Great Western Bancorp. Inc. (NYSE:GWB) Q4 2018 Earnings Conference Call Transcript

Oct 25, 2018 • 08:30 am ET


Great Western Bancorp. Inc. (NYSE:GWB) Q4 2018 Earnings Conference Call Transcript


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Good morning, and welcome to the Great Western Bancorp Fourth Quarter and Full Year Fiscal Year 2018 Earnings Announcement Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Ann Nachtigal. Please go ahead.

Ann Nachtigal

Thank you, Phil, and good morning, everyone. Joining us this morning on Great Western Bancorp's fourth quarter and full year fiscal year 2018 conference call are Ken Karels, Chairman and CEO; Doug Bass, President and COO; Peter Chapman, CFO; Karlyn Knieriem, CRO; and Michael Gough, our Chief Credit Officer.

(Forward Looking Cautionary Statements)

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

With that, let me turn it over now to Great Western Bancorp's Chairman and CEO, Ken Karels. Ken?

Kenneth James Karels

Good morning, and thank you for joining the call. Net income for the quarter was strong at $42.3 million or $0.72 per share, an increase of 13%. Adjusted net interest margin declined slightly to 3.77% as we focused on deposit growth this past year. Loan originations remained solid, but prepayments of loans accelerated, resulting in an increase of 0.4% for the quarter and 5% for the year. Our efficiency ratio remained strong at 48.1% for the quarter, but was elevated slightly due to some OREO expense. Profitability was exceptional, with our return on tangible common equity at 15.7%.

Now for more insight on our fourth quarter financial results, I'd like to turn the call over to our Chief Financial Officer, Peter Chapman. Pete?

Peter Chapman

Thanks, Ken, and good morning, everybody. Thanks for joining us. Looking to revenue, net interest income was $126.9 million for the quarter, which was in line with the prior quarter, and net interest margin for the quarter was 3.79% and our adjusted net interest margin, 3.77%. Adjusted net interest margin declined 17 basis points quarter-over-quarter, with 7 basis points of this attributable to a $2 million reduction in purchase loan interest and 4 basis points from elevated interest reversals from loans moving to non-accrual status.

We do not expect these items to reoccur next quarter. Outside of these two items, the remaining 6 basis point decline was driven by a 12 basis point increase in the cost of deposits, partly offset by a 5 basis point increase in loan yield. A lower increase in LIBOR compared to the prior quarter also contributed to a 1 basis point decline. We'd expect margins to stabilize in the following quarter.

Non-interest income for the quarter was $19.3 million, a 2% increase over the prior quarter. The increase was driven by stronger service charge income through an increase in commercial credit card volumes and seasonally higher NSF income, an increase in wealth management income, and seasonally stronger mortgage