~~On May 16, 2016,~~new standard, the Company ~~acquired by merger 100% of HF Financial Corp. ("HF Financial"),~~formed a working group and has completed the ~~holding company of Home Federal Bank. Under terms of the agreement, HF Financial's stockholders had the right~~initial scoping phase to ~~receive for each share of HF Financial common stock, at their election (but~~determine which revenue streams may be subject to ~~proration~~accounting or disclosure changes upon adoption in ~~the event cash or stock is oversubscribed), either (i) 0.6500 share~~October of the Company's common stock, or (ii) $19.50 in cash. The total consideration was prorated as necessary to ensure that 24.29% of the total outstanding shares of HF Financial common stock were exchanged for cash and 75.71% of the total outstanding shares of HF

~~21-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Financial common stock were exchanged for shares of the Company's common stock. Total merger consideration of $142.0 million was paid by the Company in the acquisition, which resulted in goodwill of $41.2 million, as shown in the table below. With2018. Based on this acquisition, the Company expanded its presence in South Dakota and into North Dakota and Minnesota through the addition of 23 bank offices and experienced in-market teams. The following summarizes consideration paid and an allocation of purchase price to net assets acquired.

Number of Shares Amount
(dollars in thousands)
Equity consideration:
Common stock issued 3,448,119
$ 107,478
Non-equity consideration:
Cash 34,487
Total consideration paid 141,965
Fair value of net assets acquired including identifiable intangible assets 100,749
Goodwill $ 41,216

~~As of the acquisition date, goodwill of $41.2 million arose from the acquisition~~preliminary analysis, we do not anticipate significant changes as a result of ~~consideration in excess of net assets acquired. No goodwill is expected to be deductible for income tax purposes. The fair value of intangible assets created in~~implementing the acquisition was $14.5 million related to core deposits and other intangible assets and loan servicing rights. During the fourth quarter of 2016, the Company obtained additional information regarding the valuation of the deferred tax assets, which resulted in an increase in goodwill recognized in the transaction of $0.6 million. There were no adjustments to current period income statement as a result of the adjustment.

~~The following table summarizes the assets acquired and liabilities assumed which were recorded~~standard, but will conclude on the ~~consolidated balance sheet as~~quantitative and qualitative impacts once we have completed our review of key contracts for any in-scope items over the ~~date of merger of HF Financial:~~

Fair Value
(dollars in thousands)
Identifiable assets acquired:
Cash and cash equivalents $ 18,818
Investment securities 165,052
Loans 863,741
Premises and equipment 19,220
Accrued interest receivable 4,117
Other repossessed property 4
Intangible assets 7,877
Loan servicing rights 6,573
Other assets 36,076
Total identifiable assets acquired $ 1,121,478
Liabilities assumed:
Deposits $ 863,121
FHLB advances and other borrowings 115,881
Subordinated debentures 21,110
Other liabilities 20,617
Total liabilities assumed 1,020,729
Fair value of net identifiable assets acquired 100,749
Net purchase price 141,965
Goodwill $ 41,216

~~The Company accounted for the aforementioned business combination under the acquisition method in accordance with ASC Topic 805,~~ ~~Business Combinations~~. Accordingly, the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of acquisition. The Company has made all final adjustments to the purchase price allocation and retrospectively adjusted goodwill recorded. Material adjustments to acquisition date estimated fair values would be recorded in the reporting period in which the adjustment amounts are determined. Determining the fair value of assets and liabilities, particularly illiquid assets and liabilities, is a complicated process involving significant judgment regarding estimates and assumptions used to calculate estimatedcoming months.

~~22-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

fair value. Fair value adjustments based on updated estimates could materially affect the goodwill recorded on the acquisition. The Company may incur losses on the acquired loans that are materially different from losses the Company originally projected.

The results of the merged HF Financial operations are presented within the Company’s consolidated financial statements from the acquisition date. The disclosure of HF Financial's post-acquisition revenue and net income is not practical due to the combining of HF Financial’s operations with and into the Company as of the acquisition date. Acquisition-related transaction expenses associated with the HF Financial acquisition totaled $0.0 million and $12.2 million for the three months ended June 30, 2017 and 2016, respectively, and $0.7 million and $13.0 million for the nine months ended June 30, 2017 and 2016, respectively.

~~Supplemental pro forma information~~

The following unaudited pro forma combined results of operations of the Company and HF Financial presents results as if the acquisition had been completed as of the beginning of each period indicated. The unaudited pro forma combined results of operations are presented solely for information purposes and are not intended to represent or be indicative of the consolidated results of operations that the Company would have reported had this transaction been completed as of the dates and for the periods presented, nor are they necessarily indicative of future results. In particular, no adjustments have been made to eliminate the amount of HF Financial's provision for loan and lease losses incurred prior to the acquisition date that would not have been necessary had the acquired loans been recorded at fair value as of the beginning of each period indicated. In accordance with Article 11 of SEC Regulation S-X, transaction costs directly attributable to the acquisition have been excluded.

Three Months Ended Nine Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
(Unaudited, dollars in thousands, except per share data)
Net interest income $ 98,730
$ 96,844
$ 294,772
$ 288,227
Net income 35,060
27,846
107,125
92,528
Basic earnings per share 0.60
0.49
1.82
1.66
Fully diluted earnings per share 0.59
0.49
1.81
1.65

In the acquisition, the Company acquired $863.7 million of loans at fair value, net of $28.5 million, or 3.30%, estimated discount to the outstanding principal balance. Of the total loans acquired, management identified $65.4 million that were considered to be credit impaired and are accounted for under ASC Topic 310-30. The table below summarizes the total contractually required principal and interest cash payments, management's estimate of expected total cash payments and fair value of the loans as of acquisition date for purchased credit impaired loans. Contractually required principal and interest payments have been adjusted for estimated prepayments.

Amount
(Unaudited, dollars in thousands)
Contractually required principal and interest $ 83,710
Non-accretable difference (28,516 )
Cash flows expected to be collected 55,194
Accretable yield (3,662 )
Total purchased credit impaired loans acquired $ 51,532

~~The following table presents the acquired loan data for the HF Financial acquisition.~~

Fair Value of Acquired Loans at Acquisition Date Gross Contractual Amounts Receivable at Acquisition Date Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
(Unaudited, dollars in thousands)
Acquired receivables subject to ASC 310-30 $ 51,532
$ 83,710
$ 28,516
Acquired receivables not subject to ASC 310-30 812,209
998,255
9,572

~~23-~~12-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

4.3. Securities Available for Sale

The amortized cost and approximate fair value of investments in securities, all of which are classified as available for sale according to management’s intent, are summarized as follows:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(dollars in thousands)									(dollars in thousands)
As of June 30, 2017
As of December 31, 2017
U.S. Treasury securities	$	227,779	$	813	$	(15	)	$	228,577	$	228,302	$	2	$	(527	)	$	227,777
Mortgage-backed securities:
Government National Mortgage Association	546,454		325		(6,736		)	540,043		481,441		94		(9,330		)	472,205
Federal Home Loan Mortgage Corporation										203,561		—		(2,869		)	200,692
Federal National Mortgage Association	319,848		111		(2,382		)	317,577		161,958		—		(2,528		)	159,430
Small Business Assistance Program	207,160		629		(1,104		)	206,685		237,965		212		(1,838		)	236,339
States and political subdivision securities	73,048		194		(719		)	72,523		70,034		86		(943		)	69,177
Other	1,013		24		—			1,037		1,006		15		—			1,021
Total	$	1,375,302	$	2,096	$	(10,956	)	$	1,366,442	$	1,384,267	$	409	$	(18,035	)	$	1,366,641


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(dollars in thousands)									(dollars in thousands)
As of September 30, 2016
As of September 30, 2017
U.S. Treasury securities	$	227,007	$	3,973	$	—		$	230,980	$	228,039	$	579	$	(15	)	$	228,603
Mortgage-backed securities:
Government National Mortgage Association	664,529		3,172		(1,922		)	665,779		511,457		228		(6,635		)	505,050
Federal Home Loan Mortgage Corporation										169,147		75		(1,247		)	167,975
Federal National Mortgage Association	212,452		1,324		—			213,776		170,247		22		(1,287		)	168,982
Small Business Assistance Program	142,921		2,362		—			145,283		224,005		726		(1,001		)	223,730
States and political subdivision securities	55,525		123		(164		)	55,484		73,041		187		(642		)	72,586
Corporate debt securities	4,998		24		—			5,022
Other	1,013		49		—			1,062		1,006		28		—			1,034
Total	$	1,308,445	$	11,027	$	(2,086	)	$	1,317,386	$	1,376,942	$	1,845	$	(10,827	)	$	1,367,960

The amortized cost and approximate fair value of debt securities available for sale as of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, by contractual maturity, are shown below. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without penalty.


	June 30, 2017				September 30, 2016				December 31, 2017				September 30, 2017
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(dollars in thousands)								(dollars in thousands)
Due in one year or less	$	56,022	$	56,064	$	3,706	$	3,709	$	93,551	$	93,461	$	91,535	$	91,597
Due after one year through five years	227,404		227,847		265,253		269,242		189,128		188,080		193,117		193,373
Due after five years through ten years	17,279		17,067		18,449		18,413		15,535		15,291		16,306		16,097
Due after ten years	122		122		122		122		122		122		122		122
	300,827		301,100		287,530		291,486		298,336		296,954		301,080		301,189
Mortgage-backed securities	1,073,462		1,064,305		1,019,902		1,024,838		1,084,925		1,068,666		1,074,856		1,065,737
Securities without contractual maturities	1,013		1,037		1,013		1,062		1,006		1,021		1,006		1,034
Total	$	1,375,302	$	1,366,442	$	1,308,445	$	1,317,386	$	1,384,267	$	1,366,641	$	1,376,942	$	1,367,960

Proceeds from sales of securities available for sale were ~~$0.0 million and $120.9~~$0.2 million for the three months ended ~~June 30,~~December 31, 2017 and ~~2016, respectively and $5.0 million and $145.9~~$0.0 million for the ~~nine~~three months ended ~~June 30, 2017 and 2016, respectively. Gross~~December 31, 2016. No gross gains (pre-tax) ~~of $0.0 million and $0.1 million and~~or gross losses (pre-tax) ~~of $0.0 million and $0.0 million~~ were realized on the sales for the three months ended ~~June 30,~~December 31, 2017 and 2016 respectively. Gross gains (pre-tax) of $0.0 million and $0.2 million and gross losses (pre-tax) of $0.0 million and $0.0 million were realized on the sales for the nine months ended June 30, 2017 and 2016, respectively, using the specific identification method. The Company recognized no other-than-temporary impairment for the three months ended December 31, 2017 and 2016.

~~24-~~13-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

months ended June 30, 2017 and 2016. The Company recognized no other-than-temporary impairment for the nine months ended June 30, 2017 and $0.4 million for the nine months ended June 30, 2016 in net loss on sale of securities in the consolidated statements of comprehensive income on two security holdings attributable to credit.

Securities with an estimated fair value of approximately ~~$916.1~~$990.6 million and ~~$971.3~~$951.4 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively, were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The counterparties do not have the right to sell or pledge the securities the Company has pledged as collateral.

As detailed in the following tables, certain investments in debt securities, which are approximately ~~66%~~90% and ~~25%~~68% of the Company’s investment portfolio at ~~June 30,~~estimated fair value at December 31, 2017 and September 30, ~~2016,~~2017, respectively, are reported in the consolidated financial statements at an amount less than their amortized cost. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, implicit or explicit government guarantees, and information obtained from regulatory filings, management believes the declines in fair value of these securities are temporary. As the Company does not intend to sell the securities and it is not more likely than not ~~that~~ the Company will be required to sell the securities before the recovery of their amortized cost basis, which may be maturity, the Company does not consider the securities to be other-than-temporarily impaired at ~~June 30,~~December 31, 2017 or September 30, ~~2016.~~2017.

The following table presents the Company’s gross unrealized losses and approximate fair value in investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position:


	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(dollars in thousands)															(dollars in thousands)
As of June 30, 2017
As of December 31, 2017
U.S. Treasury securities	$	10,009	$	(15	)	$	—	$	—		$	10,009	$	(15	)	$	183,651	$	(415	)	$	19,133	$	(112	)	$	202,784	$	(527	)
Mortgage-backed securities	686,003		(6,943		)	162,412		(3,279		)	848,415		(10,222		)	184,096		(1,703		)	787,256		(14,862		)	971,352		(16,565		)
States and political subdivision securities	43,619		(638		)	4,331		(81		)	47,950		(719		)	5,198		(33		)	54,253		(910		)	59,451		(943		)
Total	$	739,631	$	(7,596	)	$	166,743	$	(3,360	)	$	906,374	$	(10,956	)	$	372,945	$	(2,151	)	$	860,642	$	(15,884	)	$	1,233,587	$	(18,035	)


	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses
	(dollars in thousands)															(dollars in thousands)
As of September 30, 2016
As of September 30, 2017
U.S. Treasury securities																$	10,003	$	(15	)	$	—	$	—		$	10,003	$	(15	)
Mortgage-backed securities	$	17,528	$	(6	)	$	284,995	$	(1,916	)	$	302,523	$	(1,922	)	$	635,969	$	(5,425	)	$	241,368	$	(4,746	)	$	877,337	$	(10,171	)
States and political subdivision securities	27,933		(164		)	—		—			27,933		(164		)	21,705		(197		)	25,773		(444		)	47,478		(641		)
Total	$	45,461	$	(170	)	$	284,995	$	(1,916	)	$	330,456	$	(2,086	)	$	667,677	$	(5,637	)	$	267,141	$	(5,190	)	$	934,818	$	(10,827	)

As of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, the Company had ~~240~~320 and ~~110~~249 securities, respectively, in an unrealized loss position.

4. Loans

The ~~components~~composition of ~~accumulated other comprehensive income (loss) from net unrealized gains (losses) on securities available for sale for the three~~loans as of December 31, 2017 and ~~nine months ended June~~September 30, 2017, ~~and 2016, are~~is as follows:

Three Months Ended Nine Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
(dollars in thousands)
Beginning balance accumulated other comprehensive income (loss) $ (6,678 ) $ 4,709
$ 5,534
$ 2,318
Net unrealized holding gain (loss) arising during the period 1,896
6,837
(17,845 ) 11,024
Reclassification adjustment for net gain (loss) realized in net income —
134
44
(196 )
Net change in unrealized gain (loss) before income taxes 1,896
6,971
(17,801 ) 10,828
Income tax (expense) benefit (721 ) (2,649 ) 6,764
(4,115 )
Net change in unrealized gain (loss) on securities after taxes 1,175
4,322
(11,037 ) 6,713
Ending balance accumulated other comprehensive income (loss) $ (5,503 ) $ 9,031
$ (5,503 ) $ 9,031



	December 31, 2017			September 30, 2017
	(dollars in thousands)
Commercial real estate	$	4,295,696		$	4,124,805
Agriculture	2,177,383			2,122,138
Commercial non-real estate	1,695,731			1,718,914
Residential real estate	924,439			932,892
Consumer	62,872			66,559
Other	45,805			43,207
Ending balance	9,201,926			9,008,515
Less: Unamortized discount on acquired loans	(26,536		)	(29,121		)
Unearned net deferred fees and costs and loans in process	(10,017		)	(10,841		)
Total	$	9,165,373		$	8,968,553

~~25-~~14-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

~~5. Loans~~

~~The composition of loans as of June 30, 2017 and September 30, 2016, is as follows:~~

June 30, 2017 September 30, 2016
(dollars in thousands)
Residential real estate $ 953,340
$ 1,020,958
Commercial real estate 3,965,599
3,754,107
Commercial non real estate 1,715,630
1,673,166
Agriculture 2,087,113
2,168,937
Consumer 70,028
76,273
Other 44,111
42,477
Ending balance 8,835,821
8,735,918
Less: Unamortized discount on acquired loans (33,135 ) (39,947 )
Unearned net deferred fees and costs and loans in process (10,834 ) (13,327 )
Total $ 8,791,852
$ 8,682,644

The loan ~~breakouts~~segments above include loans covered by FDIC loss sharing agreements totaling ~~$61.8~~$53.4 million and ~~$73.3~~$57.5 million as of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively, residential real estate loans held for sale totaling ~~$11.5~~$5.8 million and ~~$12.9~~$7.5 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively, and ~~$1.05 billion~~$980.1 million and ~~$1.13~~$1.02 billion of loans accounted for at fair value at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

Unearned net deferred fees and costs totaled ~~$10.1~~$11.9 million and ~~$8.6~~$11.6 million as of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

Loans in process represent loans that have been funded as of the balance sheet dates but not classified into a loan category and loan payments received as of the balance sheet dates that have not been applied to individual loan accounts. Loans in process totaled ~~$0.7~~$(1.9) million and ~~$4.7~~$(0.8) million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

Loans guaranteed by agencies of the U.S. government totaled ~~$166.1~~$162.3 million and ~~$120.0~~$168.3 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

Principal balances of residential real estate loans sold totaled ~~$66.0~~$50.2 million and ~~$64.2~~$91.7 million for the three months ended ~~June 30, 2017 and 2016, respectively and $211.1 million and $172.8 million for the nine months ended June 30,~~December 31, 2017 and 2016, respectively.

Nonaccrual

The following table presents the Company’s nonaccrual loans at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, excluding ASC 310-30 loans. Loans greater than 90 days past due and still accruing interest as of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, were ~~$0.4~~$0.2 million and ~~$2.0~~$1.9 million, respectively.


					December 31, 2017		September 30, 2017
	June 30, 2017		September 30, 2016		(dollars in thousands)
Nonaccrual loans	(dollars in thousands)
Commercial real estate					$	33,816	$	14,693
Agriculture					91,094		99,325
Commercial non-real estate					13,016		13,674
Residential real estate	$	5,548	$	5,962	4,068		4,421
Commercial real estate	13,863		13,870
Commercial non real estate	23,917		27,280
Agriculture	73,351		66,301
Consumer	216		223		162		112
Total	$	116,895	$	113,636	$	142,156	$	132,225

Credit Quality Information

~~26-~~15-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

~~Credit Quality Information~~

The composition of the loan portfolio by internally assigned grade is as follows as of ~~June 30,~~December 31, 2017 and September 30, ~~2016.~~2017. This table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of ~~$1.05 billion~~$980.1 million at ~~June 30,~~December 31, 2017 and ~~$1.13~~$1.02 billion at September 30, ~~2016:~~2017:


As of June 30, 2017	Residential Real Estate		Commercial Real Estate		Commercial Non Real Estate		Agriculture		Consumer		Other		Total
As of December 31, 2017															Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
															(dollars in thousands)
Credit Risk Profile by Internally Assigned Grade	(dollars in thousands)
Grade:
Pass	$	867,159	$	3,548,040	$	1,151,190	$	1,455,712	$	69,088	$	44,111	$	7,135,300	$	3,693,522	$	1,669,121	$	1,363,503	$	849,854	$	62,084	$	45,805	$	7,683,889
Watchlist	4,606		63,743		36,847		193,703		64		—		298,963		48,429		149,746		32,571		3,708		195		—		234,649
Substandard	8,395		43,540		30,184		168,075		416		—		250,610		72,183		117,824		22,177		7,495		250		—		219,929
Doubtful	486		579		5,282		129		—		—		6,476		198		29		3,031		133		—		—		3,391
Loss															—		—		—		—		—		—		—
Ending balance	880,646		3,655,902		1,223,503		1,817,619		69,568		44,111		7,691,349		3,814,332		1,936,720		1,421,282		861,190		62,529		45,805		8,141,858
Loans covered by FDIC loss sharing agreements	61,789		—		—		—		—		—		61,789		—		—		—		53,388		—		—		53,388
Total	$	942,435	$	3,655,902	$	1,223,503	$	1,817,619	$	69,568	$	44,111	$	7,753,138	$	3,814,332	$	1,936,720	$	1,421,282	$	914,578	$	62,529	$	45,805	$	8,195,246


As of September 30, 2016	Residential Real Estate		Commercial Real Estate		Commercial Non Real Estate		Agriculture		Consumer		Other		Total
As of September 30, 2017															Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
															(dollars in thousands)
Credit Risk Profile by Internally Assigned Grade	(dollars in thousands)
Grade:
Pass	$	919,224	$	3,276,048	$	1,093,913	$	1,514,344	$	75,065	$	42,477	$	6,921,071	$	3,519,689	$	1,577,403	$	1,369,803	$	853,266	$	65,673	$	43,207	$	7,429,041
Watchlist	4,741		81,148		37,283		204,326		110		—		327,608		80,195		157,407		31,878		4,158		187		—		273,825
Substandard	10,885		57,415		42,319		130,569		417		—		241,605		37,627		130,953		21,438		7,368		306		—		197,692
Doubtful	130		147		395		630		—		—		1,302		521		119		3,841		242		—		—		4,723
Loss															—		—		—		—		—		—		—
Ending balance	934,980		3,414,758		1,173,910		1,849,869		75,592		42,477		7,491,586		3,638,032		1,865,882		1,426,960		865,034		66,166		43,207		7,905,281
Loans covered by FDIC loss sharing agreements	73,272		—		—		—		—		—		73,272		—		—		—		57,537		—		—		57,537
Total	$	1,008,252	$	3,414,758	$	1,173,910	$	1,849,869	$	75,592	$	42,477	$	7,564,858	$	3,638,032	$	1,865,882	$	1,426,960	$	922,571	$	66,166	$	43,207	$	7,962,818

Past Due Loans

The following table presents the Company’s past due loans at ~~June 30,~~December 31, 2017 and September 30, ~~2016.~~2017. This table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of ~~$1.05 billion~~$980.1 million at ~~June 30,~~December 31, 2017 and ~~$1.13~~$1.02 billion at September 30, ~~2016.~~2017.


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Financing Receivables		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Financing Receivables
As of June 30, 2017	(dollars in thousands)
													(dollars in thousands)
As of December 31, 2017
Commercial real estate													$	5,571	$	18,485	$	11,134	$	35,190	$	3,779,142	$	3,814,332
Agriculture													8,515		11,173		19,122		38,810		1,897,910		1,936,720
Commercial non-real estate													1,651		283		6,734		8,668		1,412,614		1,421,282
Residential real estate	$	1,004	$	606	$	2,322	$	3,932	$	876,714	$	880,646	3,733		954		1,572		6,259		854,931		861,190
Commercial real estate	361		1,603		6,019		7,983		3,647,919		3,655,902
Commercial non real estate	1,735		502		21,008		23,245		1,200,258		1,223,503
Agriculture	11,501		1,924		12,181		25,606		1,792,013		1,817,619
Consumer	120		33		42		195		69,373		69,568		124		15		77		216		62,313		62,529
Other	—		—		—		—		44,111		44,111		—		—		—		—		45,805		45,805
Ending balance	14,721		4,668		41,572		60,961		7,630,388		7,691,349		19,594		30,910		38,639		89,143		8,052,715		8,141,858
Loans covered by FDIC loss sharing agreements	190		402		728		1,320		60,469		61,789		1,721		328		1,525		3,574		49,814		53,388
Total	$	14,911	$	5,070	$	42,300	$	62,281	$	7,690,857	$	7,753,138	$	21,315	$	31,238	$	40,164	$	92,717	$	8,102,529	$	8,195,246

~~27-~~16-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)


	30-59 Days Past Due			60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Financing Receivables		30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Financing Receivables
As of September 30, 2016	(dollars in thousands)
														(dollars in thousands)
As of September 30, 2017
Commercial real estate														$	876	$	22,536	$	6,504	$	29,916	$	3,608,116	$	3,638,032
Agriculture														1,453		3,181		20,844		25,478		1,840,404		1,865,882
Commercial non-real estate														2,485		115		8,580		11,180		1,415,780		1,426,960
Residential real estate	$	828		$	548	$	2,063	$	3,439	$	931,541	$	934,980	1,428		76		951		2,455		862,579		865,034
Commercial real estate	1,765			1,959		3,745		7,469		3,407,289		3,414,758
Commercial non real estate	1,588			5,515		9,594		16,697		1,157,213		1,173,910
Agriculture	(26		)	709		11,549		12,232		1,837,637		1,849,869
Consumer	209			20		28		257		75,335		75,592		71		24		18		113		66,053		66,166
Other	—			—		—		—		42,477		42,477		—		—		—		—		43,207		43,207
Ending balance	4,364			8,751		26,979		40,094		7,451,492		7,491,586		6,313		25,932		36,897		69,142		7,836,139		7,905,281
Loans covered by FDIC loss sharing agreements	1,404			1,173		367		2,944		70,328		73,272		998		54		738		1,790		55,747		57,537
Total	$	5,768		$	9,924	$	27,346	$	43,038	$	7,521,820	$	7,564,858	$	7,311	$	25,986	$	37,635	$	70,932	$	7,891,886	$	7,962,818

Impaired Loans

The following table presents the Company’s impaired loans. This table excludes purchased credit impaired loans ~~covered by FDIC loss sharing agreements:~~and loans measured at fair value with changes in fair value reported in earnings of $980.1 million at December 31, 2017 and $1.02 billion at September 30, 2017:


													December 31, 2017						September 30, 2017
	June 30, 2017						September 30, 2016						Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance		(dollars in thousands)
Impaired loans:	(dollars in thousands)
With an allowance recorded:
Commercial real estate													$	17,503	$	21,856	$	3,168	$	20,819	$	24,893	$	3,621
Agriculture													62,382		72,426		9,447		79,219		88,268		11,468
Commercial non-real estate													18,428		26,662		5,210		17,950		28,755		4,779
Residential real estate	$	6,029	$	6,764	$	3,134	$	6,244	$	6,886	$	3,000	5,713		6,469		2,731		5,177		5,874		2,581
Commercial real estate	18,795		22,862		4,759		29,965		32,349		3,846
Commercial non real estate	26,422		32,898		6,568		34,526		35,283		6,475
Agriculture	82,982		91,567		10,275		71,501		80,842		12,278
Consumer	382		397		111		383		393		87		230		237		86		280		287		86
Total impaired loans with an allowance recorded	134,610		154,488		24,847		142,619		155,753		25,686		104,256		127,650		20,642		123,445		148,077		22,535

With no allowance recorded:
Commercial real estate													53,783		93,231		—		16,652		69,677		—
Agriculture													54,806		60,690		—		51,256		64,177		—
Commercial non-real estate													13,415		22,835		—		13,983		38,924		—
Residential real estate	2,690		4,517				4,120		5,807		—		2,070		5,047		—		2,574		9,613		—
Commercial real estate	23,509		24,483		—		24,040		24,660		—
Commercial non real estate	14,994		16,279		—		15,299		16,469		—
Agriculture	52,808		54,611		—		30,339		31,907		—
Consumer	22		24		—		12		12		—		15		134		—		13		950		—
Total impaired loans with no allowance recorded	94,023		99,914		—		73,810		78,855		—		124,089		181,937		—		84,478		183,341		—
Total impaired loans	$	228,633	$	254,402	$	24,847	$	216,429	$	234,608	$	25,686	$	228,345	$	309,587	$	20,642	$	207,923	$	331,418	$	22,535

The average recorded investment on impaired loans and interest income recognized on impaired loans for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016, respectively, are as follows:


	Three Months Ended								Nine Months Ended								Three Months Ended December 31, 2017				Three Months Ended December 31, 2016
	June 30, 2017				June 30, 2016				June 30, 2017				June 30, 2016				Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status		(dollars in thousands)
	(dollars in thousands)
Commercial real estate																	$	54,379	$	1,576	$	52,022	$	670
Agriculture																	123,832		982		107,222		1,867
Commercial non-real estate																	31,888		451		48,700		422
Residential real estate	$	9,051	$	112	$	11,463	$	147	$	9,489	$	352	$	11,743	$	439	7,767		165		10,056		114
Commercial real estate	40,939		579		77,907		1,000		45,294		1,794		78,962		3,192
Commercial non real estate	43,224		331		32,560		388		45,424		1,111		37,322		1,162
Agriculture	140,512		1,993		126,806		2,103		127,621		5,186		118,056		5,359
Consumer	415		13		310		13		408		40		314		38		269		4		374		15
Total	$	234,141	$	3,028	$	249,046	$	3,651	$	228,236	$	8,483	$	246,397	$	10,190	$	218,135	$	3,178	$	218,374	$	3,088

~~28-~~17-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Valuation adjustments made to repossessed properties totaled ~~$0.1~~$0.0 million and ~~$0.5~~$0.4 million for the three months ended ~~June 30, 2017 and 2016, respectively, and $1.0 million for the nine months ended June 30,~~December 31, 2017 and 2016, respectively. The adjustments are included in noninterest expense.

Troubled Debt Restructurings

Included in certain loan categories in the impaired loans are troubled debt restructurings (“TDRs”) that were classified as impaired. These TDRs do not include purchased credit impaired loans. When the Company grants concessions to borrowers such as reduced interest rates or extensions of loan periods that would not be considered other than because of borrowers’ financial difficulties, the modification is considered a TDR. Specific reserves included in the allowance for loan and lease losses for TDRs were ~~$7.2~~$6.9 million and ~~$9.3~~$8.8 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively. ~~Commitments~~There were no commitments to lend additional funds to borrowers whose loans were modified in a TDR ~~were $0.0 million and $0.9 million~~ as of ~~June 30,~~December 31, 2017 and September 30, ~~2016, respectively.~~2017.

The following table presents the recorded value of the Company’s TDR balances as of ~~June 30,~~December 31, 2017 and September 30, ~~2016:~~2017:


	June 30, 2017				September 30, 2016				December 31, 2017				September 30, 2017
	Accruing		Nonaccrual		Accruing		Nonaccrual		Accruing		Nonaccrual		Accruing		Nonaccrual
	(dollars in thousands)								(dollars in thousands)
Commercial real estate									$	621	$	4,859	$	1,121	$	5,351
Agriculture									23,178		54,401		22,678		59,633
Commercial non-real estate									8,284		3,957		8,369		5,641
Residential real estate	$	320	$	594	$	370	$	937	258		808		311		688
Commercial real estate	5,451		2,168		18,250		2,356
Commercial non real estate	7,430		1,710		8,102		4,789
Agriculture	36,376		41,902		19,823		28,688
Consumer	4		29		23		8		11		—		11		21
Total	$	49,581	$	46,403	$	46,568	$	36,778	$	32,352	$	64,025	$	32,490	$	71,334

~~29-~~18-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents a summary of all accruing loans restructured in TDRs during the three months ended ~~June 30,~~December 31, 2017 and 2016, respectively:


	Three Months Ended June 30, 2017					Three Months Ended June 30, 2016					Three Months Ended December 31, 2017					Three Months Ended December 31, 2016
		Recorded Investment					Recorded Investment					Recorded Investment					Recorded Investment
	Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification
	(dollars in thousands)										(dollars in thousands)
Commercial real estate
Rate modification											—	$	—	$	—	—	$	—	$	—
Term extension											—	—		—		—	—		—
Payment modification											—	—		—		—	—		—
Bankruptcy											—	—		—		—	—		—
Other											—	—		—		—	—		—
Total commercial real estate											—	—		—		—	—		—
Agriculture
Rate modification											—	—		—		—	—		—
Term extension											—	—		—		—	—		—
Payment modification											—	—		—		—	—		—
Bankruptcy											—	—		—		—	—		—
Other											—	—		—		—	—		—
Total agriculture											—	—		—		—	—		—
Commercial non-real estate
Rate modification											—	—		—		—	—		—
Term extension											—	—		—		—	—		—
Payment modification											—	—		—		2	433		433
Bankruptcy											—	—		—		—	—		—
Other											—	—		—		—	—		—
Total commercial non-real estate											—	—		—		2	433		433
Residential real estate
Rate modification	—	$	—	$	—	—	$	—	$	—	—	—		—		—	—		—
Term extension	—	—		—		1	42		42		—	—		—		—	—		—
Payment modification	—	—		—		—	—		—		—	—		—		1	9		9
Bankruptcy	—	—		—		—	—		—		—	—		—		—	—		—
Other	—	—		—		—	—		—		—	—		—		—	—		—
Total residential real estate	—	—		—		1	42		42		—	—		—		1	9		9
Commercial real estate
Rate modification	—	—		—		—	—		—
Term extension	1	3,230		3,230		—	—		—
Payment modification	—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		—	—		—
Total commercial real estate	1	3,230		3,230		—	—		—
Commercial non real estate
Rate modification	—	—		—		—	—		—
Term extension	1	542		542		3	57		57
Payment modification	—	—		—		1	878		878
Bankruptcy	—	—		—		—	—		—
Other	1	150		150		—	—		—
Total commercial non real estate	2	692		692		4	935		935
Agriculture
Rate modification	—	—		—		—	—		—
Term extension	3	7,561		7,561		—	—		—
Payment modification	—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	3	728		728		—	—		—
Total agriculture	6	8,289		8,289		—	—		—
Consumer
Rate modification	—	—		—		—	—		—		—	—		—		—	—		—
Term extension	—	—		—		—	—		—		—	—		—		—	—		—
Payment modification	—	—		—		—	—		—		—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—		—	—		—		—	—		—
Other	—	—		—		—	—		—		—	—		—		—	—		—
Total consumer	—	—		—		—	—		—		—	—		—		—	—		—
Total accruing	9	$	12,211	$	12,211	5	$	977	$	977	—	$	—	$	—	3	$	442	$	442
Change in recorded investment due to principal paydown at time of modification	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—
Change in recorded investment due to chargeoffs at time of modification	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—

~~30-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~The following table presents a summary of all accruing loans restructured in TDRs during the nine months ended June 30, 2017 and 2016, respectively:~~

Nine Months Ended June 30, 2017 Nine Months Ended June 30, 2016
Recorded Investment Recorded Investment
Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification
(dollars in thousands)
Residential real estate
Rate modification —
$ —
$ —
—
$ —
$ —
Term extension —
—
—
1
42
42
Payment modification 1
9
9
—
—
—
Bankruptcy —
—
—
—
—
—
Other —
—
—
—
—
—
Total residential real estate 1
9
9
1
42
42
Commercial real estate
Rate modification —
—
—
—
—
—
Term extension 1
3,230
3,230
2
1,898
1,898
Payment modification —
—
—
—
—
—
Bankruptcy —
—
—
—
—
—
Other —
—
—
3
6,714
6,714
Total commercial real estate 1
3,230
3,230
5
8,612
8,612
Commercial non real estate
Rate modification —
—
—
1
49
49
Term extension 1
542
542
4
115
115
Payment modification 4
526
526
2
948
948
Bankruptcy —
—
—
—
—
—
Other 1
150
150
3
3,849
3,849
Total commercial non real estate 6
1,218
1,218
10
4,961
4,961
Agriculture
Rate modification —
—
—
—
—
—
Term extension 5
15,995
15,995
13
26,914
26,914
Payment modification —
—
—
4
989
989
Bankruptcy —
—
—
—
—
—
Other 3
728
728
—
—
—
Total agriculture 8
16,723
16,723
17
27,903
27,903
Consumer
Rate modification —
—
—
—
—
—
Term extension —
—
—
—
—
—
Payment modification —
—
—
—
—
—
Bankruptcy —
—
—
—
—
—
Other —
—
—
—
—
—
Total consumer —
—
—
—
—
—
Total accruing 16
$ 21,180
$ 21,180
33
$ 41,518
$ 41,518
Change in recorded investment due to principal paydown at time of modification —
$ —
$ —
—
$ —
$ —
Change in recorded investment due to chargeoffs at time of modification —
$ —
$ —
—
$ —
$ —

~~31-~~19-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents a summary of all non-accruing loans restructured in TDRs during the three months ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended June 30, 2017					Three Months Ended June 30, 2016					Three Months Ended December 31, 2017					Three Months Ended December 31, 2016
		Recorded Investment					Recorded Investment					Recorded Investment					Recorded Investment
	Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification
	(dollars in thousands)										(dollars in thousands)
Commercial real estate
Rate modification											—	$	—	$	—	—	$	—	$	—
Term extension											—	—		—		—	—		—
Payment modification											—	—		—		—	—		—
Bankruptcy											—	—		—		—	—		—
Other											—	—		—		—	—		—
Total commercial real estate											—	—		—		—	—		—
Agriculture
Rate modification											—	—		—		—	—		—
Term extension											—	—		—		—	—		—
Payment modification											—	—		—		—	—		—
Bankruptcy											—	—		—		—	—		—
Other											—	—		—		—	—		—
Total agriculture											—	—		—		—	—		—
Commercial non-real estate
Rate modification											—	—		—		—	—		—
Term extension											—	—		—		—	—		—
Payment modification											—	—		—		—	—		—
Bankruptcy											—	—		—		—	—		—
Other											—	—		—		—	—		—
Total commercial non-real estate											—	—		—		—	—		—
Residential real estate
Rate modification	—	$	—	$	—	—	$	—	$	—	—	—		—		—	—		—
Term extension	—	—		—		—	—		—		—	—		—		—	—		—
Payment modification	—	—		—		1	50		49		—	—		—		1	21		21
Bankruptcy	—	—		—		—	—		—		—	—		—		—	—		—
Other	—	—		—		—	—		—		—	—		—		—	—		—
Total residential real estate	—	—		—		1	50		49		—	—		—		1	21		21
Commercial real estate
Rate modification	—	—		—		—	—		—
Term extension	—	—		—		—	—		—
Payment modification	—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		—	—		—
Total commercial real estate	—	—		—		—	—		—
Commercial Non Real Estate
Rate modification	—	—		—		—	—		—
Term extension	—	—		—		—	—		—
Payment modification	—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		—	—		—
Total commercial non real estate	—	—		—		—	—		—
Agriculture
Rate modification	—	—		—		—	—		—
Term extension	3	4,351		4,351		1	101		100
Payment modification	—	—		—		4	932		887
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		1	96		96
Total agriculture	3	4,351		4,351		6	1,129		1,083
Consumer
Rate modification	—	—		—		—	—		—		—	—		—		—	—		—
Term extension	—	—		—		—	—		—		—	—		—		—	—		—
Payment modification	—	—		—		—	—		—		—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—		—	—		—		—	—		—
Other	—	—		—		—	—		—		—	—		—		—	—		—
Total consumer	—	—		—		—	—		—		—	—		—		—	—		—
Total non-accruing	3	$	4,351	$	4,351	7	$	1,179	$	1,132	—	$	—	$	—	1	$	21	$	21
Change in recorded investment due to principal paydown at time of modification	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—
Change in recorded investment due to chargeoffs at time of modification	—	$	—	$	—	7	$	47	$	—	—	$	—	$	—	—	$	—	$	—

~~32-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~The following table presents a summary of all non-accruing loans restructured in TDRs during the nine months ended June 30, 2017 and 2016:~~

Nine Months Ended June 30, 2017 Nine Months Ended June 30, 2016
Recorded Investment Recorded Investment
Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification
(dollars in thousands)
Residential real estate
Rate modification —
$ —
$ —
—
$ —
$ —
Term extension —
—
—
—
—
—
Payment modification 1
21
21
2
237
236
Bankruptcy —
—
—
—
—
—
Other —
—
—
—
—
—
Total residential real estate 1
21
21
2
237
236
Commercial real estate
Rate modification —
—
—
—
—
—
Term extension —
—
—
—
—
—
Payment modification —
—
—
—
—
—
Bankruptcy —
—
—
—
—
—
Other —
—
—
—
—
—
Total commercial real estate —
—
—
—
—
—
Commercial Non Real Estate
Rate modification —
—
—
—
—
—
Term extension —
—
—
—
—
—
Payment modification —
—
—
2
760
760
Bankruptcy —
—
—
—
—
—
Other —
—
—
—
—
—
Total commercial non real estate —
—
—
2
760
760
Agriculture
Rate modification —
—
—
—
—
—
Term extension 9
17,339
17,339
1
101
100
Payment modification —
—
—
4
932
887
Bankruptcy —
—
—
—
—
—
Other —
—
—
1
96
96
Total agriculture 9
17,339
17,339
6
1,129
1,083
Consumer
Rate modification —
—
—
—
—
—
Term extension 3
21
21
—
—
—
Payment modification —
—
—
—
—
—
Bankruptcy —
—
—
1
8
8
Other —
—
—
—
—
—
Total consumer 3
21
21
1
8
8
Total non-accruing 13
$ 17,381
$ 17,381
11
$ 2,134
$ 2,087
Change in recorded investment due to principal paydown at time of modification —
$ —
$ —
—
$ —
$ —
Change in recorded investment due to chargeoffs at time of modification —
$ —
$ —
7
$ 47
$ —

~~33-~~20-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The table below represents loans that were modified as TDRs within the previous 12 months and for which there was a payment default for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016, respectively.


	Three Months Ended						Nine Months Ended						Three Months Ended December 31, 2017			Three Months Ended December 31, 2016
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		(dollars in thousands)
	(dollars in thousands)
Commercial real estate													1	$	3,230	1	$	34
Agriculture													—	—		—	—
Commercial non-real estate													—	—		3	1,945
Residential real estate	—	$	—	—	$	—	—	$	—	1	$	—	—	—		—	—
Commercial real estate	—	—		—	—		—	—		—	—
Commercial non real estate	1	—		2	275		1	—		2	275
Agriculture	—	—		1	760		—	—		3	760
Consumer	—	—		—	—		—	—		—	—		—	—		1	8
Total	1	$	—	3	$	1,035	1	$	—	6	$	1,035	1	$	3,230	5	$	1,987

A loan is considered to be in payment default once it is 90 days or more contractually past due under the modified terms. The table above includes loans that experienced a payment default during the period, but may be performing in accordance with the modified terms as of the balance sheet date. For the three months ended ~~June 30,~~December 31, 2017 and 2016, there were ~~$3.4~~$0.6 million and ~~$17.9~~$0.0 million, ~~respectively, and $5.5 million and $22.2 million for the nine months ended June 30, 2017 and 2016,~~ respectively, of loans removed from TDR status as they were restructured at market terms and are performing.

6.5. Allowance for Loan and Lease Losses

The allowance for loan and lease losses is determined based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies, and other credit risk indicators, which is inherently subjective. The Company considers the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. In addition, consideration is given to concentration risks associated with the various loan portfolios and current economic conditions that might impact the portfolio. The Company also considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry, or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions and macroeconomic factors, such as changes in unemployment rates, gross domestic product, and consumer bankruptcy filings.

Changes to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses, which is reflected on the consolidated statements of income. Past due status is monitored as an indicator of credit deterioration. Loans that are 90 days or more past due are put on nonaccrual status unless a repayment is eminent. Loans deemed to be uncollectible are charged off against the allowance for loan and lease losses. Recoveries of amounts previously charged-off are credited to the allowance for loan and lease losses.

The specific reserve relates to impaired loans. A loan is impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due (interest as well as principal) according to the contractual terms of the loan agreement. Specific reserves are determined on a loan-by-loan basis based on management’s best estimate of the Company's exposure, given the current payment status of the loan, the present value of expected payments, and the value of any underlying collateral. Impaired loans also include loans modified in troubled debt restructurings. Generally, the impairment related to troubled debt restructurings is measured based on the fair value of the collateral, less cost to sell, or the present value of expected payments relative to the unpaid principal balance. If the impaired loan is identified as collateral dependent, then the fair value of the collateral method of measuring the amount of the impairment is utilized. This method requires obtaining an independent appraisal of the collateral and reducing the appraised value by applying a discount factor to the appraised value, if necessary, and including costs to sell.

21-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following tables present the Company’s allowance for loan and lease losses roll forward for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:

Three Months Ended June 30, 2017 Residential Real Estate Commercial Real Estate Commercial
Non Real Estate Agriculture Consumer Other Total
(dollars in thousands)
Beginning balance April 1, 2017 $ 6,069
$ 16,996
$ 11,949
$ 26,320
$ 371
$ 980
$ 62,685
Charge-offs (236 ) (57 ) (4,076 ) (288 ) (28 ) (518 ) (5,203 )
Recoveries 50
57
283
258
45
243
936
Provision (123 ) 1,209
6,269
(1,805 ) (38 ) 338
5,850
Improvement of ASC 310-30 loans —
(54 ) —
—
—
—
(54 )
Ending balance June 30, 2017 $ 5,760
$ 18,151
$ 14,425
$ 24,485
$ 350
$ 1,043
$ 64,214



Three Months Ended December 31, 2017	Commercial Real Estate			Agriculture			Commercial Non-Real Estate			Residential Real Estate			Consumer			Other			Total
	(dollars in thousands)
Beginning balance October 1, 2017	$	16,941		$	25,757		$	14,114		$	5,347		$	329		$	1,015		$	63,503
Charge-offs	(329		)	(2,198		)	(1,239		)	(255		)	(54		)	(534		)	(4,609		)
Recoveries	148			47			121			90			22			144			572
Provision	(755		)	1,144			3,438			330			10			437			4,604
(Improvement) of ASC 310-30 loans	(10		)	—			—			(37		)	—			—			(47		)
Ending balance December 31, 2017	$	15,995		$	24,750		$	16,434		$	5,475		$	307		$	1,062		$	64,023

Three Months Ended June 30, 2016 Residential Real Estate Commercial Real Estate Commercial
Non Real Estate Agriculture Consumer Other Total
(dollars in thousands)
Beginning balance April 1, 2016 $ 8,796
$ 20,904
$ 12,631
$ 18,323
$ 336
$ 927
$ 61,917
Charge-offs (257 ) (291 ) (1,936 ) (1,133 ) (37 ) (497 ) (4,151 )
Recoveries 133
77
235
262
61
337
1,105
Provision (778 ) (713 ) 1,200
5,634
79
304
5,726
Improvement of ASC 310-30 loans (205 ) (149 ) —
—
—
—
(354 )
Ending balance June 30, 2016 $ 7,689
$ 19,828
$ 12,130
$ 23,086
$ 439
$ 1,071
$ 64,243



Three Months Ended December 31, 2016	Commercial Real Estate			Agriculture			Commercial Non-Real Estate			Residential Real Estate			Consumer			Other			Total
	(dollars in thousands)
Beginning balance October 1, 2016	$	17,946		$	25,115		$	12,990		$	7,106		$	438		$	1,047		$	64,642
Charge-offs	—			(2,866		)	(1,959		)	(150		)	(79		)	(498		)	(5,552		)
Recoveries	99			27			98			205			15			184			628
Provision	(1,546		)	6,243			2,314			(350		)	(34		)	323			6,950
(Improvement) impairment of ASC 310-30 loans	124			—			—			(25		)	—			—			99
Ending balance December 31, 2016	$	16,623		$	28,519		$	13,443		$	6,786		$	340		$	1,056		$	66,767

The following tables provide details regarding the allowance for loan and lease losses and balance by type of allowance as of December 31, 2017 and September 30, 2017. These tables are presented net of unamortized discount on acquired loans and excludes loans of $980.1 million measured at fair value, loans held for sale of $5.8 million, and guaranteed loans of $162.3 million for December 31, 2017 and loans measured at fair value of $1.02 billion, loans held for sale of $7.5 million, and guaranteed loans of $168.3 million for September 30, 2017.

Nine Months Ended June 30, 2017 Residential Real Estate Commercial Real Estate Commercial
Non Real Estate Agriculture Consumer Other Total
(dollars in thousands)
Beginning balance October 1, 2016 $ 7,106
$ 17,946
$ 12,990
$ 25,115
$ 438
$ 1,047
$ 64,642
Charge-offs (502 ) (1,881 ) (7,769 ) (7,708 ) (138 ) (1,834 ) (19,832 )
Recoveries 311
441
502
402
75
819
2,550
Provision (263 ) 1,759
8,702
6,676
(25 ) 1,011
17,860
Improvement of ASC 310-30 loans (892 ) (114 ) —
—
—
—
(1,006 )
Ending balance June 30, 2017 $ 5,760
$ 18,151
$ 14,425
$ 24,485
$ 350
$ 1,043
$ 64,214



As of December 31, 2017	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)
Allowance for loan and lease losses
Individually evaluated for impairment	$	3,168	$	9,447	$	5,210	$	2,731	$	86	$	—	$	20,642
Collectively evaluated for impairment	12,155		15,188		11,224		2,646		221		1,062		42,496
ASC 310-30 loans	672		115		—		98		—		—		885
Total allowance	$	15,995	$	24,750	$	16,434	$	5,475	$	307	$	1,062	$	64,023

Financing Receivables
Individually evaluated for impairment	$	71,286	$	117,188	$	31,843	$	7,783	$	245	$	—	$	228,345
Collectively evaluated for impairment	3,635,278		1,788,260		1,328,215		851,442		61,683		45,805		7,710,683
ASC 310-30 loans	29,388		7,181		1,926		49,085		601		—		88,181
Loans Outstanding	$	3,735,952	$	1,912,629	$	1,361,984	$	908,310	$	62,529	$	45,805	$	8,027,209

~~34-~~22-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Nine Months Ended June 30, 2016 Residential Real Estate Commercial Real Estate Commercial
Non Real Estate Agriculture Consumer Other Total
(dollars in thousands)
Beginning balance October 1, 2015 $ 8,025
$ 18,014
$ 15,996
$ 13,952
$ 348
$ 865
$ 57,200
Charge-offs (959 ) (1,063 ) (2,193 ) (2,257 ) (183 ) (1,494 ) (8,149 )
Recoveries 472
568
875
386
131
868
3,300
Provision 463
2,547
(2,478 ) 11,005
143
832
12,512
Improvement of ASC 310-30 loans (312 ) (238 ) (70 ) —
—
—
(620 )
Ending balance June 30, 2016 $ 7,689
$ 19,828
$ 12,130
$ 23,086
$ 439
$ 1,071
$ 64,243

The following tables provide details regarding the allowance for loan and lease losses and balance by type of allowance as of June 30, 2017 and September 30, 2016. These tables are presented net of unamortized discount on acquired loans and excludes loans of $1.05 billion measured at fair value, loans held for sale of $11.5 million, and guaranteed loans of $166.1 million for June 30, 2017 and loans measured at fair value of $1.13 billion, loans held for sale of $12.9 million, and guaranteed loans of $120.0 million for September 30, 2016.

As of June 30, 2017 Residential Real Estate Commercial Real Estate Commercial
Non Real Estate Agriculture Consumer Other Total
(dollars in thousands)
Allowance for loan and lease losses
Individually evaluated for impairment $ 3,134
$ 4,759
$ 6,568
$ 10,275
$ 111
$ —
$ 24,847
Collectively evaluated for impairment 2,626
12,734
7,857
14,210
239
1,043
38,709
ASC 310-30 loans —
658
—
—
—
—
658
Total allowance $ 5,760
$ 18,151
$ 14,425
$ 24,485
$ 350
$ 1,043
$ 64,214

Financing Receivables
Individually evaluated for impairment $ 8,719
$ 42,304
$ 41,416
$ 135,790
$ 404
$ —
$ 228,633
Collectively evaluated for impairment 865,406
3,492,431
1,120,263
1,649,452
68,470
44,111
7,240,133
ASC 310-30 loans 56,492
38,221
2,393
8,963
694
—
106,763
Loans Outstanding $ 930,617
$ 3,572,956
$ 1,164,072
$ 1,794,205
$ 69,568
$ 44,111
$ 7,575,529


As of September 30, 2016	Residential Real Estate		Commercial Real Estate		Commercial Non Real Estate		Agriculture		Consumer		Other		Total
As of September 30, 2017															Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)														(dollars in thousands)
Allowance for loan and lease losses
Individually evaluated for impairment	$	3,000	$	3,846	$	6,475	$	12,278	$	87	$	—	$	25,686	$	3,621	$	11,468	$	4,779	$	2,581	$	86	$	—	$	22,535
Collectively evaluated for impairment	3,199		13,328		6,515		12,837		351		1,047		37,277		12,638		14,174		9,335		2,570		243		1,015		39,975
ASC 310-30 loans	907		772		—		—		—		—		1,679		682		115		—		196		—		—		993
Total allowance	$	7,106	$	17,946	$	12,990	$	25,115	$	438	$	1,047	$	64,642	$	16,941	$	25,757	$	14,114	$	5,347	$	329	$	1,015	$	63,503

Financing Receivables
Individually evaluated for impairment	$	10,364	$	54,005	$	49,825	$	101,840	$	395	$	—	$	216,429	$	37,471	$	130,475	$	31,933	$	7,751	$	293	$	—	$	207,923
Collectively evaluated for impairment	918,710		3,249,974		1,079,295		1,721,219		74,301		42,477		7,085,976		3,487,232		1,702,634		1,333,888		854,330		65,207		43,207		7,486,498
ASC 310-30 loans	65,737		44,448		3,196		15,254		896		—		129,531		30,099		7,174		1,920		52,736		666		—		92,595
Loans Outstanding	$	994,811	$	3,348,427	$	1,132,316	$	1,838,313	$	75,592	$	42,477	$	7,431,936	$	3,554,802	$	1,840,283	$	1,367,741	$	914,817	$	66,166	$	43,207	$	7,787,016

For acquired loans not accounted for under ASC ~~310-20~~310-30 (purchased ~~non-credit impaired)~~non-impaired), the Company utilizes specific and collective reserve calculation methods similar to originated loans. The required ALLL for these loans is included in the individually evaluated for impairment bucket of the ALLL if the loan is rated substandard or worse, and in the collectively evaluated for impairment bucket for pass rated loans.

The Company maintains an ALLL for acquired loans accounted for under ASC 310-30 as a result of impairment to loan pools arising from the periodic re-valuation of these loans. Any impairment in the individual pool is generally recognized in the current period as provision for loan and lease losses. Any improvement in the estimated cash flows, is generally not recognized immediately, but is instead reflected as an adjustment to the related loan pools yield on a prospective basis once any previously recorded impairment has been recaptured.

~~35-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The ALLL for ASC 310-30 loans totaled ~~$0.7~~$0.9 million at ~~June 30,~~December 31, 2017, compared to ~~$1.7~~$1.0 million at September 30, ~~2016.~~2017. For the three months ended ~~June 30,~~December 31, 2017, ~~and 2016,~~ loan pools accounted for under ASC 310-30 had a net reversal of provision of $0.1 million and $0.4 million, respectively. Net provision reversal for the nine months ended June 30, 2017 and 2016 totaled $1.0 million and $0.6 million, respectively. The net reversals of provision for the periods ended June 30, 2017 were primarilyas a result of ~~updated assumptions applied to one of the acquired mortgage pools which resulted~~increases in ~~higher than~~ expected cash flows. ~~The~~For the three months ended December 31, 2016, loan pools accounted for under ASC 310-30 had a net ~~reversals~~provision of ~~provision for the periods ended June 30, 2016 were driven by~~$0.1 million as a result of actual cash flows being ~~higher~~lower than expected cash flows.

The reserve for unfunded loan commitments was $0.5 million at both ~~June 30,~~December 31, 2017 and September 30, ~~2016~~2017 and is recorded in other liabilities on the consolidated balance sheets.

7.6. Accounting for Certain Loans Acquired with Deteriorated Credit Quality

In June 2010 and May 2016, the Company acquired certain loans that had deteriorated credit quality (ASC 310-30 loans or Purchase Credit Impaired loans). Loan accounting specific to these purchased credit impaired loans addresses differences between contractual cash flows expected to be collected from the initial investment in loans if those differences are attributable, at least in part, to credit quality. Several factors were considered when evaluating whether a loan was considered a purchased credit impaired loan, including the delinquency status of the loan, updated borrower credit status, geographic information and updated loan-to-values ~~(“LTV”~~("LTV"). Further, these purchased credit impaired loans had differences between contractual amounts owed and cash flows expected to be collected, that were at least in part, due to credit quality. U.S. GAAP allows purchasers to aggregate purchased credit impaired loans acquired in the same fiscal quarter in one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Loan pools are periodically reassessed to determine expected cash flows. In determining the expected cash flows, the timing of cash flows and prepayment assumptions for smaller, homogeneous loans are based on statistical models that take into account factors such as the loan interest rate, credit profile of the borrowers, the years in which the loans were originated, and whether the loans are fixed or variable rate loans. Prepayments may be assumed on large individual loans that consider similar prepayment factors listed above for smaller homogeneous loans. The re-assessment of purchased credit impaired loans resulted in the following changes in the accretable yield during the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Balance at beginning of period	$	38,705		$	39,843		$	38,124		$	44,489		$	44,131		$	38,124
Acquisition	—			3,662			—			3,662
Accretion	(3,789		)	(2,529		)	(9,767		)	(7,119		)	(3,381		)	(2,938		)
Reclassification from (to) nonaccretable difference	13,218			—			19,777			(56		)
Reclassification from nonaccretable difference													1,168			4,572
Balance at end of period	$	48,134		$	40,976		$	48,134		$	40,976		$	41,918		$	39,758

23-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The ~~reclassification~~reclassifications from nonaccretable difference noted in the table above ~~represents~~represent instances where specific pools of loans are expected to perform better over the remaining lives of the loans than expected at the prior re-assessment date. The reclassification to nonaccretable difference noted in the table above represents instances where specific pools of loans are estimated to have a shortfall in the expected future cash flows compared to the contractual cash flows at the prior re-assessment date.

The following table provides purchased credit impaired loans at ~~June 30,~~December 31, 2017 and September 30, ~~2016:~~2017:


	June 30, 2017						September 30, 2016						December 31, 2017						September 30, 2017
	Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³		Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³		Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³		Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³
	(dollars in thousands)												(dollars in thousands)
Commercial real estate													$	108,397	$	29,388	$	28,716	$	110,797	$	30,099	$	29,417
Agriculture													10,341		7,181		7,066		10,463		7,174		7,059
Commercial non-real estate													9,764		1,926		1,926		9,825		1,920		1,920
Residential real estate	$	66,140	$	56,492	$	56,492	$	76,696	$	65,737	$	64,830	57,758		49,085		48,987		61,981		52,736		52,540
Commercial real estate	120,999		38,221		37,563		129,615		44,448		43,676
Commercial non real estate	10,355		2,393		2,393		11,588		3,196		3,196
Agriculture	12,386		8,963		8,963		19,174		15,254		15,254
Consumer	831		694		694		1,033		896		896		737		601		601		798		666		666
Total lending	$	210,711	$	106,763	$	106,105	$	238,106	$	129,531	$	127,852	$	186,997	$	88,181	$	87,296	$	193,864	$	92,595	$	91,602

¹Represents the legal balance of ASC 310-30 loans.	¹Represents the legal balance of ASC 310-30 loans.												¹Represents the legal balance of ASC 310-30 loans.
² Represents the book balance of ASC 310-30 loans.	² Represents the book balance of ASC 310-30 loans.												² Represents the book balance of ASC 310-30 loans.
³ Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.	³ Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.												³ Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.

~~36-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

8.7. FDIC Indemnification Asset

Under the terms of the purchase and assumption agreement with the FDIC with regard to the TierOne Bank acquisition, the Company is reimbursed for a portion of the losses incurred on covered assets. As covered assets are resolved, whether it be through repayment, short sale of the underlying collateral, the foreclosure on or sale of collateral, or the sale or charge-off of loans or ~~Other Real Estate Owned ("OREO"),~~other repossessed property, any differences between the carrying value of the covered assets versus the payments received during the resolution process, that are reimbursable by the FDIC, are recognized as reductions in the FDIC indemnification asset. Any gains or losses realized from the resolution of covered assets reduce or increase, respectively, the amount recoverable from the FDIC. The following table represents a summary of the activity related to the FDIC indemnification asset for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Balance at beginning of period	$	8,371		$	12,875		$	10,777		$	14,722		$	5,704		$	10,777
Amortization	(1,492		)	(959		)	(3,473		)	(2,886		)	(1,018		)	(867		)
Changes in expected reimbursements from FDIC for changes in expected credit losses	36			(14		)	(69		)	(141		)	(18		)	28
Changes in reimbursable expenses	(283		)	(268		)	(821		)	(695		)	(206		)	(239		)
Reimbursements of covered losses to the FDIC	353			72			571			706			230			188
Balance at end of period	$	6,985		$	11,706		$	6,985		$	11,706		$	4,692		$	9,887

The loss claims filed are subject to review, approval, and annual audits by the FDIC or its assigned agents for compliance with the terms in the loss sharing agreements. The commercial loss share agreement claim period ended on June 4, 2015. The non-commercial loss share agreement ends June 4, 2020.

24-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

8. Derivative Financial Instruments

~~In the normal course of business, the~~The Company uses interest rate swaps to manage its interest rate risk and market risk in accommodating the needs of its customers. ~~Also,~~The Company recognizes all derivatives on the ~~Company enters into interest rate lock commitments on mortgage loans to be held for sale, with corresponding forward sales contracts related to these interest rate lock commitments.~~

~~Derivative instruments are recognized as~~consolidated balance sheet at fair value in either other assets or accrued expenses and other liabilities ~~in the accompanying consolidated financial statements and are measured at fair value.~~

as appropriate. The following table ~~summarizes~~presents the notional amounts and ~~estimated~~gross fair values of all derivative assets and liabilities held by the ~~Company’s derivative instruments at June 30,~~Company as of December 31, 2017 and September 30, ~~2016:~~

June 30, 2017
Notional Amount Balance Sheet Location Positive Fair Value Negative Fair Value
Derivatives not designated as hedging instruments: (dollars in thousands)
Interest rate swaps $ 1,035,288
Liabilities $ 1,626
$ (19,914 )
Mortgage loan commitments 43,808
Assets —
(56 )
Mortgage loan forward sale contracts 56,939
Liabilities 56
—
2017:


									December 31, 2017							September 30, 2017
	September 30, 2016								Notional Amount		Gross Asset Fair Value		Gross Liability Fair Value			Notional Amount		Gross Asset Fair Value		Gross Liability Fair Value
	Notional Amount		Balance Sheet Location	Positive Fair Value		Negative Fair Value			(dollars in thousands)
Derivatives not designated as hedging instruments:	(dollars in thousands)
Interest rate swaps	$	1,055,822	Liabilities	$	525	$	(81,974	)
Financial institution counterparties									$	1,022,553	$	7,554	$	(16,858	)	$	1,025,474	$	4,967	$	(22,737	)
Customer counterparties									63,915		814		(76		)	36,072		615		—
Mortgage loan commitments	52,333		Assets	66		—			22,618		1		—			37,765		—		(48		)
Mortgage loan forward sale contracts	60,529		Liabilities	—		(66		)	27,622		—		(1		)	43,628		48		—
Total									$	1,136,708	$	8,369	$	(16,935	)	$	1,142,939	$	5,630	$	(22,785	)

Netting of Derivatives

We record the derivatives on a net basis when a right of offset exists, based on transactions with a single counterparty that are subject to a legally enforceable master netting agreement. When bilateral netting agreements or similar agreements exist between the Company and its counterparties that create a single legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company reports derivative assets and liabilities on a net by derivative contract by counterparty basis. The following tables provide information on the Company's netting adjustments as of December 31, 2017 and September 30, 2017:



	Amounts offset on the Consolidated Balance Sheet
	Gross Fair Value			Fair Value Offset Amount			Cash Collateral			Net Amount Presented on the Consolidated Balance Sheet
	(dollars in thousands)
December 31, 2017
Total Derivative Assets	$	8,369		$	(5,906	)	$	(1,650	)	$	813
Total Derivative Liabilities^{1, 2}	$	(16,935	)	$	5,906		$	—		$	(11,029	)

¹ In addition to the cash collateral, there were securities of $24.9 million posted as collateral for financial institution counterparties at December 31, 2017.
²There was an additional $2.9 million of collateral held for initial margin with our Futures Clearing Merchant for clearing derivatives at December 31, 2017 and is included in other assets in the consolidated balance sheets.



	Amounts offset on the Consolidated Balance Sheet
	Gross Fair Value			Fair Value Offset Amount			Cash Collateral		Net Amount Presented on the Consolidated Balance Sheet
	(dollars in thousands)
September 30, 2017
Total Derivative Assets	$	1,850		$	(1,850	)	$	—	$	—
Total Derivative Liabilities^{1, 2}	(19,005		)	1,850			—		(17,155		)

¹ In addition to the cash collateral, there were securities of $25.0 million posted as collateral for financial institution counterparties at September 30, 2017.
²There was an additional $2.3 million of collateral held for initial margin with our Futures Clearing Merchant for clearing derivatives at September 30, 2017 and is included in other assets in the consolidated balance sheets.

25-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

As with any financial instrument, derivative financial instruments have inherent risk including adverse changes in interest rates. The Company’s exposure to derivative credit risk is defined as the possibility of sustaining a loss due to the failure of the counterparty to perform in accordance with the terms of the contract. Credit risks associated with interest rate swaps are similar to those relating to traditional on-balance sheet financial instruments. The Company manages interest rate swap credit risk with the same standards and procedures applied to its commercial lending activities. ~~Amounts due from swap counterparties to reclaim cash collateral under the interest rate swap master netting arrangements have not been offset against the derivative balances.~~

~~37-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Credit-risk-related contingent features

The Company has agreements with its derivative counterparties that contain a provision where if the Company or the derivative counterparty fails to maintain its status as a well/adequately capitalized institution, then the ~~counterparty~~other party has the right to terminate the derivative positions and the Company or the derivative counterparty would be required to settle its obligations under the agreements. The Company has minimum collateral posting thresholds with its derivative counterparties.

As of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, the termination value of derivatives in a net liability position related to these agreements was ~~$21.2~~$10.7 million and ~~$84.4~~$20.3 million, respectively, which includes accrued interest but excludes any adjustment for nonperformance risk. ~~The Company has minimum collateral posting thresholds with its derivative counterparties and~~Additionally, as of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017 the termination value of derivatives in a net asset position related to these agreements was $1.6 million and $1.2 million, respectively, which includes accrued interest but excludes any adjustment for nonperformance risk and as of December 31, 2017 and September 30, 2017, the derivative counterparty had posted to the Company ~~had posted $35.0~~$1.7 million and ~~$106.1~~$1.0 million, respectively, in eligible collateral.

The effect of derivatives on the consolidated statements of comprehensive income for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016 was as follows:


															Amount of Gain (Loss) Recognized in Statements of Income
		Amount of Gain (Loss) Recognized in Income													Three Months Ended
		Three Months Ended						Nine Months Ended						Location of Gain (Loss) Recognized in Statements of Income	December 31, 2017			December 31, 2016
	Location of Gain (Loss) Recognized in Income	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016				(dollars in thousands)
Derivatives not designated as hedging instruments:		(dollars in thousands)
Interest rate swaps	Noninterest income	$	(9,088	)	$	(21,925	)	$	51,481		$	(53,379	)	Net realized and unrealized gain on derivatives	$	7,227		$	58,976
Mortgage loan commitments	Noninterest income	(109		)	201			(56		)	253			Net realized and unrealized gain on derivatives	1			(105		)
Mortgage loan forward sale contracts	Noninterest income	109			(201		)	56			(253		)	Net realized and unrealized gain on derivatives	(1		)	105

~~Netting of Derivatives~~

The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company has entered into an International Swaps Derivatives Association ("ISDA") master netting arrangement with various swap counterparties. Under the terms of the master netting arrangements, all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the non-defaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted.

The following tables present the Company's gross derivative financial assets and liabilities at June 30, 2017 and September 30, 2016, and the related impact of enforceable master netting agreements and cash collateral, where applicable:

Gross
Amount Amount
Offset Net Amount Presented in Consolidated Balance Sheets
Held/Pledged Financial Instruments¹
Net
Amount
June 30, 2017 (dollars in thousands)
Derivative financial assets:
Derivatives subject to master netting arrangement or similar arrangement $ 1,626
$ (1,626 ) $ —
$ —
$ —
Derivative financial liabilities:
Derivatives subject to master netting arrangement or similar arrangement (19,914 ) 1,626
(18,288 ) 18,288
—
Total derivative financial liabilities $ (18,288 ) $ —
$ (18,288 ) $ 18,288
$ —

¹ The actual amount of collateral exceeds the fair value exposure, at the individual counterparty level, as of the date presented.

Gross
Amount Amount
Offset Net Amount Presented in Consolidated Balance Sheets
Held/Pledged Financial Instruments¹
Net
Amount
September 30, 2016 (dollars in thousands)
Derivative financial assets:
Derivatives subject to master netting arrangement or similar arrangement $ 525
$ (525 ) $ —
$ —
$ —
Derivative financial liabilities:
Derivatives subject to master netting arrangement or similar arrangement (81,974 ) 525
(81,449 ) 81,449
—
Total derivative financial liabilities $ (81,449 ) $ —
$ (81,449 ) $ 81,449
$ —

¹ The actual amount of collateral exceeds the fair value exposure, at the individual counterparty level, as of the date presented.

~~38-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~10.~~9. The Fair Value Option For Certain Loans

The Company has elected to measure certain long-term loans ~~and written loan commitments~~ at fair value to assist in managing the interest rate risk for longer-term loans. This fair value option was elected upon the origination of these loans. Interest income is recognized in the same manner as interest on non-fair value loans.

See Note 18 for additional disclosures regarding the fair value of the fair value option ~~loans and written loan commitments.~~loans.

Long-term loans ~~and written loan commitments~~ for which the fair value option has been elected had a net favorable difference between the aggregate fair value and the aggregate unpaid loan principal balance and written loan commitment amount of approximately ~~$10.9~~$1.3 million and ~~$74.1~~$8.8 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively. The total unpaid principal balance of these long-term loans was approximately ~~$1.04 billion~~$978.9 million and ~~$1.06~~$1.01 billion at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively. The fair value of these loans ~~and written loan commitments~~ is included in total loans in the consolidated balance sheets and are grouped with commercial ~~non~~ real estate, agricultural and commercial ~~real~~non-real estate ~~and agricultural~~ loans in Note ~~5. There were no written loan commitments at June 30,~~4. As of December 31, 2017 and September 30, ~~2016. As of June 30,~~ 2017, ~~and September 30, 2016,~~ there were loans with a fair value of ~~$9.8~~$14.1 million and ~~$9.4~~$14.7 million, respectively, which were greater than 90 days past due or in nonaccrual status with an unpaid principal balance of ~~$11.0~~$15.0 million and ~~$10.8~~$17.0 million, respectively.

Changes in fair value for items for which the fair value option has been elected and the line items in which these changes are reported within the consolidated statements of ~~comprehensive~~ income are as follows for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:

Three Months Ended Nine Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Noninterest Income Total Changes in Fair Value Noninterest Income Total Changes in Fair Value Noninterest Income Total Changes in Fair Value Noninterest Income Total Changes in Fair Value
(dollars in thousands)
Long-term loans and written loan commitments $ 6,060
$ 6,060
$ 14,198
$ 14,198
$ (63,158 ) $ (63,158 ) $ 35,253
$ 35,253



	Three Months Ended December 31, 2017						Three Months Ended December 31, 2016
	Noninterest Income			Total Changes in Fair Value			Noninterest Income			Total Changes in Fair Value
	(dollars in thousands)
Long-term loans	$	(8,665	)	$	(8,665	)	$	(64,001	)	$	(64,001	)

26-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

For long-term loans, ~~and written loan commitments, $0.3~~$1.0 million and ~~$2.7~~$0.5 million for the three months ended ~~June 30, 2017 and 2016, respectively, and $0.0 million and $2.3 million for the nine months ended June 30,~~December 31, 2017 and 2016, respectively, of the total change in fair value is attributable to changes in specific credit risk. The gains or losses attributable to changes in instrument-specific credit risk were determined based on an assessment of existing market conditions and credit quality of the underlying loan for the specific portfolio of loans.

~~11.~~10. Core Deposits and Other Intangibles

A summary of intangible assets subject to amortization is as follows:


	Core Deposit Intangible			Brand Intangible			Customer Relationships Intangible			Other Intangible			Total			Core Deposit Intangible			Brand Intangible			Other Intangible			Total
As of June 30, 2017	(dollars in thousands)
As of December 31, 2017																(dollars in thousands)
Gross carrying amount	$	67,018		$	8,464		$	16,089		$	538		$	92,109		$	7,339		$	8,464		$	538		$	16,341
Accumulated amortization	(60,989		)	(5,123		)	(16,089		)	(103		)	(82,304		)	(1,847		)	(5,405		)	(141		)	(7,393		)
Net intangible assets	$	6,029		$	3,341		$	—		$	435		$	9,805		$	5,492		$	3,059		$	397		$	8,948

As of September 30, 2016
As of September 30, 2017
Gross carrying amount	$	67,018		$	8,464		$	16,089		$	538		$	92,109		$	7,339		$	8,464		$	538		$	16,341
Accumulated amortization	(59,842		)	(4,700		)	(15,800		)	(35		)	(80,377		)	(1,579		)	(5,264		)	(124		)	(6,967		)
Net intangible assets	$	7,176		$	3,764		$	289		$	503		$	11,732		$	5,760		$	3,200		$	414		$	9,374

Amortization expense of intangible assets was ~~$0.5~~$0.4 million and $0.8 million for the three months ended ~~June 30,~~December 31, 2017 and 2016, ~~respectively, and $1.9 million and $2.2 million for the nine months ended June 30, 2017 and 2016.~~

~~39-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

respectively.

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in subsequent fiscal years is as follows:


	Amount		Amount
	(dollars in thousands)		(dollars in thousands)
Remaining in 2017	$	430
2018	1,662
Remaining in 2018			$	1,236
2019	1,538		1,538
2020	1,430		1,430
2021	1,334		1,334
2022 and thereafter	3,411
2022			1,249
2023 and thereafter			2,161
Total	$	9,805	$	8,948

~~12.~~11. Loan Servicing Rights

~~Mortgage~~Loan servicing rights are created when residential mortgage loans are sold in the secondary market with the seller retaining the right to service those loans and receive servicing income over the life of the loan. The Company acquired loan servicing rights as a part of the HF Financial acquisition. The actual balance of loans being serviced for others are not ~~included~~reported as assets in the accompanying consolidated ~~statements of financial condition.~~ balance sheets.

The following table is the activity for loan servicing rights and the related valuation allowance for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Loan servicing rights
Beginning of period	$	4,906		$	—		$	5,794		$	—		$	4,155		$	5,794
Acquired in HF Financial acquisition	—			6,573			—			6,573
Additions	—			—			—			—			—			—
Amortization¹	(369		)	(166		)	(1,257		)	(166		)	(313		)	(508		)
End of period	$	4,537		$	6,407		$	4,537		$	6,407		$	3,842		$	5,286

Valuation allowance
Beginning of period	$	(3	)	$	—		$	(13	)	$	—
(Additions) / reductions ¹	(4		)	(176		)	6			(176		)
End of period	$	(7	)	$	(176	)	$	(7	)	$	(176	)
Loan servicing rights, net	$	4,530		$	6,231		$	4,530		$	6,231

Servicing fees received	$	500		$	306		$	1,573		$	306
Balance of loans serviced at:
Beginning of period	792,779			—			868,865			—
End of period	759,670			914,694			759,670			914,694

¹ Changes to carrying amounts are reported net of loan servicing income on the consolidated statements of comprehensive income for the periods presented.

27-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)



	Three Months Ended
	December 31, 2017			December 31, 2016
	(dollars in thousands)
Valuation allowance
Beginning of period	$	(81	)	$	(13	)
(Additions) / reductions ¹	38			5
End of period	$	(43	)	$	(8	)
Loan servicing rights, net	$	3,799		$	5,278

Servicing fees received	$	437		$	548
Balance of loans serviced at:
Beginning of period	722,461			868,865
End of period	692,593			823,375

¹ Changes to carrying amounts are reported net of loan servicing income on the consolidated statements of comprehensive income for the periods presented.

Amortization of servicing rights is adjusted each quarter based upon analysis of portfolio attributes and factors, including an evaluation of historical prepayment activity and prospective industry consensus data. An independent third party is utilized to calculate the amortization and valuation based upon specific loan characteristics, prepayment speeds generated from a validation model utilizing both empirical and market derived data and discount rates. At ~~June 30,~~December 31, 2017, the constant prepayment rates (CPR) used to calculate the amortization averaged 12.0%. For valuation purposes, an average discount rate of 11.9% was utilized at ~~June 30,~~December 31, 2017. Based on the Company's analysis of mortgage servicing rights, a $0.0 million valuation reserve was recorded at ~~June 30,~~December 31, 2017, and a $0.1 million valuation reserve was recorded at September 30, ~~2016, respectively.~~2017.

~~13.~~12. Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase generally mature overnight following the transaction date. Securities underlying the agreements had an amortized cost of approximately ~~$128.2~~$152.8 million and ~~$151.8~~$139.3 million and fair value of approximately ~~$126.4~~$149.8 million and ~~$152.3~~$137.4 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively. In most cases, the Company over-collateralizes the repurchase agreements at 102% of total funds borrowed to protect the purchaser from changes in market value. Additionally, the Company utilizes held-in-custody procedures to ensure the securities sold under repurchase agreements are

~~40-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

unencumbered. The following tables present the gross obligation by the class of collateral pledged and the remaining contractual maturity of the agreements at ~~June 30,~~December 31, 2017 and September 30, ~~2016.~~2017.


											December 31, 2017
	June 30, 2017										Remaining Contractual Maturity of the Agreements
	Remaining Contractual Maturity of the Agreements										Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total		(dollars in thousands)
Repurchase agreements	(dollars in thousands)
Municipal securities	$	3,673	$	—	$	—	$	—	$	3,673	$	2,919	$	—	$	—	$	—	$	2,919
Mortgage-backed securities	120,178		—		—		—		120,178		113,965		—		—		—		113,965
Total repurchase agreements	$	123,851	$	—	$	—	$	—	$	123,851	$	116,884	$	—	$	—	$	—	$	116,884


											September 30, 2017
	September 30, 2016										Remaining Contractual Maturity of the Agreements
	Remaining Contractual Maturity of the Agreements										Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total		(dollars in thousands)
Repurchase agreements	(dollars in thousands)
Municipal securities	$	—	$	—	$	—	$	—	$	—	$	3,626	$	—	$	—	$	—	$	3,626
Mortgage-backed securities	138,744		—		—		2,944		141,688		129,010		—		—		—		129,010
Total repurchase agreements	$	138,744	$	—	$	—	$	2,944	$	141,688	$	132,636	$	—	$	—	$	—	$	132,636

28-

~~14.~~

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

13. FHLB Advances and Other Borrowings

FHLB advances and other borrowings consist of the following at ~~June 30,~~December 31, 2017 and September 30, ~~2016:~~2017:


	June 30, 2017		September 30, 2016		December 31, 2017		September 30, 2017
	(dollars in thousands)				(dollars in thousands)
Notes payable to Federal Home Loan Bank (FHLB), interest rates from 1.05% to 3.66% and maturity dates from July 2017 to July 2023, collateralized by real estate loans and FHLB stock, with various call dates at the option of the FHLB	$	431,000	$	640,000
Federal Home Loan Bank fed funds advance, interest rate of 1.32%, maturity date of September 2017	40,000		231,000
Other	700		—
Short-term borrowings:
Notes payable to Federal Home Loan Bank (FHLB), interest rates from 1.42% to 1.54% and maturity dates in January 2018, collateralized by real estate loans and FHLB stock, with various call dates at the option of the FHLB					$	665,000	$	512,200
Federal Home Loan Bank fed funds advance, interest rate of 1.33%					—		75,000
Long-term borrowings:
Notes payable to Federal Home Loan Bank (FHLB), interest rates from 1.05% to 3.66% and maturity dates from April 2018 to July 2023, collateralized by real estate loans and FHLB stock, with various call dates at the option of the FHLB					56,000		56,000
Total	471,700		871,000		721,000		643,200
Fair value adjustment¹	19		37		9		14
Total FHLB advances and other borrowings	$	471,719	$	871,037	$	721,009	$	643,214

¹ Adjustment reflects the fair value adjustments related to the FHLB advances and notes payable assumed as part of the HF Financial acquisition.	¹ Adjustment reflects the fair value adjustments related to the FHLB advances and notes payable assumed as part of the HF Financial acquisition.				¹ Adjustment reflects the fair value adjustments related to the FHLB advances and notes payable assumed as part of the HF Financial acquisition.

The Company has a $10.0 million revolving line of credit ~~with a large retail bank,~~ which expires on July 28, 2018. The line of credit has an interest rate of one month LIBOR plus 200 basis points, with interest payable monthly. There is also an unused line fee of 0.15% on the unused portion which is payable quarterly. The interest rate was ~~3.23%~~3.56% at ~~June 30,~~December 31, 2017. There were no outstanding advances on this line of credit at ~~June 30,~~December 31, 2017 and September 30, ~~2016.~~2017.

As of ~~June 30,~~December 31, 2017, the Company had a borrowing capacity of ~~$1.77~~$1.69 billion with the Federal Reserve Board Discount Window ("FRB Discount Window"). Principal balances of loans pledged to FRB DWDiscount Window to collateralize the borrowing totaled ~~$2.41~~$1.99 billion at ~~June 30,~~December 31, 2017 and ~~$0.0 million~~$2.55 billion at September 30, ~~2016.~~2017. The Company has secured this line for contingency funding.

As of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, based on its Federal Home Loan Bank stock holdings, the combined aggregate additional borrowing capacity of the Company with the Federal Home Loan Bank was ~~$1.68~~$1.40 billion and ~~$1.09~~$1.55 billion, respectively.

Principal balances of loans pledged to the Federal Home Loan Bank to collateralize notes payable totaled ~~$3.64~~$3.77 billion and ~~$3.11~~$3.71 billion at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

~~41-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

As of ~~June 30,~~December 31, 2017, FHLB advances and other borrowings are due or callable (whichever is earlier) in subsequent fiscal years as follows:


	Amount		Amount
	(dollars in thousands)		(dollars in thousands)
Remaining in 2017	$	415,700
2018	31,000
Remaining in 2018			$	696,000
2019	—		—
2020	—		—
2021	—		—
2022 and thereafter	25,000
2022			—
2023 and thereafter			25,000
Total	$	471,700	$	721,000

~~15.~~14. Subordinated Debentures and Subordinated Notes Payable

Junior Subordinated Deferrable Interest Debentures

The Company has ~~caused~~ seven trusts ~~to be~~which were created ~~(or~~or assumed as part of the HF Financial and Sunstate Bank ~~acquisitions)~~acquisitions that have issued and outstanding 73,400 shares, $1,000 par value, as of ~~June 30,~~December 31, 2017 of Company Obligated Mandatorily Redeemable Preferred Securities (the "Preferred Securities"). These seven trusts were established and exist for the sole purpose of issuing ~~the~~ Preferred Securities and investing the proceeds in junior subordinated deferrable interest debentures (the "Debentures") issued by the Company. The Debentures constitute the sole assets of the seven trusts. The Preferred Securities provide for cumulative cash distributions calculated at a rate based on ~~three-month~~three month LIBOR plus a range from 1.48% to 3.35% adjusted quarterly. The Company may, at one or more times, defer interest payments on the Debentures for up to 20 consecutive quarters following suspension of

29-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

dividends on all capital stock, but not beyond the respective maturity date. At the end of any deferral period, all accumulated and unpaid interest must be paid. The Debentures have redemption dates ranging from January 7, 2033 to October 1, 2037; however, the Company has the option to shorten the respective maturity date for all seven Preferred Securities as the call option date has passed. Holders of the Preferred Securities have no voting rights. The Preferred Securities are unsecured and rank junior in priority of the payment to all of the Company's indebtedness and senior to the Company's common and preferred stock. The trusts’ ability to pay amounts due on the Preferred Securities is solely dependent upon the Company making payment on the related Debentures. The Company’s obligation under the Debentures and relevant trust agreements constitute a full, irrevocable, and unconditional guarantee on a subordinated basis by it of the obligations of the trusts under the Preferred Securities.

For regulatory purposes the Debentures qualify as elements of capital. $73.5 million ~~and $77.2 million~~ of Debentures were eligible for treatment as Tier 1 capital ~~respectively,~~ as of ~~June 30,~~December 31, 2017 and September 30, ~~2016.~~2017.

Relating to the trusts, the Company held as assets $2.5 million in common shares at ~~June 30,~~December 31, 2017 and September 30, ~~2016, respectively,~~2017 which are included in other assets on the consolidated balance sheets.

~~In the first quarter of fiscal year 2017, the Company redeemed 5,000 shares of the HF Capital Trust V Debentures under the First Supplemental Indenture dated May 13, 2016.~~

Subordinated Notes Payable

In 2015, the Company issued $35.0 million of 4.875% fixed-to-floating rate subordinated notes that mature on August 15, 2025 through a private placement. The notes, which qualify as Tier 2 capital under capital rules in effect at ~~June 30,~~December 31, 2017, have an interest rate of 4.875% per annum, payable semi-annually on each February 15 and August 15, which commenced on February 15, 2016 until August 15, 2020, to but excluding the maturity date or date of earlier redemption, the notes will bear interest at a rate per annum equal to three-month LIBOR for the related interest period plus 3.15%, payable quarterly on each November 15, February 15, April 15 and August 15. The notes are subordinated in right of payment to all of the Company's senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company's subsidiary bank. The Company may elect to redeem the notes (subject to regulatory approval), in whole or in part, on any early redemption date which is any interest payment date on or after August 15, 2020 at a redemption price equal to 100% of the principal amount plus any accrued and unpaid interest. Other than on an early redemption date, the notes cannot be accelerated except in the event of bankruptcy or the occurrence of certain other events of bankruptcy, insolvency or reorganization. Unamortized debt issuance costs related to these notes, which are included in Subordinated Debentures and Subordinated Notes Payable, totaled $0.2 million ~~and $0.3 million~~ at ~~June 30,~~December 31, 2017 and September 30, ~~2016, respectively.~~2017. Proceeds from the private placement of subordinated notes repaid outstanding subordinated debt.

Subordinated debentures and subordinated notes payable are summarized as follows:



	December 31, 2017					September 30, 2017
	Amount Outstanding			Common Shares Held in Other Assets		Amount Outstanding			Common Shares Held in Other Assets
	(dollars in thousands)
Junior subordinated debentures payable to nonconsolidated trusts
GW Statutory Trust IV, variable rate of 2.85%, plus 3 month LIBOR	$	23,093		$	693	$	23,093		$	693
GW Statutory Trust VI, variable rate of 1.48%, plus 3 month LIBOR	30,928			928		30,928			928
SSB Trust II, variable rate of 1.85%, plus 3 month LIBOR	2,062			62		2,062			62
HF Capital Trust III, variable rate of 3.35%, plus 3 month LIBOR	5,155			155		5,155			155
HF Capital Trust IV, variable rate of 3.10%, plus 3 month LIBOR	7,217			217		7,217			217
HF Capital Trust V, variable rate of 1.83%, plus 3 month LIBOR	5,310			310		5,310			310
HF Capital Trust VI, variable rate of 1.65%, plus 3 month LIBOR	2,155			155		2,155			155
Total junior subordinated debentures payable	75,920			$	2,520	75,920			$	2,520
Less: fair value adjustment¹	(2,387		)			(2,409		)
Total junior subordinated debentures payable, net of fair value adjustment	73,533					73,511

Subordinated notes payable
Fixed to floating rate, 4.875% per annum	35,000					35,000
Less: unamortized debt issuance costs	(190		)			(209		)
Total subordinated notes payable	34,810					34,791
Total subordinated debentures and subordinated notes payable	$	108,343				$	108,302

¹ Adjustment reflects the fair value adjustments related to the junior subordinated deferrable interest debentures assumed as part of the HF Financial acquisition.

~~42-~~30-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

15. Income Taxes

The provision for income taxes charged to operations consists of the following for the three months ended December 31, 2017 and 2016:



	Three Months Ended December 31,
	2017		2016
	(dollars in thousands)
Currently paid or payable
Federal	$	8,960	$	13,152
State	2,455		2,364
Total	11,415		15,516
Deferred tax expense
Federal	16,764		478
State	462		66
Total	17,226		544
Total provision for income taxes	$	28,641	$	16,060

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate of 24.5% for the three months ended December 31, 2017 and 35% for the three months ended December 31, 2016 to pretax income due to the following for the three months ended December 31, 2017 and 2016:



	Three Months Ended December 31,
	2017			2016
	(dollars in thousands)
Income tax expense computed at the statutory rate	$	14,195		$	18,537
Increase (decrease) in income taxes resulting from:
State income taxes, net of federal benefit	2,202			1,580
Tax exempt interest income	(1,371		)	(2,038		)
Impact of enacted federal income tax rate reduction	13,586			—
Other	29			(2,019		)
Income tax expense, as reported	$	28,641		$	16,060

Net deferred tax assets (liabilities) consist of the following components at December 31, 2017 and September 30, 2017:



	December 31, 2017			September 30, 2017
	(dollars in thousands)
Deferred tax assets:
Allowance for loan and lease losses	$	16,026		$	23,730
Compensation	2,481			6,227
Securities available for sale	4,345			3,413
Other real estate owned	475			763
Core deposit intangible and other fair value adjustments	4,197			6,058
Excess tax basis of FDIC indemnification asset and clawback liability	3,393			4,563
Excess tax basis of loans acquired over carrying value	6,349			9,417
Other reserves	2,446			4,406
Other	4,953			6,922
Total deferred tax assets	44,665			65,499
Deferred tax liabilities:
Goodwill and other intangibles	(10,493		)	(13,784		)
Premises and equipment	(5,211		)	(8,828		)
Other	(413		)	(487		)
Total deferred tax liabilities	(16,117		)	(23,099		)
Net deferred tax assets	$	28,548		$	42,400

31-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

~~Subordinated debentures~~At December 31, 2017, the Company had an income tax payable to the Internal Revenue Service (the "IRS") of $4.6 million, which is included in other liabilities on the consolidated balance sheets. At September 30, 2017, the Company had an income tax receivable from the IRS of $4.6 million, which is included in other assets on the consolidated balance sheets. The Company is no longer subject to U.S. federal, state and ~~subordinated notes payable are summarized as follows:~~local or non-U.S. income tax examinations by tax authorities for years before 2014.

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Reform Act"), was enacted into law. Beginning in 2018, the Tax Reform Act reduces the federal tax rate for corporations from 35% to 21% and changes or limits certain tax deductions. Because of the Company's September 30 fiscal year end, a blended statutory rate of 24.5% is applied to all net income before taxes generated during the current fiscal year. The new blended statutory rate reduced the provision for income taxes by approximately $5.0 million for the three months ended December 31, 2017. Another result of the lower corporate tax rate this quarter was the Company recording a revaluation discrete tax adjustment of $13.6 million to reduce its net deferred tax assets, which increased the provision for income taxes. The actual impact of the revaluing deferred taxes may vary from the estimated charge to provision of $13.6 million due to uncertainties in our preliminary estimates and the effect of further clarification of the new law that cannot be estimated at this time.

June 30, 2017 September 30, 2016
Amount Outstanding Common Shares Held in Other Assets Amount Outstanding Common Shares Held in Other Assets
(dollars in thousands)
Junior subordinated debentures payable to nonconsolidated trusts
GW Statutory Trust IV, variable rate of 2.85%, plus 3 month LIBOR $ 23,093
$ 693
$ 23,093
$ 693
GW Statutory Trust VI, variable rate of 1.48%, plus 3 month LIBOR 30,928
928
30,928
928
SSB Trust II, variable rate of 1.85%, plus 3 month LIBOR 2,062
62
2,062
62
HF Capital Trust III, variable rate of 3.35%, plus 3 month LIBOR 5,155
155
5,155
155
HF Capital Trust IV, variable rate of 3.10%, plus 3 month LIBOR 7,217
217
7,217
217
HF Capital Trust V, variable rate of 1.83%, plus 3 month LIBOR 5,310
310
10,310
310
HF Capital Trust VI, variable rate of 1.65%, plus 3 month LIBOR 2,155
155
2,155
155
Total junior subordinated debentures payable 75,920
$ 2,520
80,920
$ 2,520
Less: fair value adjustment¹
(2,432 ) (3,765 )
Total junior subordinated debentures payable, net of fair value adjustment 73,488
77,155

Subordinated notes payable
Fixed to floating rate, 4.875% per annum 35,000
35,000

Less: unamortized debt issuance costs (227 ) (282 )
Total subordinated notes payable 34,773
34,718

Total subordinated debentures and subordinated notes payable $ 108,261
$ 111,873

¹ Adjustment reflects the fair value adjustments related to the junior subordinated deferrable interest debentures assumed as part of the HF Financial acquisition.
The Bank's effective tax rate for the three months ended December 31, 2017 was 49.5%, compared to 30.8% for the prior quarter. The increase in the effective tax rate during the quarter mostly resulted from the revaluation of deferred taxes. For 2018, the Bank expects its annual effective tax rate to be approximately 26%.

Uncertain tax positions were not significant at December 31, 2017 or September 30, 2017.

16. Employee Benefit Plans

Profit Sharing Plan

The Company participates in a multiple employer 401(k) profit sharing plan ~~(the Plan)~~("the 401(k) Plan"). All employees are eligible to participate, beginning with the first day of the month coincident with or immediately following the completion of one year of service and having reached the age of 21. In addition to employee contributions, the Company may contribute discretionary amounts for eligible participants. Contribution rates for participating employees must be equal. The Company contributed ~~$1.4~~$1.8 million and ~~$1.2~~$1.5 million to the 401(k) Plan for the three months ended ~~June 30, 2017 and 2016, respectively and $4.3 million and $3.2 million for the nine months ended June 30,~~December 31, 2017 and 2016, respectively.

Defined Benefit Plan

The Company acquired a noncontributory (cash balance) defined benefit pension plan ("the Pension Plan") from HF Financial which covers former employees of HF Financial and its wholly-owned subsidiaries. Effective July 1, 2015, the ~~plan~~Pension Plan was frozen which eliminates future contributions for qualified individuals.

On November 27, 2017, the Company's Board of Directors voted to terminate the Pension Plan, effective February 1, 2018. In order to settle its liabilities under the Pension Plan, the Company will offer participants the option to receive either an annuity purchased from an insurance carrier or a lump-sum cash payment. If the total $3.1 million value of the Pension Plan's cash assets is insufficient to cover the lump-sum payouts and annuity purchases, the Company will contribute the necessary funds to complete the termination of the Pension Plan. In addition to plan assets, the Company has a $2.3 million pension liability recorded as of December 31, 2017. The ~~plan has~~required final contribution is subject to a number of factors, including changes in interest rates and the exact proportion of participants electing a lump-sum distribution versus an annuity. The Company estimates that the total benefit payments will be $5.4 million as part of Pension Plan termination. At this time, the Company is unable to estimate the net income or expense associated with terminating the Pension Plan, but believes the amount will not ~~been terminated, so~~be material to the ~~plan continues to exist with related benefit~~financial statements.

The Company anticipates completing the transfer of all liabilities and administrative responsibilities under the Pension Plan by the end of fiscal third quarter 2018. Once this process is complete, the Company will no longer have any remaining pension obligations and ~~plan assets for those vested within the plan. The Company does not anticipate funding any contributions for fiscal year 2017.~~

~~Information relative to the components of net~~thus no periodic ~~benefit cost measured at/or for the three and nine months ended June 30, 2017 and 2016 for the defined benefit plan is presented below:~~pension expense.

Three Months Ended Nine Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
(dollars in thousands)
Net periodic benefit cost
Service cost $ 12
$ 8
$ 36
$ 8
Interest cost 56
109
168
109
Expected return on plan assets (64 ) (95 ) (192 ) (95 )
Amortization of prior losses 62
—
186
—
Net periodic benefit cost $ 66
$ 22
$ 198
$ 22

~~43-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

17. Stock-Based Compensation

On September 26, 2014, the Board of Directors adopted, and on October 10, 2014, NAB, at that time our controlling shareholder, approved the Great Western Bancorp, Inc. 2014 Omnibus Incentive Compensation Plan (the “2014 Plan”), the Great Western Bancorp, Inc. 2014 Non-Employee Director Plan (the “2014 Director Plan”), and the Great Western Bancorp, Inc. Executive Incentive Compensation Plan (the “Bonus Plan”), collectively ("the Plans"), which provide for the issuance of restricted share units and performance based share units to certain officers, employees and directors of the Company. The Plans were primarily established to enhance the Company’s ability to attract, retain and motivate employees. The Company’s Board of Directors, the Compensation Committee of the Board of Directors ("Compensation Committee"), or executive management upon delegation of the Compensation

32-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Committee has exclusive authority to select the employees and others, including directors, to receive the awards and to establish the terms and conditions of each award made pursuant to the Company’s stock-based compensation plans.

Stock units issued under the Company’s restricted and performance based stock plans may not be sold or otherwise transferred until the vesting period (typically 3 years) has been met and/or performance objectives have been obtained. During the vesting periods, participants do not have voting rights and dividends are accumulated until the time upon which the award vests. Upon specified events, as defined in the Plans, stock unit awards that have not vested and/or performance hurdles that have not been met will be forfeited.

Based on the substantive terms of each award, restricted and performance-based awards are classified as equity awards and accounted for under the treasury stock method. The fair value of equity-classified awards is based on the market price of the stock on the measurement date and is amortized as compensation expense on a straight-line basis over the vesting or performance period.

~~Effective with the adoption of ASU 2016-09 at the beginning of the fiscal year, stock~~Stock compensation is recognized based on the number of awards to vest using actual forfeiture amounts. For performance-based stock awards, an estimate is made of the number of shares expected to vest as a result of actual performance against the performance targets to determine the amount of compensation expense to be recognized. The estimate is reevaluated quarterly and total compensation expense is adjusted for any change in the current period. Stock-based compensation expense is included in salaries and employee benefits expense in the consolidated statements of ~~comprehensive~~ income. For the three months ended ~~June 30,~~December 31, 2017 and 2016, stock compensation expense was ~~$1.4~~$1.5 million and ~~$0.9~~$1.6 million, ~~respectively and $5.0 million and $2.7 million for the nine months ended June 30, 2017 and 2016,~~ respectively. Related income tax benefits recognized were $0.5 million and ~~$0.3~~$0.6 million for the three months ended ~~June 30, 2017 and 2016, respectively and $1.9 million and $1.0 million for the nine months ended June 30,~~December 31, 2017 and 2016, respectively.

The following is a summary of the Plans’ restricted share and performance-based stock award activity as of ~~June 30,~~December 31, 2017 and September 30, ~~2016:~~

June 30, 2017 September 30, 2016
Restricted Shares Common
Shares Weighted-Average Grant Date Fair Value Common
Shares Weighted-Average Grant Date Fair Value
Restricted shares, beginning of fiscal year 160,335
$ 26.89
80,446
$ 18.18
Granted 90,170
39.35
113,543
30.95
Vested and issued (68,293 ) 26.97
(25,729 ) 18.11
Forfeited (2,041 ) 30.80
(7,925 ) 25.09
Canceled —
—
—
—
Restricted shares, end of period 180,171
$ 33.05
160,335
$ 26.89

Vested, but not issuable at end of period 29,287
$ 30.05
24,480
$ 26.14

Performance Shares
Performance shares, beginning of fiscal year 236,185
$ 20.28
211,026
$ 18.00
Granted 40,204
39.43
43,371
30.78
Vested and issued —
—
(55 ) 18.00
Forfeited (4,478 ) 20.07
(18,157 ) 18.83
Canceled —
—
—
—
Performance shares, end of period 271,911
$ 23.12
236,185
$ 20.28

2017. The number of performance shares granted is reflected in the ~~above~~below table at the ~~100% target performance level. The actual performance-based award payouts will vary based on the~~amount of achievement of the pre-established ~~targets and can range from 0% to 150%~~

targets.

~~44-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

of the target amount. The maximum number of performance-based shares that could be issued if performance is attained at 150% of target based on the grants made to date was approximately 407,867 shares at June 30, 2017.



	December 31, 2017					September 30, 2017
	Common Shares			Weighted-Average Grant Date Fair Value		Common Shares			Weighted-Average Grant Date Fair Value
Restricted Shares
Restricted shares, beginning of fiscal year	180,337			$	33.06	160,335			$	26.89
Granted	85,481			41.07		90,363			39.35
Vested	(81,999		)	32.12		(68,293		)	26.97
Forfeited	(471		)	39.41		(2,068		)	30.91
Canceled	—			—		—			—
Restricted shares, end of period	183,348			$	37.20	180,337			$	33.06

Vested, but not issuable at end of period	39,514			$	32.90	29,287			$	30.05

Performance Shares
Performance shares, beginning of fiscal year	133,604			$	33.39	236,185			$	20.28
Granted	58,528			28.16		137,612			39.43
Vested	—			—		(235,055		)	18.00
Forfeited	(441		)	36.82		(5,138		)	19.80
Canceled	—			—		—			—
Performance shares, end of period	$	191,691		$	35.73	$	133,604		$	33.39

Vested, but not issuable at end of period	5,612			$	18.00	—			$	—

As of ~~June 30,~~December 31, 2017, there was ~~$6.3~~$9.3 million of unrecognized compensation cost related to nonvested restricted stock awards expected to be recognized over a period of ~~2.4~~2.9 years. The fair value of the vested, but not issued stock awards at ~~June 30,~~December 31, 2017, was ~~$1.2~~$1.8 million.

33-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

18. Fair Value Measurements

The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value are as follows:

Level 1 Quoted prices in active markets for identical assets or liabilities


Level 2	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities


Level 3	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities

Level 1 inputs are considered to be the most transparent and reliable and Level 3 inputs are considered to be the least transparent and reliable. The Company assumes the use of the principal market to conduct a transaction of each particular asset or liability being measured and then considers the assumptions that market participants would use when pricing the asset or liability. Whenever possible, the Company first looks for quoted prices for identical assets or liabilities in active markets (Level 1 inputs) to value each asset or liability. However, when inputs from identical assets or liabilities on active markets are not available, the Company utilizes market observable data for similar assets and liabilities. The Company maximizes the use of observable inputs and limits the use of unobservable inputs to occasions when observable inputs are not available. The need to use unobservable inputs generally results from the lack of market liquidity of the actual financial instrument or of the underlying collateral. Although in some instances, third party price indications may be available, limited trading activity can challenge the observability of these quotations.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Securities Available for Sale

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows and classified as Level 2 securities. Level 2 securities include ~~agency~~ mortgage-backed, states and political subdivisions, ~~corporate debt,~~ and other securities. Where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Level 3 securities were immaterial at December 31, 2017 and September 30, 2017.

Interest Rate Swaps and Loans

Interest rate swaps are valued by the Company's Swap Dealers using ~~LIBOR rates.~~cash flow valuation techniques with observable market data inputs. The fair value of loans accounted for under the fair value option represents the net carrying value of the loan, plus the equal and opposite amount of the value of the swap needed to hedge the interest rate risk and an adjustment for credit risk based on our assessment of existing market conditions for the specific portfolio of loans. This is used due to the strict prepayment penalties put in the loan terms to cover the cost of exiting the hedge of the loans in the case of early prepayment or termination. The adjustment for credit risk on loans accounted for under the fair value option is not significant to the overall fair value of the loans. The fair values estimated by the Company's Swap Dealers use interest rates that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy. The Company ~~is required~~has entered into Collateral Agreements with its Swap Dealers and Futures Clearing Merchant which entitle it to ~~post cash~~receive collateral to ~~swap counterparties for interest rate derivative contracts that~~cover market values on derivatives which are in ~~a liability~~asset position, thus a credit risk adjustment on interest rate swaps is not warranted. The Company regularly enters into interest rate lock commitments on mortgage loans to be held for sale with corresponding forward sales contracts related to these interest rate lock commitments, the fair values of which are calculated by applying observable market values from Fannie Mae TBA pricing to each interest rate lock commitment and forward sales contract, therefore, are classified within Level 2 of the valuation hierarchy. The Company also has back-to-back swaps with loan customers, with corresponding swaps with an outside third party in exact offsetting terms.

~~45-~~34-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

~~interest rate lock commitments. The Company also has back to back swaps with loan customers, with corresponding swaps with an outside third party in exact offsetting terms.~~

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~June 30,~~December 31, 2017 and September 30, ~~2016:~~2017:


	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)								(dollars in thousands)
As of June 30, 2017
As of December 31, 2017
U.S. Treasury securities	$	228,577	$	228,577	$	—	$	—	$	227,777	$	227,777	$	—	$	—
Mortgage-backed securities	1,064,305		—		1,064,305		—		1,068,666		—		1,068,666		—
States and political subdivision securities	72,523		—		71,454		1,069		69,177		—		68,212		965
Corporate debt securities	—		—		—		—
Other	1,037		—		1,037		—		1,021		—		1,021		—
Total securities available for sale	$	1,366,442	$	228,577	$	1,136,796	$	1,069	$	1,366,641	$	227,777	$	1,137,899	$	965
Derivatives-assets	$	56			$	56	$	—	$	813	$	—	$	813	$	—
Derivatives-liabilities	18,232		—		18,232		—		11,029		—		11,029		—
Fair value loans and written loan commitments	1,049,548		—		1,049,548		—
Fair value loans									980,144		—		980,144		—

As of September 30, 2016
As of September 30, 2017
U.S. Treasury securities	$	230,980	$	230,980	$	—	$	—	$	228,603	$	228,603	$	—	$	—
Mortgage-backed securities	1,024,838		—		1,024,838		—		1,065,737		—		1,065,737		—
States and political subdivision securities	55,484		—		54,169		1,315		72,586		—		71,517		1,069
Corporate debt securities	5,022		—		5,022		—
Other	1,062		—		1,062		—		1,034		—		1,034		—
Total securities available for sale	$	1,317,386	$	230,980	$	1,085,091	$	1,315	$	1,367,960	$	228,603	$	1,138,288	$	1,069
Derivatives-assets	$	66	$	—	$	66	$	—	$	48	$	—	$	48	$	—
Derivatives-liabilities	81,515		—		81,515		—		17,107		—		17,107		—
Fair value loans and written loan commitments	1,131,111		—		1,131,111		—
Fair value loans									1,016,576		—		1,016,576		—

The following table presents the changes in Level 3 financial instruments for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Balance, beginning of period	$	1,224		$	1,458		$	1,315		$	1,835		$	1,069		$	1,315
Additions	—			15			—			15
Principal paydown	(155		)	(158		)	(246		)	(235		)	(104		)	(91		)
Realized loss on securities	—			—			—			(300		)
Balance, end of period	$	1,069		$	1,315		$	1,069		$	1,315		$	965		$	1,224

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Other ~~Real Estate Owned~~Repossessed Property

Other ~~real estate owned~~repossessed property consists of loan collateral that has been repossessed through foreclosure. This collateral is comprised of commercial and residential real ~~estate. OREO~~estate and other repossessed assets. Other repossessed property is recorded initially at fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically, and the assets may be marked down further to fair value less selling

~~46-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

costs, reflecting a valuation allowance. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods. These measurements are classified as Level 3.

Impaired Loans (Collateral Dependent)

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for estimating fair value include using the fair value of the collateral for collateral dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of the impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor,

35-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

if necessary, to the appraised value and including costs to sell. Because many of these inputs are not observable, the measurements are classified as Level 3.

Mortgage Loans Held for Sale

Fair value of mortgage loans held for sale is based on either quoted prices for the same or similar loans, or values obtained from third parties, or are estimated for portfolios of loans with similar financial characteristics and are therefore considered a Level 2 valuation.

Loan Servicing Rights

Fair value is determined at a tranche level, based on market prices for comparable mortgage servicing contracts (Level 3), when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income and that can be validated against market data (Level 3).

Property Held for Sale

This real estate property is carried in premises and equipment as property held for sale at fair value based upon the transactional price if available, or the appraised value of the property.

The following tables present the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at ~~June 30,~~December 31, 2017 and September 30, ~~2016:~~2017:

Fair Value Level 1 Level 2 Level 3
(dollars in thousands)
As of June 30, 2017
Other real estate owned $ 3,985
$ —
$ —
$ 3,985
Impaired loans 203,786
—
—
203,786
Loans held for sale, at lower of cost or fair value 11,504
—
11,504
—
Loan servicing rights 4,530
—
—
4,530
Property held for sale 5,074
—
—
5,074

As of September 30, 2016
Other real estate owned $ 6,911
$ —
$ —
$ 6,911
Impaired loans 190,743
—
—
190,743
Loans held for sale, at lower of cost or fair value 12,918
—
12,918
—
Loan servicing rights 5,781
—
—
5,781
Property held for sale 8,112
—
—
8,112

~~47-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~



	Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
As of December 31, 2017
Other repossessed property	$	2,590	$	—	$	—	$	2,590
Impaired loans	207,703		—		—		207,703
Loans held for sale, at lower of cost or fair value	5,757		—		5,757		—
Loan servicing rights	3,799		—		—		3,799
Property held for sale	1,111		—		—		1,111

As of September 30, 2017
Other repossessed property	$	7,728	$	—	$	—	$	7,728
Impaired loans	185,388		—		—		185,388
Loans held for sale, at lower of cost or fair value	7,456		—		7,456		—
Loan servicing rights	4,074		—		—		4,074
Property held for sale	5,147		—		—		5,147

The valuation techniques and significant unobservable inputs used to measure Level 3 fair value measurements at ~~June 30,~~December 31, 2017 were as follows:

Fair Value of Assets / (Liabilities) at June 30, 2017

Valuation
Technique(s)

Unobservable
Input

Range

Weighted
Average

Fair Value of Assets / (Liabilities) at December 31, 2017

Valuation
Technique(s)

Unobservable
Input

Range

Weighted
Average

(dollars in thousands)

Other real estate owned

3,985

Appraisal value

Property specific adjustment

N/A

Other repossessed property

2,590

Appraisal value

Property specific adjustment

N/A

Impaired loans

203,786

Appraisal value

Property specific adjustment

N/A

207,703

Appraisal value

Property specific adjustment

N/A

Loan servicing rights

4,530

Discounted cash flows

Constant prepayment rate
Discount rate

9.4 - 22.3%
10.0 - 15.0%

12.0%
11.9%

3,799

Discounted cash flows

Constant prepayment rate
Discount rate

9.2 - 23.2%
10.0 - 15.0%

12.0%
11.9%

Property held for sale

5,074

Appraisal value

Property specific adjustment

N/A

1,111

Appraisal value

Property specific adjustment

N/A

Disclosures about Fair Value of Financial Instruments

For financial instruments that have quoted market prices, those quotes are used to determine fair value. Financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate are assumed to have a fair value that approximates carrying value, after taking into consideration any applicable credit risk. If no market quotes are

36-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

available, financial instruments are valued by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

The short maturity of the Company’s assets and liabilities results in having a significant number of financial instruments whose fair value equals or closely approximates carrying value. Such financial instruments are reported in the following consolidated balance sheet categories: cash and cash equivalents, securities sold under agreements to repurchase, and accrued interest.

Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include premises and equipment, deferred income taxes, goodwill, and core deposit and other intangibles. In addition, the tax ramifications related to the realization of unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.

Off-balance sheet instruments (commitments to extend credit and standby letters of credit) are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these instruments are immaterial. Fair values for balance sheet instruments as of ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017 are as follows:


		June 30, 2017				September 30, 2016					December 31, 2017				September 30, 2017
	Level in Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Level in Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(dollars in thousands)									(dollars in thousands)
Assets
Cash and cash equivalents	Level 1	$	327,901	$	327,901	$	524,611	$	524,611	Level 1	$	297,596	$	297,596	$	360,396	$	360,396
Loans, net excluding fair valued loans and loans held for sale	Level 3	7,666,586		7,586,629		7,473,973		7,433,851		Level 3	8,115,449		8,020,867		7,881,018		7,798,134
Accrued interest receivable	Level 2	45,478		45,478		49,531		49,531		Level 2	54,817		54,817		53,176		53,176
Cash surrender value of life insurance policies	Level 2	29,403		29,403		29,166		29,166		Level 2	29,823		29,823		29,619		29,619
Federal Home Loan Bank stock	Level 2	30,752		30,752		47,025		47,025		Level 2	40,602		40,602		37,551		37,551

Liabilities
Deposits	Level 2	$	8,959,102	$	8,960,335	$	8,604,790	$	8,603,708	Level 2	$	9,024,185	$	9,020,660	$	8,977,613	$	8,978,926
FHLB advances and other borrowings	Level 2	471,719		473,204		871,037		874,763		Level 2	721,009		722,807		643,214		645,421
Securities sold under repurchase agreements	Level 2	123,851		123,851		141,688		141,688		Level 2	116,884		116,884		132,636		132,636
Accrued interest payable	Level 2	5,006		5,006		4,074		4,074		Level 2	6,139		6,139		4,405		4,405
Subordinated debentures and subordinated notes payable	Level 2	108,261		108,324		111,873		112,826		Level 2	108,343		108,097		108,302		108,293

The following methods and assumptions were used in estimating the fair value of financial instruments that were not previously disclosed:

Cash and cash equivalents: Due to the short term nature of cash and cash equivalents, the estimated fair value is equal to the carrying value and they are categorized as a Level 1 fair value measurement.

~~48-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Loans, net excluding fair valued loans and loans held for sale: The fair value of the loan portfolio is estimated using observable inputs including estimated cash flows, and discount rates based on interest rates currently being offered for loans with similar terms, to borrowers of similar credit quality. Loans held for investment are categorized as a Level 3 fair value measurement.

Accrued interest receivable: Due to the nature of accrued interest receivable, the estimated fair value is equal to the carrying value and they are categorized as a Level 2 fair value measurement.

Cash Surrender Value of Life Insurance Policies: Fair value is equal to the cash surrender value of the life insurance policies.

Federal Home Loan Bank stock: The carrying amount of FHLB stock approximates its fair value as it can only be redeemed with the FHLB at par value. Federal Home Loan Bank stock has been categorized as a Level 2 fair value measurement.

Deposits: The estimated fair value of deposits with no stated maturity, such as non-interest bearing demand deposits, savings, NOW, and money market accounts, is equal to the amount payable on demand. The fair value of interest-bearing time deposits is based on the discounted value of contractual cash flows of such deposits, taking into account the option for early withdrawal. The discount rate is estimated using the rates offered by the Company, at the respective measurement dates, for deposits of similar maturities. Deposits have been categorized as a Level 2 fair value measurement.

37-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

FHLB advances and other borrowings: The fair value of FHLB advances and other borrowings is estimated using discounted cash flow analysis, based on current incremental borrowing rates for similar types of borrowing arrangements. In the absence of a reasonably precise methodology to determine the fair value of the credit agreement, carrying value has been used to represent fair value. FHLB advances and other borrowings have been categorized as a Level 2 fair value measurement.

Securities sold under repurchase agreements: The Company’s repurchase agreements are overnight transactions that mature the day after the transaction, and as a result of this short-term nature, the estimated fair value equals the carrying value. Securities sold under repurchase agreements have been categorized as a Level 2 fair value measurement.

Accrued interest payable: Due to the nature of accrued interest payable, the estimated fair value is equal to the carrying value and they are categorized as a Level 2 fair value measurement.

Subordinated Debentures and Subordinated Notes Payable: The fair value of subordinated debentures and subordinated notes payable is estimated using discounted cash flow analysis, based on current incremental debt rates. Subordinated debentures and subordinated notes payable have been categorized as a Level 2 fair value measurement.

19. Earnings per Share

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding determined for the basic earnings per share calculation plus the dilutive effect of stock compensation using the treasury stock method.

The following information was used in the computation of basic and diluted earnings per share (EPS) for the three ~~and nine~~ months ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended				Nine Months Ended				Three Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		December 31, 2017		December 31, 2016
	(dollars in thousands, except per share data)								(dollars in thousands, except per share data)
Net income	$	35,060	$	26,360	$	107,125	$	87,495	$	29,230	$	36,903

Weighted average common shares outstanding	58,790,314		57,012,698		58,776,546		55,845,322		58,902,629		58,750,522
Dilutive effect of stock based compensation	340,318		164,007		288,856		147,689		185,100		241,383
Weighted average common shares outstanding for diluted earnings per share calculation	59,130,632		57,176,705		59,065,402		55,993,011		59,087,729		58,991,905

Basic earnings per share	$	0.60	$	0.46	$	1.82	$	1.57	$	0.50	$	0.63
Diluted earnings per share	$	0.59	$	0.46	$	1.81	$	1.56	$	0.49	$	0.63

The Company had 0 and ~~36,696~~50,076 shares of unvested performance stock as of ~~June 30,~~December 31, 2017 and 2016, respectively, which were not included in the computation of diluted earnings per common share because performance conditions for vesting had not been met. The Company had 0 and ~~88,775~~95,553 shares of anti-dilutive stock awards outstanding as of ~~June 30,~~December 31, 2017 and 2016, respectively.

~~49-~~38-


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The historical consolidated financial data discussed below reflects our historical results of operations and financial condition and should be read in conjunction with our financial statements and related notes thereto presented elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016,~~2017, previously filed with the SEC. In addition to historical financial data, this discussion includes certain forward-looking statements regarding events and trends that may affect our future results. Such statements are subject to risks and uncertainties that could cause our actual results to differ materially. See “Cautionary Note Regarding Forward-Looking Statements.” For a more complete discussion of the factors that could affect our future results, see “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016.~~2017.

Any discrepancies included in this filing between totals and the sums of percentages and dollar amounts presented, or between rounded dollar amounts, are due to rounding.

Unless otherwise noted, references to "the current period" or "the current quarter" refer to the fiscal quarter ended ~~June 30,~~December 31, 2017 and references to "the comparable period" or "the comparable quarter" refer to the fiscal quarter ended ~~June 30,~~December 31, 2016.

Tax Equivalent Presentation

All references to net interest income, net interest margin, interest income on non ASC 310-30 loans, yield on non ASC 310-30 loans and the related non-GAAP adjusted measure of each item are presented on a fully-tax equivalent ("FTE") basis unless otherwise noted.

Overview

We are a full-service regional bank holding company focused on relationship-based business and agribusiness banking. We serve our customers through ~~174~~173 branches in attractive markets in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota.

Our bank was established more than 80 years ago and we have achieved strong market positions by developing and maintaining extensive local relationships in the communities we serve. By leveraging our business and agribusiness focus, presence in attractive markets, highly efficient operating model and robust approach to risk management, we have achieved significant and profitable growth—both organically and through disciplined acquisitions. We provide financial results based on a fiscal year ending September 30 as a single reportable segment.

The principal sources of our revenues and cash flows are: (i) interest and fees earned on loans made or held by our bank; (ii) interest on fixed income investments held by our bank; (iii) fees on wealth management services; (iv) service charges on deposit accounts maintained at our bank; (v) gain on the sale of loans held for sale (vi) ~~securities gains;~~gains on sales of securities; and (vii) merchant and card fees. Our principal expenses are: (i) interest expense on deposit accounts and other borrowings; (ii) salaries and employee benefits; (iii) data processing costs primarily associated with maintaining our bank's loan and deposit functions; (iv) occupancy expenses for maintaining our bank's facilities; (v) professional fees; (vi) business development; (vii) FDIC insurance assessments; and (viii) other real estate owned expenses. The largest component contributing to our net income is net interest income, which is the difference between interest earned on earning assets (primarily loans and investments) and interest paid on interest-bearing liabilities (primarily deposit accounts and other borrowings). One of management's principal functions is to manage the spread between interest earned on earning assets and interest paid on interest-bearing liabilities in an effort to maximize net interest income while maintaining an appropriate level of interest rate risk.

39-

Impact of the Tax Cuts and Jobs Act of 2017

The Tax Cuts and Jobs Act of 2017 significantly impacted the Company's financial results for the quarter and going forward. The three main impacts include:

A ~~driver~~nonrecurring reduction in the carrying value of ~~increases in revenues, expenses~~the Company's deferred taxes of $13.6 million, equating to $0.23, or 1.3%, of the Company's tangible book value per share and ~~net income has been the acquisition~~a reduction of ~~HF Financial in May 2016. The operations and customers of HF Financial have been fully integrated into the Company. Also refer~~approximately 15 basis points to the ~~Quarterly Report on Form 10-Q~~total capital ratio as of December 31, 2017 and $0.23 per diluted share for the quarter ended ~~June~~December 31, 2017;

A reduction in the statutory federal tax rate upon which the Company's net income before taxes is taxed beginning with the current fiscal year ending September 30, ~~2016~~2018. Because of the Company's fiscal year end, a blended statutory federal tax rate of 24.5% is applied to all net income before taxes generated during the current fiscal year and the ~~Annual Report on Form 10-K~~overall effective tax rate for the fiscal year is expected to be approximately 26.0%. Compared to the previous statutory tax rate, the blended rate reduced the provision for income taxes by approximately $5.0 million for the quarter ended ~~September 30, 2016 for further discussion on~~December 31, 2017. Beginning in fiscal year 2019, the Company's net income will be taxed at the 21.0% statutory federal tax rate; and

•

A reduction in the tax-related benefit generated by tax-advantaged assets. The tax equivalent adjustment to net interest income and net interest margin was $1.6 million for the current quarter, compared to $2.1 million in the prior quarter, on a consistent asset base. This change reduced net interest margin and adjusted net interest marginin the current quarterby approximately 2 basis points and increased our efficiency ratio by a negligible amount.

The actual impact of the HFrevaluing deferred taxes may vary from the estimated charge to provision of $13.6 million due to uncertainties in our preliminary estimates and the effect of further clarification of the new law that cannot be estimated at this time. For more information on our tangible book value per share, net interest margin, adjusted net interest margin and efficiency ratio, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial ~~acquisition~~Measures" section.

Correction of Prior Period Balances

The consolidated statements of income have been revised to correct an immaterial classification error in loan interest income and noninterest income related to credit card interchange income for all periods presented. The reclassification had no effect on net income, earnings per share, retained earnings or capital ratios for all periods presented; however, our net interest margin and adjusted net interest margin were reduced by seven to eight basis points compared to what was originally reported for the prior comparable periods presented. Periods not presented herein will be revised, as applicable, as they are included in future filings. For more information on the ~~Company's~~reclassification of credit card interchange income, see "—Notes to the Consolidated Financial Statements, Nature of Operations and Summary of Significant Policies" section. For more information on our efficiency ratio, net interest margin and adjusted net interest margin, including a reconciliation to the most directly comparable GAAP financial ~~results and condition.~~measure, see "—Non-GAAP Financial Measures" section.

Highlights for the First Quarter of Fiscal Year 2018

Net income was ~~$35.1~~$29.2 million, or $0.49 per diluted share, for the ~~third~~first quarter of fiscal year 2018, compared to $36.9 million, or $0.63 per diluted share, for the first quarter of fiscal year 2017. Adjusted net income, which excludes the effect of one-time acquisition expenses and the deferred taxes revaluation triggered by the Tax Cuts and Jobs Act of 2017, was $42.8 million, or $0.72 per diluted share, compared to $37.3 million, or $0.63 per diluted share, respectively, for the same periods, an increase of $5.5 million, or 14.7%. Compared to the first quarter of fiscal year 2017, ~~an increase of $8.7 million, or 33.0% compared to the third quarter of fiscal year 2016. Compared to the third quarter of fiscal year 2016,~~ total revenue (non-FTE) for the ~~third~~first quarter of fiscal year ~~2017~~2018 grew by ~~13.4%~~4.2%, provision for loan and lease losses were reduced 35.4% and noninterest expenses ~~were reduced~~grew by ~~10.3%, respectively.~~4.4%. Total revenue (non-FTE) is the sum of

~~50-~~

net interest income (non-FTE) and noninterest income. Fiscal year-to-date net income was $107.1 million, compared to $87.5 million for the same period in fiscal year 2016, an increase of $19.6 million, or 22.4%, due to total revenue (non-FTE) growth of 16.3%, partially offset by increased noninterest expense of 7.3% and higher provision for loan and lease losses.

Our efficiency ratio was ~~46.7%~~45.8% and ~~58.8%~~45.1% for the quarters ending ~~June 30,~~December 31, 2017 and ~~June 30,~~December 31, 2016, respectively. Our efficiency ratio was 46.3% on a fiscal year-to-date basis compared to 50.0% for nine month period ended 2016. The elevated efficiency ratio of the comparable prior quarter was due almost entirely to one-time acquisition expenses. For more information on our adjusted net income and efficiency ratio, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.

Net interest margin, which measures our ability to maintain interest rates on interest earning assets above those of interest bearing liabilities, was ~~4.00%~~3.89%, ~~3.98%~~3.93% and ~~3.95%~~3.82%, respectively, for the quarters ended ~~June~~December 31, 2017, September 30, 2017 ~~March~~and December 31, ~~2017 and June 30, 2016 and 3.95% and 3.97%, respectively, for the nine months ended June 30, 2017 and~~ 2016. Adjusted net interest margin, which reflects the realized gain (loss) on interest rate swaps, was ~~3.87%~~3.80%, ~~3.83%~~3.82% and ~~3.74%, respectively, and 3.80% and 3.74%~~3.65%, respectively, for the same periods. We believe our adjusted net interest margin is more representative of our underlying performance and is the measure we use internally to evaluate our results. Net interest margin and adjusted net interest marginincreased by 57 basis points and 1315 basis points, respectively, compared to the same quarter in fiscal year ~~2016.~~2017. The yield on interest-earning assets increased by 1524 basis points over the same quarter in fiscal year ~~2016,~~2017, driven by higher average loan balances as a proportion of

40-

earning assets and improving loan and investment yields. Meanwhile, the cost of interest-bearing liabilities increased by 1118 basis points over the same period, including a 1015 basis point increase in the cost of deposits, partially offset by a ~~significant~~ reduction in average FHLB borrowings outstanding. In addition, the reduction in the magnitude of the tax equivalent adjustment driven by a lower statutory tax rate reduced each metric by approximately 2 basis points. A ~~$1.7~~$2.0 million reduction in the cost of interest rate swaps, that hedge the interest rate risk on long term fixed rate loans in the portfolio, compared to the prior comparable quarter is the primary driver of the more pronounced increase in adjusted net interest margin compared to net interest margin. For more information on our adjusted net interest margin, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.

Net income for the third quarter of fiscal year 2017 represents earnings per diluted common share of $0.59, compared to $0.46 for the same quarter in fiscal year 2016 and was $1.81 fiscal year-to-date compared to $1.56 for the same period in fiscal year 2016. On July 27, 2017, our board of directors declared a dividend of $0.20 per common share payable on August 23, 2017 to stockholders of record as of the close of business on August 11, 2017.

Total loans were ~~$8.79~~$9.17 billion at ~~June~~December 31, 2017 compared to $8.97 billion at September 30, ~~2017, an increase~~2017. The net growth of ~~$109.2~~$196.8 million, or ~~1.3%~~2.2%, ~~compared to September 30, 2016. The majority of the loan growth during the nine month period~~ occurred primarily within the commercial real estate ("CRE") ~~and commercial and industrial ("C&I") segments~~segment of the loan portfolio, which grew ~~$211.5~~$170.9 million, including strong growth in owner-occupied CRE and ~~$42.5~~construction loans. The agriculture loan segment increased by $55.2 million, ~~respectively, offset~~with approximately $20 million of that growth resulting from short-term advances required by ~~reductions~~many of ~~$81.8 million in agriculture loans and $67.6 million in residential real estate loans.~~ our dairy customers for tax planning purposes that have already been repaid.

Deposits grew to ~~$8.96~~$9.02 billion at ~~June 30,~~December 31, 2017, an increase of ~~$354.3~~$46.6 million, or ~~4.1%~~0.5%, compared to $8.98 billion at September 30, ~~2016.~~2017. Deposit growth was driven by ~~$35.0~~$76.0 million ofincrease in noninterest-bearing ~~deposit growth and $319.3~~deposits, partially offset by a $29.4 million ofreduction in interest-bearing ~~deposit growth,~~deposits, which is net of continued outflows of time deposits.

At ~~June 30,~~December 31, 2017, loans graded "Watch" were ~~$299.0~~$287.5 million, a decrease of ~~$28.6~~$24.1 million, or ~~8.7%~~7.7%, compared to September 30, ~~2016, and loans~~2017. Loans graded "Substandard" were ~~$250.6~~$247.7 million, an increase of ~~$9.0~~$14.8 million, or ~~3.7%~~6.4%, over the same period. The decrease in "Watch" graded loans and the increase in "Substandard" graded loans was primarily driven by the deterioration of a small number of CRE relationships.

Nonaccrual loans, including ASC 310-30 loans, were ~~$123.6~~$147.3 million as of ~~June 30,~~December 31, 2017, with ~~$5.0~~$4.1 million of the balance covered by FDIC loss-sharing agreements. Total nonaccrual loans ~~decreased~~increased by ~~$2.8~~$9.0 million compared to September 30, ~~2016.~~2017, primarily driven by one CRE loan relationship. Total ~~OREO~~other repossessed property balances were ~~$9.1~~$10.5 million as of ~~June 30,~~December 31, 2017, ~~a decrease~~an increase of ~~$1.2~~$1.5 million, or ~~12.0%~~16.7%, compared to September 30, ~~2016.~~2017.

As of mid-January, annual reviews have been completed on approximately 70% of agriculture loan relationships with maturity dates between November 1, 2017 and January 15, 2018. Growers' 2017 performance was broadly in line with expectations and risk rating changes are expected to be minimal with upgrades modestly exceeding downgrades.

Provision for loan and lease losses was ~~$5.8~~$4.6 million for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~$5.4~~$7.0 million for the same quarter of fiscal year ~~2016.~~2017. Net charge-offs for the ~~third~~first quarter of fiscal year ~~2017~~2018 were ~~$4.3~~$4.0 million, or ~~0.20%~~0.18% of average total loans on an annualized basis, with the majority of net charge-offs concentrated in the ~~C&I segment~~agriculture and commercial non-real estate segments of the loan ~~portfolio, bringing fiscal year-to-date net~~portfolio. Net charge-offs ~~to $17.3~~were $4.9 million, or ~~0.27% of average total loans on an annualized basis. For the comparable periods in fiscal year 2016, net charge-offs were $3.0 million, or 0.15%~~0.22% of average total loans on an annualized basis for the ~~third~~first quarter of fiscal year ~~2016, bringing fiscal year-to-date net charge offs to $4.8 million, or 0.08% of average total loans on an annualized basis.~~2017. The ratio of ALLL to total loans was ~~0.73%~~0.70% at ~~June 30,~~December 31, 2017, ~~down~~a reduction from ~~0.74%~~0.71% at September 30, ~~2016.~~2017. The balance of the ALLL ~~decreased~~increased from ~~$64.6~~$63.5 million at September 30, ~~2016~~2017 to ~~$64.2~~$64.0 million at ~~June 30,~~December 31, 2017.

Our capital position is strong, with Tier 1 capital, total capital and Tier 1 leverage ratios of ~~11.5%~~11.3%, ~~12.6%~~12.3% and 10.3%, respectively, at ~~June 30,~~December 31, 2017, compared to ~~11.1%~~11.4%, ~~12.2%~~12.5% and ~~9.5%~~10.3%, respectively, at September 30, ~~2016.~~2017. In addition, our Common Equity Tier 1 ratio was ~~10.7%~~10.5% at ~~June 30,~~December 31, 2017 and ~~10.2%~~10.7% at September 30, ~~2016.~~2017. Our tangible common equity to tangible assets ratio

~~51-~~

was 9.2% at ~~June 30,~~December 31, 2017 and ~~8.5%~~9.2% at September 30, ~~2016.~~2017. The revaluation of the Company's deferred taxes reduced the total capital ratio by approximately 15 basis points. For more information on our tangible common equity to tangible assets ratio, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.

41-

Key Factors Affecting Our Business and Financial Statements

As discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016,~~2017, our business, financial condition and results of operations are impacted by several key factors, including economic conditions, interest rates, asset quality and loss-sharing agreements, banking laws and regulations, competition, ~~our~~ operational efficiency, goodwill and amortization of other intangible assets and ~~accounting for~~ loans and interest rate swaps accounted for at fair value. There have been no material changes to these factors except as otherwise supplemented within this Quarterly Report on Form 10-Q for the ~~nine months ended June 30, 2017 and within our Quarterly Report on Form 10-Q for the~~ three ~~and six~~ months ended December 31, ~~2016 and March 31, 2017, respectively.~~2017.

Results of Operations—Three ~~and Nine~~ Month Periods Ended ~~June 30,~~December 31, 2017 and 2016

Overview

The following table highlights certain key financial and performance information for the three ~~and nine~~ month periods ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands, except share and per share amounts)												(dollars in thousands, except share and per share amounts)
Operating Data:
Interest and dividend income (FTE)	$	112,555		$	102,094		$	333,177		$	293,502		$	116,519		$	108,797
Interest expense	11,671			8,537			31,928			24,033			14,332			9,764
Noninterest income	15,485			9,097			43,226			26,739			16,674			15,658
Noninterest expense	54,922			61,222			161,312			150,297			54,868			52,537
Provision for loan and lease losses	5,796			5,372			16,854			11,892			4,557			7,049
Net income	35,060			26,360			107,125			87,495			29,230			36,903
Adjusted net income¹	35,060			33,911			107,565			95,524			42,816			37,343
Common shares outstanding	58,761,597			58,693,499			58,761,597			58,693,499			58,896,189			58,755,989
Weighted average diluted common shares outstanding	59,130,632			57,176,705			59,065,402			55,993,011			59,087,729			58,991,905
Earnings per common share - diluted	$	0.59		$	0.46		$	1.81		$	1.56		$	0.49		$	0.63
Adjusted earnings per common share - diluted ¹	0.59			0.59			1.82			1.71			0.72			0.63

Performance Ratios:
Net interest margin (FTE) ²	4.00		%	3.95		%	3.95		%	3.97		%
Net interest margin (FTE) ^{1 2}													3.89		%	3.82		%
Adjusted net interest margin (FTE)^{1 2}	3.87		%	3.74		%	3.80		%	3.74		%	3.80		%	3.65		%
Return on average total assets ²	1.25		%	1.00		%	1.26		%	1.16		%	1.00		%	1.28		%
Return on average common equity ²	8.2		%	6.8		%	8.5		%	7.8		%	6.6		%	8.8		%
Return on average tangible common equity ^{1 2}	14.8		%	12.9		%	15.5		%	15.0		%	11.6		%	16.3		%
Efficiency ratio ¹	46.7		%	58.8		%	46.3		%	50.0		%	45.8		%	45.1		%

¹This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.	¹This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.												¹This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.
² Annualized for all partial-year periods.	² Annualized for all partial-year periods.												² Annualized for all partial-year periods.

~~52-~~42-

Net Interest Income

The following table presents net interest income, net interest margin and adjusted net interest margin for the three ~~and nine~~ month periods ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Net interest income:
Total interest and dividend income (FTE)	$	112,555		$	102,094		$	333,177		$	293,502		$	116,519		$	108,797
Less: Total interest expense	11,671			8,537			31,928			24,033			14,332			9,764
Net interest income (FTE)	$	100,884		$	93,557		$	301,249		$	269,469		$	102,187		$	99,033

Net interest margin (FTE) and adjusted net interest margin (FTE) ¹
Average interest-earning assets	10,124,404			9,528,576			10,185,187			9,061,896			10,412,882			10,286,284
Average interest-bearing liabilities	9,485,260			8,928,981			9,556,764			8,502,729			9,751,936			9,652,611
Net interest margin (FTE)	4.00		%	3.95		%	3.95		%	3.97		%	3.89		%	3.82		%
Adjusted net interest margin (FTE) ¹	3.87		%	3.74		%	3.80		%	3.74		%	3.80		%	3.65		%

¹This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.	¹This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.												¹This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.

Net interest income was ~~$100.9~~$102.2 million for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~$93.6~~$99.0 million for the same quarter in fiscal year ~~2016,~~2017, an increase of ~~7.8%. Net interest income was $301.2 million for the first nine months of fiscal year 2017, compared to $269.5 million for the same period in fiscal year 2016, an increase of 11.8%~~3.2%. The ~~increases~~increase in net interest income ~~for both periods were~~was primarily attributable to higher loan interest income driven by ~~8.0% and 13.9%, respectively,~~3.3% of growth in average loans outstanding between periods and ~~increasing benchmark~~a modest increase in investment portfolio income driven by rising interest rates, which favorably impact the contractual interest rates on variable and adjustable rate loans. Additionally, higher LIBOR rates have also driven a significant reduction in the cost of interest rate swaps we use to hedge the interest rate risk on longer-term fixed rate loans, which we record through noninterest income. Higher loan interest income was partially offset ~~for the three and nine month periods ended June 30, 2017~~ by ~~increases in deposit~~higher interest expense ~~of $3.0 million~~associated with interest-bearing deposits and $6.5 million, respectively, which is similarly the result of growth in average deposits outstanding and in most cases is also directly or indirectly attributable to increasing benchmark interest rates.borrowings.

Net interest margin was ~~4.00%~~3.89% for the ~~third~~first quarter of fiscal year ~~2017,~~2018, an increase of 57 basis points compared to the same quarter in fiscal year ~~2016.~~2017. Adjusted net interest margin was ~~3.87%~~3.80% for the ~~third~~first quarter of fiscal year ~~2017,~~2018, an increase of 1315 basis points compared to the same quarter in fiscal year ~~2016.~~2017. The yield on interest-earning assets increased by 24 basis points over the same quarter in fiscal year 2017, driven by higher average loan balances as a proportion of earning assets and improving loan and investment yields. Meanwhile, the cost of interest-bearing liabilities increased by 18 basis points over the same period, including a 15 basis point increase in the cost of deposits, partially offset by a reduction in average FHLB borrowings outstanding. In addition, the reduction in the magnitude of the tax equivalent adjustment driven by a lower statutory tax rate reduced each metric by approximately 2 basis points. A ~~$1.7~~$2.0 million reduction in the cost of interest rate swaps, that hedge the interest rate risk on long term fixed rate loans in the portfolio, compared to the prior comparable quarter is the driver of the more pronounced increase in adjusted net interest margin compared to net interest margin. Net interest margin was 3.95% for the first nine months of fiscal year 2017, a decrease of 2 basis points compared to the same period in fiscal year 2016. Adjusted net interest margin was 3.80% for the first nine months of fiscal year 2017, an increase of 6 basis points compared to the same period in fiscal year 2016. A $4.2 million reduction in the cost of interest rate swaps compared to the prior comparable period is theprimary driver of the more pronounced increase in adjusted net interest margin compared to net interest margin. For more information on our adjusted net interest income and adjusted net interest margin, including a reconciliation of each to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.

The following tables present the distribution of average assets, liabilities and equity, interest income and resulting yields on average interest-earning assets, and interest expense and rates on average interest-bearing liabilities for the current and comparable three ~~and nine~~ month periods, respectively. Loans on nonaccrual status that had interest accrued as of the date of nonaccrual is immediately reversed as a reduction to interest income, while any interest subsequently recovered is recorded in the period of recovery. Tax-exempt loans and securities, totaling ~~$715.1~~$735.7 million at ~~June 30,~~December 31, 2017 and ~~$673.3~~$724.1 million at ~~June 30,~~December 31, 2016, are typically entered at lower interest rate arrangements than comparable non-exempt loans and securities. The amount of interest income reflected below has been adjusted to include the amount of tax benefit realized in the period and as such is presented on a fully-tax equivalent basis, the calculation of which is outlined in the discussion of non-GAAP items later in this section. ASC 310-30 loans represent loans accounted for in accordance with ASC 310-30 Accounting for Purchased Loans that were credit impaired at the time we acquired them. Non ASC 310-30 loans represent loans we have originated and loans we have acquired that were not credit impaired at the time we acquired them.

~~53-~~43-


	For the three months ended												For the three months ended
	June 30, 2017						June 30, 2016						December 31, 2017						December 31, 2016
	Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹
	(dollars in thousands)												(dollars in thousands)
Assets
Interest-bearing bank deposits	$	62,187	$	163	1.05	%	$	130,521	$	157	0.48	%	$	65,935	$	231	1.39	%	$	266,704	$	346	0.51	%
Investment securities	1,398,370		6,803		1.95	%	1,373,451		6,283		1.84	%	1,416,179		7,043		1.97	%	1,377,459		6,377		1.84	%
Non ASC 310-30 loans, net ²	8,550,349		102,720		4.82	%	7,903,860		93,733		4.77	%	8,840,929		106,500		4.78	%	8,515,947		99,730		4.65	%
ASC 310-30 loans, net	113,498		2,869		10.14	%	120,744		1,921		6.40	%	89,839		2,745		12.12	%	126,174		2,344		7.37	%
Loans, net	8,663,847		105,589		4.89	%	8,024,604		95,654		4.79	%	8,930,768		109,245		4.85	%	8,642,121		102,074		4.69	%
Total interest-earning assets	10,124,404		112,555		4.46	%	9,528,576		102,094		4.31	%	10,412,882		116,519		4.44	%	10,286,284		108,797		4.20	%
Noninterest-earning assets	1,154,295						1,085,961						1,176,658						1,152,013
Total assets	$	11,278,699	$	112,555	4.00	%	$	10,614,537	$	102,094	3.87	%	$	11,589,540	$	116,519	3.99	%	$	11,438,297	$	108,797	3.77	%

Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	1,815,407					$	1,497,567					$	1,844,490					$	1,792,060
NOW, money market and savings deposits	5,849,998		$	7,172	0.49	%	5,236,443		$	4,270	0.33	%	5,887,195		$	8,291	0.56	%	5,548,112		$	5,129	0.37	%
Time deposits	1,289,402		2,306		0.72	%	1,340,460		2,182		0.65	%	1,267,300		2,707		0.85	%	1,348,119		2,161		0.64	%
Total deposits	8,954,807		9,478		0.42	%	8,074,470		6,452		0.32	%	8,998,985		10,998		0.48	%	8,688,291		7,290		0.33	%
Securities sold under agreements to repurchase	118,373		86		0.29	%	152,615		124		0.33	%	125,060		95		0.30	%	136,405		115		0.33	%
FHLB advances and other borrowings	303,846		994		1.31	%	600,477		986		0.66	%	519,575		2,069		1.58	%	716,953		1,271		0.70	%
Subordinated debentures and subordinated notes payable	108,234		1,113		4.13	%	101,419		975		3.87	%	108,316		1,170		4.28	%	110,962		1,088		3.89	%
Total borrowings	530,453		2,193		1.66	%	854,511		2,085		0.98	%	752,951		3,334		1.76	%	964,320		2,474		1.02	%
Total interest-bearing liabilities	9,485,260		$	11,671	0.49	%	8,928,981		$	8,537	0.38	%	9,751,936		$	14,332	0.58	%	9,652,611		$	9,764	0.40	%
Noninterest-bearing liabilities	77,979						118,184						76,477						119,443
Stockholders' equity	1,715,460						1,567,372						1,761,127						1,666,243
Total liabilities and stockholders' equity	$	11,278,699					$	10,614,537					$	11,589,540					$	11,438,297
Net interest spread					3.51	%					3.49	%					3.41	%					3.37	%
Net interest income and net interest margin (FTE)			$	100,884	4.00	%			$	93,557	3.95	%			$	102,187	3.89	%			$	99,033	3.82	%
Less: Tax equivalent adjustment			$	2,154					$	1,905					$	1,565					$	2,142
Net interest income and net interest margin - ties to Statements of Comprehensive Income			$	98,730	3.91	%			$	91,652	3.87	%			$	100,622	3.83	%			$	96,891	3.74	%

¹Annualized for all partial-year periods.	¹Annualized for all partial-year periods.												¹Annualized for all partial-year periods.
²Interest income includes $0.7 million and $1.8 million for the third quarter of fiscal year 2017 and 2016, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.
²Interest income includes $0.6 million and $1.4 million for the third quarter of fiscal year 2018 and 2017, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.													²Interest income includes $0.6 million and $1.4 million for the third quarter of fiscal year 2018 and 2017, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.

The yield on interest-earning assets was ~~4.46%~~4.44% for the ~~third~~first quarter of fiscal year ~~2017,~~2018, an increase of 1524 basis points over the same quarter in fiscal year ~~2016,~~2017, driven by higher average loan balances as a proportion of earning assets and improving loan and investment yields. Meanwhile, the cost of interest-bearing liabilities was ~~0.49%~~0.58% for the ~~third~~first quarter of fiscal year ~~2017,~~2018, an increase of 1118 basis points over the same quarter in fiscal year ~~2016,~~2017, including a 1015 basis point increase in the cost of deposits, partially offset by a ~~significant~~ reduction in average FHLB borrowings outstanding. ~~For more information on our adjusted net interest margin, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.~~

The yield on interest-earning assets was 4.37% for the first nine months of fiscal year 2017, an increase of 4 basis points over the same period in fiscal year 2016, driven by higher average loan balances as a proportion of earning assets. Meanwhile, the cost of interest-bearing liabilities was 0.45% for the first nine months of fiscal year 2017, an increase of 7 basis points over the same period, including a 6 basis point increase in the cost of deposits.

~~54-~~44-

For the nine months ended
June 30, 2017 June 30, 2016
Average Balance Interest (FTE)
Yield / Cost ¹
Average Balance Interest (FTE)
Yield / Cost ¹
(dollars in thousands)
Assets
Interest bearing bank deposits $ 146,209
$ 728
0.67 % $ 102,206
$ 326
0.43 %
Investment securities 1,386,190
19,719
1.90 % 1,362,576
18,517
1.82 %
Non ASC 310-30 loans, net ³
8,532,650
305,208
4.78 % 7,489,534
269,452
4.81 %
ASC 310-30 loans, net 120,138
7,522
8.37 % 107,580
5,207
6.47 %
Loans, net 8,652,788
312,730
4.83 % 7,597,114
274,659
4.83 %
Total interest-earning assets 10,185,187
333,177
4.37 % 9,061,896
293,502
4.33 %
Noninterest-earning assets 1,150,838
1,055,005

Total assets $ 11,336,025
$ 333,177
3.93 % $ 10,116,901
$ 293,502
3.88 %

Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,810,880
$ 1,420,749

NOW, money market and savings deposits 5,673,929
$ 18,060
0.43 % 4,973,268
$ 11,498
0.31 %
Time deposits 1,307,908
6,536
0.67 % 1,326,782
6,648
0.67 %
Total deposits 8,792,717
24,596
0.37 % 7,720,799
18,146
0.31 %
Securities sold under agreements to repurchase 124,249
298
0.32 % 163,622
395
0.32 %
FHLB advances and other borrowings 530,668
3,735
0.94 % 524,004
2,831
0.72 %
Subordinated debentures and subordinated notes payable 109,130
3,299
4.04 % 94,304
2,661
3.77 %
Total borrowings 764,047
7,332
1.28 % 781,930
5,887
1.01 %
Total interest-bearing liabilities 9,556,764
$ 31,928
0.45 % 8,502,729
$ 24,033
0.38 %
Noninterest-bearing liabilities 89,770
107,432

Stockholders' equity 1,689,491
1,506,740

Total liabilities and stockholders' equity $ 11,336,025
$ 10,116,901

Net interest spread 3.48 % 3.50 %
Net interest income and net interest margin (FTE) ¹
$ 301,249
3.95 % $ 269,469
3.97 %
Less: Tax equivalent adjustment $ 6,477
$ 5,522

Net interest income and net interest margin - ties to Statements of Comprehensive Income $ 294,772
3.87 % $ 263,947
3.89 %

¹Annualized for all partial-year periods.
²Interest income includes $3.0 million and $1.9 million for the first nine months of fiscal year 2017 and 2016, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.

Interest and Dividend Income

The following table presents interest and dividend income for the three ~~and nine~~ month periods ended ~~June 30,~~December 31, 2017 and 2016:

Three Months Ended Nine Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
(dollars in thousands)
Interest and dividend income:
Loans (FTE) $ 105,589
$ 95,654
$ 312,730
$ 274,659
Taxable securities 6,238
5,826
18,170
17,600
Nontaxable securities 269
61
710
85
Dividends on securities 296
396
839
832
Federal funds sold and other 163
157
728
326
Total interest and dividend income (FTE) 112,555
102,094
333,177
293,502
Less: Tax equivalent adjustment 2,154
1,905
6,477
5,522
Total interest and dividend income (GAAP) $ 110,401
$ 100,189
$ 326,700
$ 287,980

~~55-~~



	Three Months Ended
	December 31, 2017		December 31, 2016
	(dollars in thousands)
Interest and dividend income:
Loans (FTE)	$	109,245	$	102,074
Taxable securities	6,494		5,878
Nontaxable securities	260		199
Dividends on securities	289		300
Federal funds sold and other	231		346
Total interest and dividend income (FTE)	116,519		108,797
Less: Tax equivalent adjustment	1,565		2,142
Total interest and dividend income (GAAP)	$	114,954	$	106,655

Total interest and dividend income consists primarily of interest income on loans and interest and dividend income on our investment portfolio. Total interest and dividend income was ~~$112.6~~$116.5 million for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~$102.1~~$108.8 million for the same quarter of fiscal year ~~2016,~~2017, an increase of ~~10.2%. Total interest and dividend income was $333.2 million for the first nine months of fiscal year 2017, compared to $293.5 million for the same period of fiscal year 2016, an increase of 13.5%~~7.1%. Significant components of interest and dividend income are described in further detail below.

Loans. Interest income on all loans increased to $105.6 million in third quarter of fiscal year 2017 from $95.7 million in the same quarter in fiscal year 2016, an increase of 10.4% between the two periods. The increase was primarily attributable to higher loan interest income driven by 8.0% growth in average loans outstanding between periods and increasing benchmark interest rates, which favorably impact the contractual interest rates on variable and adjustable rate loans. Interest income on ASC 310-30 loans increased $0.9 million between the two periods, primarily driven by a full quarter of accretion on loans acquired in the HF Financial acquisition. Interest income on acquired loans accounted for under ASC 310-20 decreased $1.1 million between the two periods, primarily driven by runoff of the acquired loan portfolios.

Interest income on all loans increased to $312.7 million in the first nine months of fiscal year 2017 from $274.7 million in the third quarter of fiscal year 2016, an increase of 13.9% between the two periods. Average net loan balances for the first ~~nine months~~quarter of fiscal year ~~2017~~2018 were ~~$8.65~~$8.93 billion, representing a ~~13.9%~~3.3% increase compared to the same period in fiscal year ~~2016.~~2017. Interest income on ~~ASC 310-30~~all loans increased ~~$2.3~~to $109.2 million in first quarter of fiscal year 2018 from $102.1 million in the same quarter in fiscal year 2017, an increase of $7.1 million, or 7.0% between the two periods, primarily driven by loans acquired in the HF Financial acquisition. Interest income on acquired loans accounted for under ASC 310-20 increased $1.1 million between the two periods, primarily driven by a full nine months of accretion recognized on the loans acquired from HF Financial.periods.

Our yield on loans is affected by market interest rates, the level of adjustable-rate loan indices, interest rate floors and caps, customer repayment activity, the level of loans held for sale, portfolio mix, and the level of nonaccrual loans. The average tax equivalent yield on non-ASC 310-30 loans was ~~4.82%~~4.78% for the ~~third~~first quarter of fiscal year ~~2017,~~2018, an increase of 513 basis points compared to the same quarter in fiscal year ~~2016. The average tax equivalent yield on non ASC 310-30 loans was 4.78% for the first nine months of fiscal year 2017, a 3 basis point decrease compared to the same period in fiscal year 2016.~~2017. Adjusted for the current realized gain (loss) on derivatives we use to manage interest rate risk on certain of our loans at fair value, which we believe represents the underlying economics of the transactions, the adjusted yield on non ASC 310-30 loans was ~~4.66%~~4.67% for the ~~third~~first quarter of fiscal year ~~2017, an 14~~2018, a 23 basis point an increase compared to the same quarter in fiscal year ~~2016. The adjusted yield on non ASC 310-30 loans was 4.60% for~~2017. In addition, the reduction in the magnitude of the tax equivalent adjustment driven by a lower statutory tax rate reduced each metric by approximately 2 basis points. Starting in first ~~nine months~~quarter of fiscal year ~~2017, an 8 basis point increase over~~2016 and continuing through the ~~prior comparable period. There continues to be a competitive interest rate environment for high quality commercial and agricultural credits across our footprint, but~~first quarter of 2018 we have begun to benefit from a period-over-period increase in LIBOR rates which has reduced the net cost of pay fixed, receive floating interest rate swaps the Company utilizes related to certain fixed rate loans and benchmark rate hikes which have raised interest rates on many of our floating and variable rate loans.

The average duration, net of interest rate swaps, of the loan portfolio was ~~1.3~~1.2 years as of ~~June 30,~~December 31, 2017. Approximately ~~48%~~47%, or ~~$4.19~~$4.33 billion, of the portfolio is comprised of fixed rate loans, of which ~~$1.05 billion~~$980.1 million of loans are fixed rate loans with an original term of 5 years or greater for which we have entered into equal and offsetting fixed-to-floating interest rate swaps. These loans effectively behave as floating rate loans. Of the remaining floating and variable rate loans in the portfolio, approximately ~~52%~~51% are indexed to Wall Street Journal Prime, ~~27%~~28% to 5-year Treasuries and the balance to various other indices. Approximately 4%2% of our total loans' rates are floored, with an average interest rate floor 8171 bps above market rates.

Loan-related fee income of ~~$3.3 million is included in interest income for the third quarter of fiscal year 2017 and $3.0 million for the same quarter in fiscal year 2016. Loan-related fee income of $9.8~~$2.0 million is included in interest income for the first ~~nine months~~quarter of fiscal year ~~2017 compared to $7.8~~2018 and $1.4 million for the same ~~period~~quarter in fiscal year ~~2016.~~2017. In addition, certain fees collected at loan origination are considered to be a component of yield on the underlying loans and are deferred and recognized into income over the life of the loans. Amortization related to the FDIC indemnification assets of ~~$1.5~~$1.0 million and ~~$1.0~~$0.9 million for the ~~third~~first quarter of fiscal years ~~2017~~2018 and ~~2016, respectively, and $3.5 million and $2.9 million for the first nine months of fiscal years~~ 2017, ~~and 2016,~~ respectively, is included as a reduction to interest income.

Investment Portfolio. The carrying value of investment securities and FHLB stock was ~~$1.40~~$1.41 billion as of ~~June 30,~~December 31, 2017. Interest and dividend income on investments includes income earned on investment securities and FHLB stock. Interest and dividend income on investments ~~increased by 8.3% to $6.8~~was $7.0 million infor the ~~third~~first quarter of fiscal year ~~2017~~2018, an increase of $0.6 million, or 10.4%, from ~~$6.3~~$6.4 million in the ~~third~~first quarter of fiscal year ~~2016,~~2017, driven by an increase in average balances coupled with a yield increase from 1.84% to ~~1.95%~~1.97% over the same period. ~~Interest and dividend income on investments increased by 6.5% to $19.7 million in the first nine months of fiscal year 2017~~

~~56-~~45-

~~from $18.5 million in the same period of fiscal year 2016, driven by an increase in average balances coupled with a yield increase from 1.82% to 1.90% over the same period.~~

The weighted average life of the investment portfolio was ~~3.5 years and 3.3~~3.6 years at ~~June 30,~~December 31, 2017 and September 30, ~~2016, respectively.~~2017. Average investments represented ~~13.8%~~13.6% and ~~14.4%~~13.4% of total average interest-earning assets for the ~~third~~first quarters of fiscal years 2018 and 2017, ~~and 2016, respectively, and 13.6% and 15.0% for the first nine months of fiscal years 2017 and 2016,~~ respectively.

Interest Expense

The following table presents interest expense for the three ~~and nine~~ month periods ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended				Nine Months Ended				Three Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		December 31, 2017		December 31, 2016
	(dollars in thousands)								(dollars in thousands)
Interest expense:
Deposits	$	9,478	$	6,451	$	24,596	$	18,145	$	10,998	$	7,290
Securities sold under agreements to repurchase	86		124		298		395		95		115
FHLB advances and other borrowings	994		986		3,735		2,831		2,069		1,271
Subordinated debentures and subordinated notes payable	1,113		976		3,299		2,662		1,170		1,088
Total interest expense	$	11,671	$	8,537	$	31,928	$	24,033	$	14,332	$	9,764

Total interest ~~expense~~ increased $4.6 million, or 46.8%, to ~~$11.7~~$14.3 million in the ~~third~~first quarter of fiscal year ~~2017~~2018 from ~~$8.5~~$9.8 million in the same quarter in fiscal year 2016, an increase of 36.7%, mostly due to a 6.2% increase in average interest-bearing liabilities between periods. The average cost of total interest-bearing liabilities was 0.49% for the third quarter of fiscal year 2017, compared to 0.38% for the same quarter in fiscal year 2016. Total interest expense increased to $31.9 million for the first nine months of fiscal year 2017 from $24.0 million in the same period in fiscal year 2016, an increase of $7.9 million, or 32.9%. The average cost of total interest-bearing liabilities was 0.45% for the first nine months of fiscal year 2017, compared to 0.38% for the same period in fiscal year 2016.2017. Significant components of interest expense are described in further detail below.

Deposits. Interest expense on deposits, consisting of checking accounts, money market accounts, NOW accounts, savings accounts and time deposits, was ~~$9.5~~$11.0 million and ~~$6.5~~$7.3 million for the ~~third~~first quarter of fiscal year 2018 and 2017, ~~and 2016,~~ respectively, an increase of $3.7 million, or 50.9%, driven by growth in average interest-bearing deposits outstanding and increasing benchmark interest rates. Average deposit balances increased to ~~$8.95~~$9.00 billion from ~~$8.07~~$8.69 billion, ~~respectively,~~ for the same periods, an increase of ~~$880.3 million,~~$0.31 billion, or ~~10.9%~~3.6%. The cost of deposits increased to ~~0.42%~~0.48% for the ~~third~~first quarter of fiscal year ~~2017~~2018 from ~~0.32%~~0.33% for the same quarter of fiscal year 2016. Interest expense on deposits was $24.6 million for the first nine months of fiscal year 2017 compared with $18.1 million in the same period in fiscal year 2016, an increase of $6.5 million, or 35.5%, reflecting a rise in market interest rates. Average deposit balances were $8.79 billion and $7.72 billion, respectively, for the same periods. The cost of deposits increased to 0.37% in the first nine months of fiscal year 2017 from 0.31% in the same period in fiscal year 2016.2017.

Average non-interest-bearing demand account balances ~~comprised 20.3%~~remained stable at 20.5% of average total deposits for the ~~third~~first quarter of fiscal year ~~2017, compared to 18.5%~~2018 and 20.6% for the comparable quarter in fiscal year ~~2016.~~2017. Total average other liquid accounts, consisting of money market and savings accounts, ~~remained stable at 65.3%~~increased to 65.4% of total average deposits for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~64.9%~~63.9% of total average deposits for the comparable quarter in fiscal year ~~2016,~~2017, while time deposit accounts ~~represented 14.4%~~decreased to 14.1% of average total deposits for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~16.6%~~15.5% in the comparable quarter in fiscal year ~~2016. These trends in the composition of our deposit portfolio represent a continuation of~~2017. We continue our strategy ~~to move away from more costly time deposit accounts toward more~~of focusing on cost-effective transaction accounts as well as our focus on gathering business deposits, which are typically transaction accounts by nature.

FHLB Advances and Other Borrowings. Interest expense on FHLB advances and other borrowings was ~~$1.0~~$2.1 million for ~~both~~ the ~~third~~first quarter of fiscal year ~~2017 and~~2018, an increase of $0.8 million, or 62.7%, compared to $1.3 million for the comparable quarter in ~~2016,~~2017, reflecting a weighted average cost of ~~1.31%~~1.58% and ~~0.66%~~0.70% for the ~~third~~first quarters ~~ended June 30,~~of fiscal years 2018 and 2017, ~~and 2016,~~ respectively. Our average balance for FHLB advances and other borrowings ~~decreased to $303.8~~was $519.6 million in the current quarter of fiscal year ~~2017~~2018, a $197.4 million reduction, compared to ~~$600.5~~$717.0 million in the comparable quarter of fiscal year 2016. Interest expense on FHLB advances and other borrowings was $3.7 million for the first nine months of fiscal year 2017 and $2.8 million for the comparable period in fiscal year 2016, representing a weighted average cost of 0.94% and 0.72%, respectively. Our average FHLB advances and other borrowings for the nine months ended June 30, 2017 were $530.7 million, an increase of $6.7

~~57-~~

~~million, or 1.27%, compared to the comparable period ended June 30, 2016.~~2017. Average FHLB advances and other borrowings as a proportion of total average interest-bearing liabilities were ~~3.2%~~5.3% for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~6.7%~~7.4% for the comparable quarter in fiscal year ~~2016.~~2017. The average rate paid on FHLB advances is impacted by market rates and the various terms and repricing frequency of the specific outstanding borrowings in each year. The weighted average contractual rate paid on our FHLB advances was ~~1.36%~~1.57% and 0.83% at ~~June 30,~~December 31, 2017 and 2016, respectively, and the average tenor was ~~5 months.~~3 and 61 months for the same periods.

We must collateralize FHLB advances by pledging real estate loans or investments. We pledge more assets than required by our current level of borrowings in order to maintain additional borrowing capacity. Although we may substitute other loans for such pledged loans, we are restricted in our ability to sell or otherwise pledge these loans without substituting collateral or prepaying a portion of the FHLB advances. At ~~June 30,~~December 31, 2017, we had pledged ~~$3.64~~$3.77 billion of loans to the FHLB, against which we had borrowed ~~$471.0~~$721.0 million.

46-

Subordinated Debentures and Subordinated Notes Payable. Interest expense on our outstanding subordinated debentures and subordinated notes payable was ~~$1.1~~$1.2 million in ~~third~~first quarter of fiscal year ~~2017~~2018 and ~~$1.0~~$1.1 million in the comparable quarter in fiscal year 2016. Interest expense on our outstanding subordinated debentures and subordinated notes payable was $3.3 million for the first nine months of fiscal year 2017 and $2.7 million in the comparable period in fiscal year 2016.2017. The weighted average contractual rate on outstanding subordinated notes was 4.88% at both ~~June 30,~~December 31, 2017 and September 30, 2016. The increase in interest expense for the first nine months in fiscal year 2017 was due to the additional subordinated debt acquired in the HF Financial acquisition, partially offset by the redemption of $5.0 million of subordinated debentures in the first quarter of fiscal year 2017.

Securities Sold Under Agreements to Repurchase. Securities sold under agreements to repurchase represent retail repurchase agreements with customers and represent a small portion of our overall funding profile. The interest expense associated with this class of liabilities remained largely consistent between the current quarter and comparable quarter.

Rate and Volume Variances

Net interest income is affected by changes in both volume and interest rates. Volume changes are caused by increases or decreases during the year in the level of average interest-earning assets and average interest-bearing liabilities. Rate changes result from increases or decreases in the yields earned on assets or the rates paid on liabilities.

The following table presents the current and comparable quarter ~~nine month periods~~ and a summary of the changes in interest income and interest expense on a tax equivalent basis resulting from changes in the volume of average asset and liability balances and changes in the average yields or rates compared with the preceding fiscal year. If significant, the change in interest income or interest expense due to both volume and rate has been prorated between the volume and the rate variances based on the dollar amount of each variance.

Current Quarter vs Comparable Quarter Current 9 month period vs Comparable 9 month period
Volume Rate Total Volume Rate Total
(dollars in thousands)
Increase (decrease) in interest income:
Cash and cash equivalents $ (112 ) $ 118
$ 6
$ 173
$ 228
$ 401
Investment securities 116
404
520
307
896
1,203
Non ASC 310-30 loans 7,753
1,233
8,986
36,349
(592 ) 35,757
ASC 310-30 loans (121 ) 1,070
949
651
1,663
2,314
Loans 7,632
2,303
9,935
37,000
1,071
38,071
Total increase 7,636
2,825
10,461
37,480
2,195
39,675
Increase (decrease) in interest expense:
NOW, money market & savings deposits 548
2,355
2,903
1,768
4,792
6,560
Time deposits (85 ) 209
124
(117 ) 5
(112 )
Securities sold under agreements to repurchase (26 ) (12 ) (38 ) (95 ) —
(95 )
FHLB advances and other borrowings (648 ) 656
8
36
868
904
Subordinated debentures and subordinated notes payable 68
69
137
432
206
638
Total increase (decrease) (143 ) 3,277
3,134
2,024
5,871
7,895
Increase (decrease) in net interest income (FTE) $ 7,779
$ (452 ) $ 7,327
$ 35,456
$ (3,676 ) $ 31,780

~~58-~~



	Current Quarter vs Comparable Quarter
	Volume			Rate			Total
	(dollars in thousands)
Increase (decrease) in interest income:
Cash and cash equivalents	$	(397	)	$	282		$	(115	)
Investment securities	183			483			666
Non ASC 310-30 loans	3,868			2,902			6,770
ASC 310-30 loans	(810		)	1,211			401
Loans	3,058			4,113			7,171
Total increase	2,844			4,878			7,722
Increase (decrease) in interest expense:
NOW, money market & savings deposits	331			2,831			3,162
Time deposits	(136		)	682			546
Securities sold under agreements to repurchase	(10		)	(10		)	(20		)
FHLB advances and other borrowings	(428		)	1,226			798
Subordinated debentures and subordinated notes payable	(26		)	108			82
Total (decrease) increase	(269		)	4,837			4,568
Increase in net interest income (FTE)	$	3,113		$	41		$	3,154

Provision for Loan and Lease Losses

We recognized provision for loan and lease losses of ~~$5.8~~$4.6 million for the ~~third~~first quarter of fiscal year ~~2017~~2018 compared to a provision for loan and lease losses of ~~$5.4~~$7.0 million for the comparable quarter in fiscal year ~~2016, an increase~~2017, a decrease of ~~$0.4~~$2.4 million between the periods, or 7.9%. Provision for loan losses was $16.9 million for the first nine months of fiscal year 2017 compared to $11.9 million for the comparable period in fiscal year 2016, an increase of $5.0 million, or 41.7%35.4%. The ~~increase~~decrease in provision was driven primarily by ~~the higher level of net charge-offs recognized during fiscal year 2017, which was concentrated~~lower specific reserves in the ~~C&I segment~~agriculture and commercial non-real estate segments of the loan portfolio. We recorded a $0.1 million net ~~reduction~~improvement in provision for ASC 310-30 loans ~~of $0.1 million~~ for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to a net ~~reduction~~impairment in provision of ~~$0.4~~$0.1 million for the comparable quarter in fiscal year ~~2016. We recorded a net reduction in provision for ASC 310-30 loans of $1.0 million for the first nine months of fiscal year 2017 and $0.6 million for the comparable period in fiscal year 2016.~~2017.


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Provision for loan and lease losses, non ASC 310-30 loans *	$	5,850		$	5,726		$	17,860		$	12,512		$	4,604		$	6,950
Reduction in provision for loan and lease losses, ASC 310-30 loans	(54		)	(354		)	(1,006		)	(620		)
Provision for (reduction in) loan and lease losses, ASC 310-30 loans													(47		)	99
Provision for loan and lease losses, total	$	5,796		$	5,372		$	16,854		$	11,892		$	4,557		$	7,049

* As presented above, the non ASC 310-30 loan portfolio includes originated loans, other than loans for which we have elected the fair value option, and loans we acquired that we did not determine were acquired with deteriorated credit quality.

47-

Total Credit-Related Charges

~~We recognized other credit-related charges~~In addition to the lower provision for loan losses we incurred during the ~~third~~current fiscal quarter of ~~fiscal year 2017 that were lower~~2018 compared to the same quarter in ~~2016 and were higher in first nine months of~~ 2017, ~~compared to the same period in fiscal year 2016.~~we recognized other credit-related charges. We believe that the following table, which summarizes each component of the total credit-related charges incurred during the current, prior and comparable quarter, ~~and nine month periods,~~ is helpful to understanding the overall impact on our quarterly results of operations. Net ~~OREO~~other repossessed property charges includes ~~OREO~~other repossessed property operating costs, valuation adjustments and (loss) gain on sale of ~~OREO~~other repossessed properties, each of which entered ~~OREO~~other repossessed property as a result of the former borrower failing to perform on a loan obligation. Reversal of interest income on nonaccrual loans occurs when we become aware that a loan, for which we had been recognizing interest income, will no longer be able to perform according to the terms and conditions of the loan agreement, including repayment of interest owed to us, while a recovery of interest income on nonaccrual loans occurs when we receive repayment of interest owed to us. Loan fair value adjustments related to credit relate to the portion of our loan portfolio for which we have elected the fair value option; these amounts reflect expected credit losses in the portfolio.

For the three months ended: For the nine months ended:
Included within F/S Line Item(s): June 30, 2017 March 31, 2017 June 30, 2016 June 30, 2017 June 30, 2016
(Dollars in thousands)
Provision for loan and lease losses Provision for loan and lease losses $ 5,796
$ 4,009
$ 5,372
$ 16,854
$ 11,892
Net OREO charges Net loss on repossessed property and other related expenses 152
397
379
1,208
479
(Recovery) reversal of interest income on nonaccrual loans Interest income on loans 332
(25 ) 1,505
233
1,320
Loan fair value adjustment related to credit Net increase (decrease) in fair value of loans at fair value (293 ) (251 ) 2,722
(4 ) 2,296
Total $ 5,987
$ 4,130
$ 9,978
$ 18,291
$ 15,987

~~59-~~



		For the three months ended:
Item	Included within F/S Line Item(s):	December 31, 2017			December 31, 2016
		(Dollars in thousands)
Provision for loan and lease losses	Provision for loan and lease losses	$	4,557		$	7,049
Net other repossessed property charges	Net loss on repossessed property and other related expenses	214			658
Reversal (recovery) of interest income on nonaccrual loans	Interest income on loans	1,068			(74		)
Loan fair value adjustment related to credit	Net (decrease) increase in fair value of loans at fair value	(1,038		)	539
Total		$	4,801		$	8,172

Noninterest Income

The following table presents noninterest income for the three ~~and nine~~ month periods ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended						Nine Months Ended						Three Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016			December 31, 2017			December 31, 2016
	(dollars in thousands)												(dollars in thousands)
Non-interest income:
Service charges and other fees	$	12,730		$	12,316		$	36,735		$	33,098		$	13,178		$	13,837
Wealth management fees	2,433			1,807			7,116			5,087			2,185			2,254
Mortgage banking income, net	1,828			1,669			6,130			4,143			1,660			2,662
Net gain (loss) on sale of securities	—			134			44			(196		)
Net (loss) on sale of securities													(1		)	—
Other	1,522			898			4,878			2,733			1,090			1,930
Subtotal, product and service fees	18,513			16,824			54,903			44,865			18,112			20,683
Net increase (decrease) in fair value of loans at fair value	6,060			14,198			(63,158		)	35,253
Net (decrease) in fair value of loans at fair value													(8,665		)	(64,001		)
Net realized and unrealized gain on derivatives	(9,088		)	(21,925		)	51,481			(53,379		)	7,227			58,976
Subtotal, loans at fair value and related derivatives	(3,028		)	(7,727		)	(11,677		)	(18,126		)	(1,438		)	(5,025		)
Total noninterest income	$	15,485		$	9,097		$	43,226		$	26,739		$	16,674		$	15,658

Our noninterest income is comprised of the various fees we charge our customers for products and services we provide and the impact of changes in fair value of loans for which we have elected the fair value treatment and realized and unrealized gains (losses) on the related interest rate swaps we utilize to manage interest rate risk on these loans. While we are required under U.S. GAAP to present both components within total noninterest income, we believe it is helpful to analyze the two broader components of noninterest income separately to better understand the underlying performance of the business.

Noninterest income was ~~$15.5~~$16.7 million for the ~~third~~first quarter of fiscal year ~~2017,~~2018, compared to ~~$9.1~~$15.7 million for the comparable quarter in fiscal year ~~2016,~~2017, an increase of ~~$6.4~~$1.0 million, or ~~70.2%~~6.5%. ~~Noninterest income for the first nine months of fiscal year 2017 was $43.2 million, an increase of $16.5 million, or 61.7%, compared to the same period in fiscal year 2016.~~ Significant components of noninterest income are described in further detail below.

Product and Service Fees. We recognized ~~$18.5~~$18.1 million of noninterest income related to product and service fees in the ~~third~~first quarter of fiscal year ~~2017, an increase~~2018, a decrease of ~~$1.7~~$2.6 million, or ~~10.0%~~12.4%, compared to the same quarter in fiscal year ~~2016.~~2017. The ~~increase~~decrease was primarily attributable to a ~~$0.6~~$1.0 million ~~increase~~decrease in ~~wealth management~~mortgage banking income, a ~~$0.6~~$0.8 million ~~increase~~decrease in other income, and a ~~$0.4~~ $0.7

48-

million ~~increase~~decrease in service charges and other fees, which reflected a modest ~~increases in~~decrease primarily driven by the full quarter impact of the "Durbin Amendment" limit on debit card interchange income and commercial deposit charges. Shortly after the end of calendar year 2015, we received regulatory approval to revert to higher interchange rates as a result of maintaining consolidated total assets under $10 billion as of December 31, 2015. We had previously been subject to capped interchange rates as a result of consolidating our total assets with other U.S. assets held by our former foreign parent company. Management estimates that ~~the impact of recording higher debit card interchange income (i.e., "Durbin Amendment") was $2.6 million for the third quarter of fiscal year~~became effective in July 2017. ~~The higher allowable interchange rates were effective through June 30, 2017 and management expects lower interchange income in the quarter ending September 30, 2017.~~

Noninterest income related to product and service fees was $54.9 million for the first nine months of fiscal year 2017 compared to $44.9 million for the same period in fiscal year 2016, an increase of $10.0 million, or 22.4%. The increase was partly driven by a $3.6 million increase in service charges and other fees due to increased debit interchange income of $3.6 million. Net mortgage banking income increased by $2.0 million, wealth management income increased by $2.0 million and other income increased by $2.1 million.

Loans at fair value and related derivatives. As discussed in "—Analysis of Financial Condition—Derivatives," changes in the fair value of loans for which we have elected the fair value treatment and realized and unrealized gains and losses on the related derivatives are recognized within noninterest income. For the ~~third~~first quarter of fiscal year ~~2017,~~2018, these items accounted for ~~$(3.0)~~$(1.4) million of noninterest income compared to ~~$(7.7)~~$(5.0) million for the same quarter in fiscal year ~~2016.~~2017. The change was driven by a net favorable change in the credit adjustment of ~~$3.0~~$1.6 million ~~and~~combined with a ~~$1.7~~$2.0 million reduction in the current cost of interest rate swaps driven by changes in the interest rate environment. For the first nine months of fiscal year 2017, these items accounted for $(11.7) million of noninterest income compared to $(18.1) million for the same period in fiscal year 2016. The change was driven by a net favorable $2.3 million change in the credit adjustment combined with a $4.1 million reduction in the current cost of interest rate swaps driven by

~~60-~~

changes in the interest rate environment. We believe that the current realized loss on the derivatives economically offsets the interest income earned on the related loans; we present elsewhere the adjusted net interest income and adjusted net interest margin reflecting the metrics we use to manage the business.

Noninterest Expense

The following table presents noninterest expense for the three ~~and nine~~ month periods ended ~~June 30,~~December 31, 2017 and 2016:


	Three Months Ended				Nine Months Ended				Three Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		December 31, 2017		December 31, 2016
	(dollars in thousands)								(dollars in thousands)
Noninterest expense:
Salaries and employee benefits	$	32,868	$	28,352	$	96,872	$	78,417	$	32,868	$	31,634
Data processing	6,378		5,625		18,020		15,822		5,896		5,677
Occupancy expenses	4,057		4,002		12,437		11,436		4,002		4,024
Professional fees	4,141		3,327		10,535		9,087		4,240		2,835
Communication expenses	992		788		2,945		2,650		988		1,040
Advertising	1,059		1,047		3,029		3,015		1,059		975
Equipment expense	809		959		2,375		2,794		846		798
Net loss recognized on repossessed property and other related expenses	152		379		1,208		479		214		658
Amortization of core deposits and other intangibles	538		822		1,927		2,239		426		839
Acquisition expenses	—		12,179		710		12,950		—		710
Other	3,928		3,742		11,254		11,408		4,329		3,347
Total noninterest expense	$	54,922	$	61,222	$	161,312	$	150,297	$	54,868	$	52,537

Our noninterest expense consists primarily of salaries and employee benefits, data processing, occupancy expenses, professional fees, communication expenses, advertising and acquisition expenses. Noninterest expense was $54.9 million in the ~~third~~first quarter of fiscal year ~~2017~~2018 compared to ~~$61.2~~$52.5 million for the same quarter in fiscal year ~~2016, a decrease~~2017, an increase of ~~10.3%~~$2.3 million, or ~~$6.3 million.~~4.4%. Included in noninterest expense for the ~~third~~first quarter of fiscal year ~~2016~~2017 was ~~$12.2~~$0.7 million of non-recurring acquisitions expenses; absent this reduction, total noninterest expense increased by ~~$5.9~~$3.0 million, or ~~12.0%~~5.9%, over the same period. ~~The majority of the~~This increase was primarily attributable to a $1.4 million increase in professional fees primarily driven by an increase in our FDIC assessment, a ~~$4.5~~$1.2 million increase in salaries and employee benefits ~~which includes additional roles added to meet regulatory~~ and ~~risk management expectations, higher long-term incentive compensation and higher cost of employee benefits, which is primarily related to health insurance. Data processing costs increased by $0.8~~a $1.0 million ~~driven by amortization of recent technology investments, and professional fees increased by $0.8 million, including higher legal and insurance costs.~~

Noninterest expense was $161.3 million for the first nine months of fiscal year 2017 compared to $150.3 million for the same period in fiscal year 2016, an increase of $11.0 million, or 7.3%. Included in noninterest expense was $0.7 million and $12.9 million of non-recurring acquisition expenses for the first nine months of fiscal year 2017 and 2016, respectively. Absent these non-recurring expenses, total noninterest expense increased $23.3 million, or 16.9%. The increase was primarily driven by an increase in ~~salaries and employee benefits~~other expenses, partially offset by a decrease of ~~$18.5 million, an increase in data processing of $2.2 million, an increase in professional fees of $1.4 million and an increase of $1.0~~$0.4 million in ~~occupancy~~net loss recognized on repossessed property and other related expenses.

Our efficiency ratio was ~~46.7%~~45.8% and ~~58.8%~~45.1% for the three month periods ending ~~June 30,~~December 31, 2017 and 2016, respectively and 46.3% and 50.0%, respectively, for the nine month periods ending June 30, 2017 and 2016. The elevated efficiency ratios of the comparable prior periods were due almost entirely to non-recurring acquisition expenses.respectively. For more information on our efficiency ratio, including a reconciliation to the most directly comparable GAAP financial measures, see "—Non-GAAP Financial Measures" section.

Provision for Income Taxes

The provision for income taxes varies due to the amount of taxable income, the level and effectiveness of tax-advantaged assets and tax credit funds and the rates charged by federal and state authorities. The provision for income taxes of ~~$18.4~~$28.6 million for the ~~third~~first quarter of fiscal year ~~2017~~2018 represents an effective tax rate of ~~34.5%~~49.5%, compared to a provision of ~~$7.8~~$16.1 million or an effective tax rate of ~~22.8%~~30.3% for the comparable quarter. ~~The lower~~Excluding the deferred taxes revaluation as a result of the Tax Reform Act of 2017, the effective tax rate ~~for~~was 26.0%. For more information on the ~~third quarter~~impact of ~~fiscal year 2016 included a non-recurring benefit~~the deferred taxes adjustment, see "—Overview, Impact of ~~$3.7 million relating to a correction~~the Tax Cuts and Jobs Act of ~~an immaterial error of a deferred tax item from an acquisition in 2008. The~~2017" section.

~~61-~~49-

provision for income taxes of $52.7 million for the first nine months of fiscal year 2017 represents an effective tax rate of 33.0%, compared to a provision of $41.0 million or an effective tax rate of 31.9% for the comparable period in fiscal year 2016.

Return on Assets and Equity

The table below presents our return on average total assets, return on average common equity and average common equity to average assets ratio for the dates presented:


	Three Months Ended				Nine Months Ended				Three Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016		December 31, 2017		December 31, 2016
Return on average total assets	1.25	%	1.00	%	1.26	%	1.16	%	1.00	%	1.28	%
Return on average common equity	8.2	%	6.8	%	8.5	%	7.8	%	6.6	%	8.8	%
Average common equity to average assets ratio	15.2	%	14.8	%	14.9	%	14.9	%	15.2	%	14.6	%

Excluding the revaluation of our deferred taxes, return on average total assets and return on average common equity would have been 1.47% and 9.6%, respectively, for the three months ended December 31, 2017.

Analysis of Financial Condition

The following table highlights certain key financial and performance information as of the dates indicated:


	As of						As of
	June 30, 2017			September 30, 2016			December 31, 2017			September 30, 2017
	(dollars in thousands)						(dollars in thousands)
Balance Sheet and Other Information:
Total assets	$	11,466,184		$	11,531,180		$	11,806,581		$	11,690,011
Loans ¹	8,791,852			8,682,644			9,165,373			8,968,553
Allowance for loan and lease losses	64,214			64,642			64,023			63,503
Deposits	8,959,102			8,604,790			9,024,185			8,977,613
Stockholders' equity	1,732,983			1,663,391			1,767,873			1,755,000
Tangible common equity ²	984,155			912,636			1,019,902			1,006,603
Tier 1 capital ratio	11.5		%	11.1		%	11.3		%	11.4		%
Total capital ratio	12.6		%	12.2		%	12.3		%	12.5		%
Tier 1 leverage ratio	10.3		%	9.5		%	10.3		%	10.3		%
Common equity tier 1 ratio	10.7		%	10.2		%	10.5		%	10.7		%
Tangible common equity / tangible assets ²	9.2		%	8.5		%	9.2		%	9.2		%
Book value per share - GAAP	$	29.49		$	28.34		$	30.02		$	29.83
Tangible book value per share ²	$	16.75		$	15.55		$	17.32		$	17.11
Nonaccrual loans / total loans	1.41		%	1.46		%	1.61		%	1.54		%
Net charge-offs (recoveries) / average total loans³	0.27		%	0.12		%	0.18		%	0.26		%
Allowance for loan and lease losses / total loans	0.73		%	0.74		%	0.70		%	0.71		%

¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.	¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.						¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
²This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.	²This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.						²This is a non-GAAP financial measure we believe is helpful to interpreting our financial results. For more information on this non-GAAP financial measure, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.
³ Annualized for partial-year periods, except for September 30, 2016, which was for the twelve month period.
³ Annualized for partial-year periods, except for September 30, 2017, which was for the twelve month period.							³ Annualized for partial-year periods, except for September 30, 2017, which was for the twelve month period.

Our total assets were ~~$11.47~~$11.81 billion at ~~June 30,~~December 31, 2017, compared with ~~$11.53~~$11.69 billion at September 30, ~~2016.~~2017. The ~~decrease~~increase in total assets during the first ~~nine~~three months of fiscal year ~~2017~~2018 was principally attributable to an increase in net loans of $196.3 million since September 30, 2017, partially offset by a decrease in cash and cash equivalents of ~~$196.7 million since September 30, 2016, partially offset by an increase in net loans of $109.6~~$62.8 million for the same period. At ~~June 30,~~December 31, 2017, loans were ~~$8.79~~$9.17 billion, compared to ~~$8.68~~$8.97 billion at September 30, ~~2016. This~~2017. Net loan growth was primarily driven by growth in CRE and ~~C&I~~agriculture segments of the loan portfolio, offset by ~~reductions~~a reduction in ~~agriculture and residential real~~commercial non-real estate loans. During the first ~~nine months~~quarter of fiscal year ~~2017,~~2018, total deposits grew by ~~$354.3~~$46.6 million, or ~~4.1%~~0.5%. ~~Deposit~~The growth was driven by ~~$35.0~~a $76.0 million ofincrease in noninterest-bearing ~~deposit growth and $319.3~~deposits, partially offset by a $29.4 million ofreduction in interest-bearing ~~deposit growth,~~deposits, which is net of continued outflows of time deposits.

~~62-~~50-

Loan Portfolio

The following table presents our loan portfolio by category at each of the dates indicated:

June 30, 2017 September 30, 2016
(dollars in thousands)
Unpaid principal balance:
Commercial non-real estate ¹

Originated $ 1,655,832
$ 1,601,328
Acquired 59,798
71,838
Total 1,715,630
1,673,166
Agriculture¹

Originated 1,949,817
1,974,226
Acquired 137,296
194,711
Total 2,087,113
2,168,937
Commercial real estate ¹

Originated 3,438,550
3,171,516
Acquired 527,049
582,591
Total 3,965,599
3,754,107
Residential real estate
Originated 731,332
746,384
Acquired 222,008
274,574
Total 953,340
1,020,958
Consumer
Originated 58,662
59,850
Acquired 11,366
16,423
Total 70,028
76,273
Other lending
Originated 44,037
42,398
Acquired 74
79
Total 44,111
42,477
Total originated 7,878,230
7,595,702
Total acquired 957,591
1,140,216
Total unpaid principal balance 8,835,821
8,735,918
Less: Unamortized discount on acquired loans (33,135 ) (39,947 )
Less: Unearned net deferred fees and costs and loans in process (10,834 ) (13,327 )
Total loans 8,791,852
8,682,644
Allowance for loan and lease losses (64,214 ) (64,642 )
Loans, net $ 8,727,638
$ 8,618,002

¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to hedge our interest rate risk.

We have successfully completed nine acquisitions since 2006. Our most recent acquisition of HF Financial, which represented approximately $863.7 million in acquired loans, was completed on May 16, 2016.



	December 31, 2017			September 30, 2017
	(dollars in thousands)
Unpaid principal balance:
Commercial real estate ¹
Originated	$	3,824,110		$	3,628,235
Acquired	471,586			496,570
Total	4,295,696			4,124,805
Agriculture¹
Originated	2,055,784			1,990,648
Acquired	121,599			131,490
Total	2,177,383			2,122,138
Commercial non-real estate ¹
Originated	1,652,168			1,670,349
Acquired	43,563			48,565
Total	1,695,731			1,718,914
Residential real estate
Originated	731,517			724,906
Acquired	192,922			207,986
Total	924,439			932,892
Consumer
Originated	53,698			56,467
Acquired	9,174			10,092
Total	62,872			66,559
Other lending
Originated	45,737			43,132
Acquired	68			75
Total	45,805			43,207
Total originated	8,363,014			8,113,737
Total acquired	838,912			894,778
Total unpaid principal balance	9,201,926			9,008,515
Less: Unamortized discount on acquired loans	(26,536		)	(29,121		)
Less: Unearned net deferred fees and costs and loans in process	(10,017		)	(10,841		)
Total loans	9,165,373			8,968,553
Allowance for loan and lease losses	(64,023		)	(63,503		)
Loans, net	$	9,101,350		$	8,905,050

¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to hedge our interest rate risk.

During the first ~~nine months~~quarter of fiscal year ~~2017,~~2018, total loans increased by ~~1.3%~~2.2%, or ~~$109.2~~$196.8 million. The growth was primarily focused in CRE and ~~C&I~~agriculture segments of the loan portfolio, which grew ~~$211.5~~$170.9 million and ~~$42.5~~$55.2 million, respectively, offset by ~~reductions~~a reduction of ~~$81.8~~$23.2 million in ~~agriculture loans and $67.6 million in~~commercial non-real estate loans. Over the same time period, residential real estate, ~~loans.~~consumer and other loan balances remained generally stable.

~~63-~~51-

The following table presents an analysis of the unpaid principal balance of our loan portfolio at ~~June 30,~~December 31, 2017, by borrower and collateral type and by each of the ~~five~~six major geographic areas we use to manage our markets.


	June 30, 2017																							December 31, 2017
	Nebraska			Iowa / Kansas / Missouri			South Dakota			Arizona / Colorado			North Dakota / Minnesota			Other⁽²⁾			Total			%		South Dakota			Iowa / Kansas / Missouri			Nebraska			Arizona			Colorado			North Dakota / Minnesota			Other⁽²⁾			Total			%
	(dollars in thousands)																							(dollars in thousands)
Commercial real estate ¹																								$	1,048,217		$	1,093,977		$	823,487		$	447,780		$	669,144		$	203,797		$	9,294		$	4,295,696		46.7	%
Agriculture ¹																								677,224			422,709			166,876			733,246			177,045			3,313			(3,030		)	2,177,383			23.7	%
Commercial non-real estate ¹	$	327,702		$	835,860		$	307,020		$	190,802		$	8,362		$	45,884		$	1,715,630		19.4	%	269,197			829,648			355,848			73,320			120,453			8,714			38,551			1,695,731			18.4	%
Agriculture ¹	150,571			424,131			724,730			785,336			3,384			(1,039		)	2,087,113			23.6	%
Commercial real estate ¹	766,489			1,000,876			986,608			986,375			208,008			17,243			3,965,599			44.9	%
Residential real estate	208,513			275,864			241,898			175,006			16,766			35,293			953,340			10.8	%	224,912			277,580			196,380			23,106			154,553			18,898			29,010			924,439			10.0	%
Consumer	14,696			24,211			27,079			2,341			698			1,003			70,028			0.8	%	24,288			20,394			14,461			893			1,277			694			865			62,872			0.7	%
Other lending	—			—			—			—			—			44,111			44,111			0.5	%	—			—			—			—			—			—			45,805			45,805			0.5	%
Total	$	1,467,971		$	2,560,942		$	2,287,335		$	2,139,860		$	237,218		$	142,495		$	8,835,821		100.0	%	$	2,243,838		$	2,644,308		$	1,557,052		$	1,278,345		$	1,122,472		$	235,416		$	120,495		$	9,201,926		100.0	%
% by location	16.6		%	29.0		%	25.9		%	24.2		%	2.7		%	1.6		%	100.0		%			24.4		%	28.7		%	16.9		%	13.9		%	12.2		%	2.6		%	1.3		%	100.0		%

¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to hedge our interest rate risk.	¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to hedge our interest rate risk.																							¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to hedge our interest rate risk.
²Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.	²Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.																							²Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.

The following table presents additional detail regarding our agriculture, CRE and residential real estate loans at ~~June 30,~~December 31, 2017:


	June 30, 2017		December 31, 2017
	(dollars in thousands)		(dollars in thousands)
Commercial non-real estate	$	1,715,630
Agriculture real estate	991,163
Agriculture operating loans	1,095,950
Agriculture	2,087,113
Construction and development	490,025		$	622,985
Owner-occupied CRE	1,232,488		1,317,585
Non-owner-occupied CRE	1,881,726		2,035,987
Multifamily residential real estate	361,360		319,139
Commercial real estate	3,965,599		4,295,696
Agriculture real estate			994,069
Agriculture operating loans			1,183,314
Agriculture			2,177,383
Commercial non-real estate			1,695,731
Home equity lines of credit	318,753		286,328
Closed-end first lien	473,011		461,499
Closed-end junior lien	39,400		38,278
Residential construction	122,176		138,334
Residential real estate	953,340		924,439
Consumer	70,028		62,872
Other	44,111		45,805
Total unpaid principal balance	$	8,835,821	$	9,201,926

Commercial Real Estate. CRE includes owner-occupied CRE, non-owner-occupied CRE, construction and development lending, and multi-family residential real estate. While CRE lending will remain a significant component of our overall loan portfolio, we are committed to managing our exposure to riskier construction and development lending specifically, and to CRE lending in general, by targeting relationships with sound management and financials which are priced to reflect the amount of risk we accept as the lender.

Agriculture. Agriculture loans include farm operating loans and loans collateralized by farm land. According to the American Banker's Association, at September 30, 2017, we were ranked the sixth-largest farm lender bank in the United States measured by total dollar volume of farm loans. We consider agriculture lending one of our core competencies. We target a 20% to 30% portfolio composition for agriculture loans according to our Risk Appetite Statement approved by our Board of Directors. Within our agriculture portfolio, loans are diversified across a wide range of subsectors with the majority of the portfolio concentrated within various types of grain, livestock and dairy products, and across different geographical segments within our footprint. While our borrowers have experienced volatile commodity prices over recent years, we believe there continues to typically be strong secondary

52-

sources of repayment and low borrower leverage for the agriculture loan portfolio. Continued pressure on commodity prices or a further downturn in the agriculture economy could directly and adversely affect our agricultural loan portfolio and indirectly and adversely impact other lending categories including commercial non-real estate, CRE, residential real estate and consumer.

Commercial Non-Real Estate. Commercial non-real estate, or business lending, represents one of our core competencies. We believe that providing a tailored range of integrated products and services, including lending, to small- and medium-enterprise customers is the business at which we excel and through which we can generate favorable returns for our stockholders. We offer a number of different products including working capital and other shorter-term lines of credit, fixed-rate loans and variable rate loans with interest rate swaps over a wide range of terms, and variable-rate loans with varying terms. Our bank's direct exposure to energy-related borrowers is less than ~~1.2%~~1.4% of total loans.

~~Agriculture.~~ Agriculture loans include farm operating loans and loans collateralized by farm land. According to the American Banker's Association, at March 31, 2017, we were ranked the sixth-largest farm lender bank in the United States measured by total

~~64-~~

dollar volume of farm loans. We consider agriculture lending one of our core competencies. We target a 20% to 30% portfolio composition for agriculture loans according to our Risk Appetite Statement approved by our Board of Directors. Within our agriculture portfolio, loans are diversified across a wide range of subsectors with the majority of the portfolio concentrated within various types of grain, livestock and dairy products, and across different geographical segments within our footprint. While our borrowers have experienced volatile commodity prices over recent years, we believe there continues to typically be strong secondary sources of repayment and low borrower leverage for the agriculture loan portfolio. Continued pressure on the commodity prices or a further downturn in the agriculture economy could indirectly and adversely impact other lending categories including C&I, CRE, residential real estate and consumer.

~~Commercial Real Estate.~~ CRE includes owner-occupied CRE, non-owner-occupied CRE, construction and development lending, and multi-family residential real estate. While CRE lending will remain a significant component of our overall loan portfolio, we are committed to managing our exposure to riskier construction and development lending specifically, and to CRE lending in general, by targeting relationships with sound management and financials which are priced to reflect the amount of risk we accept as the lender.

Residential Real Estate. Residential real estate lending reflects 1-to-4-family real estate construction loans, closed-end first-lien mortgages (primarily single-family long-term first mortgages resulting from acquisitions of other banks), closed-end junior-lien mortgages and home equity lines of credit, or HELOCs. Our closed-end first-lien mortgages include a small percentage of single-family first mortgages that we originate and do not subsequently sell into the secondary market, including some jumbo products, adjustable-rate mortgages and rural home mortgages. Conversely, a large percentage of our total single-family first mortgage originations are sold into the secondary market in order to meet our interest rate risk management objectives.

Consumer. Our consumer lending offering comprises a relatively small portion of our total loan portfolio, and predominantly reflects small-balance secured and unsecured products marketed by our retail branches.

Other Lending. Other lending includes all other loan relationships that do not fit within the categories above, primarily consumer and commercial credit cards, customer deposit account overdrafts, and lease receivables.

The following table presents the maturity distribution of our loan portfolio as of ~~June 30,~~December 31, 2017. The maturity dates were determined based on the contractual maturity date of the loan:


	1 Year or Less		>1 Through 5 Years		>5 Years		Total		1 Year or Less		>1 Through 5 Years		>5 Years		Total
	(dollars in thousands)								(dollars in thousands)
Maturity distribution:
Commercial real estate									$	406,956	$	1,922,674	$	1,966,066	$	4,295,696
Agriculture									1,089,887		697,437		390,059		2,177,383
Commercial non-real estate	$	654,691	$	583,707	$	477,232	$	1,715,630	731,008		503,767		460,956		1,695,731
Agriculture	988,485		717,800		380,828		2,087,113
Commercial real estate	327,971		1,772,383		1,865,245		3,965,599
Residential real estate	224,329		340,676		388,335		953,340		232,965		317,212		374,262		924,439
Consumer	9,454		48,065		12,509		70,028		10,257		42,043		10,572		62,872
Other lending	44,111		—		—		44,111		45,805		—		—		45,805
Total	$	2,249,041	$	3,462,631	$	3,124,149	$	8,835,821	$	2,516,878	$	3,483,133	$	3,201,915	$	9,201,926

The following table presents the distribution, as of ~~June 30,~~December 31, 2017, of our loans that were due after one year between fixed and variable interest rates:


	Fixed		Variable		Total		Fixed		Variable		Total
	(dollars in thousands)						(dollars in thousands)
Maturity distribution:
Commercial real estate							$	1,986,802	$	1,901,938	$	3,888,740
Agriculture							839,307		248,189		1,087,496
Commercial non-real estate	$	658,463	$	402,476	$	1,060,939	595,977		368,746		964,723
Agriculture	867,464		231,164		1,098,628
Commercial real estate	1,826,478		1,811,150		3,637,628
Residential real estate	222,404		506,607		729,011		215,908		475,566		691,474
Consumer	46,103		14,471		60,574		42,432		10,183		52,615
Total	$	3,620,912	$	2,965,868	$	6,586,780	$	3,680,426	$	3,004,622	$	6,685,048

~~65-~~53-

~~OREO~~Other Repossessed Property

In the normal course of business, we obtain title to parcels of real estate and other assets when borrowers are unable to meet their contractual obligations and we initiate foreclosure proceedings, or via deed in lieu of foreclosure actions. ~~OREO~~Other repossessed property assets are considered nonperforming assets. When we obtain title to an asset, we evaluate how best to maintain and protect our interest in the property and seek to liquidate the asset at an acceptable price in a timely manner. Our total ~~OREO~~other repossessed property carrying value was ~~$9.1~~$10.5 million as of ~~June 30,~~December 31, 2017, ~~a decrease~~an increase of ~~$1.2~~$1.5 million, or ~~12.0%~~16.7%, compared to September 30, ~~2016.~~2017. The following table presents our ~~OREO~~other repossessed property balances for the period indicated:


	Three Months Ended June 30, 2017		Nine Months Ended June 30, 2017		Three Months Ended December 31, 2017
	(dollars in thousands)				(dollars in thousands)
Beginning balance	$	6,994	$	10,282	$	8,985
Additions to OREO	2,961		4,182
Additions to other repossessed property					3,671
Valuation adjustments and other	(110)		(983)		(13)
Sales	(794)		(4,430)		(2,157)
Ending balance	$	9,051	$	9,051	$	10,486

Investments

The following table presents the amortized cost of each category of our investment portfolio at the dates indicated:


	June 30, 2017		September 30, 2016		December 31, 2017		September 30, 2017
	(dollars in thousands)				(dollars in thousands)
U.S. Treasury securities	$	227,779	$	227,007	$	228,302	$	228,039
Mortgage-backed securities:
Government National Mortgage Association	546,454		664,529		481,441		511,457
Federal Home Loan Mortgage Corporation					203,561		169,147
Federal National Mortgage Association	319,848		212,452		161,958		170,247
Small Business Assistance Program	207,160		142,921		237,965		224,005
States and political subdivision securities	73,048		55,525		70,034		73,041
Corporate debt securities	—		4,998
Other	1,013		1,013		1,006		1,006
Total	$	1,375,302	$	1,308,445	$	1,384,267	$	1,376,942

We have historically invested excess deposits in high-quality, liquid investment securities including residential agency mortgage-backed securities and, to a lesser extent, U.S. Treasury securities, corporate debt securities and securities issued by U.S. states and political subdivisions. Our investment portfolio serves as a means to collateralize FHLB borrowings and public funds deposits, to earn net spread income on excess deposits and to maintain liquidity and balance interest rate risk. Since September 30, ~~2016,~~2017, the fair value of the portfolio has ~~increased~~decreased by ~~$49.1~~$1.3 million, or ~~3.7%~~0.1%.

The following table presents the aggregate amortized cost of each investment category of the investment portfolio and the weighted average yield for each investment category for each maturity period held at ~~June 30,~~December 31, 2017. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. The weighted-average yield ("WA Yield") on these assets is presented below based on the contractual rate, as opposed to a tax equivalent yield concept.


	June 30, 2017																												December 31, 2017
	Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Mortgage-backed securities				Securities without contractual maturities				Total				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Mortgage-backed securities				Securities without contractual maturities				Total
	Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield
	(dollars in thousands)																												(dollars in thousands)
U.S. Treasury securities	$	49,846	1.35	%	$	177,933	1.62	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	227,779	1.56	%	$	84,927	1.39	%	$	143,375	1.66	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	228,302	1.56	%
Mortgage-backed securities	—		—	%	—		—	%	—		—	%	—		—	%	1,073,462		1.99	%	—		—	%	1,073,462		1.99	%	—		—	%	—		—	%	—		—	%	—		—	%	1,084,925		2.06	%	—		—	%	1,084,925		2.06	%
States and political subdivision securities	6,176		1.31	%	49,471		1.45	%	17,279		1.87	%	122		5.00	%	—		—	%	—		—	%	73,048		1.54	%	8,624		1.40	%	45,753		1.49	%	15,535		1.84	%	122		5.00	%	—		—	%	—		—	%	70,034		1.56	%
Other	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	1,013		—	%	1,013		—	%	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	1,006		—	%	1,006		—	%
Total	$	56,022	1.34	%	$	227,404	1.58	%	$	17,279	1.87	%	$	122	5.00	%	$	1,073,462	1.99	%	$	1,013	—	%	$	1,375,302	1.89	%	$	93,551	1.39	%	$	189,128	1.62	%	$	15,535	1.84	%	$	122	5.00	%	$	1,084,925	2.06	%	$	1,006	—	%	$	1,384,267	1.95	%

~~66-~~54-

Asset Quality

We place an asset on nonaccrual status when any installment of principal or interest is more than 90 days past due or earlier when management determines the ultimate collection of all contractually due principal or interest to be unlikely. Restructured loans for which we grant payment or significant interest rate concessions are placed on nonaccrual status until collectability improves and a satisfactory payment history is established, generally by the receipt of at least six consecutive payments. Our collection policies related to delinquent and charged-off loans are highly focused on individual relationships, and we believe that these policies are in compliance with all applicable laws and regulations.

The following table presents the dollar amount of nonaccrual loans, ~~OREO,~~other repossessed property, restructured performing loans and accruing loans over 90 days past due, at the end of the dates indicated. Loans covered by FDIC loss-sharing agreements are generally pooled with other similar loans and are accreting purchase discount into income each period. Subject to compliance with the applicable loss-sharing agreement, we are indemnified by the FDIC at a rate of 80% for any future credit losses on loans covered by a FDIC loss-sharing agreement through June 4, 2020 for single-family real estate loans.


	June 30, 2017			September 30, 2016			December 31, 2017			September 30, 2017
	(dollars in thousands)						(dollars in thousands)
Nonaccrual loans ¹
Commercial real estate ³							$	33,939		$	14,912
Agriculture ³							92,262			100,504
Commercial non-real estate ³	$	23,920		$	27,307		13,016			13,674
Agriculture ³	74,960			68,526
Commercial real estate ³	14,129			20,624
Residential real estate
Loans covered by FDIC loss-sharing agreements	5,034			4,095			4,131			4,893
Loans not covered by FDIC loss-sharing agreements	5,373			5,599			3,810			4,206
Total	10,407			9,694			7,941			9,099
Consumer ³	225			244			167			123
Other lending ³	—			—			—			—
Total nonaccrual loans covered by FDIC loss-sharing agreements	5,034			4,095			4,131			4,893
Total nonaccrual loans not covered by FDIC loss-sharing agreements	118,607			122,300			143,194			133,419
Total nonaccrual loans	123,641			126,395			147,325			138,312
OREO	9,051			10,282
Other repossessed property							10,486			8,985
Total nonperforming assets	132,692			136,677			157,811			147,297
Restructured performing loans	49,581			46,568			32,352			32,490
Total nonperforming and restructured assets	$	182,273		$	183,245		$	190,163		$	179,787

Accruing loans 90 days or more past due	$	423		$	1,991		$	157		$	1,859
Nonperforming restructured loans included in total nonaccrual loans	$	46,403		$	36,778		$	64,025		$	71,334

Percent of total assets
Nonaccrual loans ¹
Loans not covered by FDIC loss-sharing agreements	1.03		%	1.06		%	1.21		%	1.14		%
Total	1.08		%	1.10		%	1.25		%	1.18		%
OREO	0.08		%	0.09		%
Other repossessed property							0.09		%	0.08		%
Nonperforming assets²	1.16		%	1.19		%	1.34		%	1.26		%
Nonperforming and restructured assets²	1.59		%	1.59		%	1.61		%	1.54		%

¹ Includes nonperforming restructured loans	¹ Includes nonperforming restructured loans						¹ Includes nonperforming restructured loans
²Includes nonaccrual loans, which includes nonperforming restructured loans.	²Includes nonaccrual loans, which includes nonperforming restructured loans.						²Includes nonaccrual loans, which includes nonperforming restructured loans.
³Loans not covered by FDIC loss-sharing agreements	³Loans not covered by FDIC loss-sharing agreements						³Loans not covered by FDIC loss-sharing agreements

At ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, our nonperforming assets were ~~1.16%~~1.34% and ~~1.19%~~1.26%, respectively, of total assets. Nonaccrual loans were ~~$123.6~~$147.3 million as of ~~June 30,~~December 31, 2017, with ~~$5.0~~$4.1 million of the balance covered by FDIC loss-sharing ~~agreements. Total~~agreements, which represented a total increase in nonaccrual loans ~~decreased by $2.8 million compared to September 30, 2016. Total OREO balances were $9.1 million as~~ of ~~June 30, 2017, a decrease of $1.2~~$9.0 million, or ~~12.0%~~6.5%, compared to September 30, ~~2016.~~2017. Total other repossessed property balances were $10.5 million as of December 31, 2017, an increase of $1.5 million, or 16.7%, compared to September 30, 2017.

~~67-~~55-

We recognized approximately ~~$0.7~~$0.2 million of interest income on loans that were on nonaccrual for the ~~nine month period ended June 30, 2017.~~first quarter of fiscal year 2018. Excluding loans covered by FDIC loss-sharing agreements, we had average nonaccrual loans (calculated as a two-point average) of ~~$120.5~~$138.3 million outstanding during the first ~~nine months~~quarter of fiscal year ~~2017.~~2018. Based on the average loan portfolio yield for these loans for the first ~~nine months~~quarter of fiscal year ~~2017,~~2018, we estimate that interest income would have been ~~$4.3~~$1.7 million higher during this period had these loans been accruing.

We consistently monitor all loans internally rated “watch” or worse because that rating indicates we have identified some potential weakness emerging; but loans rated “watch” will not necessarily become problem loans or become impaired. Aside from the loans on the watch list, we do not believe we have any potential problem loans that are not already identified as nonaccrual, past due or restructured as it is our policy to promptly reclassify loans as soon as we become aware of doubts as to the borrowers’ ability to meet repayment terms.

When we grant concessions to borrowers that we would not otherwise grant if not for the borrowers’ financial difficulties, such as reduced interest rates or extensions of loan periods, we consider these modifications troubled debt restructurings ("TDRs").

The table below outlines total TDRs, split between performing and nonperforming loans, at each of the dates indicated:


	June 30, 2017		September 30, 2016		December 31, 2017		September 30, 2017
	(dollars in thousands)				(dollars in thousands)
Commercial non-real estate
Commercial real estate
Performing TDRs	$	7,430	$	8,102	$	621	$	1,121
Nonperforming TDRs	1,710		4,789		4,859		5,351
Total	9,140		12,891		5,480		6,472
Agriculture
Performing TDRs	36,376		19,823		23,178		22,678
Nonperforming TDRs	41,902		28,688		54,401		59,633
Total	78,278		48,511		77,579		82,311
Commercial real estate
Commercial non-real estate
Performing TDRs	5,451		18,250		8,284		8,369
Nonperforming TDRs	2,168		2,356		3,957		5,641
Total	7,619		20,606		12,241		14,010
Residential real estate
Performing TDRs	320		370		258		311
Nonperforming TDRs	594		937		808		688
Total	914		1,307		1,066		999
Consumer
Performing TDRs	4		23		11		11
Nonperforming TDRs	29		8		—		21
Total	33		31		11		32
Total performing TDRs	49,581		46,568		32,352		32,490
Total nonperforming TDRs	46,403		36,778		64,025		71,334
Total TDRs	$	95,984	$	83,346	$	96,377	$	103,824

As of ~~June 30,~~December 31, 2017, total performing TDRs ~~increased $3.0~~decreased $0.1 million, or ~~6.5%~~0.4%, compared to September 30, ~~2016.~~2017. Total nonperforming TDRs ~~increased $9.6~~decreased $7.3 million, or ~~26.2%~~10.2%, compared to September 30, ~~2016~~2017 due mainly to partial charge offs on two relationships and a substantial paydown from one relationship in our agriculture ~~portfolio.~~

portfolio during the quarter.

We entered into loss-sharing agreements with the FDIC related to certain assets (loans and ~~OREO)~~other repossessed property) acquired from TierOne Bank on June 4, 2010. We are generally indemnified by the FDIC at a rate of 80% for any future credit losses through June 4, 2020 for single-family real estate loans and ~~OREO.~~other repossessed property. Our commercial loss-sharing agreement with the FDIC has expired.

56-

The table below presents nonaccrual loans, TDRs, and ~~OREO~~other repossessed property covered by the remaining loss-sharing agreement; a rollforward of the allowance for loan and lease losses for loans covered by the remaining loss-sharing agreement; a rollforward of allowance for loan and lease losses

~~68-~~

for ASC 310-30 loans covered by the remaining loss-sharing agreement; and a rollforward of ~~OREO~~other repossessed property covered by the remaining loss-sharing agreement at and for the periods presented.


	At and for the nine months ended June 30, 2017			At and for the fiscal year ended September 30, 2016			At and for the three months ended December 31, 2017			At and for the fiscal year ended September 30, 2017
	(dollars in thousands)						(dollars in thousands)
Assets covered by FDIC loss-sharing agreements
Nonaccrual loans ¹	$	5,034		$	4,095		$	4,131		$	4,893
TDRs	201			255			182			191
OREO	—			106
Other repossessed property							86			—
Allowance for loan and lease losses, loans covered by FDIC loss-sharing agreements
Balance at beginning of period	$	907		$	1,625		$	196		$	907
Additional impairment recorded							52			196
Recoupment of previously-recorded impairment	(892		)	(677		)	(90		)	(892		)
Charge-offs	(15		)	(41		)	(60		)	(15		)
Balance at end of period	$	—		$	907		$	98		$	196

OREO covered by loss-sharing arrangement
Other repossessed property covered by loss-sharing arrangement
Balance at beginning of period	$	106		$	61		$	—		$	106
Additions to OREO	14			182
Valuation adjustments and other	—			(15		)
Additions to other repossessed property							86			14
Sales	(120		)	(122		)	—			(120		)
Balance at end of period	$	—		$	106		$	86		$	—

¹Includes nonperforming restructured loans.	¹Includes nonperforming restructured loans.						¹Includes nonperforming restructured loans.

Allowance for Loan and Lease Losses

We establish an allowance for the inherent risk of probable losses within our loan portfolio. The allowance for loan and lease losses is management’s best estimate of probable credit losses that are incurred in the loan portfolio. We determine the allowance for loan and lease losses based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies and other credit risk indicators, which is an inherently subjective process. We consider the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. In addition, we consider concentration risks associated with the various loan portfolios and current economic conditions that might impact the portfolio. All of these estimates are susceptible to significant change. Changes to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses. Loans deemed to be uncollectible are charged off against the allowance for loan and lease losses. Recoveries of amounts previously charged-off are credited to the allowance for loan and lease losses.

Our allowance for loan and lease losses consists of two components. For non-impaired loans, we calculate a weighted average ratio of 12-, 36- and 60-month historical realized losses by collateral type; adjust as necessary for our interpretation of current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio and/or significant policy and underwriting changes not entirely covered by the calculated historical loss rates; and apply the loss rates to outstanding loan balances in each collateral category. We calculate the weighted average ratio of 12-, 36- and 60-month historical realized losses for each collateral type by dividing the average net annual charge-offs by the average outstanding loans of such type subject to the calculation for each of the 12-, 36- and 60-month periods, then averaging those three results. For impaired loans, we estimate our exposure for each individual relationship, given the current payment status of the loan and the value of the underlying collateral as supported by third party appraisals, broker’s price opinions, and/or the borrower’s financial statements and internal valuation assessments, each adjusted for liquidation costs. Any shortfall between the liquidation value of the underlying collateral and the recorded investment value of the loan is considered the required specific reserve amount. Actual losses in any period may exceed allowance amounts. We evaluate and adjust our allowance for loan and lease losses, and the allocation of the allowance between loan categories, each month.

~~69-~~57-

The following table presents an analysis of our allowance for loan and lease losses, including provisions for loan and lease losses, charge-offs and recoveries, for the periods indicated:


	At and for the nine months ended June 30, 2017			At and for the fiscal year ended September 30, 2016			At and for the three months ended December 31, 2017			At and for the fiscal year ended September 30, 2017
	(dollars in thousands)						(dollars in thousands)
Allowance for loan and lease losses:
Balance at beginning of period	$	64,642		$	57,200		$	63,503		$	64,642
Provision charged to expense	17,860			18,011			4,604			22,210
Recoupment of ASC 310-30 loans	(1,006		)	(1,056		)	(47		)	(671		)
Charge-offs:
Commercial real estate							(329		)	(2,043		)
Agriculture							(2,198		)	(7,853		)
Commercial non-real estate	(7,769		)	(2,629		)	(1,239		)	(12,576		)
Agriculture	(7,708		)	(4,294		)
Commercial real estate	(1,881		)	(3,625		)
Residential real estate	(502		)	(1,157		)	(255		)	(809		)
Consumer	(138		)	(206		)	(54		)	(196		)
Other lending	(1,834		)	(2,255		)	(534		)	(2,403		)
Total charge-offs	(19,832		)	(14,166		)	(4,609		)	(25,880		)

Recoveries:
Commercial real estate							148			485
Agriculture							47			415
Commercial non-real estate	502			1,429			121			652
Agriculture	402			556
Commercial real estate	441			719
Residential real estate	311			495			90			507
Consumer	75			149			22			102
Other lending	819			1,305			144			1,041
Total recoveries	2,550			4,653			572			3,202

Net loan charge-offs	(17,282		)	(9,513		)	(4,037		)	(22,678		)

Balance at end of period	$	64,214		$	64,642		$	64,023		$	63,503

Average total loans for the period ¹	$	8,652,788		$	7,850,282		$	8,930,768		$	8,695,672
Total loans at period end ¹	$	8,791,852		$	8,682,644		$	9,165,373		$	8,968,553
Ratios
Net charge-offs to average total loans ³	0.27		%	0.12		%	0.18		%	0.26		%
Allowance for loan and lease losses to:
Total loans	0.73		%	0.74		%	0.70		%	0.71		%
Nonaccruing loans ²	54.14		%	52.86		%	44.71		%	47.60		%

¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.	¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.						¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
²Nonaccruing loans excludes loans covered by FDIC loss-sharing agreements.	²Nonaccruing loans excludes loans covered by FDIC loss-sharing agreements.						²Nonaccruing loans excludes loans covered by FDIC loss-sharing agreements.
³Annualized for partial-year periods	³Annualized for partial-year periods						³Annualized for partial-year periods

In the first ~~nine months~~quarter of fiscal year ~~2017,~~2018, net charge-offs were ~~$17.3~~$4.0 million, or ~~0.27%~~0.18% of average total loans on an annualized basis, comprised of ~~$19.8~~$4.6 million of charge-offs and ~~$2.6~~$0.6 million of recoveries. For fiscal year ~~2016,~~2017, net charge-offs were ~~$9.5~~$22.7 million, or ~~0.12%~~0.26%, of average total loans. ~~The higher level of net charge-offs recognized during the period were concentrated in the C&I and agriculture segments of the loan portfolio.~~

At ~~June 30,~~December 31, 2017, the allowance for loan and lease losses was ~~0.73%~~0.70% of our total loan portfolio, a 1 basis point decrease compared to ~~0.74%~~0.71% at September 30, 2016. The higher level of net charge-offs recognized in the first nine months of 2017 was the primary driver of the reduction in ALLL as the majority of charge-offs related to loans for which a specific ALLL had previously been recorded.2017. The balance of the ALLL ~~decreased~~increased to $64.0 million from ~~$64.6 million to $64.2~~$63.5 million over the same period.

~~70-~~

Additionally, a portion of our loans which are carried at fair value, totaling ~~$1.05 billion~~$980.1 million at ~~June 30,~~December 31, 2017 and ~~$1.13~~$1.02 billion at September 30, ~~2016,~~2017, respectively, have no associated allowance for loan and lease losses, but rather have a fair value adjustment related to credit risk included within their carrying value, thus driving the overall ratio of allowance for loan and lease losses to total loans lower. The amount of fair value adjustment related to credit risk on these loans was ~~$7.4~~$6.2 million and $8.3 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively, or ~~0.08%~~0.07% and 0.09% of total loans, respectively. Finally, total purchase

58-

discount remaining on all acquired loans equates to ~~0.38%~~0.29% and ~~0.46%~~0.32% of total loans at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

The following table presents management’s historical allocation of the allowance for loan and lease losses by loan category, in both dollars and percentage of our total allowance for loan and lease losses, to specific loans in those categories at the dates indicated:


	June 30, 2017				September 30, 2016				December 31, 2017				September 30, 2017
	Amount		Percent		Amount		Percent		Amount		Percent		Amount		Percent
	(dollars in thousands)								(dollars in thousands)
Allocation of allowance for loan and lease losses:
Commercial real estate									$	15,995	25.0	%	$	16,941	26.7	%
Agriculture									24,750		38.7	%	25,757		40.6	%
Commercial non-real estate	$	14,425	22.5	%	$	12,990	20.1	%	16,434		25.7	%	14,114		22.2	%
Agriculture	24,485		38.1	%	25,115		38.9	%
Commercial real estate	18,151		28.3	%	17,946		27.8	%
Residential real estate	5,760		9.0	%	7,106		11.0	%	5,475		8.5	%	5,347		8.4	%
Consumer	350		0.5	%	438		0.6	%	307		0.4	%	329		0.5	%
Other lending	1,043		1.6	%	1,047		1.6	%	1,062		1.7	%	1,015		1.6	%
Total	$	64,214	100.0	%	$	64,642	100.0	%	$	64,023	100.0	%	$	63,503	100.0	%

Management will continue to evaluate the loan portfolio and assess economic conditions in order to determine future allowance levels and the amount of loan and lease loss provisions. We review the appropriateness of our allowance for loan and lease losses on a monthly basis. Management monitors closely all past due and restructured loans in assessing the appropriateness of its allowance for loan and lease losses. In addition, we follow procedures for reviewing and grading all substantial commercial and agriculture relationships at least annually. Based predominantly upon the review and grading process, we determine the appropriate level of the allowance in response to our assessment of the probable risk of loss inherent in our loan portfolio. Management makes additional loan and lease loss provisions when the results of its problem loan assessment methodology or overall allowance appropriateness test indicate additional provisions are required.

The review of problem loans is an ongoing process during which management may determine that additional charge-offs are required or additional loans should be placed on nonaccrual status. We have also recorded an allowance for unfunded lending-related commitments that represents our estimate of incurred losses on the portion of lending commitments that borrowers have not advanced. The balance of the allowance for unfunded lending-related commitments was $0.5 million at ~~June 30,~~December 31, 2017 and September 30, ~~2016.~~2017.

Deposits

We obtain funds from depositors by offering consumer and business demand deposit accounts, money market accounts, NOW accounts, savings accounts and term time deposits. At ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, our total deposits were ~~$8.96~~$9.02 billion and ~~$8.60~~$8.98 billion, respectively, representing an increase of ~~4.1%~~0.5%, which was primarily spread across commercial and public deposit accounts. Our accounts are federally insured by the FDIC up to the legal maximum. We have significantly shifted the composition of our deposit portfolio away from time deposits toward demand, NOW, money market and savings accounts in recent years.

The following table presents the balances and weighted average cost of our deposit portfolio at the following dates:


	June 30, 2017				September 30, 2016				December 31, 2017				September 30, 2017
	Amount		Weighted Avg. Cost		Amount		Weighted Avg. Cost		Amount		Weighted Avg. Cost		Amount		Weighted Avg. Cost
	(dollars in thousands)								(dollars in thousands)
Non-interest-bearing demand	$	1,915,560	—	%	$	1,880,512	—	%	$	1,932,080	—	%	$	1,856,126	—	%
NOW accounts, money market and savings	5,760,950		0.50	%	5,343,183		0.36	%	5,838,497		0.58	%	5,847,432		0.55	%
Time certificates, $250,000 or more	262,724		1.07	%	265,904		0.99	%	268,179		1.25	%	273,365		1.16	%
Other time certificates	1,019,868		0.73	%	1,115,191		0.65	%	985,429		0.84	%	1,000,690		0.78	%
Total	$	8,959,102	0.44	%	$	8,604,790	0.34	%	$	9,024,185	0.50	%	$	8,977,613	0.48	%

At December 31, 2017 and September 30, 2017, we had $701.0 million and $725.4 million, respectively, in brokered deposits.

~~71-~~59-

Municipal public deposits constituted ~~$867.8~~$886.8 million and ~~$874.5~~$843.5 million of our deposit portfolio at ~~June 30,~~December 31, 2017, and September 30, ~~2016,~~2017, respectively, of which ~~$525.5~~$584.8 million and ~~$492.7~~$533.3 million, respectively, were required to be collateralized. Our top 10 depositors were responsible for ~~8.9% and 7.9%~~8.5% of our total deposits at ~~June 30,~~December 31, 2017 and September 30, ~~2016, respectively.~~2017.

The following table presents deposits by region:


	June 30, 2017		September 30, 2016		December 31, 2017		September 30, 2017
	(dollars in thousands)				(dollars in thousands)
South Dakota					$	2,290,178	$	2,231,857
Iowa / Kansas / Missouri	$	2,607,022	$	2,531,781	2,650,868		2,561,315
Nebraska	2,505,854		2,297,599		2,438,327		2,521,631
South Dakota	2,267,859		2,258,707
Arizona / Colorado	1,446,937		1,331,127
Arizona					404,166		377,610
Colorado					1,114,374		1,153,058
North Dakota / Minnesota	60,134		101,421		43,927		51,527
Corporate and other	71,296		84,155		82,345		80,615
Total deposits	$	8,959,102	$	8,604,790	$	9,024,185	$	8,977,613

We fund a portion of our assets with time deposits that have balances ofgreater than $250,000 ~~or more~~ and that have maturities generally in excess of six months. At ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, our time deposits ofgreater than $250,000 ~~or more~~ totaled ~~$262.7~~$268.2 million and ~~$265.9~~$273.4 million, respectively. The following table presents the maturities of our time deposits ofgreater than $250,000 ~~or more~~ and less than or equal to $250,000 in size at ~~June 30,~~December 31, 2017:


	Greater than or equal to $250,000			Less than $250,000			Greater than $250,000			Less than or equal to $250,000
	(dollars in thousands)						(dollars in thousands)
Remaining maturity:
Three months or less	$	67,332		$	209,571		$	54,429		$	181,847
Over three through six months	40,130			169,815			38,086			111,578
Over six through twelve months	47,374			211,254			69,227			326,341
Over twelve months	107,888			429,228			106,437			365,663
Total	$	262,724		$	1,019,868		$	268,179		$	985,429
Percent of total deposits	2.9		%	11.4		%	3.0		%	10.9		%

At ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, the average remaining maturity of all time deposits was approximately 14 months. The average time deposits amount per account was approximately ~~$27,449~~$28,124 and ~~$27,237~~$27,870 at ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, respectively.

Derivatives

In 2017, we began a new program of selling interest swaps directly to customers. These interest rate swaps sales are used to enable customers to achieve a long-term fixed rate by selling the ~~normal course~~customer a long-term variable rate loan indexed to LIBOR plus a credit spread whereby the Bank enters into an interest rate swap with our customer where the customer pays a fixed rate of ~~business,~~interest set at the time of origination on the interest rate swap and then the customer receives a floating rate equal to the rate paid on the loan, thus resulting in a fixed rate of interest over the life of the interest rate swap. We then enter into a mirrored interest rate swap with a swap dealer where we ~~enter~~pay and receive the same fixed and floating rate as we pay and receive from the interest rate swap we have with our customer. As the interest paid and received by us on the two swaps net to zero, we are left with the variable rate of the long-term loan.

Prior to 2017 we entered into fixed-rate loans having original maturities of 5 years or greater (typically between 5 and 15 years) with certain of our commercial and agribusiness banking customers to assist them in facilitating their risk management strategies. We ~~mitigate~~mitigated our interest rate risk associated with certain of these loans by entering into equal and offsetting fixed-to-floating interest rate swap agreements for these loans with swap counterparties. We ~~have~~ elected to account for the loans at fair value under ASC 825 Fair Value Option. Changes in the fair value of these loans are recorded in earnings as a component of noninterest income in the relevant period. The related interest rate swaps are recognized as either assets or liabilities in our financial statements and any gains or losses on these swaps, both realized and unrealized, are recorded in earnings as a component of noninterest income. The economic hedges are fully effective from an interest rate risk perspective, as gains and losses on our swaps are directly offset by changes in fair value of the hedged loans (i.e., swap interest rate risk adjustments are directly offset by associated loan interest rate risk adjustments). Consequently, any changes in noninterest income associated with changes in fair value resulting from interest rate

60-

movement, as opposed to changes in credit quality, on the loans are directly offset by equal and opposite unrealized charges to or reductions in noninterest income for the related interest rate swap. Any changes in the fair value of the loans related to credit quality and the current realized gain (loss) on derivatives are not offsetting amounts within noninterest income. To ensure the correlation of movements in fair value between the interest rate swap and the related loan, we pass on all economic costs associated with our hedging activity resulting from loan customer prepayments (partial or full) to the customer.

~~72-~~

Short-Term Borrowings

Our primary sources of short-term borrowings include securities sold under repurchase agreements and certain FHLB advances maturing within 12 months. The following table presents certain information with respect to only our borrowings with original maturities less than 12 months at and for the periods noted:


	At and for the Nine Months Ended June 30, 2017			At and for the Fiscal Year Ended September 30, 2016			At and for the Three Months Ended December 31, 2017			At and for the Fiscal Year Ended September 30, 2017
	(dollars in thousands)						(dollars in thousands)
Short-term borrowings:
Securities sold under agreements to repurchase	$	123,851		$	138,744		$	116,884		$	132,636
FHLB advances	415,000			231,000			665,000			587,200
Other short-term borrowings	$	700		$	—
Total short-term borrowings	$	539,551		$	369,744		$	781,884		$	719,836

Maximum amount outstanding at any month-end during the period	$	538,851		$	549,227		$	781,884		$	719,836
Average amount outstanding during the period	$	277,899		$	272,344		$	587,306		$	352,395
Weighted average rate for the period	0.60		%	0.37		%	1.23		%	0.70		%
Weighted average rate as of date indicated	0.93		%	0.46		%	1.24		%	1.24		%

We have a $10.0 million revolving line of credit with a large national bank, which expires July 28, 2018, at an interest rate of one month LIBOR +plus 200 basis points. At ~~June 30,~~December 31, 2017, we did not have any advances on the line of credit.

Other Borrowings

We have outstanding $75.9 ~~million and $80.9~~ million of junior subordinated debentures to affiliated trusts in connection with the issuance of trust preferred securities by such trusts as of ~~June 30,~~December 31, 2017 and September 30, ~~2016, respectively.~~2017. We are permitted under applicable laws and regulations to count these trust preferred securities as part of our Tier 1 capital. ~~In the first quarter of fiscal year 2017, the Company redeemed 5,000 shares of the HF Capital Trust V Debentures under the First Supplemental Indenture dated May 13, 2016.~~

In 2015, we issued $35.0 million of fixed-to-floating rate subordinated notes that mature on August 15, 2025 through a private placement. The notes, which qualify as Tier 2 capital under capital rules in effect at ~~June 30,~~December 31, 2017, have an interest rate of 4.875% per annum, payable semi-annually on each February 15 and August 15, commencing on February 15, 2016 until August 15, 2020. During the first ~~nine months~~quarter of fiscal year ~~2017,~~2018, we incurred ~~$3.3~~$1.2 million in interest expense on all outstanding subordinated debentures and notes compared to ~~$2.7~~$1.1 million in the same period in fiscal year ~~2016, which related to the increase in subordinated debt acquired in the HF Financial acquisition.~~2017.

~~73-~~61-

Off-Balance Sheet Commitments, Commitments, Guarantees and Contractual Obligations

The following table summarizes the maturity of our contractual obligations and other commitments to make future payments at ~~June 30,~~December 31, 2017. Customer deposit obligations categorized as “not determined” include noninterest-bearing demand accounts, NOW accounts, money market and savings ~~accounts.~~accounts with no stated maturity date.


	Less Than 1 Year		1 to 2 Years		2 to 5 Years		>5 Years		Not Determined		Total		Less Than 1 Year		1 to 2 Years		2 to 5 Years		>5 Years		Not Determined		Total
	(dollars in thousands)												(dollars in thousands)
Contractual Obligations:
Customer deposits	$	719,103	$	296,822	$	238,000	$	2,294	$	7,702,883	$	8,959,102	$	753,768	$	257,158	$	213,794	$	1,148	$	7,798,317	$	9,024,185
Securities sold under agreement to repurchase	123,851		—		—		—		—		123,851		116,884		—		—		—		—		116,884
FHLB advances and other borrowings	446,700		—		—		25,000		—		471,700		696,000		—		—		25,000		—		721,000
Subordinated notes payable	—		—		—		75,920		—		75,920		—		—		—		75,920		—		75,920
Subordinated debentures	—		—		—		35,000		—		35,000		—		—		—		35,000		—		35,000
Operating leases, net of sublease income	5,331		5,082		10,919		8,339		—		29,671		5,157		4,523		8,757		6,629		—		25,066
Accrued interest payable	5,006		—		—		—		—		5,006		6,139		—		—		—		—		6,139
Interest on FHLB advances	1,583		915		2,745		991		—		6,234		1,541		915		2,745		534		—		5,735
Interest on subordinated notes payable	2,618		2,618		7,854		32,467		—		45,557		2,851		2,851		8,553		34,012		—		48,267
Interest on subordinated debentures	1,706		1,706		5,119		5,332		—		13,863		1,706		1,706		5,119		4,479		—		13,010
Other Commitments:
Commitments to extend credit—non-credit card	$	1,224,354	$	227,201	$	469,640	$	207,036	$	—	$	2,128,231	$	1,338,261	$	210,889	$	436,865	$	302,759	$	—	$	2,288,774
Commitments to extend credit—credit card	201,201		—		—		—		—		201,201		209,318		—		—		—		—		209,318
Letters of credit	81,652		—		—		—		—		81,652		68,240		—		—		—		—		68,240

Instruments with Off-Balance Sheet Risk

In the normal course of business, we enter into various transactions that are not included in our consolidated financial statements in accordance with GAAP. These transactions include commitments to extend credit to our customers and letters of credit. Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the commitment. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Letters of credit are conditional commitments issued primarily to support or guarantee the performance of a customer’s obligations to a third party. The credit risk involved in issuing letters of credit is essentially the same as originating a loan to the customer. We manage the risks associated with these arrangements by evaluating each customer’s creditworthiness prior to issuance through a process similar to that used by us in deciding whether to extend credit to the customer.

The following table presents the total notional amounts of all commitments by us to extend credit and letters of credit as of the dates indicated:


	June 30, 2017		September 30, 2016		December 31, 2017		September 30, 2017
	(dollars in thousands)				(dollars in thousands)
Commitments to extend credit	$	2,329,432	$	2,158,041	$	2,498,092	$	2,515,653
Letters of credit	81,652		61,802		68,240		70,186
Total	$	2,411,084	$	2,219,843	$	2,566,332	$	2,585,839

Liquidity

Liquidity refers to our ability to maintain cash flow that is adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. We consider the effective and prudent management of liquidity to be fundamental to our health and strength. Our objective is to manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other commitments on a timely basis and at a reasonable cost.

~~74-~~62-

Our liquidity risk is managed through a comprehensive framework of policies and limits overseen by our bank’s asset and liability committee. We continuously monitor and make adjustments to our liquidity position by adjusting the balance between sources and uses of funds as we deem appropriate. Our primary measures of liquidity include monthly cash flow analyses under ordinary business activities and conditions and under situations simulating a severe run on our bank. We also monitor our bank’s deposit to loan ratio to ensure high quality funding is available to support our strategic lending growth objectives, and have internal management targets for the FDIC’s liquidity ratio, net short-term non-core funding dependence ratio and non-core liabilities to total assets ratio. The results of these measures and analyses are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. We also acquire brokered deposits when the cost of funds is advantageous to other funding sources.

Great Western Bancorp, Inc. Our ~~holding company's~~ primary source of liquidity is cash obtained from dividends paid by our bank. We primarily use our cash for the payment of dividends, when and if declared by our ~~board~~Board of ~~directors,~~Directors and the payment of interest on our outstanding junior subordinated debentures and subordinated notes. We also use cash, as necessary, to satisfy the needs of our bank through equity contributions and for acquisitions. At ~~June 30,~~December 31, 2017, our holding company had ~~$19.1~~$53.4 million of cash. During the ~~third~~first quarter of fiscal year ~~2017,~~2018, we declared and paid a dividend of $0.20 per common share. The outstanding amounts under our revolving line of credit with a large ~~national~~retail bank and our private placement subordinated capital notes together totaled $35.0 million at ~~June 30,~~December 31, 2017. Our management believes that the sources of available liquidity are adequate to meet all reasonably foreseeable short-term and intermediate-term demands. We may consider raising additional capital in public or private offerings of debt or equity securities.

Great Western Bank. Our bank maintains sufficient liquidity by maintaining minimum levels of excess cash reserves (measured on a daily basis), a sufficient amount of unencumbered, highly liquid assets and access to contingent funding with the FHLB. At ~~June 30,~~December 31, 2017, our bank had cash of ~~$327.9~~$297.6 million and $1.37 billion of highly-liquid securities held in our investment portfolio, of which ~~$916.1~~$990.6 million were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The balance could be sold to meet liquidity requirements. Our bank had ~~$471.0~~$721.0 million in FHLB borrowings at ~~June 30,~~December 31, 2017, with additional available lines of ~~$1.68~~$1.40 billion. Our bank also had an additional borrowing capacity of ~~$1.77~~$1.69 billion with the FRB Discount Window. Our bank primarily uses liquidity to meet loan requests and commitments (including commitments under letters of credit), to accommodate outflows in deposits and to take advantage of interest rate market opportunities. At ~~June 30,~~December 31, 2017, we had a total of ~~$2.41~~$2.57 billion of outstanding exposure under commitments to extend credit and issued letters of credit. Our management believes that the sources of available liquidity are adequate to meet all our bank’s reasonably foreseeable short-term and intermediate-term demands.

Capital

As a bank holding company, we must comply with the capital requirements established by the Federal Reserve, and our bank must comply with the capital requirements established by the FDIC. The current risk-based guidelines applicable to us and our bank are based on the Basel III framework, as implemented by the federal bank regulators.

The following table presents our regulatory capital ratios at ~~June 30,~~December 31, 2017 and the standards for both well-capitalized depository institutions and minimum capital requirements. Our capital ratios exceeded applicable regulatory requirements as of that date.


	Actual								Actual
	Capital Amount		Ratio		Minimum Capital Requirement Ratio		Well Capitalized Ratio		Capital Amount		Ratio		Minimum Capital Requirement Ratio		Well Capitalized Ratio
	(dollars in thousands)								(dollars in thousands)
Great Western Bancorp, Inc.
Tier 1 capital	$	1,079,284	11.5	%	6.0	%	8.0	%	$	1,116,008	11.3	%	6.0	%	8.0	%
Total capital	1,178,981		12.6	%	8.0	%	10.0	%	1,215,514		12.3	%	8.0	%	10.0	%
Tier 1 leverage	1,079,284		10.3	%	4.0	%	5.0	%	1,116,008		10.3	%	4.0	%	5.0	%
Common equity Tier 1	1,005,796		10.7	%	5.75	%	6.5	%	1,042,475		10.5	%	5.75	%	6.5	%
Risk-weighted assets	9,392,670								9,892,037

~~75-~~63-


	Actual								Actual
	Capital Amount		Ratio		Minimum Capital Requirement Ratio		Well Capitalized Ratio		Capital Amount		Ratio		Minimum Capital Requirement Ratio		Well Capitalized Ratio
	(dollars in thousands)								(dollars in thousands)
Great Western Bank
Tier 1 capital	$	1,090,648	11.6	%	6.0	%	8.0	%	$	1,087,819	11.0	%	6.0	%	8.0	%
Total capital	1,155,346		12.3	%	8.0	%	10.0	%	1,152,325		11.7	%	8.0	%	10.0	%
Tier 1 leverage	1,090,648		10.4	%	4.0	%	5.0	%	1,087,819		10.0	%	4.0	%	5.0	%
Common equity Tier 1	1,090,648		11.6	%	5.75	%	6.5	%	1,087,819		11.0	%	5.75	%	6.5	%
Risk-weighted assets	9,388,166								9,889,986

At ~~June 30,~~December 31, 2017 and September 30, ~~2016,~~2017, our Tier 1 capital included an aggregate of $73.5 million ~~and $77.2 million, respectively,~~ of trust preferred securities issued by our subsidiaries. At ~~June 30,~~December 31, 2017, our Tier 2 capital included ~~$64.2~~$64.0 million of the allowance for loan and lease losses and $35.0 million of private placement subordinated capital notes. At September 30, ~~2016,~~2017, our Tier 2 capital included ~~$64.6~~$63.5 million of the allowance for loan and lease losses and $35.0 million of private placement subordinated capital notes. Our total risk-weighted assets were ~~$9.39~~$9.89 billion at ~~June 30,~~December 31, 2017.

The revaluation of the Company's deferred taxes reduced the total capital ratio by approximately 15 basis points.

Non-GAAP Financial Measures

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)~~expenses as well as the effect of revaluation of deferred taxes). 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 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.

64-

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 filing.



	At or for the three months ended:
	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
	(Dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP	$	29,230		$	37,662		$	35,060		$	35,162		$	36,903
Add: Acquisition expenses, net of tax	—			—			—			—			440
Add: Deferred taxes revaluation	13,586			—			—			—			—
Adjusted net income	$	42,816		$	37,662		$	35,060		$	35,162		$	37,343

Weighted average diluted common shares outstanding	59,087,729			58,914,144			59,130,632			59,073,669			58,991,905
Earnings per common share - diluted	$	0.49		$	0.64		$	0.59		$	0.60		$	0.63
Adjusted earnings per common share - diluted	$	0.72		$	0.64		$	0.59		$	0.60		$	0.63

Tangible net income and return on average tangible common equity:
Net income - GAAP	$	29,230		$	37,662		$	35,060		$	35,162		$	36,903
Add: Amortization of intangible assets, net of tax	376			380			488			500			676
Tangible net income	$	29,606		$	38,042		$	35,548		$	35,662		$	37,579

Average common equity	$	1,761,127		$	1,740,429		$	1,715,460		$	1,686,770		$	1,666,243
Less: Average goodwill and other intangible assets	748,144			748,571			749,074			749,638			750,290
Average tangible common equity	$	1,012,983		$	991,858		$	966,386		$	937,132		$	915,953
Return on average common equity *	6.6		%	8.6		%	8.2		%	8.5		%	8.8		%
Return on average tangible common equity **	11.6		%	15.2		%	14.8		%	15.4		%	16.3		%

* 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	$	100,622		$	99,672		$	96,888		$	95,744		$	96,891
Add: Tax equivalent adjustment	1,565			2,122			2,154			2,182			2,142
Net interest income (FTE)	102,187			101,794			99,042			97,926			99,033
Add: Current realized derivative gain (loss)	(2,476		)	(2,714		)	(3,320		)	(3,875		)	(4,486		)
Adjusted net interest income (FTE)	$	99,711		$	99,080		$	95,722		$	94,051		$	94,547

Average interest-earning assets	$	10,412,882		$	10,283,401		$	10,124,404		$	10,144,875		$	10,286,284
Net interest margin (FTE) *	3.89		%	3.93		%	3.92		%	3.91		%	3.82		%
Adjusted net interest margin (FTE) **	3.80		%	3.82		%	3.79		%	3.76		%	3.65		%

* 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.

~~76-~~65-

At or for the nine months ended: At or for the three months ended:
June 30, 2017 June 30, 2016 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016
(Dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP $ 107,125
$ 87,495
$ 35,060
$ 35,162
$ 36,903
$ 33,758
$ 26,360
Add: Acquisition expenses 710
12,950
—
—
710
2,742
12,179
Add: Tax effect at 38% (270 ) (4,921 ) —
—
(270 ) (1,042 ) (4,628 )
Adjusted net income $ 107,565
$ 95,524
$ 35,060
$ 35,162
$ 37,343
$ 35,458
$ 33,911

Weighted average diluted common shares outstanding 59,065,402
55,993,011
59,130,632
59,073,669
58,991,905
58,938,367
57,176,705
Earnings per common share - diluted $ 1.81
$ 1.56
$ 0.59
$ 0.60
$ 0.63
$ 0.57
$ 0.46
Adjusted earnings per common share - diluted $ 1.82
$ 1.71
$ 0.59
$ 0.60
$ 0.63
$ 0.60
$ 0.59

Tangible net income and return on average tangible common equity:
Net income - GAAP $ 107,125
$ 87,495
$ 35,060
$ 35,162
$ 36,903
$ 33,758
$ 26,360
Add: Amortization of intangible assets 1,927
2,239
538
550
839
1,024
822
Add: Tax on amortization of intangible assets (264 ) (660 ) (50 ) (50 ) (163 ) (220 ) (220 )
Tangible net income $ 108,788
$ 89,074
$ 35,548
$ 35,662
$ 37,579
$ 34,562
$ 26,962

Average common equity $ 1,689,491
$ 1,506,740
$ 1,715,460
$ 1,686,770
$ 1,666,243
$ 1,647,155
$ 1,567,372
Less: Average goodwill and other intangible assets 749,667
712,049
749,074
749,638
750,290
750,756
727,707
Average tangible common equity $ 939,824
$ 794,691
$ 966,386
$ 937,132
$ 915,953
$ 896,399
$ 839,665
Return on average common equity * 8.5 % 7.8 % 8.2 % 8.5 % 8.8 % 8.2 % 6.8 %
Return on average tangible common equity ** 15.5 % 15.0 % 14.8 % 15.4 % 16.3 % 15.3 % 12.9 %

* 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 $ 294,772
$ 263,947
$ 98,730
$ 97,399
$ 98,642
$ 98,227
$ 91,652
Add: Tax equivalent adjustment 6,477
5,522
2,154
2,182
2,142
2,012
1,905
Net interest income (FTE) 301,249
269,469
100,884
99,581
100,784
100,239
93,557
Add: Current realized derivative gain (loss) (11,681 ) (15,832 ) (3,320 ) (3,875 ) (4,486 ) (4,895 ) (5,005 )
Adjusted net interest income (FTE) $ 289,568
$ 253,637
$ 97,564
$ 95,706
$ 96,298
$ 95,344
$ 88,552

Average interest-earning assets $ 10,185,187
$ 9,061,896
$ 10,124,404
$ 10,144,875
$ 10,286,284
$ 10,173,743
$ 9,528,576
Net interest margin (FTE) * 3.95 % 3.97 % 4.00 % 3.98 % 3.89 % 3.92 % 3.95 %
Adjusted net interest margin (FTE) ** 3.80 % 3.74 % 3.87 % 3.83 % 3.71 % 3.73 % 3.74 %

* 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.



	At or for the three months ended:
	December 31, 2017			September 30, 2017			June 30, 2017			March 31, 2017			December 31, 2016
	(Dollars in thousands except share and per share amounts)
Adjusted interest income and adjusted yield (fully-tax equivalent basis), on non ASC 310-30 loans:
Interest income - GAAP	$	104,935		$	102,998		$	98,724		$	97,170		$	97,588
Add: Tax equivalent adjustment	1,565			2,122			2,154			2,182			2,142
Interest income (FTE)	106,500			105,120			100,878			99,352			99,730
Add: Current realized derivative gain (loss)	(2,476		)	(2,714		)	(3,320		)	(3,875		)	(4,486		)
Adjusted interest income (FTE)	$	104,024		$	102,406		$	97,558		$	95,477		$	95,244

Average non ASC 310-30 loans	$	8,840,929		$	8,728,514		$	8,550,349		$	8,531,652		$	8,515,947
Yield (FTE) *	4.78		%	4.78		%	4.73		%	4.72		%	4.65		%
Adjusted yield (FTE) **	4.67		%	4.65		%	4.58		%	4.54		%	4.44		%

* 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	$	117,296		$	114,412		$	114,215		$	111,233		$	112,549
Add: Tax equivalent adjustment	1,565			2,122			2,154			2,182			2,142
Total revenue (FTE)	$	118,861		$	116,534		$	116,369		$	113,415		$	114,691

Noninterest expense	$	54,868		$	55,332		$	54,922		$	53,852		$	52,537
Less: Amortization of intangible assets	426			430			538			550			839
Tangible noninterest expense	$	54,442		$	54,902		$	54,384		$	53,302		$	51,698
Efficiency ratio *	45.8		%	47.1		%	46.7		%	47.0		%	45.1		%

* 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	$	1,767,873		$	1,755,000		$	1,732,983		$	1,706,861		$	1,678,638
Less: Goodwill and other intangible assets	747,971			748,397			748,828			749,366			749,916
Tangible common equity	$	1,019,902		$	1,006,603		$	984,155		$	957,495		$	928,722

Total assets	$	11,806,581		$	11,690,011		$	11,466,184		$	11,356,841		$	11,422,617
Less: Goodwill and other intangible assets	747,971			748,397			748,828			749,366			749,916
Tangible assets	$	11,058,610		$	10,941,614		$	10,717,356		$	10,607,475		$	10,672,701
Tangible common equity to tangible assets	9.2		%	9.2		%	9.2		%	9.0		%	8.7		%

Tangible book value per share:
Total stockholders' equity	$	1,767,873		$	1,755,000		$	1,732,983		$	1,706,861		$	1,678,638
Less: Goodwill and other intangible assets	747,971			748,397			748,828			749,366			749,916
Tangible common equity	$	1,019,902		$	1,006,603		$	984,155		$	957,495		$	928,722

Common shares outstanding	58,896,189			58,834,066			58,761,597			58,760,517			58,755,989
Book value per share - GAAP	$	30.02		$	29.83		$	29.49		$	29.05		$	28.57
Tangible book value per share	$	17.32		$	17.11		$	16.75		$	16.29		$	15.81

~~77-~~

At or for the nine months ended: At or for the three months ended:
June 30, 2017 June 30, 2016 June 30, 2017 March 31, 2017 December 31, 2016 September 30, 2016 June 30, 2016
(Dollars in thousands except share and per share amounts)
Adjusted interest income and adjusted yield (fully-tax equivalent basis), on non ASC 310-30 loans:
Interest income - GAAP $ 298,731
$ 263,930
$ 100,566
$ 98,825
$ 99,339
$ 99,058
$ 91,829
Add: Tax equivalent adjustment 6,477
5,522
2,154
2,182
2,142
2,012
1,905
Interest income (FTE) 305,208
269,452
102,720
101,007
101,481
101,070
93,734
Add: Current realized derivative gain (loss) (11,681 ) (15,832 ) (3,320 ) (3,875 ) (4,486 ) (4,895 ) (5,005 )
Adjusted interest income (FTE) $ 293,527
$ 253,620
$ 99,400
$ 97,132
$ 96,995
$ 96,175
$ 88,729

Average non ASC 310-30 loans $ 8,532,650
$ 7,489,534
$ 8,550,349
$ 8,531,652
$ 8,515,947
$ 8,477,214
$ 7,903,860
Yield (FTE) * 4.78 % 4.81 % 4.82 % 4.80 % 4.73 % 4.74 % 4.77 %
Adjusted yield (FTE) ** 4.60 % 4.52 % 4.66 % 4.62 % 4.52 % 4.51 % 4.52 %

* 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 $ 337,998
$ 290,686
$ 114,215
$ 111,233
$ 112,549
$ 114,025
$ 100,749
Add: Tax equivalent adjustment 6,477
5,522
2,154
2,182
2,142
2,012
1,905
Total revenue (FTE) $ 344,475
$ 296,208
$ 116,369
$ 113,415
$ 114,691
$ 116,037
$ 102,654

Noninterest expense $ 161,312
$ 150,297
$ 54,922
$ 53,852
$ 52,537
$ 57,342
$ 61,222
Less: Amortization of intangible assets 1,927
2,239
538
550
839
1,024
822
Tangible noninterest expense $ 159,385
$ 148,058
$ 54,384
$ 53,302
$ 51,698
$ 56,318
$ 60,400
Efficiency ratio * 46.3 % 50.0 % 46.7 % 47.0 % 45.1 % 48.5 % 58.8 %

* Calculated as the ratio of tangible noninterest expense to total revenue (FTE).

Tangible common equity and tangible common equity to tangible assets:
Total stockholders' equity $ 1,732,983
$ 1,640,511
$ 1,732,983
$ 1,706,861
$ 1,678,638
$ 1,663,391
$ 1,640,511
Less: Goodwill and other intangible assets 748,828
751,217
748,828
749,366
749,916
750,755
751,217
Tangible common equity $ 984,155
$ 889,294
$ 984,155
$ 957,495
$ 928,722
$ 912,636
$ 889,294

Total assets $ 11,466,184
$ 11,453,222
$ 11,466,184
$ 11,356,841
$ 11,422,617
$ 11,531,180
$ 11,453,222
Less: Goodwill and other intangible assets 748,828
751,217
748,828
749,366
749,916
750,755
751,217
Tangible assets $ 10,717,356
$ 10,702,005
$ 10,717,356
$ 10,607,475
$ 10,672,701
$ 10,780,425
$ 10,702,005
Tangible common equity to tangible assets 9.2 % 8.3 % 9.2 % 9.0 % 8.7 % 8.5 % 8.3 %

Tangible book value per share:
Total stockholders' equity $ 1,732,983
$ 1,640,511
$ 1,732,983
$ 1,706,861
$ 1,678,638
$ 1,663,391
$ 1,640,511
Less: Goodwill and other intangible assets 748,828
751,217
748,828
749,366
749,916
750,755
751,217
Tangible common equity $ 984,155
$ 889,294
$ 984,155
$ 957,495
$ 928,722
$ 912,636
$ 889,294

Common shares outstanding 58,761,597
58,693,499
58,761,597
58,760,517
58,755,989
58,693,304
58,693,499
Book value per share - GAAP $ 29.49
$ 27.95
$ 29.49
$ 29.05
$ 28.57
$ 28.34
$ 27.95
Tangible book value per share $ 16.75
$ 15.15
$ 16.75
$ 16.29
$ 15.81
$ 15.55
$ 15.15

~~78-~~66-

Impact of Inflation and Changing Prices

Our financial statements included in this report have been prepared in accordance with GAAP, which requires us to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession generally are not considered. The primary effect of inflation on our operations is reflected in increased operating costs. In our management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities.

Recent Accounting Pronouncements

See "Note 2. New Accounting Pronouncements" in the accompanying "Notes to Unaudited Consolidated Financial Statements" included in this report for a discussion of new accounting pronouncements and their expected impact on our financial statements.

Critical Accounting Policies and the Impact of Accounting Estimates

~~The following change was made~~There have been no material changes to our critical accounting policies and accounting estimates from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016:~~

~~Goodwill~~

Goodwill represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in transactions accounted for as business acquisitions. Goodwill is evaluated annually for impairment. We historically performed our impairment evaluation as of June 30 of each fiscal year. During the third quarter of fiscal year 2017, we voluntarily changed our annual impairment assessment date from June 30 to July 1. The change in evaluation date will better align with the Company's budget and strategic planning cycle. This voluntary change in accounting principle was not made to delay, accelerate or avoid an impairment charge. The change is not applied retrospectively as it is impracticable to do so because retrospective application would require the application of significant estimates and assumptions with the use of hindsight. Accordingly, the change will be applied prospectively. The change has no direct or indirect financial statement impact to the three and nine months ended June 30, 2017. If the implied fair value of goodwill is lower than its carrying amount, goodwill impairment is indicated and goodwill is written down to its implied fair value. The evaluation of possible goodwill impairment involves significant judgment based on short-term and long-term projections of future performance. No goodwill impairment was recognized during the three and nine months ended June 30, 2017 and 2016.


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of ~~June 30,~~December 31, 2017, there have been no material changes in the quantitative and qualitative information about market risk provided pursuant to Item 305 of Regulation S-K as presented in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016.~~2017.

Evaluation of Interest Rate Risk

We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios at least monthly and compare these results against a scenario with no changes in interest rates. Our net interest income simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) the timing of changes in interest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market-rate-sensitive instruments on and off balance sheet, (4) differing sensitivities of financial instruments due to differing underlying rate indices, (5) varying loan prepayment speeds for different interest rate scenarios, (6) the effect of interest rate limitations in our assets, such as floors and caps, (7) the effect of our interest rate swaps, and (8) overall growth and repayment rates and product mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

Potential changes to our adjusted net interest income (i.e., GAAP net interest income plus current realized gain or loss on derivatives) in hypothetical rising and declining rate scenarios calculated as of ~~June 30,~~December 31, 2017 are presented in the following table. The projections assume (1) immediate, parallel shifts downward of the yield curve of 100 basis points and immediate, parallel shifts

~~79-~~

upward of the yield curve of 100, 200, 300 and 400 basis points and (2) gradual shifts downward of 100 basis points over 12 months and gradual shifts upward of 100, 200, 300 and 400 basis points over 12 months. In the current interest rate environment, a downward shift of the yield curve of 200, 300 and 400 basis points does not provide us with meaningful results. In a downward parallel shift of the yield curve, interest rates at the short-end of the yield curve are not modeled to decline any further than 0%. For the immediate-shift scenarios, we assume short-term rates follow a forward yield curve throughout the forecast period that is dictated by the instantaneously shocked yield curve from the as of date. In the gradual-shift scenarios, we take each rate across the yield curve from the as of date and shock it by 1/12th of the total change in rates each month for twelve months.

67-


	Estimated Increase (Decrease) in Annualized Adjusted Net Interest Income for the Quarter Ended June 30, 2017				Estimated Increase (Decrease) in Annualized Adjusted Net Interest Income for the Quarter Ended December 31, 2017
Change in Market Interest Rates as of June 30, 2017	Twelve Months Ending June 30, 2018		Twelve Months Ending June 30, 2019
Change in Market Interest Rates as of December 31, 2017					Twelve Months Ending December 31, 2018		Twelve Months Ending December 31, 2019
Immediate Shifts
+400 basis points	10.33	%	16.81	%	10.76	%	17.37	%
+300 basis points	7.77	%	12.69	%	8.09	%	13.11	%
+200 basis points	5.19	%	8.53	%	5.41	%	8.81	%
+100 basis points	2.60	%	4.29	%	2.72	%	4.44	%
-100 basis points	(4.09	)%	(6.58	)%	(4.66	)%	(6.87	)%

Gradual Shifts
+400 basis points	3.86	%			2.16	%
+300 basis points	2.92	%			1.64	%
+200 basis points	1.97	%			1.11	%
+100 basis points	1.02	%			0.57	%
-100 basis points	(2.10	)%			(1.43	)%

We primarily use interest rate swaps to ensure that long-term fixed-rate loans are effectively re-priced as short-term rates change, which we believe would allow us to achieve these results. The results of this simulation analysis are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. For example, if the timing and magnitude of interest rate changes differ from those projected, our net interest income might vary significantly. Non-parallel yield curve shifts such as a flattening or steepening of the yield curve or changes in interest rate spreads, would also cause our net interest income to be different from that depicted. An increasing interest rate environment could reduce projected net interest income if deposits and other short-term liabilities re-price faster than expected or faster than our assets re-price. Actual results could differ from those projected if we grow assets and liabilities faster or slower than estimated, if we experience a net outflow of deposit liabilities or if our mix of assets and liabilities otherwise changes. Actual results could also differ from those projected if we experience substantially different repayment speeds in our loan portfolio than those assumed in the simulation model. Finally, these simulation results do not contemplate all the actions that we may undertake in response to potential or actual changes in interest rates, such as changes to our loan, investment, deposit, funding or hedging strategies.

For more information on our adjusted net interest income, including a reconciliation to the most directly comparable GAAP financial measures, see "—Non-GAAP Financial Measures" above.


ITEM 4.	CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act), to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.

~~80-~~

(b) Changes in Internal Control over Financial Reporting. During the most recently completed fiscal quarter, there was no change made in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

68-

PART II. OTHER INFORMATION


ITEM 1.	LEGAL PROCEEDINGS

From time to time we are a party to various litigation and regulatory matters incidental to the conduct of our business. We establish reserves for such matters when potential losses become probable and can be reasonably estimated. We believe the ultimate resolution of existing litigation and regulatory matters will not have a material adverse effect on our financial condition, results of operations or cash flows. However, changes in circumstances or additional information could result in additional accruals or resolution of these matters in excess of established accruals, which could adversely affect our financial condition, results of operations or cash flows, potentially materially.


ITEM 1A.	RISK FACTORS

There have been no material changes in the risk factors described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2016.~~2017.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Equity Securities

None.

Purchases of Equity Securities

We did not repurchase any of our common stock during the ~~third~~first quarter of fiscal year ~~2017.~~2018.


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.


ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.	OTHER INFORMATION

Not applicable.

~~81-~~69-


ITEM 6.	EXHIBITS


EX - 11.1	Statement regarding Computation of Per Share Earnings (included as Note 19 to the registrant's unaudited consolidated financial statements)


EX - 31.1	Rule 13a-14(a) Certification of Chief Executive Officer of Great Western Bancorp, Inc. in accordance with Section 302 of the Sarbanes-Oxley Act of 2002


EX - 31.2	Rule 13a-14(a) Certification of Chief Financial Officer of Great Western Bancorp, Inc. in accordance with Section 302 of the Sarbanes-Oxley Act of 2002


EX - 32.1	Section 1350 Certification of Chief Executive Officer of Great Western Bancorp, Inc. in accordance with Section 906 of the Sarbanes-Oxley Act of 2002


EX - 32.2	Section 1350 Certification of Chief Financial Officer of Great Western Bancorp, Inc. in accordance with Section 906 of the Sarbanes-Oxley Act of 2002


101.INS	XBRL Instance Document


101.SCH	XBRL Taxonomy Extension Schema Document


101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF	XBRL Taxonomy Extension Definition Linkbase Document


101.LAB	XBRL Taxonomy Extension Label Linkbase Document


101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

~~82-~~70-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	Great Western Bancorp, Inc.
Date: ~~August 8, 2017~~February 7, 2018	By: ______/s/_Peter Chapman_________________ Name: Peter Chapman Title: Chief Financial Officer and Executive Vice President (Principal Financial Officer and Authorized Officer)

~~83-~~71-

INDEX TO EXHIBITS



Number			Description

11.1			Statement regarding Computation of Per Share Earnings (included as Note 19 to the registrant's unaudited consolidated financial statements)

31.1* 31.1*			Rule 13a-14(a) Certification of Chief Executive Officer of Great Western Bancorp, Inc. in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

31.2* 31.2*			Rule 13a-14(a) Certification of Chief Financial Officer of Great Western Bancorp, Inc. in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

32.1* 32.1*			Section 1350 Certification of Chief Executive Officer of Great Western Bancorp, Inc. in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

32.2* 32.2*			Section 1350 Certification of Chief Financial Officer of Great Western Bancorp, Inc. in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

101.INS**			XBRL Instance Document

101.SCH**			XBRL Taxonomy Extension Schema Document

101.CAL**			XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF**			XBRL Taxonomy Extension Definition Linkbase Document

101.LAB**			XBRL Taxonomy Extension Label Linkbase Document

101.PRE**			XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith
** Furnished, not filed

~~84-~~72-



EXPLANATORY NOTE
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I. FINANCIAL INFORMATION	5
Item 1. Financial Statements (Unaudited)	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	5039
Item 3. Quantitative and Qualitative Disclosures About Market Risk	7967
Item 4. Controls and Procedures	8068
PART II. OTHER INFORMATION	8169
Item 1. Legal Proceedings	8169
Item 1A. Risk Factors	8169
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8169
Item 3. Defaults Upon Senior Securities	8169
Item 4. Mine Safety Disclosures	8169
Item 5. Other Information	8169
Item 6. Exhibits	8270
SIGNATURES	8371
INDEX TO EXHIBITS	8472



	Number of Shares	Amount
		(dollars in thousands)
Equity consideration:
Common stock issued	3,448,119	$	107,478
Non-equity consideration:
Cash		34,487
Total consideration paid		141,965
Fair value of net assets acquired including identifiable intangible assets		100,749
Goodwill		$	41,216



	Fair Value
	(dollars in thousands)
Identifiable assets acquired:
Cash and cash equivalents	$	18,818
Investment securities	165,052
Loans	863,741
Premises and equipment	19,220
Accrued interest receivable	4,117
Other repossessed property	4
Intangible assets	7,877
Loan servicing rights	6,573
Other assets	36,076
Total identifiable assets acquired	$	1,121,478
Liabilities assumed:
Deposits	$	863,121
FHLB advances and other borrowings	115,881
Subordinated debentures	21,110
Other liabilities	20,617
Total liabilities assumed	1,020,729
Fair value of net identifiable assets acquired	100,749
Net purchase price	141,965
Goodwill	$	41,216



	Amount
	(Unaudited, dollars in thousands)
Contractually required principal and interest	$	83,710
Non-accretable difference	(28,516		)
Cash flows expected to be collected	55,194
Accretable yield	(3,662		)
Total purchased credit impaired loans acquired	$	51,532



	Fair Value of Acquired Loans at Acquisition Date		Gross Contractual Amounts Receivable at Acquisition Date		Best Estimate at Acquisition Date of Contractual Cash Flows Not Expected to be Collected
	(Unaudited, dollars in thousands)
Acquired receivables subject to ASC 310-30	$	51,532	$	83,710	$	28,516
Acquired receivables not subject to ASC 310-30	812,209		998,255		9,572



	Nine Months Ended June 30, 2017					Nine Months Ended June 30, 2016
		Recorded Investment					Recorded Investment
	Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification
	(dollars in thousands)
Residential real estate
Rate modification	—	$	—	$	—	—	$	—	$	—
Term extension	—	—		—		1	42		42
Payment modification	1	9		9		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		—	—		—
Total residential real estate	1	9		9		1	42		42
Commercial real estate
Rate modification	—	—		—		—	—		—
Term extension	1	3,230		3,230		2	1,898		1,898
Payment modification	—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		3	6,714		6,714
Total commercial real estate	1	3,230		3,230		5	8,612		8,612
Commercial non real estate
Rate modification	—	—		—		1	49		49
Term extension	1	542		542		4	115		115
Payment modification	4	526		526		2	948		948
Bankruptcy	—	—		—		—	—		—
Other	1	150		150		3	3,849		3,849
Total commercial non real estate	6	1,218		1,218		10	4,961		4,961
Agriculture
Rate modification	—	—		—		—	—		—
Term extension	5	15,995		15,995		13	26,914		26,914
Payment modification	—	—		—		4	989		989
Bankruptcy	—	—		—		—	—		—
Other	3	728		728		—	—		—
Total agriculture	8	16,723		16,723		17	27,903		27,903
Consumer
Rate modification	—	—		—		—	—		—
Term extension	—	—		—		—	—		—
Payment modification	—	—		—		—	—		—
Bankruptcy	—	—		—		—	—		—
Other	—	—		—		—	—		—
Total consumer	—	—		—		—	—		—
Total accruing	16	$	21,180	$	21,180	33	$	41,518	$	41,518
Change in recorded investment due to principal paydown at time of modification	—	$	—	$	—	—	$	—	$	—
Change in recorded investment due to chargeoffs at time of modification	—	$	—	$	—	—	$	—	$	—



	Gross Amount			Amount Offset			Net Amount Presented in Consolidated Balance Sheets			Held/Pledged Financial Instruments¹		Net Amount
June 30, 2017	(dollars in thousands)
Derivative financial assets:
Derivatives subject to master netting arrangement or similar arrangement	$	1,626		$	(1,626	)	$	—		$	—	$	—
Derivative financial liabilities:
Derivatives subject to master netting arrangement or similar arrangement	(19,914		)	1,626			(18,288		)	18,288		—
Total derivative financial liabilities	$	(18,288	)	$	—		$	(18,288	)	$	18,288	$	—

¹ The actual amount of collateral exceeds the fair value exposure, at the individual counterparty level, as of the date presented.



	For the nine months ended
	June 30, 2017						June 30, 2016
	Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹
	(dollars in thousands)
Assets
Interest bearing bank deposits	$	146,209	$	728	0.67	%	$	102,206	$	326	0.43	%
Investment securities	1,386,190		19,719		1.90	%	1,362,576		18,517		1.82	%
Non ASC 310-30 loans, net ³	8,532,650		305,208		4.78	%	7,489,534		269,452		4.81	%
ASC 310-30 loans, net	120,138		7,522		8.37	%	107,580		5,207		6.47	%
Loans, net	8,652,788		312,730		4.83	%	7,597,114		274,659		4.83	%
Total interest-earning assets	10,185,187		333,177		4.37	%	9,061,896		293,502		4.33	%
Noninterest-earning assets	1,150,838						1,055,005
Total assets	$	11,336,025	$	333,177	3.93	%	$	10,116,901	$	293,502	3.88	%

Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	1,810,880					$	1,420,749
NOW, money market and savings deposits	5,673,929		$	18,060	0.43	%	4,973,268		$	11,498	0.31	%
Time deposits	1,307,908		6,536		0.67	%	1,326,782		6,648		0.67	%
Total deposits	8,792,717		24,596		0.37	%	7,720,799		18,146		0.31	%
Securities sold under agreements to repurchase	124,249		298		0.32	%	163,622		395		0.32	%
FHLB advances and other borrowings	530,668		3,735		0.94	%	524,004		2,831		0.72	%
Subordinated debentures and subordinated notes payable	109,130		3,299		4.04	%	94,304		2,661		3.77	%
Total borrowings	764,047		7,332		1.28	%	781,930		5,887		1.01	%
Total interest-bearing liabilities	9,556,764		$	31,928	0.45	%	8,502,729		$	24,033	0.38	%
Noninterest-bearing liabilities	89,770						107,432
Stockholders' equity	1,689,491						1,506,740
Total liabilities and stockholders' equity	$	11,336,025					$	10,116,901
Net interest spread					3.48	%					3.50	%
Net interest income and net interest margin (FTE) ¹			$	301,249	3.95	%			$	269,469	3.97	%
Less: Tax equivalent adjustment			$	6,477					$	5,522
Net interest income and net interest margin - ties to Statements of Comprehensive Income			$	294,772	3.87	%			$	263,947	3.89	%

¹Annualized for all partial-year periods.
²Interest income includes $3.0 million and $1.9 million for the first nine months of fiscal year 2017 and 2016, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.



	Current Quarter vs Comparable Quarter									Current 9 month period vs Comparable 9 month period
	Volume			Rate			Total			Volume			Rate			Total
	(dollars in thousands)
Increase (decrease) in interest income:
Cash and cash equivalents	$	(112	)	$	118		$	6		$	173		$	228		$	401
Investment securities	116			404			520			307			896			1,203
Non ASC 310-30 loans	7,753			1,233			8,986			36,349			(592		)	35,757
ASC 310-30 loans	(121		)	1,070			949			651			1,663			2,314
Loans	7,632			2,303			9,935			37,000			1,071			38,071
Total increase	7,636			2,825			10,461			37,480			2,195			39,675
Increase (decrease) in interest expense:
NOW, money market & savings deposits	548			2,355			2,903			1,768			4,792			6,560
Time deposits	(85		)	209			124			(117		)	5			(112		)
Securities sold under agreements to repurchase	(26		)	(12		)	(38		)	(95		)	—			(95		)
FHLB advances and other borrowings	(648		)	656			8			36			868			904
Subordinated debentures and subordinated notes payable	68			69			137			432			206			638
Total increase (decrease)	(143		)	3,277			3,134			2,024			5,871			7,895
Increase (decrease) in net interest income (FTE)	$	7,779		$	(452	)	$	7,327		$	35,456		$	(3,676	)	$	31,780



		For the three months ended:								For the nine months ended:
	Included within F/S Line Item(s):	June 30, 2017			March 31, 2017			June 30, 2016		June 30, 2017			June 30, 2016
		(Dollars in thousands)
Provision for loan and lease losses	Provision for loan and lease losses	$	5,796		$	4,009		$	5,372	$	16,854		$	11,892
Net OREO charges	Net loss on repossessed property and other related expenses	152			397			379		1,208			479
(Recovery) reversal of interest income on nonaccrual loans	Interest income on loans	332			(25		)	1,505		233			1,320
Loan fair value adjustment related to credit	Net increase (decrease) in fair value of loans at fair value	(293		)	(251		)	2,722		(4		)	2,296
Total		$	5,987		$	4,130		$	9,978	$	18,291		$	15,987



	At or for the nine months ended:						At or for the three months ended:
	June 30, 2017			June 30, 2016			June 30, 2017			March 31, 2017			December 31, 2016			September 30, 2016			June 30, 2016
	(Dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:
Net income - GAAP	$	107,125		$	87,495		$	35,060		$	35,162		$	36,903		$	33,758		$	26,360
Add: Acquisition expenses	710			12,950			—			—			710			2,742			12,179
Add: Tax effect at 38%	(270		)	(4,921		)	—			—			(270		)	(1,042		)	(4,628		)
Adjusted net income	$	107,565		$	95,524		$	35,060		$	35,162		$	37,343		$	35,458		$	33,911

Weighted average diluted common shares outstanding	59,065,402			55,993,011			59,130,632			59,073,669			58,991,905			58,938,367			57,176,705
Earnings per common share - diluted	$	1.81		$	1.56		$	0.59		$	0.60		$	0.63		$	0.57		$	0.46
Adjusted earnings per common share - diluted	$	1.82		$	1.71		$	0.59		$	0.60		$	0.63		$	0.60		$	0.59

Tangible net income and return on average tangible common equity:
Net income - GAAP	$	107,125		$	87,495		$	35,060		$	35,162		$	36,903		$	33,758		$	26,360
Add: Amortization of intangible assets	1,927			2,239			538			550			839			1,024			822
Add: Tax on amortization of intangible assets	(264		)	(660		)	(50		)	(50		)	(163		)	(220		)	(220		)
Tangible net income	$	108,788		$	89,074		$	35,548		$	35,662		$	37,579		$	34,562		$	26,962

Average common equity	$	1,689,491		$	1,506,740		$	1,715,460		$	1,686,770		$	1,666,243		$	1,647,155		$	1,567,372
Less: Average goodwill and other intangible assets	749,667			712,049			749,074			749,638			750,290			750,756			727,707
Average tangible common equity	$	939,824		$	794,691		$	966,386		$	937,132		$	915,953		$	896,399		$	839,665
Return on average common equity *	8.5		%	7.8		%	8.2		%	8.5		%	8.8		%	8.2		%	6.8		%
Return on average tangible common equity **	15.5		%	15.0		%	14.8		%	15.4		%	16.3		%	15.3		%	12.9		%

* 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	$	294,772		$	263,947		$	98,730		$	97,399		$	98,642		$	98,227		$	91,652
Add: Tax equivalent adjustment	6,477			5,522			2,154			2,182			2,142			2,012			1,905
Net interest income (FTE)	301,249			269,469			100,884			99,581			100,784			100,239			93,557
Add: Current realized derivative gain (loss)	(11,681		)	(15,832		)	(3,320		)	(3,875		)	(4,486		)	(4,895		)	(5,005		)
Adjusted net interest income (FTE)	$	289,568		$	253,637		$	97,564		$	95,706		$	96,298		$	95,344		$	88,552

Average interest-earning assets	$	10,185,187		$	9,061,896		$	10,124,404		$	10,144,875		$	10,286,284		$	10,173,743		$	9,528,576
Net interest margin (FTE) *	3.95		%	3.97		%	4.00		%	3.98		%	3.89		%	3.92		%	3.95		%
Adjusted net interest margin (FTE) **	3.80		%	3.74		%	3.87		%	3.83		%	3.71		%	3.73		%	3.74		%

* 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.