GREAT WESTERN BANCORP, INC. 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 endedSeptember 30, 2019 , previously filed with theSEC . 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 this Quarterly Report on Form 10-Q and "Item 1A. Risk Factors" in both our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2019 and our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2020 . 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 endedJune 30, 2020 and references to "the comparable period" or "the comparable quarter" refer to the fiscal quarter endedJune 30, 2019 . 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 financial measure of each item are presented on a FTE basis unless otherwise noted. Overview We are a full-service regional bank holding company focused on relationship-based business and agri-business banking. We serve our customers through 175 branches in attractive markets in nine states:Arizona ,Colorado ,Iowa ,Kansas ,Minnesota ,Missouri ,Nebraska ,North Dakota andSouth 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 agri-business 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 endingSeptember 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) 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 and communication costs primarily associated with maintaining our Bank's loan and deposit functions; (iv) occupancy expenses for maintaining our Bank's facilities; (v) professional fees, includingFDIC insurance assessments; (vi) business development; and (vii) 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. Impact and Response to COVID-19 Pandemic We conduct business in nine states, includingArizona ,Colorado ,Iowa ,Kansas ,Minnesota ,Missouri ,Nebraska ,North Dakota andSouth Dakota . Many of these states have placed significant restrictions on businesses and individuals as a result of the COVID-19 pandemic. While many of these initial restrictions have been lifted, the recent surge of infections in some of these states raises the possibility that certain restrictions could re-imposed to contain further spread. As a financial institution, we are considered an essential business and therefore continue to operate on a modified basis to comply with governmental restrictions and public health authority guidelines. We have reopened 140 branches in the markets where COVID-19 cases have remained lower, only seven branches are fully closed to the general public, and the remaining branches are still being transacted through drive-up facilities, online, telephone or by appointment. Although we believe these arrangements will be fluid as the restrictions are re-evaluated by governmental authorities, we continue to operate and maintain our customer relationships. The health and safety of our employees and customers is a major concern to our management and every effort is being made to have employees work from home or, if working from one of our locations is required, to maintain appropriate social distancing and observe other health precautions. 37- -------------------------------------------------------------------------------- Through this time of disruption we have remained open for business supporting our customers while implementing our business continuity plan to mitigate the risks of the spread of COVID-19 to our employees and customers. A majority of our employees who can work outside of our offices 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. 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 internalDiversity & Inclusion Council . Finally, 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. Financial results for the first nine months of fiscal year 2020 include several items linked to the impact of the COVID-19 pandemic. Most significantly, during the second quarter of fiscal year 2020 we recognized an impairment of$742.4 million recorded in noninterest expense,$622.4 million of which stemmed from goodwill related to the acquisition of our Bank in 2008 by NAB,$118.2 million from goodwill related to subsequent acquisitions and$1.8 million from certain intangible assets, all of which were considered impaired given the market and valuation disruption during the period. The expense was offset in part by a related benefit from income taxes of$29.3 million . In addition, the COVID-19 impacts for the first nine months of fiscal year 2020 include$73.8 million in several credit and other related charges for loan and other real estate reserves, including a$59.7 million charge for general allowance increases in provision expense under the incurred loss model,$7.1 million and$3.3 million of charges for fair value credit risk and derivative reserves in noninterest income, respectively, a$3.3 million write down on an OREO hotel property negatively impacted by COVID-19 pandemic travel restrictions, and$0.4 million of charges for the reserve on unfunded commitments in noninterest expenses. All of these pretax expenses are offset in part by a related benefit from income taxes of$17.2 million . See "-Non-GAAP Financial Measures" section in this document for further discussion of the above items. Our management believes additional increases in credit and other related charges are likely to occur if the effects of the COVID-19 restrictions continue to negatively impact the loan portfolio. Furthermore, the onset of the COVID-19 pandemic has significantly heightened the level of challenges, risks and uncertainties facing our business and continuation of operations, including the following: •Market interest rates have declined significantly and these reductions, especially if prolonged, could adversely affect our net interest income, net interest margin and earnings; •We anticipate a potential slowdown in demand for our products and services, including the demand for traditional loans, although we believe the decline will likely be offset, in whole or in part, due to the new volume of PPP loans under the CARES Act and other governmental programs established in response to the pandemic; •We anticipate an increase in risk of delinquencies, defaults and foreclosures, as well as declining collateral values and further impairment of the ability of our borrowers to repay their loans, all of which may result in additional credit charges and other losses in our loan portfolio; •The COVID-19 pandemic restrictions have created significant volatility and disruption in the financial markets, which may require us to recognize an elevated level of other than temporary impairments on investment securities in our portfolio as the fair value of these securities is negatively impacted by the economic slowdown; •Declines in fair value of investment securities in our portfolio could reduce the unrealized gains reported as part of our consolidated comprehensive income (loss); and •In meeting our objective to maintain our capital levels and liquidity position through the COVID-19 pandemic, our Board of Directors could determine to forego payment of future dividends in order to maintain and/or strengthen our capital and liquidity position. Highlights for the Three and Nine Months EndedJune 30, 2020 Net income was$5.4 million , or$0.10 per diluted share, for the third quarter of fiscal year 2020, compared to net income of$26.8 million , or$0.47 per diluted share, for the same period in fiscal year 2019, a decrease of$21.4 million . The decline in net income in the current quarter was primarily due to a$22.5 million decrease in noninterest income mainly due to changes in the fair value of loans combined with a$5.1 million increase in net interest income after provision for loan and lease losses. Our efficiency ratio was 69.4% and 47.2% for the third quarter of fiscal year 2020 and 2019, respectively. For more information on our efficiency ratio, including a reconciliation to the most directly comparable GAAP financial measure, see "-Non-GAAP Financial Measures" section. 38- -------------------------------------------------------------------------------- Net interest margin, which measures our ability to maintain interest rates on interest earning assets above those of interest bearing liabilities, was 3.57%, 3.59% and 3.70%, respectively, for the three months endedJune 30, 2020 ,March 31, 2020 andJune 30, 2019 . Adjusted net interest margin, which reflects the realized gain (loss) on interest rate swaps, was 3.47%, 3.55% and 3.71%, 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 margin decreased by 13 and 24 basis points, respectively, compared to the same quarter in fiscal year 2019. Net interest margin decreased between the two periods primarily due to loan yields, which decreased 80 basis points reflecting PPP loans yielding 3.11% offset by a 74 basis point decrease in the cost of deposits to 0.37%, due to continued repricing tied to lower indices from rate cuts inMarch 2020 . A$3.4 million increase in the current quarter of the cost of interest rate swaps compared to the same period in fiscal year 2019 is the primary driver of the more pronounced decrease in adjusted net interest margin compared to the decrease in 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. Total loans were$10.31 billion atJune 30, 2020 compared to$9.71 billion atSeptember 30, 2019 , an increase of$607.2 million , or 6.3%. The growth was mainly attributable to an increase in the commercial non-real estate segment of$506.8 million , or 29.5%, an increase in the CRE segment of$263.1 million , or 5.2%, offset by a reduction in the agriculture segment of$193.5 million , or 9.6%. The increase in commercial non-real estate segment was largely due to$697.0 million in new PPP loans outstanding offset with paydowns during the period. The increase in the CRE segment was due to diversified growth across multifamily and non-owner-occupied CRE. The decrease in the agriculture segment was due to$219.8 million reduction from declines in dairy, beef cattle and other agriculture segments offset with approximately$26.3 million in PPP loans. Deposits were$11.15 billion atJune 30, 2020 , an increase of$850.3 million , or 8.3%, compared to$10.30 billion atSeptember 30, 2019 , due to a$1.47 billion increase in checking and savings deposits across both business and consumer accounts as a result of inflows from PPP proceeds and consumer stimulus receipts offset with a$0.4 million reduction in business and consumer time deposits and a$0.2 million decrease in public and brokered deposits. Interest-bearing deposits were$8.56 billion , a 2.6% increase, and noninterest-bearing deposits were$2.59 billion , a 32.5% increase. FHLB and other borrowings increased by$15.0 million , or 4.4%, as a result of more favorable rates during the quarter. AtJune 30, 2020 , nonaccrual loans, including ASC 310-30 loans, were$274.5 million , an increase of$167.3 million compared toSeptember 30, 2019 , driven by a small number of relationships in agriculture industries as they progress through the workout process and two watch rated senior care credits that deteriorated due to COVID-19 impacts. Loans "Substandard" were$698.5 million , an increase of$226.0 million , or 47.8%, over the same period. The increase in loans graded "Substandard" was primarily due to downgrades in the agriculture and agriculture-related commercial non-real estate segments, combined with the further deterioration of one of the senior care credits mentioned previously. Total other repossessed property balances were$19.2 million as ofJune 30, 2020 , a decrease of$17.5 million , or 47.7%, compared toSeptember 30, 2019 . Provision for loan and lease losses was$21.6 million for the third quarter of fiscal year 2020, compared to$26.1 million for the same period of fiscal year 2019, a decrease of$4.5 million between the periods due to higher charge-offs in the prior period, concentrated in the agriculture and commercial non-real estate segments of the loan portfolio. Net charge-offs for the third quarter of fiscal year 2020 were$9.4 million , or 0.37% of average total loans on an annualized basis, compared to net charge-offs of$17.5 million , or 0.72% of average total loans on an annualized basis for the comparable period in fiscal year 2019, with the majority of net charge-offs concentrated in the agriculture and commercial non-real estate segments of the loan portfolio. The ratio of ALLL to total loans was 1.44% atJune 30, 2020 compared to 0.73% atSeptember 30, 2019 . The balance of the ALLL increased to$148.2 million atJune 30, 2020 from$70.8 million atSeptember 30, 2019 . Tier 1 capital, total capital and Tier 1 leverage ratios were 11.3%, 12.9% and 9.3%, respectively, atJune 30, 2020 , compared to 11.7%, 12.7% and 10.1%, respectively, atSeptember 30, 2019 . In addition, our Common Equity Tier 1 ratio was 10.6% and 11.0% atJune 30, 2020 andSeptember 30, 2019 , respectively. Our tangible common equity to tangible assets ratio was 8.9% atJune 30, 2020 and 9.6% atSeptember 30, 2019 . All regulatory capital ratios remain above regulatory minimums to be considered "well capitalized". For more information on our tangible common equity to tangible assets ratio, including a reconciliation to the most directly comparable GAAP financial measure, see "-Non-GAAP Financial Measures" section. Key Factors Affecting Our Business and Financial Performance As discussed in our Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2019 , our financial performance is impacted by a number of external factors outside our control, as well as our ability to execute on the key components of our strategy for continued success and future growth. There have been no material changes to these factors or key components of our strategy except as otherwise supplemented within our Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2020 and this Quarterly Report on Form 10-Q for the quarterly period endedJune 30, 2020 . 39- -------------------------------------------------------------------------------- Results of Operations-Three and Nine Months EndedJune 30, 2020 and 2019 Overview The following table highlights certain key financial and performance information for the three and nine months endedJune 30, 2020 and 2019. Nine Months Ended June Three Months Ended June 30, 30, 2020 2019 2020 2019 (dollars in thousands, except share and per share amounts) Operating Data: Interest income (FTE)$ 121,472 $ 139,623 $ 381,289 $ 408,503 Interest expense 13,620 32,570 63,244 90,148 Noninterest income (11,683) 10,766 3,967 45,709 Noninterest expense 67,049 56,000 932,432 169,686 Provision for loan and lease losses 21,641 26,077 101,539 38,965 Net income 5,400 26,783 (691,944) 117,080 Adjusted net income ¹ 5,400 26,783 77,754 117,080 Common shares outstanding 55,014,047 56,939,032 55,014,047 56,939,032 Weighted average diluted common shares outstanding 55,145,619 57,110,103 55,788,751 57,408,023 Earnings per common share - diluted $ 0.10
0.10 0.47 1.39 2.04
Performance Ratios:
Net interest margin (FTE) ¹ ² 3.57 % 3.70 % 3.61 % 3.75 %
Adjusted net interest margin (FTE) ¹ ² 3.47 % 3.71 % 3.55 % 3.76 %
Return on average total assets ² 0.17 % 0.84 % (7.22) % 1.25 %
Return on average common equity ² 1.9 % 5.8 % (55.6) % 8.5 %
Return on average tangible common equity ¹ ² 2.0 % 9.7 % 2.5 % 14.5 %
Efficiency ratio ¹ 69.4 % 47.2 % 58.7 % 46.3 %
1 This 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.
Net Interest Income The following table presents net interest income, net interest margin and adjusted net interest margin for the three and nine months endedJune 30, 2020 and 2019. Nine Months Ended June Three Months Ended June 30, 30, 2020 2019 2020 2019 (dollars in thousands) Net interest income: Total interest income (FTE)$ 121,472
13,620 32,570 63,244 90,148
Net interest income (FTE) $ 107,852 $ 107,053 $ 318,045 $ 318,355
Net interest margin (FTE) and adjusted net
interest margin (FTE) ¹
Average interest-earning assets $ 12,156,505
11,493,387 10,889,519 11,049,204 10,637,014
Net interest margin (FTE) 3.57 % 3.70 % 3.61 % 3.75 %
Adjusted net interest margin (FTE) ¹ 3.47 % 3.71 % 3.55 % 3.76 %
1 This 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$107.9 million for the third quarter of fiscal year 2020, compared to$107.1 million for the same period in fiscal year 2019, an increase of$0.8 million , or 0.7%. Net interest income was$318.0 million for the first nine months of fiscal year 2020, compared to$318.4 million for the same period in fiscal year 2019, a decrease of$0.3 million , or 0.1%. For both the quarter and first nine months of fiscal year 2020, loan and securities yields were lower combined with deposit rate cuts. The average balance of interest-earning assets was higher for the quarter compared to the first nine months of fiscal year 2020, which contributed to the increase in net interest income for the quarter versus the slight decrease in net interest income for the nine month period. 40- -------------------------------------------------------------------------------- Net interest margin was 3.57% and 3.70% for the third quarter of fiscal year 2020 and 2019, respectively, a decrease of 13 basis points, while the adjusted net interest margin was 3.47% and 3.71% for the same periods, respectively, a decrease of 24 basis points. Net interest margin was 3.61% and 3.75% for the first nine months of fiscal year 2020, respectively, a decrease of 14 basis points, while the adjusted net interest margin was 3.55% and 3.76% for the same periods, respectively, a decrease of 21 basis points. The lower in net interest margin for both the three and nine month periods was primarily driven by loan yields, which decreased 80 and 46 basis points, respectively, and securities yields, which decreased 41 and 23 basis points, respectively, resulting from the impact of repricing following the rate cuts inMarch 2020 , partially offset by the yield on deposits, which decreased 74 and 39 basis points, respectively. A$3.4 million and$5.9 million increase in the cost of interest rate swaps between the three and nine month periods in fiscal year 2020 and the comparable period in fiscal year 2019, respectively, is the primary driver for the more pronounced decrease in adjusted net interest margin compared to the decrease in 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. 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 are 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$741.5 million atJune 30, 2020 and$778.5 million atJune 30, 2019 , are typically entered at lower interest rate arrangements than comparable non-exempt loans and securities. The amount of interest income reflected in the following table has been adjusted to include the amount of tax benefit realized in the period and as such is presented on a fully-tax equivalent basis, the calculation of which is outlined in the discussion of non-GAAP items later in this section. ASC 310-30 loans represent loans accounted for in accordance with ASC 310-30, Accounting for Purchased Loans, that were credit impaired at the time we acquired them. Non-ASC 310-30 loans represent loans we have originated and loans we have acquired that were not credit impaired at the time we acquired them. 41- -------------------------------------------------------------------------------- Three Months Ended June 30, 2020 June 30, 2019 Average Balance Interest (FTE) Yield / Cost ¹ Average Balance Interest (FTE) Yield / Cost ¹ (dollars in thousands) Assets Interest-bearing bank deposits ²$ 144,805 $ 112 0.31 %$ 51,640 $ 377 2.93 % Investment securities 1,987,648 10,532 2.13 % 1,807,747 11,430 2.54 % Non-ASC 310-30 loans, net ³ 9,974,802 109,326 4.41 % 9,699,433 125,522 5.19 % ASC 310-30 loans, net 49,250 1,502 12.27 % 58,701 2,294 15.67 % Loans, net 10,024,052 110,828 4.45 % 9,758,134 127,816 5.25 % Total interest-earning assets 12,156,505 121,472 4.02 % 11,617,521 139,623 4.82 % Noninterest-earning assets 598,159 1,213,087 Total assets$ 12,754,664 $ 121,472 3.83 %$ 12,830,608 $ 139,623 4.36 % Liabilities and Stockholders' Equity Noninterest-bearing deposits$ 2,414,567 $ 1,875,649 Interest-bearing deposits 6,974,915$ 5,604 0.32 % 6,391,396$ 18,493 1.16 % Time deposits 1,430,246 4,407 1.24 % 2,091,603 10,122 1.94 % Total deposits 10,819,728 10,011 0.37 % 10,358,648 28,615 1.11 % Securities sold under agreements to repurchase 64,645 15 0.09 % 60,551 41 0.27 % FHLB advances and other borrowings 500,248 2,524 2.03 % 361,736 2,497 2.77 % Subordinated debentures and subordinated notes payable 108,766 1,070 3.96 % 108,584 1,417 5.23 % Total borrowings 673,659 3,609 2.15 % 530,871 3,955 2.99 % Total interest-bearing liabilities 11,493,387$ 13,620 0.48 % 10,889,519$ 32,570 1.20 % Noninterest-bearing liabilities 97,553 76,957 Stockholders' equity 1,163,724 1,864,132 Total liabilities and stockholders' equity$ 12,754,664 $ 12,830,608 Net interest spread 3.35 % 3.16 % Net interest income and net interest margin (FTE)$ 107,852 3.57 %$ 107,053 3.70 % Less: Tax equivalent adjustment 1,601 1,424 Net interest income and net interest margin - ties to Statements of Comprehensive Income$ 106,251 3.52 %$ 105,629 3.65 % ¹ Annualized for all partial-year periods. 2 Interest income includes$0.1 million and$0.2 million for the third quarter of fiscal years 2020 and 2019, respectively, resulting from interest earned on derivative collateral included in other assets on the consolidated balance sheets. 3 Interest income includes$0.2 million and$0.3 million for the third quarter of fiscal years 2020 and 2019, respectively, resulting from accretion of purchase accounting discount associated with acquired loans. 42- -------------------------------------------------------------------------------- Nine Months Ended June 30, 2020 June 30, 2019 Average Balance Interest (FTE) Yield / Cost ¹ Average Balance Interest (FTE) Yield / Cost ¹ (dollars in thousands) Assets Interest-bearing bank deposits ²$ 78,164 $ 1,278 2.18 %$ 68,989 $ 1,416 2.74 % Investment securities 1,959,681 33,359 2.27 % 1,634,023 30,575 2.50 % Non-ASC 310-30 loans, net ³ 9,675,039 342,042 4.72 % 9,583,477 370,343 5.17 % ASC 310-30 loans, net 50,639 4,610 12.16 % 63,471 6,169 12.99 % Loans, net 9,725,678 346,652 4.76 % 9,646,948 376,512 5.22 % Total interest-earning assets 11,763,523 381,289 4.33 % 11,349,960 408,503 4.81 % Noninterest-earning assets 1,046,576 1,195,398 Total assets$ 12,810,099 $ 381,289 3.98 %$ 12,545,358 $ 408,503 4.35 % Liabilities and Stockholders' Equity Noninterest-bearing deposits$ 2,111,445 $ 1,846,467 Interest-bearing deposits 6,585,100$ 31,060 0.63 % 6,301,910$ 52,094 1.11 % Time deposits 1,655,059 19,758 1.59 % 2,022,702 27,413 1.81 % Total deposits 10,351,604 50,818 0.66 % 10,171,079 79,507 1.05 % Securities sold under agreements to repurchase 62,513 70 0.15 % 67,879 140 0.28 % FHLB advances and other borrowings 526,372 8,737 2.22 % 289,526 6,324 2.92 % Subordinated debentures and subordinated notes payable 108,715 3,619 4.45 % 108,530 4,177 5.15 % Total borrowings 697,600 12,426 2.38 % 465,935 10,641 3.05 % Total interest-bearing liabilities 11,049,204$ 63,244 0.76 % 10,637,014$ 90,148 1.13 % Noninterest-bearing liabilities 97,475 73,636 Stockholders' equity 1,663,420 1,834,708 Total liabilities and stockholders' equity$ 12,810,099 $ 12,545,358 Net interest spread 3.22 % 3.22 % Net interest income and net interest margin (FTE)$ 318,045 3.61 %$ 318,355 3.75 % Less: Tax equivalent adjustment 4,638 4,356 Net interest income and net interest margin - ties to Statements of Comprehensive Income$ 313,407 3.56 %$ 313,999 3.70 % ¹ Annualized for all partial-year periods. 2 Interest income includes$0.8 million and$0.3 million for the first nine months of fiscal years 2020 and 2019, respectively, resulting from interest earned on derivative collateral included in other assets on the consolidated balance sheets. 3 Interest income includes$1.2 million and$1.0 million for the first nine months of fiscal years 2020 and 2019, respectively, resulting from accretion of purchase accounting discount associated with acquired loans. Interest Income The following table presents interest income for the three and nine months endedJune 30, 2020 and 2019. Nine Months Ended June Three Months Ended June 30, 30, 2020 2019 2020 2019 (dollars in thousands) Interest income: Loans (FTE)$ 110,828 $ 127,816 $ 346,652 $ 376,512 Investment securities 10,532 11,430 33,359 30,575 Federal funds sold and other 112 377 1,278 1,416 Total interest income (FTE) 121,472 139,623 381,289 408,503 Less: Tax equivalent adjustment 1,601 1,424 4,638 4,356 Total interest income (GAAP)$ 119,871 $ 138,199 $ 376,651 $ 404,147 Total interest income consists primarily of interest income on loans and interest income on our investment portfolio. Total interest income was$121.5 million for the third quarter of fiscal year 2020, compared to$139.6 million for the same period of fiscal year 2019, a decrease of$18.1 million , or 13.0%. Total interest income was$381.3 million for the first nine months of fiscal year 2020, compared to$408.5 million for the same period in fiscal year 2019, a decrease of$27.2 million , or 6.7%. Significant components of interest income are described in further detail below. 43- -------------------------------------------------------------------------------- Loans. Interest income on all loans decreased to$110.8 million in third quarter of fiscal year 2020 from$127.8 million in the same period in fiscal year 2019, a decrease of$17.0 million , or 13.3%. Interest income on all loans decreased to$346.7 million for the first nine months of fiscal year 2020, from$376.5 million in the same period in fiscal year 2019, a decrease of$29.8 million , or 7.9%. The decreases in loan yields for both periods were partially attributable to lower loan interest income driven by decreases of 80 and 46 basis points, respectively, between the periods reflecting the impact of PPP loans which yield a lower rate. For the three and nine months endedJune 30, 2020 , interest income on ASC 310-30 loans, which are purchased credit impaired loans with a different income recognition model, decreased$0.8 million , or 34.5%, and$1.6 million , or 25.3%, respectively, primarily driven by runoff of the acquired loan portfolios. Our yield on loans is also 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 4.41% for the third quarter of fiscal year 2020, a decrease of 78 basis points compared to the same period in fiscal year 2019. The average tax equivalent yield on non-ASC 310-30 loans was 4.72% for the first nine months of fiscal year 2020, a decrease of 45 basis points compared to the same period in fiscal year 2019. 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 4.29% for the third quarter of fiscal year 2020, a 91 basis point decrease compared to the same period in fiscal year 2019. The adjusted yield on non-ASC 310-30 loans was 4.65% for the first nine months of fiscal year 2020, a decrease of 53 basis points, compared to the same period in fiscal year 2019. For more information on our adjusted yield on non-ASC 310-30 loans, including a reconciliation to the most directly comparable GAAP financial measure, see "-Non-GAAP Financial Measures" section. The average duration, net of interest rate swaps, of the loan portfolio was 1.6 years as ofJune 30, 2020 . Approximately 53%, or$5.49 billion , of the portfolio is comprised of fixed rate loans, of which$735.4 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. For floating and variable rate loans in the portfolio, approximately 37% are indexed to Wall Street Journal Prime, 29% to 5-year Treasuries and the balance to various other indices. Approximately 20% of our total loans' rates are floored, with an average interest rate floor 114 basis points above market rates as ofJune 30, 2020 . Loan-related fee income of$1.9 million is included in interest income for the third quarter of fiscal year 2020, compared to$1.7 million for the same period in fiscal year 2019. Loan-related fee income of$6.1 million is included in interest income for the first nine months of fiscal year 2020, compared to$4.8 million for the same period in fiscal year 2019. 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 theFDIC indemnification assets of$0.4 million and$0.3 million for the third quarter of fiscal years 2020 and 2019, respectively, and$1.0 million and$1.2 million for the first nine months of fiscal years 2020 and 2019, respectively, is included as a reduction to interest income. Investment Portfolio. The carrying value of investment securities and FHLB stock, which is included in other assets in the consolidated balance sheets, totaled$2.00 billion as ofJune 30, 2020 . Interest income on investments includes income earned on investment securities and FHLB stock. Interest income on investments was$10.5 million for the third quarter of fiscal year 2020, a decrease of$0.9 million , or 7.9%, from$11.4 million for the same period in fiscal year 2019, driven by an increase in average investment balance of$179.9 million , or 10.0%, offset by a yield decrease to 2.13% from 2.54% for the same periods. Interest income on investments was$33.4 million for the first nine months of fiscal year 2020, an increase of$2.8 million , or 9.1%, from$30.6 million for the same period in fiscal year 2019, primarily due to an increase in average investment balance of$325.7 million , or 19.9%, offset by a yield decrease to 2.27% from 2.50%. The weighted average life of the investment portfolio was 3.3 and 3.7 years atJune 30, 2020 andSeptember 30, 2019 , respectively. Average investments represented 16.4% and 15.6% of total average interest-earning assets for the third quarter of fiscal years 2020 and 2019, respectively. Interest Expense The following table presents interest expense for the three and nine months endedJune 30, 2020 and 2019. Nine Months Ended Three Months Ended June 30, June 30, 2020 2019 2020 2019 (dollars in thousands) Interest expense Deposits$ 10,011 $ 28,615 $ 50,818 $ 79,507 FHLB advances and other borrowings 2,539 2,538 8,807 6,464 Subordinated debentures and subordinated notes payable 1,070 1,417 3,619 4,177 Total interest expense$ 13,620 $ 32,570 $ 63,244 $ 90,148 44-
-------------------------------------------------------------------------------- Total interest expense consists primarily of interest expense on three components: deposits, FHLB advances and other borrowings, and our outstanding subordinated debentures and subordinated notes payable. Total interest expense decreased$19.0 million , or 58.2%, to$13.6 million in the third quarter of fiscal year 2020, from$32.6 million in the same period in fiscal year 2019. Total interest expense decreased$26.9 million , or 29.8%, to$63.2 million in the first nine months of fiscal year 2020, from$90.1 million in the same period in fiscal year 2019. Significant components of interest expense are described in further detail below. Deposits. Interest expense on deposits, consisting of interest-bearing accounts and time deposits, was$10.0 million and$28.6 million for the third quarter of fiscal years 2020 and 2019, respectively, a decrease of$18.6 million , or 65.0%. Interest expense on deposits was$50.8 million and$79.5 million for the first nine months of fiscal year 2020 and 2019, respectively, a decrease of$28.7 million , or 36.1%. The decreases for both periods were a result of decreasing cost of deposits offset with increases in average deposit balances. Average deposit balances increased to$10.35 billion for the first nine months of fiscal year 2020, from$10.17 billion for the comparable period in fiscal year 2019, an increase of$180.5 million , or 1.8%. The cost of deposits decreased to 0.66% for the first nine months of fiscal year 2020 from 1.05% for the same period of fiscal year 2019. Average noninterest-bearing demand account balances increased to 22.3% of average total deposits for the third quarter of fiscal year 2020 from 18.1% for the comparable period in fiscal year 2019. Total average other liquid accounts, consisting of interest-bearing demand deposits, increased to 64.5% of total average deposits for the third quarter of fiscal year 2020, compared to 61.7% of total average deposits for the comparable period in fiscal year 2019, while time deposit accounts decreased to 13.2% of average total deposits for the third quarter of fiscal year 2020, compared to 20.2% in the comparable period in fiscal year 2019. FHLB Advances and Other Borrowings. Interest expense on FHLB advances and other borrowings was$2.5 million for both the third quarters of fiscal year 2020 and 2019, reflecting a weighted average cost of 2.03% and 2.77%, respectively, for the same periods. The average balance of FHLB advances and other borrowings was$526.4 million for the first nine months of fiscal year 2020 compared to$289.5 million for the same period in fiscal year 2019. Interest expense on FHLB advances and other borrowings was$8.8 million for the first nine months of fiscal year 2020 and$6.5 million for the same period in fiscal year 2019, an increase of$2.3 million , or 36.2%, representing a weighted average cost of 2.22% and 2.92%, respectively, for the same periods. 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 2.56% and 2.60% atJune 30, 2020 and 2019, respectively, and the average tenor was 24 and 21 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. AtJune 30, 2020 , we had pledged$3.98 billion of loans to the FHLB, against which we had borrowed$355.0 million . Subordinated Debentures and Subordinated Notes Payable. Interest expense on our outstanding junior subordinated debentures and subordinated notes payable was$1.1 million in third quarter of fiscal year 2020 and$1.4 million in the comparable period in fiscal year 2019, a decrease of$0.3 million , or 24.5%. Interest expense on our outstanding junior subordinated debentures and subordinated notes payable was$3.6 million for the first nine months of fiscal year 2020 and$4.2 million in the comparable period in fiscal year 2019, a decrease of$0.6 million , or 13.4%. The weighted average contractual rate on outstanding junior subordinated debentures was 2.85% and 4.67% atJune 30, 2020 and 2019, respectively. The weighted average contractual rate on outstanding subordinated notes was 4.88% at bothJune 30, 2020 and 2019. 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 for the current and comparable quarter and nine months periods 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. 45- --------------------------------------------------------------------------------
Current 9 month
period vs
Comparable 9 month
Current Quarter vs Comparable Quarter period
Volume Rate Total Volume Rate Total
(dollars in thousands)
Increase (decrease) in interest income:
Cash and cash equivalents $ 277 $ (542)
1,062 (1,960) (898) 5,776 (2,992) 2,784
Non-ASC 310-30 loans 3,478 (19,674) (16,196) 3,630 (31,931) (28,301)
ASC 310-30 loans (335) (457) (792) (1,173) (386) (1,559)
Loans 3,143 (20,131) (16,988) 2,457 (32,317) (29,860)
Total increase (decrease) 4,482 (22,633) (18,151) 8,421 (35,635) (27,214)
Increase (decrease) in interest expense:
Interest-bearing deposits 1,552 (14,441) (12,889) 2,256 (23,290) (21,034)
Time deposits (2,659) (3,056) (5,715) (4,575) (3,080) (7,655) Securities sold under agreements to repurchase
2 (28) (26) (10) (60) (70)
FHLB advances and other borrowings 805 (778) 27 4,229 (1,816) 2,413
Subordinated debentures and subordinated
notes payable 2 (349) (347) 7 (565) (558)
Total (decrease) increase (298) (18,652) (18,950) 1,907 (28,811) (26,904)
Increase (decrease) in net interest income
(FTE) $ 4,780 $ (3,981) Provision for Loan and Lease Losses We recognized provision for loan and lease losses of$21.6 million for the third quarter of fiscal year 2020 compared to a provision for loan and lease losses of$26.1 million for the comparable period in fiscal year 2019, a decrease of$4.5 million between the periods due to higher charge-offs in the prior period, concentrated in the agriculture and commercial non-real estate segments of the loan portfolio. Provision for loan and lease losses was$101.5 million for the first nine months of fiscal year 2020, compared to$39.0 million for the comparable period in fiscal year 2019, an increase of$62.5 million between the periods primarily due to incurred loss partially resulting from the COVID-19 pandemic. This increase did not contemplate the potential impact of CECL implementation, which is effective for the CompanyOctober 1, 2020 . See "-Overview-Impact and Response to COVID-19 Pandemic" section in this document for further discussion on the increase in provision for loan and lease losses. Nine Months Ended Three Months Ended June 30, June 30, 2020 2019 2020 2019 (dollars in thousands) Provision for loan and lease losses, non-ASC 310-30 loans *$ 21,601 $ 26,200 $ 101,351 $ 39,206 Provision for (reduction in) loan and lease losses, ASC 310-30 loans 40 (123) 188 (241) Provision for loan and lease losses, total$ 21,641 $ 26,077 $ 101,539 $ 38,965 * 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. Total Credit-Related Charges We believe that the following table, which summarizes each component of the total credit-related charges incurred during the current and comparable quarters and nine month periods, is helpful to understanding the overall impact on our quarterly results of operations. Net other repossessed property charges includes other repossessed property operating costs, valuation adjustments and (loss) gain on sale of other repossessed properties, each of which entered 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 the portion of the fair value adjustment related to expected credit losses in the portfolio of loans carried at fair value. Beginning in the third quarter of 2020, we will no longer separate credit-related charges between those related or unrelated to the COVID-19 pandemic as it becomes more difficult to attribute losses caused or not caused by the pandemic the longer it continues. 46- --------------------------------------------------------------------------------
Three Months Ended June 30, Nine Months Ended June 30,
Included within F/S Line
Item Item(s): 2020 2019 2020 2019
(Dollars in thousands)
Charges unrelated to COVID-19
pandemic
Provision for loan and lease Provision for loan and lease
losses losses $ 21,641 $ 26,077 $ 41,827 $ 38,965 Net other repossessed property Net loss on repossessed charges
property and other related
expenses 2,475 595 5,194 4,062
Net reversal of interest income Interest income on loans on nonaccrual loans
1,070 173 4,164 469
Increase in unfunded commitment Other noninterest expense reserve
2,215 - 2,415 -
Net credit loss on derivatives Net realized and unrealized
loss on derivatives 1,709 - 1,709 -
Loan fair value adjustment Net decrease in fair value of
related to credit loans at fair value 23,292 4,817 28,849 5,579
Subtotal charges unrelated to COVID-19 pandemic $ 52,402 $ 31,662 $ 84,158 $ 49,075
Charges related to COVID-19
pandemic
Provision for loan and lease Provision for loan and lease
losses losses $ - $ - $ 59,712 $ -Net other repossessed property Net loss on repossessed charges
property and other related
expenses - - 3,314 -
Net reversal of interest income Interest income on loans on nonaccrual loans
- - - -
Increase in unfunded commitment Other noninterest expense reserve
- - 444 -
Net credit loss on derivatives Net realized and unrealized
loss on derivatives - - - -
Loan fair value adjustment Net decrease in fair value of
related to credit loans at fair value - - 7,100 -
Subtotal charges related to COVID-19 pandemic $ - $ - $ 70,570 $ -
Total credit-related charges $ 52,402 $ 31,662 $ 154,728 $ 49,075
In determining the credit-related charges, we continue to evaluate the impact of
COVID-19 on our loan portfolio. Industries such as hotels & resorts,
restaurants, oil & energy, retail malls, airlines and healthcare have
experienced significant revenue loss due to COVID-19. Within our portfolio we
have identified the following segments with elevated risk: hotels & resorts with
$1.20 billion , or 11.6% of total loans, restaurants with $160.2 million , or 1.6%
of total loans, arts and entertainment with $129.6 million , or 1.3% of total
loans, senior care with $358.9 million , or 3.5% of total loans, and skilled
nursing with $248.9 million , or 2.4% of total loans. 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, but we are of the view the credit-related adjustments reflect the
best estimate of incurred losses in our portfolio as of June 30, 2020 .
Noninterest Income
The following table presents noninterest income for the three and nine months
ended June 30, 2020 and 2019.
Nine Months Ended
Three Months Ended June 30, June 30,
2020 2019 2020 2019
(dollars in thousands)
Noninterest income
Service charges and other fees $ 7,731 $ 10,321 $ 28,328 $ 32,219
Wealth management fees 2,773 2,234 8,859 6,592
Mortgage banking income, net 2,422 1,055 5,179 3,366
Net gain (loss) on sale of securities - 322 - (191)
Other 1,190 1,309 3,490 4,313
Subtotal, product and service fees 14,116 15,241 45,856 46,299
Net (decrease) increase in fair value of loans
at fair value (22,118) 16,429 (1,510) 49,662
Net realized and unrealized loss on
derivatives (3,681) (20,904) (40,379) (50,252)
Subtotal, loans at fair value and related
derivatives (25,799) (4,475) (41,889) (590)
Total noninterest (loss) income $ (11,683) $
10,766
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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 $(11.7) million for the third quarter of fiscal year 2020
compared to $10.8 million for the same period in fiscal year 2019, a decrease of
$22.5 million . Noninterest income was $4.0 million for the first nine months of
fiscal year 2020 compared to $45.7 million for the same period in fiscal year
2019, a decrease of $41.7 million . Significant components of noninterest income
are described in further detail below.
Product and Service Fees. We recognized $14.1 million of noninterest income
related to product and service fees in the third quarter of fiscal year 2020, a
decrease of $1.1 million , or 7.4%, compared to the same period in fiscal year
2019. We recognized $45.9 million of noninterest income related to product and
service fees in the first nine months of fiscal year 2020, a decrease of $0.4
million , or 1.0%, compared to the same period in fiscal year 2019. The decreases
for both periods was primarily related to lower service charges and interchange
revenue driven by declines in transaction activity from COVID-19 pandemic
impacts.
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 quarter of fiscal year 2020, these items accounted for $(25.8) million
of noninterest (loss) compared to $(4.5) million of noninterest (loss) for the
same period in fiscal year 2019. For the first nine months of fiscal year 2020,
these items accounted for $(41.9) million of noninterest (loss) compared to
$(0.6) million of noninterest (loss) for the same period in fiscal year 2019.
The change for both periods was driven by a net loss related to the change in
fair value of loans for which the Company has elected the fair value option
within which was a credit charge of $21.9 million for one senior care facility
and the net realized and unrealized gain (loss) of the related derivatives. 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 months
ended June 30, 2020 and 2019.
Nine Months Ended June
Three Months Ended June 30, 30,
2020 2019 2020 2019
(dollars in thousands)
Noninterest expense
Salaries and employee benefits $ 39,042 $ 33,899 $ 112,259 $ 103,206
Data processing and communication 5,817 6,234 17,713 17,475
Occupancy and equipment 5,251 4,934 15,941 15,599
Professional fees 7,382 3,923 16,409 11,181
Advertising 750 1,145 2,573 3,299
Net loss on repossessed property and other
related expenses 2,475 595 8,508 4,062
Goodwill and intangible assets impairment - - 742,352 -
Other 6,332 5,270 16,677 14,864
Total noninterest expense $ 67,049 $ 56,000 $ 932,432 $ 169,686
Our noninterest expense consists primarily of salaries and employee benefits,
data processing and communication, occupancy and equipment, professional fees
and net loss on repossessed property, goodwill and intangible assets impairment
and other related expenses. Noninterest expense was $67.0 million and $56.0
million for the third quarter of fiscal year 2020 and 2019, respectively, an
increase of $11.0 million , or 19.7% The increase was primarily driven by an
increase in salaries and employee benefits related to annual merit increases
effective in January combined with a one-time PTO payout offered to employees
for $1.1 million , severance costs of $1.6 million , an increase in net loss on
repossessed property and other related expenses of $1.9 million and a $2.2
million increase in unfunded loan commitment reserve and consulting costs
invested to support strategy and loan portfolio review.
48-
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Noninterest expense was $932.4 million and $169.7 million for the first nine
months of fiscal year 2020 and 2019, respectively. Included within noninterest
expense in the first nine months of fiscal year 2020 was goodwill impairment of
$740.6 million , impairment of certain intangible assets of $1.8 million , a
credit related charge of $3.3 million for one OREO hotel property negatively
impacted by COVID-19 travel restrictions and $0.4 million increase in reserve
for unfunded commitments. Excluding these items, noninterest expense was $186.3
million for the first nine months of fiscal year 2020, an increase of $16.6
million , or 9.8%, compared to the same period in fiscal year 2019. The remaining
increases were driven by an increase in salaries and employee benefits related
to annual merit increases effective in January, combined with a one-time PTO
payout offered to employees for $1.1 million , severance costs of $1.6 million ,
and an increase in unfunded loan commitment reserve combined with consulting
costs invested to support strategy and loan portfolio review noted previously.
Our efficiency ratio was 69.4% and 47.2% for the third quarter of fiscal years
2020 and 2019, respectively and 58.7% and 46.3% for the first nine months of
fiscal years 2020 and 2019, respectively. The increases for both periods were
mainly due to the decrease in net revenues attributable to emergency rate cuts
and decreased deposit service charges from lower account activity combined with
increased expense results from both one-off and recurring costs. 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 $0.5 million for the third quarter of fiscal year 2020 represents an
effective tax rate of 8.1% compared to a provision of $7.5 million , or an
effective tax rate of 22.0%, for the comparable period of fiscal year 2019. The
benefit for income taxes of $24.7 million for the first nine months of fiscal
year 2020 represents an effective tax rate of 3.4%, compared to a provision of
$34.0 million or an effective tax rate of 22.5% for the same period in fiscal
year 2019. The substantial drop in the effective tax rate for both periods was
due to the impairment of goodwill and certain intangible assets and provision
for loan and lease losses in the current period. A sizable portion of the
goodwill impairment was related to non-tax-deductible goodwill for which no tax
benefit was recorded. Excluding the COVID-19 pandemic related goodwill and
certain intangible assets impairment and additional provision for loan and lease
losses, the effective tax rate would have been 21.8% for the first nine months
of fiscal year 2020.
Return on Assets and Equity
The following table presents our return on average total assets, return on
average common equity and return on average tangible common equity for the dates
presented.
Nine Months Ended
Three Months Ended June 30, June 30,
2020 2019 2020 2019
Return on average total assets 0.17 % 0.84 % (7.22) % 1.25 %
Return on average common equity 1.9 % 5.8 % (55.6) % 8.5 %
Return on average tangible common equity ¹ 2.0 % 9.7 % 2.5 % 14.5 %
1 This 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.
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