GWB - Earnings call transcript Q2 2020 | Great Western Bancorp, Inc.

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Operator

Good morning and welcome to Great Western Bancorp's Second Quarter Fiscal Year 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator instructions]

Joining us on the call today, we have Mark Borrecco, President And Chief Executive Officer; Doug Bass, Chief Operating Officer; Peter Chapman, Chief Financial Officer; Karlyn Knieriem, Chief Risk Officer; and Seth Artz, Head of Investor Relations.

Before getting started, Great Western would like to remind you that today's presentation may contain forward-looking statements that are subject to certain risks and uncertainty that could cause the company's actual future results to materially differ than those discussed. in COVID-XX environment pandemic. true stemming extreme especially the from is the with current uncertainty This

well SEC Please contained of on as in to the the their refer the presentation the forward-looking company's risk company's full for a filings statements factors. disclosure as discussion periodic website

be this and Western's only non-GAAP upon certain assist provided Reconciliation relied event Additionally, on you financial should results to is measure References in results. being the referenced today's will measures Please call. non-GAAP Great presentation. and measures and to trends performance non-GAAP not discussed understanding financial note, actual a be conference measures appropriately as within are are recorded. included of such for

Great Borrecco. President Mr. I Executive Officer, please Chief Mark, Western Bancorp's would to over now like Mark and turn proceed. the to conference

Mark Borrecco

much, Thank Good exciting, My start honored manage for COVID-XX the Western the thank joining like you through as saying Great call. and pandemic. to that the all related morning to have I challenges been I'm few truly weeks would joined by you the to we so have first operator. family.

watch our While It's me insight staying on time of of has to staff the been you this the provided our remains the making together for caliber focused exceptional communities situation experience into to come in their fluid, initial the life to support and team employees. customers need. great. Thank

focus I to performance, our on current we Before financial want operating our discuss environment.

members who one-time for out our work of our supplemental non-retail included for our PTO We hard support retail rewarded need employees and remotely, XX% with all bonus option a than over team. have working a more employees support. cast continued also XXX may team which their of We is and

access six Program. with local of branches our We adjusted XXX open aforementioned Paycheck ups, of but all, Protection of dedication the our small our remain the businesses using with and staff, drive hours. limited frontline Because supported

X,XXX totaling million of over applications, completed more $XXX loans. We have than

This have give widespread to regarding commercial relief retail our XXX. and disruption. loan help will this worked over manage term of with those modifications through they short We clients as the tune customers

We to are as monitoring these also loan customers segments, they ensure close uncertain and our be staying also issues in allowing like hospitality, our we times, proactive navigate to to have expanded providing in identifying us solutions. while key

minimizing extremely have adjust short, In organization Today, nimble our our critical focused the our pandemic. a maintaining and support been like of are running to soundness we is also safety we times that and business we risk as and customer level base, is model from while smoothly this. in

is all GWB for Officer, This our forward Even Steve current a asset were huge look with Lending. we is and to strong welcoming an knowledge most Steve recruit attract credit performance. especially C&I the especially, Credit able XX. to quality Chief Ag with new bank to experienced to executive CRE, May Steve Yose. We the of win on Steve, challenges, a given

which were this credit notable of goodwill, the to environment and right and we the by steps as taken quarter increasing our impairing current our results Lastly, measures provision given shows, take our uncertainty. have level

Now, the turn our Pete to to I Chief financial for our over Pete? Chapman. Financial would insight on call results, Officer, like

Peter Chapman

release quarter to, presentation breakout significant market detailed A recent results also everybody. bit morning, two Thanks the Mark Mark earnings this discussing release earnings the spend that time our and in in slide items included good I three of itself. within and light within to a referred little of of want is just conditions.

XXXX purchase worth other noting of parent the of was totaling Australia in million intangible goodwill additional National from It's acquisitions. and The and $XXX previous first subsequent for item the impairment assets. million goodwill Bank relates of balance to an relates to million $XXX Bank's $XXX that also the Great an Western full

market now actuality, business, sheet the with is the these in particularly in current balance reflective conditions. more So,

aware, not As be position. and were our you previously, capital does affect charge would intangibles capital from goodwill this so a deduction

both aggregate of relates credit million million pretax related an provision and second inputs credit relates attributable credit The driven collective in million loss $X.X a to calculations. our in of and adjustment $XX.X the qualitative loan condition charges. a charges value lease on The these in $XX for significant fair and -- loan reserve other into mark by these expense were our item portfolio, to XX deterioration to which a economic majority

allowance coverage increased ratio X.XX% of a less and other X.XX%, to to our and material have items percentage up X.X% adjustments respectively. loans as These from and ratio credit significantly comprehensive X.XX%

holding OREO hospitality environment. In the an impaired addition, $X.X current by million, given we

As we reflect CECL X, reminder, credit for and so not adopted charges XXXX, effective the do coverage a October CECL. quarter

and guidance are updated other light and made economic we prior redacting One is key point and as business subsequent becomes the landscape the be We'll COVID-XX will available being conditions. quarters. in we monitoring on it of significant impacts provide information the pandemic in

decline, basis million assets contributed quarter, an net $XXX NIM decreased adjusted for in the while the deposits in decline was prior March million basis XX basis XX increased XX points of cuts in compared The basis Looking decline to rate loan XXX quarter. point the basis points of $XXX a revenue, total in four income total to emergency points NIM early interest to X.XX%. Interest with to yields quarter. versus earning points in of

re-pricing our slide floors light new on timelines In on six rate gives loan portfolio. a environment on this we provided chart our of loan rate which portfolio, for detail lower and additional

floors we yielding billion fixed loans at billion recent of of portfolio $X.X now cuts, yielding the X.XX% have and variable X.XX%. $X.X alongside our rate With

as fed NIM focused customer remain behavior. and on will funding We changes lending reducing PPP and decisions, deposit the quarter through management, rate pricing we navigate in

the for with and a quarter. fee decline quarter Non-interest were to $XX.X charge million for and March activity to income charges, in volumes. debit compared being both the million value in combined including credit and Due slower fair for noticeable activity in income, other quarter not COVID transaction the card March seasonally $XX.X prior service

legal charges for of $XX.X noted in place were quarter. earlier, and a million expenses OREO compared was flexibility keeping the active $X.X their support pre-COVID-XX that bonus impairment credit supporting Expenses, excluding the bank increase merit staff to open hard in in recognition million our of January, $X prior retail in customers. $X certain million and and million increases $XX.X our in and by million to The quarter took work to and driven that in paid was the

hold equity a the the and the were common of Tangible with authorization quarter of strong quarter. $XX capital Tier of tangible share X $XX million given buybacks ratio increased in earlier X.X%. in remaining value the ended book common Our environment. the is equity to also ratio completed share very of current per XX.X% position and $XX.XX million on quarter,

dividend quarters. XX, of share through ending in as The to will quarter this March of for the COVID this is Board and ensure of subsequent We as help $X.XX declared impact monitor per the strong the the context the reflects dividends consider a within and XXXX desire uncertainty pandemic. possible of balance sheet COVID-XX the

Operating asset for our hand Now Officer, Doug. and to I'll to update portfolio you, quality, on Doug Chief an Bass. Over our over

Doug Bass

included for increase of in balances. system trended planned growth a commitments deposit million with And and Loan $XX in as Pete. quarter. the construction This nominal well. growth unfunded our perspective, Thanks, draws saw we

and the were on asset travel specific our we as composition of it restaurants, this loan and such hotels, pandemic and retail, every In COVID-XX. will more additional portfolio. economic impacted on the provided light by environment, focused economy nearly detail segments entertainment sector from and portfolio be quality In on COVID-XX disturbance and and

have for indicators actively with sectors We entire of the these early and stress. been reviewing along portfolio

in given relative geographic included and distribution, they size to entertainment additional with hotel, activity. business sudden with have concentrations, and For been quarter, along the including the on this fall we abrupt impacted how restaurant information portfolio, off

loans portfolio by is have X.X% closer segment in this by includes Hotel Entertainment, these million X.X% The estate. real XX% segments, and total Places, of XX% portfolio. of of is portfolio The Entertainment secured Restaurant XX% estate. Drinking we $XXX secured million Looking total with The and also of Hotel portfolio Casino Restaurant billion is in and our in total Hotels. at real $X.X loans, and $XXX

additional to profile those in more added detail. slides two have We

XX% portfolio with seasoned the in XX% with is To average portfolio a borrowers multiple footprint, who of customer to to XX%. remaining related that is relationships, Hotel still the longstanding own loan summarize, footprint. have It value in an and reside properties

million hotels into $XX XXXX. in phases million on projects dates These have late this of scheduled commitments. construction, continue and good into to XX for give in advanced are portfolio There hotel us the Regular total with of reviews XXXX $XX insight segment. various completion

complete, year with the when of progress material above conditions belt underwater. ag, on to attention average the sector or grain is XX% tracking process ago, downgrades annual process. Turning corn renewal our better nearly the was vastly deficiencies our Planting than a is with much from no

COVID supply overall prices is worked details demand and with disruption pandemic the through. in chains The commodity impacting are being those

commodity of direct a sectors potentially that has in through to encouraged prices. launched relief that offset meaningful USDA package decline $XX provide are aid immediate We will the billion may payments most that

within in compared reached of $XX to ratio non-accrual in three quarter-on-quarter. substandard million bringing an Net totaling and quarter, X.XX%. this developments we to which level to flat were our year-to-date their workout million move million. quality. $X.X overall decreased stability $X.X process, quarter, $XXX prior quarter, loans did loans to million our contributed were a We increase charge-offs given to credits asset modestly This the Watch

resolve diligently these Our specialized is to business service working team credits.

profitable customers recent performance COVID-XX we from market Dairy based coupled and a a we dairy prices, prices to decline upgrades will XXXX driven will customers hedging pandemic. continue, our from support of Previously, their in but prevailing programs. marketing has June from we with expect performance. milk milk upgrades the Should that volatility be lower communicated had to number see to quarter been at seen delay ensure in sustainably substandard on would had our strong, current by the prices,

external resides risk addition being and That project rating substandard well progressing implemented, mentioned new with for we we Last a classification. are loan the in fiscal our fiscal rating to year. parallel watch quarter, of system is the the mention final special to of the the of run and new ahead calibration that between transition reporting in of year, half the last stages

Mark. to back Now

Mark Borrecco

Doug. Thanks,

portfolio asset and employees, our customers our supporting quality. one monitor priority After to is our improving loan continue my will communities. of number closely, the We safety while our

with As join Ag asset Lending Officer of Chief ability our previously, team extensive knowledge as bolster improve Steve our to quality. mentioned I Credit having his will

now call for the open up will Operator? We questions.

Operator

Thank you. [Operator Instructions]

today with Terry Stephens. will question of first question. McEvoy come Please your proceed from Our

Terry McEvoy

morning, Good everyone. Thanks. Hi.

Mark Borrecco

Hi, Terry.

Terry McEvoy

Any watchlist? hotel question. run And of seven non-accrual morning. you. through those Could loans Good -- little shared over size kind us loans? just credits? seven just There a Hi. $XX color national of loans. related Maybe give given relative my given million. is Thank Are those just one more you they the

Peter Chapman

are of No. No, No, the they hotel relationships. no. not

got over before I we've Terry, $X So, million the at think, in was only COVID pandemic. that the and substandard moment,

or portfolio credits So, in terms is overall, participated Nothing pretty shared credits. of the snicks, strong.

know Doug, ones. those if bit I more on detail to don't give you larger want a

Doug Bass

Terry, risk relationships. adversely that's Yeah. Pete The And in as one seven, long-term mentioned, would with footprint all rated today. be there's only

Terry McEvoy

you. Thank Okay.

Operator

you. Thank

Our next with America. of Bank proceed will question Ebrahim from question. your come Poonawala Please of

Ebrahim Poonawala

Good morning.

Mark Borrecco

Ebrahim. morning, Good

Ebrahim Poonawala

for question new the Mark, guess, I on Mark. congrats role.

you how talk process coming into adoption, read around the the reducing power over outlook to quarters? reduction in of understand of relative -- generate terms It your the just the we despite dividend the sooner the bank in to reserves wanted that to to terms CECL the significantly EPS as us the of thought should dividend. lack Just expects build

Peter Chapman

Really, was process Yeah. part then of Look, the uncertainty the the Ebrahim. kick-off Mark, at just decision hand moment, Ebrahim. over I'll given to

quarter where stable. As them you metrics pretty the Mark for quality would while to be, say, we or have asset been like not

one We of downgrade as piece. seen result have really the COVID only, a I think,

dividend of as of in But We've the push to outlook, the reserve sort it would a talked in a and outlook got just quarter goodwill the just off. quarter commitments in was XX got quarter prudent build strong was looks We had have like maybe was well. appropriate days just thought but rather always we general than with the power, terms thought went just uncertainty how the others the it process. address also before moment, next just we same given we the coming thought thought make with the that next to about And forward. at a we any earnings the decision here pause going where as see in we've more it earnings, we've what

Mark Borrecco

sentiment. Pete. with agree Thanks, I would that Yeah.

-- you also Right understand for me, where of a we chance quality, it's right our arms uncertainty right -- as now, processes also with that we big a as that I congratulations win asset and thank think mentioning step that I the -- elements the to role into for new the the a we getting the the having sure for Officer place. around Credit in we Chief and have making Again, will have the organization. be are.

it And XX over days. step a is so, right the really for being next us now, prudent around

we mentioned, that revisit Pete that COVID a impacts have the And As will chance to much of to and better have pandemic. a by as time, the handle dividend. duration the

Ebrahim Poonawala

you. Thank

Peter Chapman

Thanks, Ebrahim.

Operator

will question D.A. of next come from with question. Rulis Davidson. Our proceed your Jeff Please

Jeff Rulis

previously progressions quarter. for credits Doug, wanted credits, morning. on that Good detail newer the there? credits? COVID, of Any was just brought Are from over problem new tipped transition anything those the in the some to in maybe I on new see the by Thanks. Question on identified non-accruals those.

Doug Bass

and that quarter hog Jeff. in in. segments of that one. a and It were went Within was they sector on other was all was ag our rating classified radar They the one in And Sure, there a previously XX/XX sector, all prior primarily end. had in were the was the and in, previously classified about prior healthcare, -- balance in quarter risk but been between C&I.

Jeff Rulis

Okay.

you -- think they it on? So, three said I came -- credits. that those was Are credits

Doug Bass

are healthcare between Yes. is healthcare. and hog XX/XX Two third the but sector, in the of the them and are Jeff, related, C&I balances roughly

Jeff Rulis

enough. Fair

you. Thank Okay.

Operator

of Please with Markets. proceed question RBC will Jon Capital from your question. Arfstrom next come Our

Jon Arfstrom

everyone. Good Thanks. morning

Peter Chapman

Good morning, Jon.

Mark Borrecco

Morning.

Jon Arfstrom

also was congratulations, fair the that easy, not accounting. goodwill. guess new thought -- on big getting a I congratulations I Mark, I and on rid role the of a never it's know number, but

fresh a it's start. So,

what But is get you, this of you asked lot you but I at guess, about and big change call picture feet, want Mark. first just the for to do Western? numbers, change you with stuff There's your see a opportunities? company? differently? the credit you you to We Great what where do you When do term near look do understand do at to What but it, headwinds, want the XX,XXX want

Mark Borrecco

see in And the How Thanks. eight first chance whole stress. an technologies, weeks for our amazing also Yeah. employees credits of organization can easier to me, to whether system how investments get do to getting step-up make the through of a people been terms just has some this one the journey and make see making at doing through at monitor we've I jobs, it successful me, easier only that how Great a think you for Western far to going smaller on is bank and that's to taking them numbers very easier rallied. has we more with and their expense and forward. customers strong Bank our And the things having make focused look not but manage, But us in our Historically, you efficiency ratio. that controls. handles easier to for

may have of more technology have that expense, will ultimately make we in that number amount far reducing processes, make technology investments but the and manual want this an of reducing efficient uptick those in our risk not place. in systems I by initial terms of that having pieces organization sure make these to the we slight

not So, from view foot make the a more only better bank We position of investments. the believe of manage efficiency, efficient, risk. those can but put foot a terms we I can bank XX,XXX make actually that strongly to targeted but actually the some view, in -- in

us. me And really, that I for big so is a opportunity think, for

we and I in look marketplace. at ourselves at also footprint how differentiate look I the our

of and processes our those lose don't to across footprint have while us more we activities, of make key feel. want the we I centralization standardized that changes while have and we local some While

but to strongly One And want us business core can believe differentiates is, local lose of in what values empowered how feel, that market our competition. our locally, think our globally. and win I I don't we from that's because

I around or but -- far processes. be able investments. with those lose far do efficiency our want manage to them making to us risk and don't And processes, increase make so, standardizing those want ability able the associated able to to want better better I to make that, I do targeted and

Jon Arfstrom

out pressure, pre-provision trajectory? It think slide a how the can we picture more understand enough. income you moving one a just pre-provision should Okay. how seems call in margin then think little want And like pretax, but little do you in But us parts A to I fees are from about terms for in Fair We softer, another squeeze question, lot you, us higher. pretax, for to here? Good. expenses or of Thanks. the maybe statement. the Pete. anything if big want about of

Peter Chapman

So, moving got parts look, the I Jon, there. think you

I it the piece little bit a this still better some will And mortgage think line emergency around will Obviously, next which exacerbated little -- fee the NIM, quarter was bit always I positive. by is of a quarter, the be be it a think cut. seasonally on softness. income then

as I at a Just the credit said, flow the will will how through on there's and through. charge that of the debit everybody card and moment at PPP income, around the just with home, surface staying uncertainty terms interchange how in flow bit of

and I in not, a quarter, amount see bit the parts, of for just plays just the think, more how this Jon, moving parts quarter. subsequent we you've before next given take So, but the will the guidance out got stock moving giving here

Jon Arfstrom

Thanks lot. Okay. a

Peter Chapman

Thanks.

Operator

question. of Please question your Andrew next Our proceed Sandler. Liesch Piper will come with from

Andrew Liesch

everyone. Morning

Mark Borrecco

Morning.

Andrew Liesch

the questions some quarter. the for on follow-up expenses Just

hundred a maybe dollars So of or one-time costs. the uptick in the commentation excess OREO maybe cost something thousand like and few

looking $XX made million in around ahead? be kind the if recognizing for rate quarters that maybe some back we the of of is investments could quarter, this there of okay, run So, some out,

Peter Chapman

Yes.

million Yeah. million quarter. in the of Andrew, You've got $XX to underlying, to the for $XX that sort

good So, run subsequent around to to yeah, in that's we we impact have COVID move around will that's baseline we anything to need run see quarters, then like. to off. the rate. base do just how But the And rate a go good and

Andrew Liesch

Great. Thanks. it my have other on got question. I

Operator

[Operator Instructions]

KBW. Our DelMonte of next proceed question come Damon your Please from will with question.

Damon DelMonte

everyone. during challenging Hey, good these times. well morning Hope everybody's doing

loan well to So, my fees you dollar amount on the looking related details amounts what activity, Thanks. realize to and bit on to get that, associated PPP little and as expect of the more a question, guys that? as with just loan modifications

Mark Borrecco

fluid, around you Yeah, Loan about it's running of the -- mods? pretty loan It's portfolio. at appreciate. XX% Damon, and as moment mods, it's at the

So, $X around around a portfolio, billion, it's about of XX% XXX the so it's -- $X.X runs the which ago. or day -- billion about on portfolio based about so information

Damon DelMonte

with PPP think million you loans, to then much from I And fees Great. regards are expecting activity, around that? the how in $XXX said in you

Peter Chapman

around it's X%. Yeah,

Damon DelMonte

X%? much. you Okay. Thank very

Peter Chapman

Damon. Thank you,

Operator

Our Janet from next JPMorgan. Please your of question with come Lee will question. proceed

Janet Lee

And morning. of is provided what that COVID to Good you loan see deferrals? in billion XXX in that I what are balances? customers. percentage Thanks. of your are those that loan And deferrals $X.X loans terms sensitive of

Peter Chapman

Yeh.

just that slowed So, been would portfolios dollar the that that about Janet, in is you $X.X $X.X service and industry has more expect billion, it's significantly. of billion. the that's about of one portfolio, half the of which we -- as And hotel amount, relation to

a of half those number spread After So, that, wide that's of different industries. pretty a about requests. across there's

really So, out there's material there. nothing particularly sticks else that

Janet Lee

you. Thank Great.

Peter Chapman

problem. No

Operator

as with of question. proceed with America. come Our Bank Poonawala follow-up will Please from your a Ebrahim next question

Ebrahim Poonawala

X.XX%, this quarter. I mark, if reserve Thanks. quarter correct Pete, the is discount like reserve of the X.X% the your the between on in the build, the heard ratio the just value have built following end reserve fair at about up and on like

the going Just pretty the adopt towards base. seems not but a since reserve like end talk had to significant us you of to it year, CECL you're obviously --

around of much trying helpful. coming quarters? be just build am more we just I a to that, some So, sense expect color get you in can reserve would could how If the over give

Peter Chapman

the our And obviously, this economic our end. updated Ebrahim. we March. a economic lot as conditions Yeah. in yet, Look, late quarter From going based there numbers rerun on provider, haven't came they was CECL on

numbers get to of the the sort focus was March. for right So,

an have So, updated on guidance look, at the CECL this piece. stage, don't

given at a uncertainty, want the I stage. Ebrahim, just give to And wouldn't range this

all bit able a of settle over July, down next this us do couple the hopefully stage. a we give might at you announcement be but Ebrahim, more color we're Given as quarters quarter. to in signs our for when of out, We results certainly,

of just quite that that, to Sorry but wouldn't moving about I a a parts like range lot of.

Ebrahim Poonawala

we of even need No, But quarters, reserve I incurred the migration, amount ex-CECL, a expect to that's coming that is which base you will you credit start a will in and to do should see start the seeing months Like we model, significant ramp-up assumption? fine. if credit? continue, under fair seeing that lead continued or reasonable

Peter Chapman

terms our we've of of It's feel question. a into stress significant go factors our good Look, we pretty been the portfolio. that in economic

bit we be you get feel strong of the not, little maintain we've if measures pretty Ebrahim. taken some it's function better reserve a or continue worse, may to potentially see things to just here, get a Really, a So, Ebrahim. going than we If yes, environment. build

So.

Ebrahim Poonawala

Thanks. right. All

Peter Chapman

Welcome. Thanks.

Operator

question-and-answer our for back Mark turn closing now would I conference remarks. all ahead. and Please any speakers concludes to to This go the like over the Borrecco Mr. session.

Mark Borrecco

Thank you, operator.

and transition. I appreciate the to the Chairman, say through the Ken, you in Before support Ken former want best I we I Karels. to your leave you my all call, thank predecessor retirement. wish

miss definitely you. will We

know my like joining and am Stay excitement I great have also we ahead so about safe, It the of have family. ready work I is I would and Great a so day. Thank us, but the you clear is a to Western team. of reiterate great deal much.

Great Western Bancorp (GWB) 1 May 202020 Q2 Earnings call transcript