Earnings Release | July 27, 2017
Net Income ($MM) Adj. Net Income ($MM) (2) Efficiency Ratio (2) About GWB 2 Company Snapshot Stock Performance Strong Earnings Growth and Efficiency Market Presence Stock Performance 06/30/16 - 06/30/17: • Price Range: $30.15-$45.62 • Avg. Close: $38.37 • 12-month Price Increase: 29.39% (1) Source: American Banker's Association (2) Efficiency ratio and adjusted net income are non-GAAP measures. See appendix for reconciliations. • Full-service regional bank focused on relationship-based business and agribusiness banking • 174 banking branches across 9 states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota • Headquartered in Sioux Falls, South Dakota • 6th largest farm lender bank in the U.S. as of 03/31/17 (1) FY13 FY14 FY15 FY16 $96 $105 $109 $121 $10 $131 51% 50% 48% 50% FY16 YTD FY17 YTD $87 $107 $9 $96 $108 50% 46%
Executing on Strategy Focused Business Banking Franchise with Agribusiness Expertise Strong Profitability and Growth Driven by a Highly Efficient Operating Model Risk Management Driving Strong Credit Quality Strong Capital Generation and Attractive Dividend (1) This is a non-GAAP measure. See appendix for reconciliation. • Loans outstanding increased by $94.4 million compared to March 31, 2017 ◦ Growth focused in the CRE and C&I segments, partially offset by continued Ag reductions • Net interest margin continued to expand compared to the March 2017 quarter as a result of increasing asset yields and a more favorable asset mix • Deposit balances declined during the quarter but have increased 4.1% FYTD • Fully diluted EPS of $0.59 for the quarter compared to $0.46 for 3QFY16, an increase of 28.3% • Attractive FYTD profitability metrics: 1.26% ROAA and 15.5% ROATCE(1) • Efficiency ratio(1) of 46.7% for the quarter compared to 58.8% for the same quarter of FY16 (elevated because of acquisition expenses) and 47.0% for the quarter ended March 31, 2017 • Net charge-offs of $4.3 million during the quarter represent 0.20% of average total loans on an annual basis, down from March 31, 2017 • Loans graded "Substandard" increased by 3.7% to $250.6 million and loans graded "Watch" decreased by 8.7% to $299.0 million compared to September 30, 2016 while nonaccrual loans decreased by 2.2%, each representing stability of key credit metrics • All regulatory capital ratios remain above minimums to be considered “well capitalized” • Strong capital generation supports a quarterly dividend of $0.20 per share ◦ Dividend payable August 23, 2017 to stockholders of record as of the close of business on August 11, 2017 3
3QFY16 3QFY17 $93.6 $100.9 3.95% 4.00% 3.74% 3.87% Revenue (1) Chart excludes changes related to loans and derivatives at fair value which netted $(3.0) million for the quarter. Dollars in thousands. (2) Adjusted NIM (FTE) is a non-GAAP measure. See appendix for reconciliations. 4 Revenue Highlights Net Interest Income ($MM) and NIM Noninterest Income (1) NIM Analysis (2)Net Interest Income (FTE) NIM (FTE) Adjusted NIM (FTE) • Net interest income (FTE) up 7.8% compared to 3QFY16 primarily driven by increased average loan balances • NIM (FTE) up 2 basis points and adjusted NIM (FTE) (2) up 4 basis points on a sequential quarter basis ◦ Expanding asset yields following four Fed rate hikes and more favorable asset mix ◦ Cost of liabilities rising more slowly than asset yields • Noninterest income, excluding the change in fair value of fair value options loans and the net gain (loss) on related derivatives, increased 10% compared to 3QFY16, primarily due to increases in wealth management fees and other income Service charges and other fees, $12,730 Wealth management, $2,433 Mortgage banking income, net, $1,828 Other, $1,522 FY16 YTD FY17 YTD $269.5 $301.2 3.97% 3.95% 3.74% 3.80%
3QFY16 3QFY17 $49.0 $54.9 $61.2 58.8% 46.7% 3QFY16 4QFY16 1QFY17 2QFY17 3QFY17 $26 $34 $37 $37 $35 $35 $35 $8 $34 $1 $35 1.00% 1.19% 1.28% 1.26% 1.25% Earnings, Expenses & Provision 5 Highlights Provision for Loan Losses ($MM)Noninterest Expense ($MM) Net Income ($MM) (1) Efficiency ratio and adjusted net income are non-GAAP measures. See appendix for reconciliations. 2.0% increase in total noninterest expense sequentially • Net income increased 33.0% compared to 3QFY16 ◦ EPS of $0.59 per fully diluted share • Efficiency ratio(1) was 46.7%, down from 58.8% 3QFY16 (elevated due to acquisition expenses) and 47.0% for 2QFY17 • Provision for loan losses increased compared to the comparable periods in FY16 primarily driven by higher required specific reserves Noninterest expense Acquisition expense Efficiency Ratio (1) 3QFY16 3QFY17 $5.4 $5.8 Net Income Adjusted Net Income (1) ROAA FY16 YTD FY17 YTD $87 $107 $9 $96 $108 1.16% 1.26% FY16 YTD FY17 YTD $137.4 $160.6$150.3 $161.3 50.0% 46.3% FY16 YTD FY17 YTD $11.9 $16.9
Balance Sheet Overview 6 Balance Sheet Highlights Total Loans ($MM) Deposits ($MM) Capital (1) TCE / TA is a non-GAAP measure. See appendix for reconciliation. • Outstanding loans increased $94.4 million during the quarter, bringing FYTD loan growth to 1.3% ◦ Loan growth focused in CRE and C&I portfolio segments, partially offset by Ag outflows • Deposits declined $132.8 million, or 1.5%, during the quarter in line with management's expectation for seasonal and cyclical outflows, bringing FYTD growth to 4.1% • All key regulatory capital ratios increased compared to September 30, 2016 4.1% FYTD growth FY13 FY14 FY15 FY16 3QFY17 $6,363 $6,787 $7,325 $7,819 $8,792 $864 $8,6831.3% FYTD growth Total Loans Loans Acquired Total Deposits Deposits Acquired Cost of Deposits FY13 FY14 FY15 FY16 3QFY17 12.4% 11.8% 10.9% 11.1% 11.5% 13.8% 12.9% 12.1% 12.2% 12.6% 8.2% 8.2% 8.3% 8.5% 9.2% Tier 1 Capital Total Capital TCE / TA (1) FY13 FY14 FY15 FY16 3QFY17 $6,948 $7,052 $7,387 $7,742 $8,959 $863 $8,605 0.48% 0.36% 0.32% 0.32% 0.42%
FY13 FY14 FY15 FY16 3QFY17 $219 $288 $310 $328 $299 $139 $358 $126 $414 $184 $494 $242 $570 $251 $550 5.6% 6.1% 6.7% 6.6% 6.3% Asset Quality 7 Highlights Net Charge-offs / Average Total Loans Sound Credit QualityWatch & Substandard Loans ($MM) “Watch” and “Substandard” loans declined as a percentage of total loans Watch Loans Substandard Loans % of Total Loans FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 YTD 0.65% 0.88% 0.54% 0.44% 0.14% 0.13% 0.12% 0.27% FY12 FY13 FY14 FY15 FY16 3QFY17 2.76% 2.03% 1.16% 0.93% 1.46% 1.41% 42.4% 43.3% 60.2% 83.8% 51.1% 51.9% NALs / Total Loans Reserves / NALs • Ratio of ALLL / total loans was 0.73% at June 30, 2017, consistent with 0.72% at March 31, 2017 ◦ Comprehensive Credit-Related Coverage is 1.19%(1), inclusive of acquired loan marks and credit adjustment on loans at fair value • Nonaccrual loans decreased by $4.0 million, loans graded “Watch” decreased $25.5 million and loans graded “Substandard” decreased $13.1 million during the quarter ◦ These metrics have remained stable through the year ◦ No significant deterioration of Ag loans occurred during the quarter and corn and soybean prices are gradually increasing (1) Comprehensive Credit-Related Coverage is a non-GAAP measure.
Proven Business Strategy 8 Focused Business Banking Franchise with Agribusiness Expertise Risk Management Driving Strong Credit Quality Attract and Retain High-Quality Relationship Bankers Invest in Organic Growth While Optimizing Footprint Deepen Customer Relationships Strong Profitability and Growth Driven by a Highly Efficient Operating Model Strong Capital Generation and Attractive Dividend Explore Accretive Strategic Acquisition Opportunities
Forward-Looking Statements: This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements about Great Western Bancorp, Inc.’s expectations, beliefs, plans, strategies, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipates,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” "views," “intends” and similar words or phrases. In particular, the statements included in this press release concerning Great Western Bancorp, Inc.’s expected performance and strategy, the outlook for its agricultural lending segment and the interest rate environment, beyond fiscal year 2016 are not historical facts and are forward-looking. Accordingly, the forward- looking statements in this press release are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties, including those related to the recently-completed acquisition of HF Financial Corp., that could cause actual results to differ materially from those expressed. All forward-looking statements are necessarily only estimates of future results, and there can be no assurance that actual results will not differ materially from expectations, and, therefore, you are cautioned not to place undue reliance on such statements. Any forward-looking statements are qualified in their entirety by reference to the factors discussed in the sections titled “Item 1A. Risk Factors” and "Cautionary Note Regarding Forward-Looking Statements" in Great Western Bancorp, Inc.’s Annual Report on Form 10-K for the fiscal year ended September 30, 2016, and other periodic filings with the SEC, including its Quarterly Reports on Form 10-Q for the periods ended June 30, 2016, December 31, 2016, and March 31, 2017. Further, any forward-looking statement speaks only as of the date on which it is made, and Great Western Bancorp, Inc. undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Non-GAAP Financial Measures: This presentation contains non-GAAP measures which our management relies on in making financial and operational decisions about our business and which exclude certain items that we do not consider reflective of our business performance. We believe that the presentation of these measures provides investors with greater transparency and supplemental data relating to our financial condition and results of operations. These non-GAAP measures should be considered in context with our GAAP results. A reconciliation of these non-GAAP measures appears in our earnings release dated July 27, 2017 and in Appendix 1 to this presentation. Our earnings release and this presentation are available in the Investor Relations section of our website at www.greatwesternbank.com. Our earnings release and this presentation are also available as part of our Current Report on Form 8-K filed with the SEC on July 27, 2017. Explanatory Note: In this presentation, all financial information presented refers to the financial results of Great Western Bancorp, Inc. combined with those of its predecessor, Great Western Bancorporation, Inc. Disclosures 9
Appendix 1 Non-GAAP Measures
Non-GAAP Measures 11 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 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.
Non-GAAP Measures 12 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 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. 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.
Non-GAAP Measures 13 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 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
GWB Legacy - Loans at Amortized Cost GWB Legacy - Loans at Fair Value HF Financial Corp. Acquired Loans Other Acquired Loans Total ALLL $ 60,888 $ — $ 865 $ 2,461 $ 64,214 Remaining Loan Discount $ — $ — $ 20,909 $ 12,227 $ 33,136 Fair Value Adjustment (Credit) $ — $ 7,378 $ — $ — $ 7,378 Total ALLL / Discount / FV Adj. $ 60,888 $ 7,378 $ 21,774 $ 14,688 $ 104,728 Total Loans $ 6,868,753 $ 1,049,548 $ 700,682 $ 172,869 $ 8,791,852 ALLL / Total Loans 0.89% —% 0.12% 1.42% 0.73% Discount / Total Loans —% —% 2.98% 7.07% 0.38% FV Adj. / Total Loans —% 0.70% —% —% 0.08% Total Coverage / Total Loans (1) 0.89% 0.70% 3.10% 8.49% 1.19% Comprehensive Credit-Related Coverage ($MM) (1) Comprehensive Credit-Related Coverage is a non-GAAP measure that Management believes is useful to demonstrate that the FV adjustments related to credit and remaining loan discounts consider credit risk and should be considered as part of total coverage.
Appendix 2 Accounting for Loans at FV and Related Derivatives
Loans at FV and Related Derivatives Overview Summary • For certain loans with an original term greater than 5 years with a fixed rate to the customer, Great Western Bank (“GWB”) has entered into equal and offsetting fixed-to-floating interest rate swaps with two US counterparties • Total size of the portfolio was $1.05 billion at June 30, 2017 • GWB has elected the Fair Value Option (ASC 825) on these loans and applies a similar treatment to the related derivatives: • Changes in the fair value of the loans and the derivatives and the current period realized cost (benefit) of the derivatives (i.e., the net pay fixed/receive floating settlement) are recorded in earnings through noninterest income • This differs significantly from most peers who have elected Hedge Accounting treatment • The historical election is irrevocable so the concept will be present for the foreseeable future in GWB’s financial statements even if different accounting elections are made on future originations • Management presents non-GAAP measures to provide more clarity on the underlying economics Income Statement Line Item: Net increase (decrease) in fair value of loans at fair value Net realized and unrealized gain (loss) on derivatives Net Relationship Notes Increase (decrease) in FV related to interest rates $ 5,768 $ (5,768) $ — (1) Increase (decrease) in FV related to credit $ 292 $ — $ 292 (2) Current period realized cost of derivatives $ — $ (3,320) $ (3,320) (3) Subtotal, loans at FV and related derivatives $ 6,060 $ (9,088) $ (3,028) (4) (1) Equal and offsetting each period. Changes in the FV of each financial asset and liability driven by current compared to contractual rates. (2) Management records an adjustment for credit risk in noninterest income based on loss history for similar loans, adjusted for an assessment of existing market conditions for each loan segment. The FV adjustment related to credit is not included in the ALLL but loans are included in the ALLL coverage ratio denominator. (3) Current period actual cost of fixed-to-float interest rate swaps. Within non-GAAP financial measures, management reclassifies this component to interest income, resulting in adjusted interest income, adjusted net interest income and adjusted NIM, reflecting the underlying economics of the transactions. All else equal, this drag on earnings will reduce as short-term LIBOR rates increase. (4) While US GAAP mandates the presentation of these items in noninterest income, management believes the residual net amount economically represents the net credit exposure of this segment of the portfolio - presented as a "credit-related charge" in the earnings release and elsewhere (see note (2)) - and the current period derivative cost which should be analyzed relative to gross interest income received from the loan customers (see note (3)) as presented in non-GAAP measures. 16
