Great Western reports COVID effect on business

July 30, 2020

Great Western Bancorp Inc. has reported net income of $5.4 million, or 10 cents per diluted share, for the third quarter of fiscal 2020, as the COVID-19 pandemic created continued impacts on the business.

Adjusted net income, which excludes the COVID-19 pandemic impact on goodwill, intangible assets, and credit and other related charges, was $5.4 million, or 10 cents per diluted share, for the third quarter, which ended June 30. That compares to $29.1 million, or 52 cents per diluted share, in the second quarter.

In the second quarter, Great Western reported a net loss of $740.6 million, or $13.25 per share. That included recognizing an impairment included in noninterest expense of $742.4 million, of which $622.4 million stemmed from goodwill related to the acquisition of Great Western Bank in 2008 by National Australia Bank, $118.2 million from goodwill related to subsequent acquisitions and $1.8 million from certain intangible assets, which were considered impaired given the market and valuation disruption during the quarter.

“While the business environment remained challenging this quarter, we focused on meeting customer needs and continued to find ways to be more agile with our remote workforce,” said Mark Borrecco, who became president and CEO in March. “Additionally, our new chief credit officer has been essential in assessing our loan portfolio and developing a strategy to improve our credit performance. Finally, we generated core profits despite a significant credit charge, which further added to our stable capital position.”

Great Western has reopened 140 branches in the markets where COVID-19 cases have remained lower, while seven branches are fully closed. A majority of employees who can work from home are doing so.

“Social distancing, restrictions on in-person meetings and conferences, company travel restrictions and increased sanitary protocols all remain in place and are all intended to offer the best protection for our employees and customers, and enhance our ability to provide our banking services,” the company said.

“We are supporting our employees with paid time off, work from home flexibility, PTO cash out, volunteer time off and a new focus for our internal diversity and inclusion council. Finally, as of July 20, 2020, we are supporting our customers with PPP lending, having provided $724.4 million in loans to over 4,600 customers, improved engagement with customers in impacted segments and a commitment to working with customers for solutions as we approach the end of the first round of payment deferrals.”

The bank continues to evaluate the impact of COVID-19 on its loan portfolio, it said.

“Industries such as hotels and resorts, restaurants, oil and energy, retail malls, airlines and health care have experienced significant revenue loss due to COVID-19,” it said, adding that hotels and resorts represent 11.6 percent of total loans, restaurants represent 1.6 percent, arts and entertainment are 1.3 percent, senior care is 3.5 percent and skilled nursing is 2.4 percent.

Loans graded substandard increased by $70.8 million, or 11.3 percent, to $698.5 million. The increase in loans graded substandard was primarily related to two senior care credits previously rated as watch that deteriorated further during the quarter.

“Loan exposure in such other identified industries is either immaterial or has not shown general distress thus far. At this time, it is difficult to determine ultimate impact upon our portfolio,” the bank said.

The bank said the credit-related adjustments reflect the best estimate of incurred losses in the portfolio as of June 30.

“While circumstances have improved in certain cases, many individuals, families and businesses are still dealing with uncertainty and challenges of COVID-19,” Borrecco said. “We feel the best approach is a cautious one, which means we will be judicious with our branch and office reopening plans. As for our customers and communities, we will continue to provide proactive support and find ways to help them navigate these uncertain times.”

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Great Western reports COVID effect on business

Great Western reported a profitable quarter amid what its CEO called a challenging business environment.

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