UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~Form~~FORM 10-Q

(Mark One)




~~(Mark One)~~
x	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

		~~For the quarterly period ended March 31, 2019~~
			Or
¨	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		~~For the transition period from to~~

For the transition period from x to x

Commission File Number 001-36688

Great Western Bancorp, Inc.

(Exact name of registrant as specified in its charter)


Delaware					47-1308512
(State or other jurisdiction of incorporation or organization)					(IRS Employer Identification Number)

~~Delaware~~				~~47-1308512~~
~~(State or other jurisdiction of~~ ~~incorporation or organization)~~	~~(IRS Employer~~ ~~Identification Number)~~

225 South Main Avenue ~~Sioux Falls, South Dakota~~			57104
Sioux Falls,		South Dakota
(Address of principal executive offices)					(Zip Code)

(605) 334-2548

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	GWB	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerx

☒

Accelerated filero

☐

Non-accelerated filero

☐

Smaller reporting companyo

☐

Emerging growth companyo

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x☒

As of ~~May 3, 2019,~~4/27/20, the number of shares of the registrant’s Common Stock outstanding was ~~56,938,553.~~55,013,928.

GREAT WESTERN BANCORP, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

EXPLANATORY NOTE

Except as otherwise stated or the context otherwise requires, references in this Quarterly Report on Form 10-Q to:

•"we," "our," "us" and ~~our~~ "Company" refers to Great Western Bancorp, Inc., a Delaware corporation, and its consolidated subsidiaries;

~~our~~ •"Bank" refers to Great Western Bank, a South Dakota banking corporation;

•"NAB" refers to National Australia Bank Limited, an Australian public company that was our ultimate parent company prior to our initial public offering in October 2014 and, until July 31, 2015, was our principal stockholder;

•our "states" refers to the nine states (Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) in which we currently conduct our business;

•our "footprint" refers to the geographic markets within our states in which we currently conduct our business;

•"ALLL" refers to allowance for loan and lease losses;

•"ASC" refers to Accounting Standards Codification;

•"ASC 310-30 loans" or "purchased credit impaired loans" refers to certain loans that had deteriorated credit quality at acquisition;

•"ASU" refers to Accounting Standards Update;

•"Capital Rules" or "Basel III" refers to the Basel Committee’s December 2010 final capital framework for strengthening international capital standards;

•"CARES Act" refers to The Coronavirus Aid, Relief, and Economic Security Act;

•"CECL" refers to the current expected credit loss model in ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments;

•"COVID-19" or "COVID-19 pandemic" refers to the Coronavirus Disease 2019;

•"CRE" refers to commercial real estate;

•"Exchange Act" refers to the Securities Exchange Act of 1934;

•"FASB" refers to the Financial Accounting Standards Board;

•"FDIC" refers to the Federal Deposit Insurance Corporation;

•"FHLB" refers to the Federal Home Loan Bank;

•"FRB" or "Federal Reserve" refers to the Board of Governors of the Federal Reserve System;

•"FTE" refers to fully-tax equivalent;

•"GAAP" or "U.S. GAAP" refers to U.S. generally accepted accounting principles;

•"HELOC" refers to home equity lines of credit;

•"HF Financial" refers to HF Financial Corporation;

•"IRS" refers to the Internal Revenue Service;

•"LIBOR" refers to London Interbank Offered Rate, and is a benchmark interest rate index for various adjustable rate products;

•"NYSE" refers to the New York Stock Exchange;

•"PPP" refers to Small Business Administration Paycheck Protection Program;

•"RPA" refers to a risk participation agreement;

•"Sarbanes-Oxley Act" refers to the Sarbanes-Oxley Act of 2002;

•"SBA" refers to Small Business Administration;

•"SEC" refers to the Securities and Exchange Commission;

•"Securities Act" refers to the Securities Act of 1933;

•"Tax Reform Act" refers to the Tax Cuts and Jobs Act of 2017; and

•"TDR" refer to a troubled debt restructuring.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "anticipates," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "views," "intends" and similar words or phrases. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in "Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" or "Part II, Item 1A. Risk Factors" of this Report or the following:

•current and future economic and market conditions in the United States generally or in our states in particular, including the rate of growth and employment levels;

•the impact on our business, operations, financial condition, liquidity, results of operations, prospects and trading prices of our shares arising out of the COVID-19 outbreak;

•our ability to anticipate interest rate changes and manage interest rate risk;

•our ability to achieve loan and deposit growth;

•the relative strength or weakness of the commercial, agricultural and real estate markets where our borrowers are located, including without limitation related asset and market prices;

•declines in asset prices and the market prices for agricultural products or changes in governmental support programs for the agricultural sector;

•our ability to effectively execute our strategic plan and manage our growth;

•our ability to successfully manage our credit risk and the sufficiency of our allowance for loan and lease loss;

•our ability to develop and effectively use the quantitative models we rely upon in our business;

~~our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;~~

operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cyber-security, technological changes, vendor problems, business interruption and fraud risks;

~~fluctuations in the values of our assets and liabilities and off-balance sheet exposures;~~

~~unanticipated changes in our liquidity position, including but not limited to changes in our access to sources of liquidity and capital to address our liquidity needs;~~

•possible changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including the potential negative effects of imposed and proposed tariffs and retaliatory tariffs on products that our customers may import or export, including among others, agricultural products;

•our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;

•operational risks or risk management failures by us or critical third parties, including without limitation with respect to data processing, information systems, cyber-security, technological changes, vendor problems, business interruption and fraud risks;

•fluctuations in the values of our assets and liabilities and off-balance sheet exposures;

•unanticipated changes in our liquidity position, including but not limited to changes in our access to sources of liquidity and capital to address our liquidity needs;

•possible impairment of our goodwill and other intangible assets, or any adjustment of the valuation of our deferred tax assets;

•the effects of geopolitical instability, including war, terrorist attacks, and man-made and natural ~~disasters;~~disasters, social instability and changes in governmental policies;

•the effects of adverse weather conditions, particularly on our agricultural borrowers;

•the impact of, and changes in applicable laws, regulations and accounting standards, policies and interpretations, including the impact of the Tax Reform Act;

•legal, compliance and reputational risks, including litigation and regulatory risks;

•our inability to receive dividends from our Bank and to service debt, pay dividends to our common stockholders and satisfy obligations as they become due;

•expected cost savings in connection with the consolidation of recent acquisitions may not be fully realized or realized within the expected time frames, and deposit attrition, customer loss and revenue loss following completed acquisitions may be greater than expected;

•our ability to meet our obligations as a public company, including our obligations under Section 404 of the Sarbanes-Oxley Act to maintain an effective system of internal control over financial reporting; and

•other risks and uncertainties inherent to our business, including those discussed under the heading "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~2019.

The foregoing factors should not be considered an exhaustive list and should be read together with the other cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~2019. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement to reflect events or circumstances occurring after the date on which the statement is made or to reflect the occurrence of unanticipated events.

PART I. FINANCIAL INFORMATION


~~ITEM 1.~~	~~FINANCIAL STATEMENTS (UNAUDITED)~~

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

GREAT WESTERN BANCORP, INC.

Consolidated Balance Sheets

(Dollars in Thousands, Except Share and Per Share Data)


	(Unaudited)							(Unaudited)
	March 31, 2019			September 30, 2018				March 31, 2020		September 30, 2019
Assets							Assets
Cash and due from banks	$	160,852		$	168,119		Cash and due from banks	$	171,219	$	201,487
Interest-bearing bank deposits	121,786			130,577			Interest-bearing bank deposits	176,267		41,987
Cash and cash equivalents	282,638			298,696			Cash and cash equivalents	347,486		243,474
Securities available for sale	1,763,305			1,385,650			Securities available for sale	1,990,027		1,783,208
Loans, net of unearned discounts and deferred fees, including $36,975 and $42,627 of loans covered by a FDIC loss share agreement at March 31, 2019 and September 30, 2018, respectively, and $835,822 and $865,386 of loans at fair value under the fair value option at March 31, 2019 and September 30, 2018, respectively, and $3,648 and $5,456 of loans held for sale at March 31, 2019 and September 30, 2018, respectively	9,770,911			9,415,924
Loans, net of unearned discounts and deferred fees, including $29,691 and $31,891 of loans covered by a FDIC loss share agreement at March 31, 2020 and September 30, 2019, respectively; $792,117 and $812,991 of loans at fair value under the fair value option at March 31, 2020 and September 30, 2019, respectively; and $4,342 and $7,351 of loans held for sale at March 31, 2020 and September 30, 2019, respectively							Loans, net of unearned discounts and deferred fees, including $29,691 and $31,891 of loans covered by a FDIC loss share agreement at March 31, 2020 and September 30, 2019, respectively; $792,117 and $812,991 of loans at fair value under the fair value option at March 31, 2020 and September 30, 2019, respectively; and $4,342 and $7,351 of loans held for sale at March 31, 2020 and September 30, 2019, respectively	9,693,295		9,706,763
Allowance for loan and lease losses	(68,003		)	(64,540		)	Allowance for loan and lease losses	(135,950)		(70,774)
Net loans	9,702,908			9,351,384			Net loans	9,557,345		9,635,989
Premises and equipment, including $3,216 and $1,104 of property held for sale at March 31, 2019 and September 30, 2018, respectively	115,189			113,839
Premises and equipment, including $706 and $2,757 of property held for sale at March 31, 2020 and September 30, 2019, respectively							Premises and equipment, including $706 and $2,757 of property held for sale at March 31, 2020 and September 30, 2019, respectively	120,653		120,645
Accrued interest receivable	56,221			58,948			Accrued interest receivable	49,358		58,699
Other repossessed property, including $0 and $131 of property covered by a FDIC loss share agreement at March 31, 2019 and September 30, 2018, respectively	32,450			23,074
Other repossessed property, including $0 of property covered by a FDIC loss share agreement at both March 31, 2020 and September 30, 2019							Other repossessed property, including $0 of property covered by a FDIC loss share agreement at both March 31, 2020 and September 30, 2019	27,289		36,764
Goodwill	739,023			739,023			Goodwill	—		739,023
Cash surrender value of life insurance policies	30,366			30,461			Cash surrender value of life insurance policies	31,231		30,796
Net deferred tax assets	22,389			30,132			Net deferred tax assets	48,084		7,286
Other assets	85,673			85,601			Other assets	216,335		132,417
Total assets	$	12,830,162		$	12,116,808		Total assets	$	12,387,808	$	12,788,301
Liabilities and stockholders’ equity							Liabilities and stockholders’ equity
Deposits
Noninterest-bearing	$	1,824,507		$	1,842,704		Noninterest-bearing	$	1,973,629	$	1,956,025
Interest-bearing	8,643,876			7,890,795			Interest-bearing	8,205,486		8,344,314
Total deposits	10,468,383			9,733,499			Total deposits	10,179,115		10,300,339
Securities sold under agreements to repurchase	62,537			90,907			Securities sold under agreements to repurchase	64,809		68,992
FHLB advances and other borrowings	275,000			275,000			FHLB advances and other borrowings	800,000		340,000
Subordinated debentures and subordinated notes payable	108,528			108,468			Subordinated debentures and subordinated notes payable	108,740		108,636
Accrued expenses and other liabilities	63,320			68,383			Accrued expenses and other liabilities	81,680		70,085
Total liabilities	10,977,768			10,276,257			Total liabilities	11,234,344		10,888,052
Stockholders’ equity							Stockholders’ equity
Common stock, $0.01 par value, authorized 500,000,000 shares; 56,938,435 shares issued and outstanding at March 31, 2019 and 58,917,147 shares issued and outstanding at September 30, 2018	569			589
Common stock, $0.01 par value, authorized 500,000,000 shares; 55,013,928 shares issued and outstanding at March 31, 2020 and 56,283,659 shares issued and outstanding at September 30, 2019							Common stock, $0.01 par value, authorized 500,000,000 shares; 55,013,928 shares issued and outstanding at March 31, 2020 and 56,283,659 shares issued and outstanding at September 30, 2019	550		563
Additional paid-in capital	1,245,657			1,318,457			Additional paid-in capital	1,190,381		1,228,714
Retained earnings	614,540			553,014			Retained earnings	(73,705)		657,475
Accumulated other comprehensive (loss)	(8,372		)	(31,509		)
Accumulated other comprehensive income							Accumulated other comprehensive income	36,238		13,497
Total stockholders' equity	1,852,394			1,840,551			Total stockholders' equity	1,153,464		1,900,249
Total liabilities and stockholders' equity	$	12,830,162		$	12,116,808		Total liabilities and stockholders' equity	$	12,387,808	$	12,788,301

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Income (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)


	Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended March 31,						Six months ended March 31,
	2019			2018			2019			2018				2020		2019		2020		2019
Interest income													Interest income
Loans	$	123,432		$	109,993		$	245,763		$	217,674		Loans	$	113,356	$	123,432	$	232,787	$	245,763
Investment securities	9,957			7,013			19,145			14,055			Investment securities	11,329		9,957		22,827		19,145
Federal funds sold and other	497			227			1,039			458			Federal funds sold and other	558		497		1,166		1,039
Total interest income	133,886			117,233			265,947			232,187			Total interest income	125,243		133,886		256,780		265,947
Interest expense													Interest expense
Deposits	27,098			12,658			50,892			23,656			Deposits	18,867		27,098		40,807		50,892
FHLB advances and other borrowings	1,923			2,815			3,926			4,978			FHLB advances and other borrowings	3,155		1,923		6,268		3,926
Subordinated debentures and subordinated notes payable	1,390			1,207			2,760			2,377			Subordinated debentures and subordinated notes payable	1,238		1,390		2,549		2,760
Total interest expense	30,411			16,680			57,578			31,011			Total interest expense	23,260		30,411		49,624		57,578
Net interest income	103,475			100,553			208,369			201,176			Net interest income	101,983		103,475		207,156		208,369
Provision for loan and lease losses	7,673			4,900			12,888			9,457			Provision for loan and lease losses	71,795		7,673		79,898		12,888
Net interest income after provision for loan and lease losses	95,802			95,653			195,481			191,719			Net interest income after provision for loan and lease losses	30,188		95,802		127,258		195,481
Noninterest income													Noninterest income
Service charges and other fees	10,209			12,047			21,897			25,224			Service charges and other fees	9,188		10,209		20,597		21,897
Wealth management fees	2,117			2,335			4,358			4,519			Wealth management fees	3,122		2,117		6,086		4,358
Mortgage banking income, net	991			1,166			2,311			2,826			Mortgage banking income, net	1,145		991		2,757		2,311
Net loss on sale of securities	—			(8		)	(513		)	(9		)	Net loss on sale of securities	—		—		—		(513)
Net increase (decrease) in fair value of loans at fair value	14,018			(14,838		)	33,234			(23,502		)
Net realized and unrealized (loss) gain on derivatives	(11,032		)	14,282			(29,348		)	21,509
Net increase in fair value of loans at fair value													Net increase in fair value of loans at fair value	35,541		14,018		20,608		33,234
Net realized and unrealized loss on derivatives													Net realized and unrealized loss on derivatives	(50,214)		(11,032)		(36,698)		(29,348)
Other	1,920			3,758			3,004			4,849			Other	1,135		1,920		2,300		3,004
Total noninterest income	18,223			18,742			34,943			35,416
Total noninterest (loss) income													Total noninterest (loss) income	(83)		18,223		15,650		34,943
Noninterest expense													Noninterest expense
Salaries and employee benefits	34,537			33,672			69,307			66,539			Salaries and employee benefits	37,312		34,537		73,217		69,307
Data processing and communication	5,964			9,190			11,242			16,074			Data processing and communication	6,123		5,964		11,896		11,242
Occupancy and equipment	5,539			5,290			10,665			10,138			Occupancy and equipment	5,597		5,539		10,690		10,665
Professional fees	3,970			4,027			7,258			8,267			Professional fees	5,263		3,970		9,027		7,258
Advertising	1,216			1,121			2,154			2,181			Advertising	958		1,216		1,823		2,154
Net loss on repossessed property and other related expenses	404			1,000			3,467			1,214			Net loss on repossessed property and other related expenses	5,691		404		6,033		3,467
Goodwill and intangible assets impairment													Goodwill and intangible assets impairment	742,352		—		742,352		—

Other	4,950			4,844			9,593			9,599			Other	5,157		4,950		10,345		9,593
Total noninterest expense	56,580			59,144			113,686			114,012			Total noninterest expense	808,453		56,580		865,383		113,686
Income before income taxes	57,445			55,251			116,738			113,123
Provision for income taxes	12,934			14,719			26,441			43,361
Net income	$	44,511		$	40,532		$	90,297		$	69,762
(Loss) income before income taxes													(Loss) income before income taxes	(778,348)		57,445		(722,475)		116,738
(Benefit from) provision for income taxes													(Benefit from) provision for income taxes	(37,730)		12,934		(25,131)		26,441
Net (loss) income													Net (loss) income	$	(740,618)	$	44,511	$	(697,344)	$	90,297
Basic earnings per common share													Basic earnings per common share
Weighted average common shares outstanding	56,994,817			58,941,315			57,484,838			58,921,972			Weighted average common shares outstanding	55,906,002		56,994,817		56,141,816		57,484,838
Basic earnings per share	$	0.78		$	0.69		$	1.57		$	1.18		Basic earnings per share	$	(13.25)	$	0.78	$	(12.42)	$	1.57
Diluted earnings per common share													Diluted earnings per common share
Weighted average diluted common shares outstanding	57,074,674			59,146,117			57,556,984			59,116,923			Weighted average diluted common shares outstanding	55,906,002		57,074,674		56,141,816		57,556,984
Diluted earnings per share	$	0.78		$	0.69		$	1.57		$	1.18		Diluted earnings per share	$	(13.25)	$	0.78	$	(12.42)	$	1.57
Dividends per share													Dividends per share
Dividends paid	$	14,235		$	11,780		$	28,771		$	23,550		Dividends paid	$	16,769	$	14,235	$	33,654	$	28,771
Dividends per share	$	0.25		$	0.20		$	0.50		$	0.40		Dividends per share	$	0.30	$	0.25	$	0.60	$	0.50

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Comprehensive Income (Unaudited)

(Dollars in Thousands)

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
Net income $ 44,511
$ 40,532
$ 90,297
$ 69,762
Other comprehensive income (loss), net of tax
Securities available for sale:
Net unrealized holding gain (loss) arising during the period 11,523
(12,425 ) 30,192
(21,070 )
Reclassification adjustment for net loss realized in net income —
8
513
9
Income tax (expense) benefit (2,839 ) 3,062
(7,568 ) 6,345
Net change in unrealized gain (loss) on securities available for sale 8,684
(9,355 ) 23,137
(14,716 )

Defined benefit pension plan obligation ¹:

Net unrealized holding gain arising during the period —
—
—
145
Income tax expense —
—
—
(55 )
Net change in defined benefit pension plan obligation —
—
—
90
Other comprehensive income (loss), net of tax 8,684
(9,355 ) 23,137
(14,626 )
Comprehensive income $ 53,195
$ 31,177
$ 113,434
$ 55,136
¹ The Company's Board of Directors voted to terminate the defined benefit pension plan ("Pension Plan") effective February 1, 2018. Transfer of all Pension Plan assets, liabilities and administrative responsibilities were completed as of September 30, 2018.


	Three Months Ended March 31,						Six months ended March 31,
	2020		2019		2020		2019
Net (loss) income	$	(740,618)	$	44,511	$	(697,344)	$	90,297
Other comprehensive income, net of tax
Securities available for sale:
Net unrealized holding gain arising during the period	38,341		11,523		30,181		30,192
Reclassification adjustment for net loss realized in net income	—		—		—		513
Income tax expense	(9,450)		(2,839)		(7,440)		(7,568)
Net change in unrealized gain on securities available for sale	28,891		8,684		22,741		23,137






Comprehensive (loss) income	$	(711,727)	$	53,195	$	(674,603)	$	113,434

See accompanying notes.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Stockholders' Equity (Unaudited)

(Dollars in Thousands, Except Share and Per Share Data)

Comprehensive Income Common Stock Par Value Additional
Paid-in Capital Retained
Earnings Accumulated Other Comprehensive (Loss) Total
Balance, January 1, 2018 $ 588
$ 1,314,723
$ 463,207
$ (10,645 ) $ 1,767,873
Net income $ 40,532
—
—
40,532
—
40,532
Other comprehensive (loss), net of tax (9,355 ) —
—
—
(9,355 ) (9,355 )
Total comprehensive income $ 31,177

Stock-based compensation, net of tax 1
1,427
—
—
1,428
Reclassification due to adoption of ASU 2018-02 ¹ —
—
2,353
(2,353 ) —
Cash dividends:
Common stock, $0.20 per share —
—
(11,780 ) —
(11,780 )
Balance, March 31, 2018 $ 589
$ 1,316,150
$ 494,312
$ (22,353 ) $ 1,788,698

Balance, January 1, 2019 $ 568
$ 1,244,232
$ 584,264
$ (17,056 ) $ 1,812,008
Net income $ 44,511
—
—
44,511
—
44,511
Other comprehensive income, net of tax 8,684
—
—
—
8,684
8,684
Total comprehensive income $ 53,195

Stock-based compensation, net of tax 1
1,425
—
—
1,426
Cash dividends:
Common stock, $0.25 per share —
—
(14,235 ) —
(14,235 )
Balance, March 31, 2019 $ 569
$ 1,245,657
$ 614,540
$ (8,372 ) $ 1,852,394
¹ Reclassification due to adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.


																				Comprehensive Income (Loss)		Common Stock Par Value		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
	Comprehensive Income			Common Stock Par Value			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)			Total
Balance, October 1, 2017				$	588		$	1,314,039		$	445,747		$	(5,374	)	$	1,755,000
Net income	$	69,762		—			—			69,762			—			69,762
Other comprehensive (loss), net of tax	(14,626		)	—			—			—			(14,626		)	(14,626		)
Total comprehensive income	$	55,136
Stock-based compensation, net of tax				1			2,111			—			—			2,112
Reclassification due to adoption of ASU 2018-02 ¹				—			—			2,353			(2,353		)	—
Cash dividends:
Common stock, $0.40 per share				—			—			(23,550		)	—			(23,550		)
Balance, March 31, 2018				$	589		$	1,316,150		$	494,312		$	(22,353	)	$	1,788,698

Balance, October 1, 2018				$	589		$	1,318,457		$	553,014		$	(31,509	)	$	1,840,551
Balance, January 1, 2019																			Balance, January 1, 2019			$	568	$	1,244,232	$	584,264	$	(17,056)	$	1,812,008
Net income	$	90,297		—			—			90,297			—			90,297			Net income	$	44,511	—		—		44,511		—		44,511
Other comprehensive income, net of tax	23,137			—			—			—			23,137			23,137			Other comprehensive income, net of tax	8,684		—		—		—		8,684		8,684
Total comprehensive income	$	113,434																	Total comprehensive income	$	53,195

Stock-based compensation, net of tax				1			1,838			—			—			1,839			Stock-based compensation, net of tax			1		1,425		—		—		1,426
Repurchase of common stock				(21		)	(74,638		)	—			—			(74,659		)

Cash dividends:																			Cash dividends:
Common stock, $0.50 per share				—			—			(28,771		)	—			(28,771		)
Common stock, $0.25 per share																			Common stock, $0.25 per share			—		—		(14,235)		—		(14,235)
Balance, March 31, 2019				$	569		$	1,245,657		$	614,540		$	(8,372	)	$	1,852,394		Balance, March 31, 2019			$	569	$	1,245,657	$	614,540	$	(8,372)	$	1,852,394
¹ Reclassification due to adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.

Balance, January 1, 2020																			Balance, January 1, 2020			$	563	$	1,229,077	$	683,682	$	7,347	$	1,920,669
Net (loss)																			Net (loss)	$	(740,618)	—		—		(740,618)		—		(740,618)
Other comprehensive income, net of tax																			Other comprehensive income, net of tax	28,891		—		—		—		28,891		28,891
Total comprehensive (loss)																			Total comprehensive (loss)	$	(711,727)

Stock-based compensation, net of tax																			Stock-based compensation, net of tax			1		1,273		—		—		1,274

Repurchase common stock																			Repurchase common stock			(14)		(39,969)		—		—		(39,983)
Cash dividends:																			Cash dividends:
Common stock, $0.30 per share																			Common stock, $0.30 per share			—		—		(16,769)		—		(16,769)
Balance, March 31, 2020																			Balance, March 31, 2020			$	550	$	1,190,381	$	(73,705)	$	36,238	$	1,153,464

See accompanying notes.


	Comprehensive Income (Loss)		Common Stock Par Value		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total
Balance, October 1, 2018			$	589	$	1,318,457	$	553,014	$	(31,509)	$	1,840,551
Net income	$	90,297	—		—		90,297		—		90,297
Other comprehensive income, net of tax	23,137		—		—		—		23,137		23,137
Total comprehensive income	$	113,434

Stock-based compensation, net of tax			1		1,838		—		—		1,839

Repurchase common stock			(21)		(74,638)		—		—		(74,659)
Cash dividends:
Common stock, $0.50 per share			—		—		(28,771)		—		(28,771)
Balance, March 31, 2019			$	569	$	1,245,657	$	614,540	$	(8,372)	$	1,852,394

Balance, October 1, 2019			$	563	$	1,228,714	$	657,475	$	13,497	$	1,900,249
Net (loss)	$	(697,344)	—		—		(697,344)		—		(697,344)
Other comprehensive income, net of tax	22,741		—		—		—		22,741		22,741
Total comprehensive (loss)	$	(674,603)
Cumulative effect adjustment related to ASU adoption ¹			—		—		(182)		—		(182)
Stock-based compensation, net of tax			1		1,636		—		—		1,637

Repurchase of common stock			(14)		(39,969)		—		—		(39,983)
Cash dividends:
Common stock, $0.60 per share			—		—		(33,654)		—		(33,654)
Balance, March 31, 2020			$	550	$	1,190,381	$	(73,705)	$	36,238	$	1,153,464
¹ Related to the Company's adoption of ASU 2016-02 and subsequent related ASUs on October 1, 2019. See Note 2, "New Accounting Pronouncements," for additional information.

GREAT WESTERN BANCORP, INC.

Consolidated Statements of Cash Flows (Unaudited)

(Dollars in Thousands)


	Six Months Ended March 31,							Six Months Ended March 31,
	2019			2018				2020		2019
Operating activities							Operating activities
Net income	$	90,297		$	69,762
Adjustments to reconcile net income to net cash provided by operating activities:
Net (loss) income							Net (loss) income	$	(697,344)	$	90,297
Adjustments to reconcile net (loss) income to net cash provided by operating activities:							Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	5,916			5,943			Depreciation and amortization	8,373		5,916
Amortization of FDIC indemnification asset	853			1,689			Amortization of FDIC indemnification asset	641		853
Net loss on sale of securities and other assets	2,974			2,143			Net loss on sale of securities and other assets	4,716		2,974

Net gain on sale of loans	(2,724		)	(3,314		)	Net gain on sale of loans	(3,148)		(2,724)
Provision for loan and lease losses	12,888			9,457			Provision for loan and lease losses	79,898		12,888
Reversal of loan servicing rights loss	—			(71		)
Goodwill and intangible assets impairment							Goodwill and intangible assets impairment	742,352		—
Provision for loan servicing rights loss							Provision for loan servicing rights loss	7		—
Stock-based compensation	1,839			2,112			Stock-based compensation	1,637		1,839
Originations of residential real estate loans held for sale	(98,875		)	(112,731		)	Originations of residential real estate loans held for sale	(172,370)		(98,875)
Proceeds from sales of residential real estate loans held for sale	103,407			121,072			Proceeds from sales of residential real estate loans held for sale	178,527		103,407
Net deferred income taxes	688			17,215			Net deferred income taxes	(48,238)		688
Changes in:							Changes in:
Accrued interest receivable	2,727			3,823			Accrued interest receivable	9,341		2,727
Other assets	22,116			423			Other assets	(66,709)		22,116
Accrued interest payable and other liabilities	(27,768		)	(18,336		)	Accrued interest payable and other liabilities	12,890		(27,768)
Net cash provided by operating activities	114,338			99,187			Net cash provided by operating activities	50,573		114,338
Investing activities							Investing activities
Purchase of securities available for sale	(541,872		)	(110,741		)	Purchase of securities available for sale	(413,887)		(541,872)
Proceeds from sales of securities available for sale	97,212			25,206			Proceeds from sales of securities available for sale	—		97,212
Proceeds from maturities of securities available for sale	94,926			122,436			Proceeds from maturities of securities available for sale	234,077		94,926
Net increase in loans	(383,665		)	(392,109		)	Net increase in loans	(11,939)		(383,665)
Recovery (payment) of covered losses from FDIC indemnification claims	43			(419		)
(Payment) recovery of covered losses from FDIC indemnification claims							(Payment) recovery of covered losses from FDIC indemnification claims	(43)		43
Purchase of premises and equipment	(5,953		)	(3,297		)	Purchase of premises and equipment	(3,861)		(5,953)
Proceeds from sale of premises and equipment	299			4,565			Proceeds from sale of premises and equipment	—		299
Proceeds from sale of repossessed property	6,593			2,050			Proceeds from sale of repossessed property	12,368		6,593
Purchase of FHLB stock	(46,948		)	(30,420		)	Purchase of FHLB stock	(110,637)		(46,948)
Proceeds from redemption of FHLB stock	47,030			34,251			Proceeds from redemption of FHLB stock	92,350		47,030
Net cash paid in business acquisition							Net cash paid in business acquisition	(4,711)		—
Net cash used in investing activities	(732,335		)	(348,478		)	Net cash used in investing activities	(206,283)		(732,335)
Financing activities							Financing activities
Net increase in deposits	734,966			409,509
Net (decrease) increase in deposits							Net (decrease) increase in deposits	(121,163)		734,966
Net decrease in securities sold under agreements to repurchase and other short-term borrowings	(28,370		)	(29,345		)	Net decrease in securities sold under agreements to repurchase and other short-term borrowings	(4,183)		(28,370)
Proceeds from FHLB advances and other long-term borrowings	465,000			419,999			Proceeds from FHLB advances and other long-term borrowings	650,000		465,000
Repayments on FHLB advances and other long-term borrowings	(465,000		)	(512,200		)	Repayments on FHLB advances and other long-term borrowings	(190,000)		(465,000)
Common stock repurchased	(74,659		)	—			Common stock repurchased	(39,983)		(74,659)
Taxes paid related to net share settlement of equity awards	(1,227		)	(3,769		)	Taxes paid related to net share settlement of equity awards	(1,295)		(1,227)
Dividends paid	(28,771		)	(23,550		)	Dividends paid	(33,654)		(28,771)
Net cash provided by financing activities	601,939			260,644			Net cash provided by financing activities	259,722		601,939
Net (decrease) increase in cash and cash equivalents	(16,058		)	11,353
Net increase (decrease) in cash and cash equivalents							Net increase (decrease) in cash and cash equivalents	104,012		(16,058)
Cash and cash equivalents, beginning of period	298,696			360,396			Cash and cash equivalents, beginning of period	243,474		298,696
Cash and cash equivalents, end of period	$	282,638		$	371,749		Cash and cash equivalents, end of period	$	347,486	$	282,638
Supplemental disclosure of cash flow information							Supplemental disclosure of cash flow information
Cash payments for interest	$	52,551		$	29,251		Cash payments for interest	$	56,613	$	52,551
Cash payments for income taxes	$	19,113		$	23,980		Cash payments for income taxes	$	17,194	$	19,113
Supplemental disclosure of noncash investing and financing activities							Supplemental disclosure of noncash investing and financing activities
Loans transferred to repossessed properties	$	(17,919	)	$	(11,005	)	Loans transferred to repossessed properties	$	(7,507)	$	(17,919)

See accompanying notes.

10-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

1. Nature of Operations and Summary of Significant Policies

Nature of Operations

The Company is a bank holding company organized under the laws of Delaware and is listed on the NYSE under the symbol "GWB". The primary business of the Company is ownership of its wholly-owned subsidiary, Great Western Bank. The Bank is a full-service regional bank focused on relationship-based business and agri-business banking in Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. The Company and the Bank are subject to the regulation of certain federal and/or state agencies and undergo periodic examinations by those regulatory authorities. Substantially all of the Company’s income is generated from banking operations.

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared in accordance with U.S. GAAP and reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position and results of operations for the periods presented. All such adjustments are of a normal recurring nature.

Certain previously reported amounts have been reclassified to conform to the current presentation.

The unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended September 30, ~~2018,~~2019, which includes a description of significant accounting policies. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the year or any other period.

The accompanying unaudited consolidated financial statements include the accounts and results of operations of the Company and its subsidiaries after elimination of all significant intercompany accounts and transactions. The preparation of unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported on the consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

Changes in Significant Accounting Policies

Pursuant to the Company's adoption of ~~certain~~ASU 2016-02 and subsequent related ASUs as of October 1, ~~2018,~~2019, the ~~following~~Company updated its accounting policy related to leases. See Note 12 for new disclosures and policy information related to the Company's leases. There were no other significant changes to the Company's accounting policies ~~have been updated~~ from those disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~

~~Revenue Recognition~~

~~We adopted ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)~~" and subsequent related ASUs effective October 1, 2018 using the modified retrospective approach, which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from2019 that could have a material effect on the Company's contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

~~The majority of our revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from~~consolidated financial instruments, such as our loans, letters of credit, derivatives and investment securities, as well as revenue related to our mortgage servicing activities, as these activities are subject to other GAAP discussed elsewhere within our disclosures and in "Note 1. Nature of Operations and Summary of Significant Policies," in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018. Descriptions of our revenue-generating activities that are within the scope of ASC Topic 606, which are presented in our consolidated income statements as components of noninterest income, are as follows:statements.

~~Service charges and fees on deposit accounts.~~Service charges on deposit accounts are earned for account maintenance and overdraft, wire and treasury management services. Revenue is recognized at the time the services are performed and is included in service charges and other fees within noninterest income on the consolidated statements of income.

~~Interchange and merchant services income.~~ Interchange and merchant services income are earned from credit and debit card payment processing through card association networks, merchant services and other card related services. Fees for these services are primarily based on interchange rates set by the networks and transaction volumes and are recognized as transactions are processed and settled with networks on behalf of card holders. These fees are presented net of direct expenses, including reward costs, associated with credit and debit card interchange income in service charges and other fees which are included in noninterest income on the consolidated statements of income.

~~11-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~Wealth management and trust fee income.~~ Wealth management and trust fees are earned for asset management, custody and recordkeeping, investment advisory and administrative services. Revenue is recognized as the services are performed. Brokerage charges are recorded as a net reduction in wealth management fees which are included in noninterest income on the consolidated statements of income.

~~Other noninterest income.~~Other noninterest income primarily includes such items as letter of credit fees, gains on sale of loans held for sale and servicing fees, none of which are subject to the requirements of ASC Topic 606.

The following table presents total noninterest income segregated between contracts with customers within the scope of ASC Topic 606 and those within the scope of other GAAP Topics. The following additionally presents revenues from customers that are included within noninterest income.

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
(dollars in thousands)
Noninterest income
Service charges and other fees $ 10,209
$ 12,047
$ 21,897
$ 25,224
Wealth management fees 2,117
2,335
4,358
4,519
Other 1,118
3,351
1,700
4,002
Noninterest income from contracts with customers within the scope of ASC Topic 606 ¹ 13,444
17,733
27,955
33,745
Noninterest income within the scope of other GAAP Topics ² 4,779
1,009
6,988
1,671
Total noninterest income $ 18,223
$ 18,742
$ 34,943
$ 35,416
¹Amounts for periods after October 1, 2018 are presented in accordance with ASC Topic 606, Revenue from Contracts with Customers, except for out of scope amounts. Amounts for periods prior to October 1, 2018 are presented in accordance with ASC Topic 605, Revenue Recognition, and have not been restated to conform with ASC Topic 606, Revenue from Contracts with Customers.
²The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's consolidated statements of income.

At March 31, 2019, the Company does not have any material contract assets, liabilities, or other receivables recorded on its consolidated balance sheets relating to its revenue streams within the scope of ASC Topic 606. Additionally, the Company's contracts generally do not contain terms that require significant judgment to determine the amount of revenue to recognize.

~~Practical expedients~~

The Company has elected the practical expedient to exclude the disclosure of unsatisfied performance obligations for contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed. The Company recognizes incremental costs of obtaining those contracts as an expense when incurred.

Subsequent Events

The Company has evaluated all events or transactions that occurred through the date the Company issued these financial statements. Other than those described below, there were no ~~other~~ material events or transactions that would require recognition in the consolidated financial statements or disclosure in the notes to the consolidated financial statements.

In April 2020, the Company offered loans to customers that are guaranteed by the SBA under its PPP authorized under the CARES Act. The Company has provided approximately $600.0 million in loans to customers under this program. The Bank also received approval from the FRB to access the PPP Liquidity Facility to fund PPP loans if needed.

On April ~~25, 2019,~~30, 2020, the Board of Directors of the Company declared a dividend of ~~$0.30~~$0.15 per common share payable on May ~~24, 2019~~29, 2020 to stockholders of record as of close of business on May ~~10, 2019.~~

~~2. New Accounting Standards~~

~~Accounting Standards Adopted in Fiscal Year 2019~~

~~In May 2014,~~15, 2020. With the ~~FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which implements a more robust framework that clarifies the principles for recognizing revenue and gives greater consistency and comparability in revenue recognition practices. In the new framework, an entity recognizes revenue in an amount that reflects the consideration to which the entity expects to be entitled in exchange for goods or services. The new model requires the identification of performance obligations included in the contract with customers, a determinationmany uncertainties of the ~~transaction price~~COVID-19 pandemic, including the full impacts on the future financial results and ~~an allocation~~operations of the ~~price~~Company, the Board of Directors determined a reduction to ~~those performance obligations. The entity recognizes revenue when performance obligations are satisfied. In August 2015,~~its regular quarterly dividend will help strengthen the ~~FASB issued ASU 2015-14, which deferred~~Company's balance sheet and liquidity in light of the ~~effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. In March 2016,~~uncertainty surrounding the FASB issued ASU 2016-08, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, which clarifies guidance pertaining to the identification of performance obligations and the licensing implementation. In May 2016, the FASB issued ASU 2016-11 and 2016-12, which further clarify guidance and provide

COVID-19 pandemic.

~~12-~~

11-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

2. New Accounting Standards

~~practical expedients related~~Accounting Standards Adopted in Fiscal Year 2020

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which amended the ~~adoption~~hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities to better align the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting. ASU ~~2014-09.~~ 2017-12 was effective for the Company on October 1, 2019. For the periods presented, the Company did not designate any derivative financial instruments as formal hedging relationships, and therefore, did not utilize hedge accounting. As such, ASU 2017-12 did not impact the Company's consolidated financial statements.

In ~~December~~February 2016, the FASB issued ASU ~~2016-20,~~2016-02, Leases (Topic 842), which requires that lessees recognize the assets and liabilities arising from leases on the balance sheet and disclose key information about leasing arrangements. Lessees are required to recognize an obligation for future lease payments measured on a discounted basis and a related right-of-use asset. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model and ASC Topic 606, Revenue from Contracts with Customers. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, and ASU 2018-11, Leases (Topic 842), Targeted Improvements, which made technical corrections and improvements to the previous ~~ASUs issued. The~~ASU issued, including a modified retrospective transition method that allows entities to apply the standard ~~permits~~as of the ~~use~~adoption date. In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, which allowed lessors to exclude sales tax from consideration of ~~either~~ the ~~retrospective or cumulative effect transition method. The standard, along~~contract through a policy election and clarified treatment of certain lessor costs and variable payments for contracts with ~~subsequent guidance from FASB, lists several items that are specifically out of scope for ASU 2014-09, including but not limited to core interest income, derivative instruments, investments,~~lease and ~~loan origination fees.~~nonlease components. The Company adopted this ~~standard and subsequent related ASUs~~guidance beginning October 1, ~~2018~~2019 using the modified retrospective ~~method. Furthermore,~~transition method and all practical expedients available other than the ~~Company prospectively changed~~use of hindsight with respect to determining the ~~presentation~~lease term and assessing impairment of ~~direct~~its right-of-use assets. As of the date of adoption, the Company's right-of-use assets and lease liabilities recorded in other assets and accrued expenses including reward costs, associated with credit and debit card interchange income previously included in data processing and communication expense which are now netted against interchange income in service charges and other ~~fees, which is included in noninterest income~~liabilities on the consolidated statements of income. Brokerage charges previously included in professional fees are now netted against wealth management fees, which is included in noninterest income on the consolidated statements of income. The net quantitative impact of these presentation changes decreased both revenue and expenses by $2.0balance sheets were $19.9 million and ~~$3.7~~$20.9 million, ~~for~~respectively, arising from operating leases in which the three and six months ended March 31, 2019; however, these presentation changes did not have an impact on net income. Prior period balances have not been restated to reflect these presentation changes. There were no significantCompany is the lessee. The Company also recognized a cumulative effect ~~adjustments~~adjustment of $0.2 million as a result of ~~implementation~~remeasuring a pre-existing lease impairment as ~~our current revenue~~of the date of adoption. These ASUs did not have a material impact on the timing of expense or income recognition ~~policies generally conform with~~in the ~~principals in ASC Topic 606. For additional information, see "Note 1. Nature~~Company's consolidated statements of ~~Operations and Summary of Significant Policies~~."income.

Accounting Standards Not Yet Adopted in Fiscal Year ~~2019~~2020

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes in the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Entities are also allowed to elect to early adopt the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until after their effective date. As ASU 2018-13 only revises disclosure requirements, the Company does not believe this ASU will have a material impact on ~~our~~the consolidated financial statements.

~~In August 2017, the FASB issued ASU 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~, which amends the hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities to better align the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting. ASU 2017-12 is to be applied to all existing hedging relationships on the date of adoption and will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted in any interim period, with the effect of adoption reflected as of the beginning of the fiscal year of adoption. The Company is currently evaluating the potential impact of ASU 2017-12 on our consolidated financial statements and does not expect to early adopt this standard.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which addresses timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires institutions to measure all expected credit losses related to financial assets measured at amortized costs with an expected loss model based on historical experience, current conditions and reasonable and supportable forecasts relevant to affect the collectability of the financial assets, which is referred to as the current expected credit loss ~~(CECL)~~ model. ASU 2016-13 requires enhanced disclosures, including qualitative and quantitative requirements, to help understand significant estimates and judgments used in estimating credit losses, as well as provide additional information about the amounts recorded in the financial statements. InFrom November 2018 through February 2020, the FASB issued ~~ASU 2018-19,~~ ~~Codification Improvements to Topic 326, Financial Instruments, Credit Losses~~,ASUs which made technical corrections and improvements to the previous ASU ~~issued.~~issued (ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments, Credit Losses; ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments; ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses; and ASU 2020-02, Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842)). The ASUs require the use of the modified retrospective approach for adoption. These ASUs will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted after December 15, 2018. The ~~amendment requires the use of the modified retrospective approach for adoption. The~~ Company continues to make progress on ~~the~~its implementation plan including continuing to work through finalizing processes, controls and ~~has submitted historical data~~an independent model validation and we are on track to ~~third party vendor to start making necessary changes to our existing credit loss estimation process.~~adopt as required on October 1, 2020. The Company ~~does not expect~~is currently

12-

GREAT WESTERN BANCORP, INC.

Notes to ~~early adopt this standard and is currently~~ Consolidated Financial Statements (Unaudited)

evaluating the potential impact on ~~our~~the consolidated financial statements; however, since the magnitude of the anticipated change in the allowance for credit losses will be impacted by economic conditions and trends in the Company’s portfolio at the time of adoption, the quantitative impact cannot yet be reasonably estimated.

In ~~February 2016,~~December 2019, the FASB issued ASU ~~2016-02, Leases~~2019-12, Income Taxes (Topic ~~842)~~740): Simplifying the Accounting for Income Taxes, which ~~requires that lessees recognize~~aims to simplify the ~~assets and liabilities arising from leases on the balance sheet and disclosing key information about leasing arrangements. Lessees will be required to recognize an obligation~~accounting for ~~future lease payments measured on a discounted basis and a related right-of-use asset. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however,~~income taxes by removing certain ~~changes were made to align, where~~

~~13-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

~~necessary, lessor accounting with the lessee accounting model and ASC Topic 606,~~ ~~Revenue from Contracts with Customers. In July 2018, the FASB issued ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases, and ASU 2018-11,~~ ~~Leases (Topic 842), Targeted Improvements, which made technical corrections and improvements~~exceptions to the ~~previous~~general principles and also simplification of areas such as franchise taxes, step-up in tax basis goodwill, separate entity financial statements and interim recognition of enactment of tax laws or rate changes. The ASU ~~issued. In December 2018, the FASB issued ASU 2018-20,~~ ~~Leases (Topic 842): Narrow-Scope Improvements for Lessors~~, which allows lessors to exclude sales tax from consideration of the contract through a policy election and clarifies treatment of certain lessor costs and variable payments for contracts with lease and nonlease components. These ASUs will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2018.~~2020, with early adoption permitted. The ~~guidance will be effective with respect to the~~ Company beginning fiscal year 2020. The Company has a project team working on the implementation plan, is currently reviewing all existing lease agreements for which the amended guidance is to be applied, is in the process of determining which practical expedients will be elected for transition and is currently evaluating the potential impact of ASU 2019-12 on ~~our~~the consolidated financial statements.

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323 and Topic 815, which clarifies that an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the fair value measurement alternative. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company does not expect adoption to have a material impact on the consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time period to ease the potential burden in accounting for reference rate reform on financial reporting. The amendments in ASU 2020-04 are elective for entities with contracts, including derivative contracts, that reference LIBOR or some other reference rate that are expected to be discontinued. For the Company's cash flow hedges, ASU 2020-04 allows: (i) an entity to change the reference rate without having to designate the hedging relationship; (ii) for cash flow hedges in which the designated hedged risk is LIBOR, allows an entity to assert that it remains probable that the hedged forecasted transaction will occur; and (iii) allows an entity to change the designated method used to assess hedge effectiveness and simplifies or temporarily suspends the assessment of hedge effectiveness for hedging relationships. ASU 2020-04 must be applied prospectively and was effective immediately upon issuance and remains effective through December 31, 2022. The Company is currently evaluating the impact that adopting this new accounting standard will have on the consolidated financial statements.

3. Securities Available for Sale

The amortized cost and approximate fair value of investments in securities, all of which are classified as available for sale according to management’s intent, are summarized as follows.


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(dollars in thousands)
As of March 31, 2020
U.S. Treasury securities	$	69,629	$	954	$	—	$	70,583
Mortgage-backed securities:
Government National Mortgage Association	566,747		11,340		(733)		577,354
Federal Home Loan Mortgage Corporation	556,535		15,747		(731)		571,551
Federal National Mortgage Association	386,996		15,337		(27)		402,306
Small Business Assistance Program	300,498		5,725		(42)		306,181
States and political subdivision securities	60,511		517		(27)		61,001
Other	1,006		45		—		1,051
Total	$	1,941,922	$	49,665	$	(1,560)	$	1,990,027

Amortized
Cost Gross Unrealized Gains Gross Unrealized Losses Estimated
Fair Value
(dollars in thousands)
As of March 31, 2019
U.S. Treasury securities $ 93,696
$ 419
$ (296 ) $ 93,819
Mortgage-backed securities:
Government National Mortgage Association 491,888
1,811
(9,909 ) 483,790
Federal Home Loan Mortgage Corporation 438,605
3,697
(2,839 ) 439,463
Federal National Mortgage Association 303,643
1,268
(2,386 ) 302,525
Small Business Assistance Program 382,165
514
(2,841 ) 379,838
States and political subdivision securities 63,400
151
(681 ) 62,870
Other 1,006
—
(6 ) 1,000
Total $ 1,774,403
$ 7,860
$ (18,958 ) $ 1,763,305

13-

Amortized
Cost Gross Unrealized Gains Gross Unrealized Losses Estimated
Fair Value
(dollars in thousands)
As of September 30, 2018
U.S. Treasury securities $ 168,394
$ —
$ (1,222 ) $ 167,172
Mortgage-backed securities:
Government National Mortgage Association 442,458
35
(16,335 ) 426,158
Federal Home Loan Mortgage Corporation 297,380
—
(7,055 ) 290,325
Federal National Mortgage Association 188,192
—
(6,081 ) 182,111
Small Business Assistance Program 260,458
—
(9,345 ) 251,113
States and political subdivision securities 69,566
4
(1,795 ) 67,775
Other 1,006
—
(10 ) 996
Total $ 1,427,454
$ 39
$ (41,843 ) $ 1,385,650

~~14-~~

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
	(dollars in thousands)
As of September 30, 2019
U.S. Treasury securities	$	94,178	$	599	$	(32)	$	94,745
Mortgage-backed securities:
Government National Mortgage Association	501,139		3,374		(3,027)		501,486
Federal Home Loan Mortgage Corporation	463,974		8,840		(770)		472,044
Federal National Mortgage Association	322,340		5,409		(398)		327,351
Small Business Assistance Program	316,502		3,674		(154)		320,022
States and political subdivision securities	66,145		494		(116)		66,523
Other	1,006		31		—		1,037
Total	$	1,765,284	$	22,421	$	(4,497)	$	1,783,208

The amortized cost and approximate fair value of debt securities available for sale as of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, by contractual maturity, are shown below. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or repaid without penalty.


	March 31, 2019				September 30, 2018					March 31, 2020						September 30, 2019
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value			Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
	(dollars in thousands)									(dollars in thousands)
Due in one year or less	$	36,309	$	36,153	$	111,842	$	111,221	Due in one year or less	$	82,615	$	83,577	$	58,377	$	58,343
Due after one year through five years	111,862		111,756		114,920		113,069		Due after one year through five years	35,858		36,102		89,836		90,601
Due after five years through ten years	8,803		8,658		11,076		10,535		Due after five years through ten years	11,667		11,905		12,110		12,324
Due after ten years	122		122		122		122		Due after ten years	—		—		—		—
	157,096		156,689		237,960		234,947			130,140		131,584		160,323		161,268
Mortgage-backed securities	1,616,301		1,605,616		1,188,488		1,149,707		Mortgage-backed securities	1,810,776		1,857,392		1,603,955		1,620,903
Securities without contractual maturities	1,006		1,000		1,006		996		Securities without contractual maturities	1,006		1,051		1,006		1,037
Total	$	1,774,403	$	1,763,305	$	1,427,454	$	1,385,650	Total	$	1,941,922	$	1,990,027	$	1,765,284	$	1,783,208

Proceeds from sales of securities available for sale were $0.0 million for both the three and six months ended March 31, 2020. Proceeds from the sales of securities available for sale were $0.0 million and $97.2 million for the three and six months ended March 31, 2019, ~~and $25.0 million and $25.2 million for the three and six months ended March 31, 2018,~~ respectively. NoNaN gross gains (pre-tax) were realized on the sales for the three and six months ended March 31, ~~2019~~2020 and ~~2018~~2019, using the specific identification method. ~~Negligible~~Nominal gross losses (pre-tax) were realized on the sales for the three months ended March 31, 2020 and 2019, and ~~2018,~~nominal and $0.5 million ~~and negligible~~ gross losses (pre-tax) were realized on the sales for ~~each of~~ the six months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, using the specific identification method. The Company recognized no0 other-than-temporary impairment for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.

Securities with an estimated fair value of approximately ~~$945.9~~$918.8 million and ~~$787.4~~$863.9 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively, were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required by contractual obligation or law. The counterparties do not have the right to sell or pledge the securities the Company has pledged as collateral.

As detailed in the following tables, certain investments in debt securities, which are approximately ~~62%~~12% and ~~98%~~36% of the Company’s investment portfolio at estimated fair value at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively, are reported in the consolidated financial statements at an amount less than their amortized cost. Based on evaluation of available evidence, including recent changes in market interest rates, credit rating information, implicit or explicit government guarantees, and information obtained from regulatory filings, management believes the declines in fair value of these securities are temporary. As the Company does not intend to sell the securities and it is not more-likely-than-not the Company will be required to sell the securities before the recovery of their amortized cost basis, which may be maturity, the Company does not consider the securities to be other-than-temporarily impaired at March 31, ~~2019~~2020 or September 30, ~~2018.~~2019.

14-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the Company’s gross unrealized losses and approximate fair value in investments, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position.


																	Less than 12 months						12 months or more						Total
	Less than 12 months					12 months or more					Total						Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses				(dollars in thousands)
	(dollars in thousands)
As of March 31, 2019
As of March 31, 2020																As of March 31, 2020
U.S. Treasury securities	$	—	$	—		$	44,232	$	(296	)	$	44,232	$	(296	)	U.S. Treasury securities	$	—	$	—	$	—	$	—	$	—	$	—
Mortgage-backed securities	126,015		(468		)	865,274		(17,507		)	991,289		(17,975		)	Mortgage-backed securities	30,374		(189)		207,955		(1,344)		238,329		(1,533)
States and political subdivision securities	—		—			49,649		(681		)	49,649		(681		)	States and political subdivision securities	—		—		9,242		(27)		9,242		(27)
Other	—		—			1,000		(6		)	1,000		(6		)	Other	—		—		—		—		—		—
Total	$	126,015	$	(468	)	$	960,155	$	(18,490	)	$	1,086,170	$	(18,958	)	Total	$	30,374	$	(189)	$	217,197	$	(1,371)	$	247,571	$	(1,560)

~~15-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


																	Less than 12 months						12 months or more						Total
	Less than 12 months					12 months or more					Total						Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses		Estimated Fair Value		Unrealized Losses
	Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses			Estimated Fair Value		Unrealized Losses				(dollars in thousands)
	(dollars in thousands)
As of September 30, 2018
As of September 30, 2019																As of September 30, 2019
U.S. Treasury securities	$	167,172	$	(1,222	)	$	—	$	—		$	167,172	$	(1,222	)	U.S. Treasury securities	$	—	$	—	$	44,729	$	(32)	$	44,729	$	(32)
Mortgage-backed securities	416,677		(8,427		)	709,387		(30,389		)	1,126,064		(38,816		)	Mortgage-backed securities	94,612		(205)		474,979		(4,144)		569,591		(4,349)
States and political subdivision securities	23,534		(250		)	42,282		(1,545		)	65,816		(1,795		)	States and political subdivision securities	—		—		23,693		(116)		23,693		(116)
Other	996		(10		)	—		—			996		(10		)	Other	—		—		—		—		—		—
Total	$	608,379	$	(9,909	)	$	751,669	$	(31,934	)	$	1,360,048	$	(41,843	)	Total	$	94,612	$	(205)	$	543,401	$	(4,292)	$	638,013	$	(4,497)

As of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, the Company had ~~293~~58 and ~~390~~169 securities, respectively, in an unrealized loss position.

4. Loans

The following table presents the composition of loans as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	March 31,			September 30,
	2019			2018				March 31, 2020		September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Commercial real estate	$	5,049,792		$	4,629,330		Commercial real estate	$	5,222,819	$	5,092,410
Agriculture	2,121,872			2,182,688			Agriculture	1,881,792		2,008,644
Commercial non-real estate	1,721,095			1,699,987			Commercial non-real estate	1,699,197		1,719,956
Residential real estate	815,212			837,569			Residential real estate	820,759		812,208
Consumer	44,504			49,689			Consumer	52,640		51,925
Other	46,163			46,487			Other	39,908		47,541
Ending balance	9,798,638			9,445,750			Ending balance	9,717,115		9,732,684
Less: Unamortized discount on acquired loans	(15,255		)	(18,283		)	Less: Unamortized discount on acquired loans	(10,468)		(13,655)
Unearned net deferred fees and costs and loans in process	(12,472		)	(11,543		)	Unearned net deferred fees and costs and loans in process	(13,352)		(12,266)
Total	$	9,770,911		$	9,415,924		Total	$	9,693,295	$	9,706,763

The loan segments above include loans covered by a FDIC non-commercial loss sharing agreement totaling ~~$37.0~~$29.7 million and ~~$42.6~~$31.9 million as of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively, residential real estate loans held for sale totaling ~~$3.6~~$4.3 million and ~~$5.5~~$7.4 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively, and ~~$835.8~~$792.1 million and ~~$865.4~~$813.0 million of loans accounted for at fair value at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

Unearned net deferred fees and costs totaled ~~$13.5~~$13.7 million and ~~$13.0~~$13.9 million as of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

Loans in process represent loans that have been funded as of the balance sheet dates but not classified into a loan category and loan payments received as of the balance sheet dates that have not been applied to individual loan accounts. Loans in process totaled ~~$(1.0)~~$(0.4) million and ~~$(1.5)~~$(1.6) million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

Loans guaranteed by agencies of the U.S. government totaled ~~$164.5~~$146.2 million and ~~$168.6~~$154.2 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

15-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Principal balances of residential real estate loans sold totaled ~~$46.8~~$68.4 million and ~~$67.6~~$46.8 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$100.7~~$175.4 million and ~~$117.8~~$100.7 million for the six months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Nonaccrual

Interest income on loans is accrued daily on the outstanding balances. A loan is placed on nonaccrual status when management believes, after considering collection efforts and ~~accrual~~other factors, the borrowers' condition is such that collection of interest is ~~discontinued when principal or interest becomes~~doubtful, which is generally 90 days past ~~due unless it is well secured and is in the process of collection, or earlier when concern exists as to the ultimate collectibility of principal or interest.~~due. When loans are placed on nonaccrual status, accrual of interest is discontinued and interest receivable is reversed against interest income in the current period. Interest payments received thereafter are applied as a reduction to the remaining principal balance as long as concern exists as to the ultimate collection of the principal. Loans are removed from nonaccrual status when they become current as to both principal and interest and concern no longer exists as to the collectability of principal and interest.

~~16-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following table presents the Company’s nonaccrual loans at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, excluding ASC 310-30 loans. Loans greater than 90 days past due and still accruing interest as of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, were ~~$0.0~~$2.3 million and ~~$0.2~~$11.2 million, respectively.


	March 31,		September 30,
	2019		2018			March 31, 2020		September 30, 2019
	(dollars in thousands)					(dollars in thousands)
Nonaccrual loans					Nonaccrual loans
Commercial real estate	$	17,929	$	22,871	Commercial real estate	$	41,541	$	14,973
Agriculture	91,771		107,198		Agriculture	143,198		77,880
Commercial non-real estate	6,868		6,887		Commercial non-real estate	21,334		9,502
Residential real estate	2,499		3,549		Residential real estate	4,437		2,661
Consumer	87		61		Consumer	97		74
Total	$	119,154	$	140,566	Total	$	210,607	$	105,090

Credit Quality Information

The Company assigns all non-consumer loans a credit quality risk rating. These ratings are Pass, Watch, Substandard, Doubtful and Loss. Loans with a Pass and Watch rating represent those loans not classified on the Company’s rating scale as problem credits, with loans with a Watch rating being monitored and updated at least quarterly by management. Substandard loans are those where a well-defined weakness has been identified that may put full collection of contractual debt at risk. Doubtful loans are those where a well-defined weakness has been identified and a loss of contractual debt is probable. Substandard and doubtful loans are monitored and updated monthly. All non-consumer loan risk ratings are monitored by management and updated ~~and monitored on a continuous basis.~~as deemed appropriate. The Company generally does not risk rate residential real estate or consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans.

The following table presents the composition of the loan portfolio by internally assigned grade as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019. This table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of ~~$835.8~~$792.1 million at March 31, ~~2019~~2020 and ~~$865.4~~$813.0 million at September 30, ~~2018.~~2019.


As of March 31, 2020	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate ¹		Consumer ¹		Other		Total
	(dollars in thousands)
Credit Risk Profile by Internally Assigned Grade
Grade:
Pass	$	4,478,193	$	1,157,671	$	1,431,706	$	776,696	$	51,657	$	39,908	$	7,935,831
Watchlist	104,941		229,606		28,859		986		728		—		365,120
Substandard	132,937		345,674		92,849		10,694		122		—		582,276
Doubtful	51		1,437		99		16		4		—		1,607
Loss	—		—		—		—		—		—		—
Ending balance	4,716,122		1,734,388		1,553,513		788,392		52,511		39,908		8,884,834
Loans covered by a FDIC loss sharing agreement	—		—		—		29,691		—		—		29,691
Total	$	4,716,122	$	1,734,388	$	1,553,513	$	818,083	$	52,511	$	39,908	$	8,914,525
¹ The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans.

16-

As of March 31, 2019 Commercial Real Estate Agriculture Commercial
Non-Real Estate Residential Real Estate ¹ Consumer ¹ Other Total
(dollars in thousands)
Credit Risk Profile by Internally Assigned Grade
Grade:
Pass $ 4,455,347
$ 1,584,602
$ 1,512,883
$ 762,495
$ 44,013
$ 46,163
$ 8,405,503
Watchlist 47,424
199,585
32,402
5,450
102
—
284,963
Substandard 32,938
158,061
20,926
6,435
210
—
218,570
Doubtful 61
137
1,325
29
—
—
1,552
Loss —
—
—
—
—
—
—
Ending balance 4,535,770
1,942,385
1,567,536
774,409
44,325
46,163
8,910,588
Loans covered by a FDIC loss sharing agreement —
—
—
36,975
—
—
36,975
Total $ 4,535,770
$ 1,942,385
$ 1,567,536
$ 811,384
$ 44,325
$ 46,163
$ 8,947,563
¹ The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans.

~~17-~~

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)


As of September 30, 2018	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate ¹		Consumer ¹		Other		Total
As of September 30, 2019															As of September 30, 2019	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate ¹		Consumer ¹		Other		Total
	(dollars in thousands)															(dollars in thousands)
Credit Risk Profile by Internally Assigned Grade															Credit Risk Profile by Internally Assigned Grade
Grade:															Grade:
Pass	$	4,108,314	$	1,610,291	$	1,401,418	$	779,610	$	48,979	$	46,487	$	7,995,099	Pass	$	4,433,530	$	1,346,436	$	1,424,357	$	763,797	$	50,796	$	47,541	$	8,066,457
Watchlist	53,150		239,392		19,503		4,548		322		—		316,915		Watchlist	85,256		179,965		103,514		6,297		755		—		375,787
Substandard	41,184		137,205		20,117		6,366		159		—		205,031		Substandard	54,242		322,327		42,048		6,863		205		—		425,685
Doubtful	93		2		2,277		37		—		—		2,409		Doubtful	56		5,811		296		55		2		—		6,220
Loss	—		—		—		—		—		—		—		Loss	—		—		—		—		—		—		—
Ending balance	4,202,741		1,986,890		1,443,315		790,561		49,460		46,487		8,519,454		Ending balance	4,573,084		1,854,539		1,570,215		777,012		51,758		47,541		8,874,149
Loans covered by a FDIC loss sharing agreement	—		—		—		42,627		—		—		42,627		Loans covered by a FDIC loss sharing agreement	—		—		—		31,891		—		—		31,891
Total	$	4,202,741	$	1,986,890	$	1,443,315	$	833,188	$	49,460	$	46,487	$	8,562,081	Total	$	4,573,084	$	1,854,539	$	1,570,215	$	808,903	$	51,758	$	47,541	$	8,906,040
¹ The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans.	¹ The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans.														¹ The Company generally does not risk rate residential real estate or consumer loans unless a default event such as a bankruptcy or extended nonperformance takes place. Alternatively, standard credit scoring systems are used to assess credit risks of residential real estate and consumer loans.

Past Due Loans

The following table presents the Company’s past due loans at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019. This table is presented net of unamortized discount on acquired loans and excludes loans measured at fair value with changes in fair value reported in earnings of ~~$835.8~~$792.1 million at March 31, ~~2019~~2020 and ~~$865.4~~$813.0 million at September 30, ~~2018.~~2019.


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Financing Receivables
	(dollars in thousands)
As of March 31, 2020
Commercial real estate	$	25,351	$	4,056	$	13,752	$	43,159	$	4,672,963	$	4,716,122
Agriculture	30,196		10,160		60,176		100,532		1,633,856		1,734,388
Commercial non-real estate	2,538		956		20,497		23,991		1,529,522		1,553,513
Residential real estate	3,702		252		2,550		6,504		781,888		788,392
Consumer	42		5		29		76		52,435		52,511
Other	—		—		—		—		39,908		39,908
Ending balance	61,829		15,429		97,004		174,262		8,710,572		8,884,834
Loans covered by a FDIC loss sharing agreement	1,201		319		757		2,277		27,414		29,691
Total	$	63,030	$	15,748	$	97,761	$	176,539	$	8,737,986	$	8,914,525


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Financing Receivables
	(dollars in thousands)
As of September 30, 2019
Commercial real estate	$	3,587	$	570	$	2,475	$	6,632	$	4,566,452	$	4,573,084
Agriculture	13,411		1,267		33,089		47,767		1,806,772		1,854,539
Commercial non-real estate	3,932		120		4,424		8,476		1,561,739		1,570,215
Residential real estate	311		676		939		1,926		775,086		777,012
Consumer	61		110		7		178		51,580		51,758
Other	—		—		—		—		47,541		47,541
Ending balance	21,302		2,743		40,934		64,979		8,809,170		8,874,149
Loans covered by a FDIC loss sharing agreement	536		410		331		1,277		30,614		31,891
Total	$	21,838	$	3,153	$	41,265	$	66,256	$	8,839,784	$	8,906,040

17-

30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total
Past Due Current Total Financing Receivables
(dollars in thousands)
As of March 31, 2019
Commercial real estate $ 3,051
$ 95
$ 5,519
$ 8,665
$ 4,527,105
$ 4,535,770
Agriculture 11,558
8,985
37,075
57,618
1,884,767
1,942,385
Commercial non-real estate 2,161
4,134
3,452
9,747
1,557,789
1,567,536
Residential real estate 2,341
700
803
3,844
770,565
774,409
Consumer 208
15
—
223
44,102
44,325
Other —
—
—
—
46,163
46,163
Ending balance 19,319
13,929
46,849
80,097
8,830,491
8,910,588
Loans covered by a FDIC loss sharing agreement 1,955
78
214
2,247
34,728
36,975
Total $ 21,274
$ 14,007
$ 47,063
$ 82,344
$ 8,865,219
$ 8,947,563

30-59 Days Past Due 60-89 Days Past Due 90 Days or Greater Past Due Total
Past Due Current Total Financing Receivables
(dollars in thousands)
As of September 30, 2018
Commercial real estate $ 920
$ 551
$ 9,135
$ 10,606
$ 4,192,135
$ 4,202,741
Agriculture 1,243
2,042
51,579
54,864
1,932,026
1,986,890
Commercial non-real estate 551
16
4,068
4,635
1,438,680
1,443,315
Residential real estate 913
200
1,747
2,860
787,701
790,561
Consumer 83
47
1
131
49,329
49,460
Other —
—
—
—
46,487
46,487
Ending balance 3,710
2,856
66,530
73,096
8,446,358
8,519,454
Loans covered by a FDIC loss sharing agreement 30
233
471
734
41,893
42,627
Total $ 3,740
$ 3,089
$ 67,001
$ 73,830
$ 8,488,251
$ 8,562,081

~~18-~~

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Impaired Loans

The following table presents the Company’s impaired loans. This table excludes purchased credit impaired loans and loans measured at fair value with changes in fair value reported in earnings of ~~$835.8~~$792.1 million at March 31, ~~2019~~2020 and ~~$865.4~~$813.0 million at September 30, ~~2018.~~2019.


	March 31, 2019						September 30, 2018							March 31, 2020										September 30, 2019
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance			Recorded Investment		Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(dollars in thousands)													(dollars in thousands)
Impaired loans:													Impaired loans:
With an allowance recorded:													With an allowance recorded:
Commercial real estate	$	22,058	$	22,102	$	2,258	$	25,136	$	25,223	$	3,668	Commercial real estate	$	60,619	$	61,828	$	7,020	$	26,003	$	26,297	$	4,159
Agriculture	67,476		81,601		14,281		60,053		76,874		9,590		Agriculture	35,013		36,267		8,136		98,392		104,350		8,234
Commercial non-real estate	14,214		16,933		3,338		14,177		17,241		4,508		Commercial non-real estate	34,227		37,737		8,601		21,331		21,777		6,062
Residential real estate	3,093		3,678		1,562		4,509		5,153		2,210		Residential real estate	5,426		5,923		2,115		3,829		4,311		1,795
Consumer	209		213		123		160		165		61		Consumer	125		133		36		207		214		97
Total impaired loans with an allowance recorded	107,050		124,527		21,562		104,035		124,656		20,037		Total impaired loans with an allowance recorded	135,410		141,888		25,908		149,762		156,949		20,347
With no allowance recorded:													With no allowance recorded:
Commercial real estate	10,595		50,487		—		15,764		58,141		—		Commercial real estate	72,060		110,873		—		28,272		66,631		—
Agriculture	92,021		102,968		—		77,172		80,355		—		Agriculture	312,866		331,126		—		231,087		255,308		—
Commercial non-real estate	8,669		17,809		—		8,905		18,047		—		Commercial non-real estate	59,250		67,488		—		21,579		31,414		—
Residential real estate	3,539		5,969		—		2,177		4,574		—		Residential real estate	5,475		7,870		—		3,290		5,454		—
Consumer	—		117		—		1		118		—		Consumer	2		110		—		1		108		—
Total impaired loans with no allowance recorded	114,824		177,350		—		104,019		161,235		—		Total impaired loans with no allowance recorded	449,653		517,467		—		284,229		358,915		—
Total impaired loans	$	221,874	$	301,877	$	21,562	$	208,054	$	285,891	$	20,037	Total impaired loans	$	585,063	$	659,355	$	25,908	$	433,991	$	515,864	$	20,347

The following table presents the average recorded investment on impaired loans and interest income recognized on impaired loans for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended								Six Months Ended									Three Months Ended March 31,															Six Months Ended March 31,
	March 31, 2019				March 31, 2018				March 31, 2019				March 31, 2018					2020						2019						2020					2019
	Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status			Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status		Average Recorded Investment		Interest Income Recognized While on Impaired Status			Average Recorded Investment		Interest Income Recognized While on Impaired Status
	(dollars in thousands)																	(dollars in thousands)
Commercial real estate	$	34,475	$	345	$	66,577	$	477	$	36,616	$	697	$	56,875	$	2,053	Commercial real estate	$	112,623	$	1,287	$	34,475	$	345	$	93,174	$	3,666		$	36,616	$	697
Agriculture	151,021		2,203		121,062		1,189		146,423		3,202		124,200		2,171		Agriculture	369,598		4,784		151,021		2,203		356,225		13,301			146,423		3,202
Commercial non-real estate	22,556		312		30,350		325		22,731		678		30,878		776		Commercial non-real estate	97,672		1,531		22,556		312		79,418		4,401			22,731		678
Residential real estate	6,724		93		7,578		116		6,711		182		7,636		281		Residential real estate	10,904		127		6,724		93		9,642		393			6,711		182
Consumer	237		6		238		4		212		11		256		8		Consumer	139		3		237		6		162		4			212		11
Total	$	215,013	$	2,959	$	225,805	$	2,111	$	212,693	$	4,770	$	219,845	$	5,289	Total	$	590,936	$	7,732	$	215,013	$	2,959	$	538,621	$	21,765		$	212,693	$	4,770

Valuation ~~adjustments~~adjustment reductions made to repossessed properties totaled ~~$0.1~~$4.8 million and ~~$0.7~~$0.1 million for the three months ended March 31, 2020 and 2019, ~~and 2018, respectively,~~respectively. Valuation adjustment reductions made to repossessed properties totaled $4.8 million and $2.0 ~~million and $0.7~~ million for the six months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The adjustments are included in net loss on repossessed property and other related expenses in noninterest expense.

Troubled Debt Restructurings

Included in certain loan categories in the impaired loans are TDRs that were classified as impaired. These TDRs do not include purchased credit impaired loans. When the Company grants concessions to borrowers such as reduced interest rates or extensions of loan periods that would not be considered other than because of borrowers’ financial difficulties, the modification is considered a TDR. Specific reserves included in the allowance for loan and lease losses for TDRs were ~~$7.4~~$6.9 million and ~~$9.2~~$10.3 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. There were ~~$0.6~~$0.1 million and $0.2 million of commitments to lend additional funds to borrowers whose loans were modified in a TDR as of March 31, ~~2019~~2020 and ~~$0.3 million commitments to lend additional funds to borrowers whose loans were modified in a TDR as of~~ September 30, ~~2018.~~

2019, respectively.

~~19-~~

18-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the recorded value of the Company’s TDR balances as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	March 31, 2019				September 30, 2018					March 31, 2020						September 30, 2019
	Accruing		Nonaccrual		Accruing		Nonaccrual			Accruing		Nonaccrual		Accruing		Nonaccrual
	(dollars in thousands)									(dollars in thousands)
Commercial real estate	$	1,930	$	1,068	$	2,649	$	2,616	Commercial real estate	$	19,843	$	3,088	$	17,145	$	904
Agriculture	12,377		46,592		13,248		73,741		Agriculture	11,838		20,357		22,929		24,762
Commercial non-real estate	2,498		705		3,420		656		Commercial non-real estate	9,402		4,465		4,398		4,257
Residential real estate	347		115		389		143		Residential real estate	294		92		263		102
Consumer	91		61		77		—		Consumer	5		40		107		48
Total	$	17,243	$	48,541	$	19,783	$	77,156	Total	$	41,382	$	28,042	$	44,842	$	30,073

TDRs are generally restructured through either a rate modification, term extension, payment modification or due to a bankruptcy. The following table presents a summary of all accruing loans restructured in TDRs for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,										Six Months Ended March 31,											Three Months Ended March 31,																			Six Months Ended March 31,
	2019					2018					2019					2018						2020								2019								2020						2019
		Recorded Investment					Recorded Investment					Recorded Investment					Recorded Investment						Recorded Investment							Recorded Investment							Recorded Investment						Recorded Investment
	Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification			Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification			Number	Pre-Modification		Post-Modification
	(dollars in thousands)																					(dollars in thousands)
Commercial real estate	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	Commercial real estate	1	$	2,879	$	2,879	—	$	—	$	—	1	$	2,879	$	2,879		—	$	—	$	—
Agriculture	—	—		—		2	6,073		6,073		—	$	—	—		2	6,073		6,073		Agriculture	2	993		993		—	—		—		2	993		993			—	—		—
Commercial non-real estate	—	—		—		—	—		—		—	$	—	—		—	—		—		Commercial non-real estate	2	3,952		3,952		—	—		—		4	5,096		5,096			—	—		—
Residential real estate	—	—		—		—	—		—		—	—		—		—	—		—		Residential real estate	1	50		50		—	—		—		1	50		50			—	—		—
Consumer	—	—		—		1	73		73		1	$	89	89		1	73		73		Consumer	—	—		—		—	—		—		—	—		—			1	89		89
Total accruing	—	$	—	$	—	3	$	6,146	$	6,146	1	$	89	$	89	3	$	6,146	$	6,146	Total accruing	6	$	7,874	$	7,874	—	$	—	$	—	8	$	9,018	$	9,018		1	$	89	$	89
Change in recorded investment due to principal paydown at time of modification	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—	Change in recorded investment due to principal paydown at time of modification	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—		—	$	—	$	—
Change in recorded investment due to chargeoffs at time of modification	—	—		—		—	—		—		—	—		—		—	—		—		Change in recorded investment due to chargeoffs at time of modification	—	—		—		—	—		—		—	—		—			—	—		—

The following table presents a summary of all nonaccruing loans restructured in TDRs for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,																			Six Months Ended March 31,
	2020								2019								2020						2019
		Recorded Investment							Recorded Investment							Recorded Investment						Recorded Investment
	Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification		Number	Pre-Modification		Post-Modification			Number	Pre-Modification		Post-Modification
	(dollars in thousands)
Commercial real estate	—	$	—	$	—	—	$	—	$	—	1	$	2,216	$	2,216		—	$	—	$	—
Agriculture	—	—		—		—	—		—		10	1,455		1,455			—	—		—
Commercial non-real estate	—	—		—		—	—		—		2	830		830			—	—		—
Residential real estate	—	—		—		—	—		—		—	—		—			—	—		—
Consumer	—	—		—		—	—		—		—	—		—			—	—		—
Total nonaccruing	—	$	—	$	—	—	$	—	$	—	13	$	4,501	$	4,501		—	$	—	$	—
Change in recorded investment due to principal paydown at time of modification	—	$	—	$	—	—	$	—	$	—	—	$	—	$	—		—	$	—	$	—
Change in recorded investment due to chargeoffs at time of modification	—	—		—		—	—		—		—	—		—			—	—		—

19-

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
Recorded Investment Recorded Investment Recorded Investment Recorded Investment
Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification Number Pre-Modification Post-Modification
(dollars in thousands)
Commercial real estate —
$ —
$ —
—
$ —
$ —
—
$ —
$ —
—
$ —
$ —
Agriculture —
—
—
6
8,374
8,374
—
$ —
—
6
8,374
8,374
Commercial non-real estate —
—
—
—
—
—
—
$ —
—
—
—
—
Residential real estate —
—
—
—
—
—
—
—
—
—
—
—
Consumer —
—
—
—
—
—
—
$ —
—
—
—
—
Total nonaccruing —
$ —
$ —
6
$ 8,374
$ 8,374
—
$ —
$ —
6
$ 8,374
$ 8,374
Change in recorded investment due to principal paydown at time of modification —
$ —
$ —
—
$ —
$ —
—
$ —
$ —
—
$ —
$ —
Change in recorded investment due to chargeoffs at time of modification —
—
—
—
—
—
—
—
—
—
—
—

~~20-~~

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents loans that were modified as TDRs within the previous 12 months and for which there was a payment default for the three and six months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.


	Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended March 31,											Six Months Ended March 31,
	2019			2018			2019			2018				2020				2019					2020				2019
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Number of Loans	Recorded Investment			Number of Loans	Recorded Investment
	(dollars in thousands)													(dollars in thousands)
Commercial real estate	—	$	—	—	$	—	—	$	—	1	$	1,012	Commercial real estate	—	$	—	—	$	—	—	$	—		—	$	—
Agriculture	—	—		3	4,264		—	—		4	5,011		Agriculture	17	2,106		—	—		19	11,180			—	—
Commercial non-real estate	—	—		—	—		—	—		—	—		Commercial non-real estate	—	—		—	—		1	2,834			—	—
Residential real estate	—	—		—	—		—	—		—	—		Residential real estate	—	—		—	—		—	—			—	—
Consumer	—	—		—	—		—	—		—	—		Consumer	—	—		—	—		—	—			—	—
Total	—	$	—	3	$	4,264	—	$	—	5	$	6,023	Total	17	$	2,106	—	$	—	20	$	14,014		—	$	—

For purposes of the table above, a loan is considered to be in payment default once it is 90 days or more contractually past due under the modified terms. The table includes loans that experienced a payment default during the period, but may be performing in accordance with the modified terms as of the balance sheet date. There were ~~$0.0~~$0.3 million and ~~$0.1~~$0.0 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$0.0~~$0.3 million and ~~$0.6~~$0.0 million for the six months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, of loans removed from TDR status as they were restructured at market terms and are performing.

5. Allowance for Loan and Lease Losses

The allowance for loan and lease losses under the incurred loss model is determined based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies, and other credit risk indicators, which are inherently subjective. The Company considers the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. In addition, consideration is given to concentration risks associated with the various loan portfolios, ~~and~~ current economic conditions and other environmental factors that might impact the portfolio. The Company also considers changes, if any, in underwriting activities, the loan portfolio composition (including product mix and geographic, industry, or customer-specific concentrations), trends in loan performance, the level of allowance coverage relative to similar banking institutions under an incurred loss model and macroeconomic factors, such as changes in unemployment rates, gross domestic product, and consumer bankruptcy filings.

Changes to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses, which is reflected on the consolidated statements of income. Past due status is monitored as an indicator of credit deterioration. Loans that are 90 days or more past due are put on nonaccrual status unless a repayment is eminent. Loans deemed to be uncollectible are charged off against the allowance for loan and lease losses. Recoveries of amounts previously charged-off are credited to the allowance for loan and lease losses.

The allowance for loan and lease losses consist of reserves for probable losses that have been identified related to specific borrowing relationships that are individually evaluated for impairment ("specific reserve"), as well as probable losses inherent in ~~our~~the loan portfolio that are not specifically identified ("collective reserve").

The specific reserve relates to impaired loans. A loan is impaired when, based on current information and events, it is probable the Company will be unable to collect all amounts due (interest as well as principal) according to the contractual terms of the loan agreement. Specific reserves are determined on a loan-by-loan basis based on management’s best estimate of the Company's exposure, given the current payment status of the loan, the present value of expected payments, and the value of any underlying collateral. Impaired loans also include loans modified in ~~troubled debt restructurings.~~TDRs. Generally, the impairment related to troubled debt restructurings is measured based on the fair value of the collateral, less cost to sell, or the present value of expected payments relative to the unpaid principal balance. If the impaired loan is identified as collateral dependent, then the fair value of the collateral method of measuring the amount of the impairment is utilized. This method requires obtaining an independent appraisal of the collateral and reducing the appraised value by applying a discount factor to the appraised value, if necessary, and including costs to sell.

Management’s estimate for collective reserves reflects losses incurred in the loan portfolio as of the consolidated balance sheet reporting date. Incurred loss estimates primarily are based on historical loss experience and portfolio mix. Incurred loss estimates may be adjusted for qualitative factors such as current economic conditions and current portfolio trends including credit quality, concentrations, aging of the portfolio, and/or significant policy and underwriting ~~changes.~~

changes, which may not be reflected in the historical loss experience.

~~21-~~

20-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following tables present the Company’s allowance for loan and lease losses roll forward for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


Three Months Ended March 31, 2020	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)
Beginning balance, January 1, 2020	$	17,462	$	32,029	$	17,389	$	4,620	$	288	$	993	$	72,781
Charge-offs	(1,417)		(4,522)		(3,577)		(118)		(25)		(707)		(10,366)
Recoveries	114		1,305		59		147		28		87		1,740
Provision	48,285		714		17,895		3,602		465		738		71,699
(Improvement) impairment of ASC 310-30 loans	(30)		—		—		105		21		—		96
Ending balance, March 31, 2020	$	64,414	$	29,526	$	31,766	$	8,356	$	777	$	1,111	$	135,950


Three Months Ended March 31, 2019	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)
Beginning balance, January 1, 2019	$	16,348	$	31,785	$	12,093	$	4,611	$	430	$	926	$	66,193
Charge-offs	(75)		(5,767)		(110)		(310)		(85)		(249)		(6,596)
Recoveries	162		199		104		125		44		99		733
Provision	(855)		7,508		962		(344)		(15)		150		7,406
Impairment of ASC 310-30 loans	23		—		—		244		—		—		267
Ending balance, March 31, 2019	$	15,603	$	33,725	$	13,049	$	4,326	$	374	$	926	$	68,003


Six Months Ended March 31, 2020	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)
Beginning balance, October 1, 2019	$	16,827	$	30,819	$	17,567	$	4,095	$	427	$	1,039	$	70,774
Charge-offs	(1,454)		(9,128)		(5,059)		(287)		(45)		(1,060)		(17,033)
Recoveries	234		1,408		172		312		48		137		2,311
Provision	48,857		6,692		19,086		3,794		326		995		79,750
(Improvement) impairment of ASC 310-30 loans	(50)		(265)		—		442		21		—		148
Ending balance, March 31, 2020	$	64,414	$	29,526	$	31,766	$	8,356	$	777	$	1,111	$	135,950


Six Months Ended iMarch 31, 2019	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)
Beginning balance, October 1, 2018	$	16,777	$	28,121	$	13,610	$	4,749	$	257	$	1,026	$	64,540
Charge-offs	(946)		(7,028)		(1,471)		(642)		(334)		(394)		(10,815)
Recoveries	259		357		228		287		128		131		1,390
Provision	(68)		12,275		682		(369)		323		163		13,006
(Improvement) impairment of ASC 310-30 loans	(419)		—		—		301		—		—		(118)
Ending balance, March 31, 2019	$	15,603	$	33,725	$	13,049	$	4,326	$	374	$	926	$	68,003

21-

Three Months Ended March 31, 2019 Commercial Real Estate Agriculture Commercial Non-Real Estate Residential Real Estate Consumer Other Total
(dollars in thousands)
Beginning balance January 1, 2019 $ 16,348
$ 31,785
$ 12,093
$ 4,611
$ 430
$ 926
$ 66,193
Charge-offs (75 ) (5,767 ) (110 ) (310 ) (85 ) (249 ) (6,596 )
Recoveries 162
199
104
125
44
99
733
Provision (855 ) 7,508
962
(344 ) (15 ) 150
7,406
Impairment of ASC 310-30 loans 23
—
—
244
—
—
267
Ending balance March 31, 2019 $ 15,603
$ 33,725
$ 13,049
$ 4,326
$ 374
$ 926
$ 68,003

Three Months Ended March 31, 2018 Commercial Real Estate Agriculture Commercial Non-Real Estate Residential Real Estate Consumer Other Total
(dollars in thousands)
Beginning balance January 1, 2018 $ 15,995
$ 24,750
$ 16,434
$ 5,475
$ 307
$ 1,062
$ 64,023
Charge-offs (1,268 ) (783 ) (1,605 ) (20 ) (62 ) (557 ) (4,295 )
Recoveries 61
125
88
27
20
190
511
Provision 4,077
152
813
(341 ) 14
281
4,996
Impairment (improvement) of ASC 310-30 loans 49
(115 ) —
(30 ) —
—
(96 )
Ending balance March 31, 2018 $ 18,914
$ 24,129
$ 15,730
$ 5,111
$ 279
$ 976
$ 65,139

Six Months Ended March 31, 2019 Commercial Real Estate Agriculture Commercial Non-Real Estate Residential Real Estate Consumer Other Total
(dollars in thousands)
Beginning balance October 1, 2018 $ 16,777
$ 28,121
$ 13,610
$ 4,749
$ 257
$ 1,026
$ 64,540
Charge-offs (946 ) (7,028 ) (1,471 ) (642 ) (334 ) (394 ) (10,815 )
Recoveries 259
357
228
287
128
131
1,390
Provision (68 ) 12,275
682
(369 ) 323
163
13,006
(Improvement) impairment of ASC 310-30 loans (419 ) —
—
301
—
—
(118 )
Ending balance March 31, 2019 $ 15,603
$ 33,725
$ 13,049
$ 4,326
$ 374
$ 926
$ 68,003

Six Months Ended March 31, 2018 Commercial Real Estate Agriculture Commercial Non-Real Estate Residential Real Estate Consumer Other Total
(dollars in thousands)
Beginning balance January 1, 2018 $ 16,941
$ 25,757
$ 14,114
$ 5,347
$ 329
$ 1,015
$ 63,503
Charge-offs (1,597 ) (2,981 ) (2,844 ) (275 ) (116 ) (1,091 ) (8,904 )
Recoveries 209
172
209
117
42
334
1,083
Provision 3,322
1,296
4,251
(11 ) 24
718
9,600
Impairment (improvement) of ASC 310-30 loans 39
(115 ) —
(67 ) —
—
(143 )
Ending balance March 31, 2018 $ 18,914
$ 24,129
$ 15,730
$ 5,111
$ 279
$ 976
$ 65,139

~~22-~~

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following tables provide details regarding the allowance for loan and lease losses and balance by type of allowance as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019. These tables are presented net of unamortized discount on acquired loans and excludes loans of ~~$835.8~~$792.1 million measured at fair value, loans held for sale of ~~$3.6~~$4.3 million, and guaranteed loans of ~~$153.5~~$138.0 million for March 31, ~~2019~~2020 and loans measured at fair value of ~~$865.4~~$813.0 million, loans held for sale of ~~$5.5~~$7.4 million, and guaranteed loans of ~~$160.3~~$145.9 million for September 30, ~~2018.~~

2019.


As of March 31, 2019	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
As of March 31, 2020															As of March 31, 2020	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)															(dollars in thousands)
Allowance for loan and lease losses															Allowance for loan and lease losses
Individually evaluated for impairment	$	2,258	$	14,281	$	3,338	$	1,562	$	123	$	—	$	21,562	Individually evaluated for impairment	$	7,020	$	8,136	$	8,601	$	2,115	$	36	$	—	$	25,908
Collectively evaluated for impairment	13,085		19,179		9,711		2,201		251		926		45,353		Collectively evaluated for impairment	57,285		21,390		23,136		5,747		720		1,111		109,389
ASC 310-30 loans	260		265		—		563		—		—		1,088		ASC 310-30 loans	109		—		29		494		21		—		653
Total allowance	$	15,603	$	33,725	$	13,049	$	4,326	$	374	$	926	$	68,003	Total allowance	$	64,414	$	29,526	$	31,766	$	8,356	$	777	$	1,111	$	135,950
Financing Receivables															Financing Receivables
Individually evaluated for impairment	$	32,653	$	159,497	$	22,883	$	6,632	$	209	$	—	$	221,874	Individually evaluated for impairment	$	132,679	$	347,879	$	93,477	$	10,901	$	127	$	—	$	585,063
Collectively evaluated for impairment	4,395,621		1,758,897		1,492,803		765,417		43,616		46,163		8,502,517		Collectively evaluated for impairment	4,486,167		1,365,625		1,415,903		774,083		52,001		39,908		8,133,687
ASC 310-30 loans	27,296		2,827		403		35,038		500		—		66,064		ASC 310-30 loans	21,611		2,970		178		28,263		383		—		53,405
Loans Outstanding	$	4,455,570	$	1,921,221	$	1,516,089	$	807,087	$	44,325	$	46,163	$	8,790,455	Loans Outstanding	$	4,640,457	$	1,716,474	$	1,509,558	$	813,247	$	52,511	$	39,908	$	8,772,155


As of September 30, 2018	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
As of September 30, 2019															As of September 30, 2019	Commercial Real Estate		Agriculture		Commercial Non-Real Estate		Residential Real Estate		Consumer		Other		Total
	(dollars in thousands)															(dollars in thousands)
Allowance for loan and lease losses															Allowance for loan and lease losses
Individually evaluated for impairment	$	3,668	$	9,590	$	4,508	$	2,210	$	61	$	—	$	20,037	Individually evaluated for impairment	$	4,159	$	8,234	$	6,062	$	1,795	$	97	$	—	$	20,347
Collectively evaluated for impairment	12,430		18,266		9,102		2,277		196		1,026		43,297		Collectively evaluated for impairment	12,509		22,320		11,476		2,188		330		1,039		49,862
ASC 310-30 loans	679		265		—		262		—		—		1,206		ASC 310-30 loans	159		265		29		112		—		—		565
Total allowance	$	16,777	$	28,121	$	13,610	$	4,749	$	257	$	1,026	$	64,540	Total allowance	$	16,827	$	30,819	$	17,567	$	4,095	$	427	$	1,039	$	70,774
Financing Receivables															Financing Receivables
Individually evaluated for impairment	$	40,900	$	137,225	$	23,082	$	6,686	$	161	$	—	$	208,054	Individually evaluated for impairment	$	54,275	$	329,479	$	42,910	$	7,119	$	208	$	—	$	433,991
Collectively evaluated for impairment	4,053,712		1,823,947		1,364,511		780,047		48,711		46,487		8,117,415		Collectively evaluated for impairment	4,418,611		1,501,164		1,480,949		763,645		51,112		47,541		8,263,022
ASC 310-30 loans	27,001		2,815		416		40,025		588		—		70,845		ASC 310-30 loans	22,124		2,756		221		30,280		438		—		55,819
Loans Outstanding	$	4,121,613	$	1,963,987	$	1,388,009	$	826,758	$	49,460	$	46,487	$	8,396,314	Loans Outstanding	$	4,495,010	$	1,833,399	$	1,524,080	$	801,044	$	51,758	$	47,541	$	8,752,832

For acquired loans not accounted for under ASC 310-30 (purchased non-impaired), the Company utilizes specific and collective reserve calculation methods similar to originated loans. The required ALLL for these loans is included in the individually evaluated for impairment bucket of the ALLL if the loan is rated substandard or worse, and in the collectively evaluated for impairment bucket for pass rated loans.

The Company maintains an ALLL for acquired loans accounted for under ASC 310-30 as a result of impairment to loan pools arising from the periodic re-valuation of these loans. Any impairment in the individual pool is generally recognized in the current period as provision for loan and lease losses. Any improvement in the estimated cash flows, is generally not recognized immediately, but is instead reflected as an adjustment to the related loan pools yield on a prospective basis once any previously recorded impairment has been recaptured.

The ALLL for ASC 310-30 loans totaled ~~$1.1~~$0.7 million and $0.6 million at March 31, ~~2019, compared to $1.2 million at~~2020 and September 30, ~~2018.~~2019, respectively. For both the three and six months ended March 31, 2020, loan pools accounted for under ASC 310-30 had a net impairment of provision of $0.1 million. For the three and six months ended March 31, 2019, loan pools accounted for under ASC 310-30 had a net impairment of $0.3 million and a net reversal of provision of $0.1 million, respectively. For the three and six months ended March 31, 2018, loan pools accounted for under ASC 310-30 had a net reversal of provision of $0.1 million and $0.1 million, respectively. The net impairment of provision for the three months ended March 31, 2019 due to actual cash flows being lower than expected while the net reversal of provision for the six months ended March 31, 2019 was a result of accretion resuming on an individually accounted for loan previously on cost recovery. The net reversals of provision for the three and six months ended March 31, 2018 were driven by increases in expected cash flows.

The reserve for unfunded loan commitments was $1.1 million and $0.5 million at ~~both~~ March 31, ~~2019~~2020 and September 30, ~~2018~~2019, respectively and is recorded in accrued expenses and other liabilities on the consolidated balance sheets.

~~23-~~22-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

6. Accounting for Certain Loans Acquired with Deteriorated Credit Quality

In June 2010 and May 2016, the Company acquired certain loans in the TierOne Bank and HF Financial transactions, respectively, that had deteriorated credit quality known as ASC 310-30 loans or purchased credit impaired loans. Several factors were considered when evaluating whether a loan was considered a purchased credit impaired loan, including the delinquency status of the loan, updated borrower credit status, geographic information and updated ~~loan-to-values ("LTV").~~loan-to-values. Further, these purchased credit impaired loans had differences between contractual amounts owed and cash flows expected to be collected, that were at least in part, due to credit quality. U.S. GAAP allows purchasers to aggregate purchased credit impaired loans acquired in the same fiscal quarter in one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows.

Loan pools are periodically reassessed to determine expected cash flows. In determining the expected cash flows, the timing of cash flows and prepayment assumptions for smaller, homogeneous loans are based on statistical models that take into account factors such as the loan interest rate, credit profile of the borrowers, the years in which the loans were originated, and whether the loans are fixed or variable rate loans. Prepayments may be assumed on large individual loans that consider similar prepayment factors listed above for smaller homogeneous loans.

The re-assessment of purchased credit impaired loans resulted in the following changes in the accretable yield during the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~

2019.

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
(dollars in thousands)
Balance at beginning of period $ 35,493
$ 41,918
$ 34,973
$ 44,131
Accretion (2,188 ) (3,664 ) (4,343 ) (7,045 )
Reclassification from (to) nonaccretable difference 375
(413 ) 3,050
755
Balance at end of period $ 33,680
$ 37,841
$ 33,680
$ 37,841


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(dollars in thousands)
Balance, beginning of period	$	21,130	$	35,493	$	26,047	$	34,973
Accretion	(1,753)		(2,188)		(3,693)		(4,343)
Reclassification (to) from nonaccretable difference	(37)		375		(3,014)		3,050
Balance, end of period	$	19,340	$	33,680	$	19,340	$	33,680

The reclassifications (to) from nonaccretable difference noted in the table above represent instances where specific pools of loans are expected to perform better over the remaining lives of the loans than expected at the prior re-assessment date.

The following table provides purchased credit impaired loans at March 31, ~~2019~~2020 and September 30, ~~2018.~~

2019.


	March 31, 2019						September 30, 2018							March 31, 2020										September 30, 2019
	Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³		Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³			Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³		Outstanding Balance ¹		Recorded Investment ²		Carrying Value ³
	(dollars in thousands)													(dollars in thousands)
Commercial real estate	$	99,468	$	27,296	$	27,036	$	100,761	$	27,001	$	26,322	Commercial real estate	$	88,443	$	21,611	$	21,502	$	90,295	$	22,124	$	21,965
Agriculture	4,622		2,827		2,562		4,841		2,815		2,551		Agriculture	4,259		2,970		2,970		4,462		2,756		2,491
Commercial non-real estate	7,419		403		403		7,475		416		416		Commercial non-real estate	7,072		178		149		7,190		221		192
Residential real estate	40,969		35,038		34,475		46,646		40,025		39,763		Residential real estate	32,947		28,263		27,769		35,413		30,280		30,168
Consumer	555		500		500		656		588		588		Consumer	441		383		362		493		438		438
Total lending	$	153,033	$	66,064	$	64,976	$	160,379	$	70,845	$	69,640	Total lending	$	133,162	$	53,405	$	52,752	$	137,853	$	55,819	$	55,254
¹Represents the legal balance of ASC 310-30 loans.	¹Represents the legal balance of ASC 310-30 loans.												¹Represents the legal balance of ASC 310-30 loans.
² Represents the book balance of ASC 310-30 loans.	² Represents the book balance of ASC 310-30 loans.												² Represents the book balance of ASC 310-30 loans.
³ Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.	³ Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.												³ Represents the book balance of ASC 310-30 loans net of the related allowance for loan and lease losses.

7. FDIC Indemnification Asset

Under the terms of the purchase and assumption agreement with the FDIC with regard to the TierOne Bank acquisition, the Company is reimbursed for a portion of the losses incurred on covered assets under the non-commercial loss share agreement. As covered assets are resolved, whether through repayment, short sale of the underlying collateral, the foreclosure on or sale of collateral, or the sale or charge-off of loans or other repossessed property, any differences between the carrying value of the covered assets versus the payments received during the resolution process that are reimbursable by the FDIC are recognized as reductions in the FDIC indemnification asset. Any gains or losses realized from the resolution of covered assets reduce or increase, respectively, the amount recoverable from the FDIC.

~~24-~~23-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table represents a summary of the activity related to the FDIC indemnification asset for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


														Three Months Ended March 31,						Six Months Ended March 31,
	Three Months Ended March 31,						Six Months Ended March 31,							2020		2019		2020		2019
	2019			2018			2019			2018				(dollars in thousands)
	(dollars in thousands)
Balance at beginning of period	$	1,950		$	4,692		$	2,502		$	5,704
Balance, beginning of period													Balance, beginning of period	$	832	$	1,950	$	1,079	$	2,502
Amortization	(360		)	(732		)	(853		)	(1,750		)	Amortization	(390)		(360)		(641)		(853)
Changes in expected reimbursements from FDIC for changes in expected credit losses	(13		)	(15		)	(13		)	(33		)	Changes in expected reimbursements from FDIC for changes in expected credit losses	—		(13)		—		(13)
Changes in reimbursable expenses	(16		)	(456		)	(41		)	(662		)	Changes in reimbursable expenses	—		(16)		—		(41)
(Reimbursements) payments of covered losses (from) to the FDIC	(9		)	189			(43		)	419
Balance at end of period	$	1,552		$	3,678		$	1,552		$	3,678
Payments (reimbursements) of covered losses to (from) the FDIC													Payments (reimbursements) of covered losses to (from) the FDIC	39		(9)		43		(43)
Balance, end of period													Balance, end of period	$	481	$	1,552	$	481	$	1,552

The loss claims filed are subject to review, approval, and annual audits by the FDIC or its assigned agents for compliance with the terms in the loss sharing agreement which ends June 4, 2020.

8. Derivative Financial Instruments

The Company uses interest rate swaps and interest rate caps/floors to manage its interest rate risk and market risk in accommodating the needs of its customers. Interest rate swaps include both traditional interest rate swaps and interest rate swaps which can be canceled by the customer on specified dates at no cost, typically referred to as swaptions. The Company recognizes all derivatives on the consolidated balance sheet at fair value in either other assets or accrued expenses and other liabilities as appropriate.

The following table presents the notional amounts and gross fair values of all derivative assets and liabilities held by the Company as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	March 31, 2019							September 30, 2018								March 31, 2020										September 30, 2019
	Notional Amount		Gross Asset Fair Value		Gross Liability Fair Value			Notional Amount		Gross Asset Fair Value		Gross Liability Fair Value				Notional Amount		Gross Asset Fair Value		Gross Liability Fair Value		Notional Amount		Gross Asset Fair Value		Gross Liability Fair Value
	(dollars in thousands)															(dollars in thousands)
Derivatives not designated as hedging instruments:															Derivatives not designated as hedging instruments:
Interest rate swaps															Interest rate swaps
Financial institution counterparties	$	1,237,398	$	4,394	$	(12,824	)	$	1,082,630	$	22,696	$	(2,231	)	Financial institution counterparties	$	1,279,918	$	—	$	(68,412)	$	1,259,765	$	35	$	(38,755)
Customer counterparties	430,434		20,676		(40		)	217,066		1,533		(2,160		)	Customer counterparties	574,453		83,802		—		499,643		48,652		—
Interest rate caps															Interest rate caps
Financial institution counterparties															Financial institution counterparties	3,438		4		—		100		2		—
Customer counterparties															Customer counterparties	3,438		—		(4)		100		—		(2)
Risk participation agreements															Risk participation agreements	78,194		—		(593)		56,833		—		(58)
Mortgage loan commitments	22,463		21		—			22,195		—		(28		)	Mortgage loan commitments	170,012		636		—		56,665		—		(11)
Mortgage loan forward sale contracts	25,103		—		(21		)	27,408		28		—			Mortgage loan forward sale contracts	166,683		—		(636)		61,872		11		—
Total	$	1,715,398	$	25,091	$	(12,885	)	$	1,349,299	$	24,257	$	(4,419	)	Total	$	2,276,136	$	84,442	$	(69,645)	$	1,934,978	$	48,700	$	(38,826)

Netting of Derivatives

The Company records the derivatives on a net basis when a right of offset exists, based on transactions with a single counterparty that are subject to a legally enforceable master netting agreement. When bilateral netting agreements or similar agreements exist between the Company and its counterparties that create a single legal claim or obligation to pay or receive the net amount in settlement of the individual derivative contracts, the Company reports derivative assets and liabilities on a net by derivative contract by counterparty basis.

24-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following tables provide information on the Company's netting adjustments as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	Gross Fair Value		Fair Value Offset Amount		Cash Collateral		Net Amount Presented on the Consolidated Balance Sheet
	(dollars in thousands)
As of March 31, 2020
Total Derivative Assets	$	84,442	$	(6,922)	$	21,203	$	98,723
Total Derivative Liabilities ¹	(69,645)		6,922		62,083		(640)

¹ There was an additional $23.6 million of collateral held for initial margin with a Futures Clearing Merchant for clearing derivatives at March 31, 2020 and is included in other assets in the consolidated balance sheets.

Gross Fair Value Fair Value Offset Amount Cash Collateral Net Amount Presented on the Consolidated Balance Sheet
(dollars in thousands)
As of March 31, 2019
Total Derivative Assets $ 25,091
$ (3,198 ) $ 3,950
$ 25,843
Total Derivative Liabilities ¹ $ (12,885 ) $ 3,198
$ 9,629
$ (58 )
¹ There was an additional $11.4 million of collateral held for initial margin with our Futures Clearing Merchant for clearing derivatives at March 31, 2019 and is included in other assets in the consolidated balance sheets.

~~25-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~


														Gross Fair Value		Fair Value Offset Amount		Cash Collateral		Net Amount Presented on the Consolidated Balance Sheet
	Gross Fair Value			Fair Value Offset Amount			Cash Collateral			Net Amount Presented on the Consolidated Balance Sheet				(dollars in thousands)
	(dollars in thousands)
As of September 30, 2018
As of September 30, 2019													As of September 30, 2019
Total Derivative Assets	$	24,257		$	(2,231	)	$	(20,115	)	$	1,911		Total Derivative Assets	$	48,700	$	(2,445)	$	12,279	$	58,534
Total Derivative Liabilities ¹	(4,419		)	2,231			—			(2,188		)	Total Derivative Liabilities ¹	(38,826)		2,445		36,368		(13)
¹There was an additional $6.2 million of collateral held for initial margin with our Futures Clearing Merchant for clearing derivatives at September 30, 2018 and is included in other assets in the consolidated balance sheets.
¹There was an additional $18.3 million of collateral held for initial margin with a Futures Clearing Merchant for clearing derivatives at September 30, 2019 and is included in other assets in the consolidated balance sheets.													¹There was an additional $18.3 million of collateral held for initial margin with a Futures Clearing Merchant for clearing derivatives at September 30, 2019 and is included in other assets in the consolidated balance sheets.

As with any financial instrument, derivative financial instruments have inherent risk including adverse changes in interest rates. The Company’s exposure to derivative credit risk is defined as the possibility of sustaining a loss due to the failure of the counterparty to perform in accordance with the terms of the contract. Credit risks associated with interest rate swaps are similar to those relating to traditional on-balance sheet financial instruments. The Company manages interest rate swap credit risk with the same standards and procedures applied to its commercial lending activities.

Credit-risk-related contingent features

The Company has agreements with its derivative counterparties that contain a provision where if the Company or the derivative counterparty fails to maintain its status as a well/adequately capitalized institution, then the other party has the right to terminate the derivative positions and the Company or the derivative counterparty would be required to settle its obligations under the agreements. The Company has minimum collateral pledging thresholds with its Swap Dealers and Futures Clearing Merchant.

~~Beginning in the second quarter of fiscal year~~In 2018, the Company entered into RPAs with some of its derivative counterparties to assume the credit exposure related to interest rate derivative contracts. The Company's loan customer enters into an interest rate swap directly with a derivative counterparty and the Company agrees through an RPA to take on the counterparty's risk of loss on the interest rate swap due to a default by the customer. The notional amounts of RPAs sold were $49.7 million and $37.4 million as of March 31, 2019 and September 30, 2018, respectively. Assuming all underlying loan customers defaulted on their obligation to perform under the interest rate swap with a derivative counterparty, the exposure from these RPAs would be $4.9 million and $0.4 million at March 31, 2019 and September 30, 2018, respectively, based on the fair value of the underlying swaps.

The effect of derivatives on the consolidated statements of income for the three and six months ended March 31, ~~2019~~2020 and ~~2018~~2019 was as follows.


		Amount of Loss Recognized in Consolidated Statements of Income
		Three Months Ended March 31,						Six Months Ended March 31,
	Location of Loss Recognized in Consolidated Statements of Income	2020		2019		2020		2019
		(dollars in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps and other derivatives	Net realized and unrealized loss on derivatives	$	(50,214)	$	(11,032)	$	(36,698)	$	(29,348)
Mortgage loan commitments	Net realized and unrealized loss on derivatives	620		9		648		21
Mortgage loan forward sale contracts	Net realized and unrealized loss on derivatives	(620)		(9)		(648)		(21)

25-

Amount of (Loss) Gain Recognized in Consolidated Statements of Income
Three Months Ended March 31, Six Months Ended March 31,
Location of (Loss) Gain Recognized in Consolidated Statements of Income 2019 2018 2019 2018
(dollars in thousands)
Derivatives not designated as hedging instruments:
Interest rate swaps Net realized and unrealized (loss) gain on derivatives $ (11,032 ) $ 14,282
$ (29,348 ) $ 21,509
Mortgage loan commitments Net realized and unrealized (loss) gain on derivatives 9
2
21
3
Mortgage loan forward sale contracts Net realized and unrealized (loss) gain on derivatives (9 ) (2 ) (21 ) (3 )
GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

9. The Fair Value Option for Certain Loans

The Company has elected to measure certain long-term loans at fair value to assist in managing the interest rate risk for longer-term loans. This fair value option was elected upon the origination of these loans. Interest income is recognized in the same manner as interest on non-fair value loans.

See Note 1618 for additional disclosures regarding the fair value of the fair value option loans.

Long-term loans for which the fair value option has been elected had a net ~~unfavorable~~favorable difference between the aggregate fair value and the aggregate unpaid loan principal balance and written loan commitment amount of approximately ~~$0.5~~$57.5 million at March 31, ~~2019~~2020 and a net ~~unfavorable~~favorable difference of approximately ~~$34.8~~$34.2 million at September 30, ~~2018.~~2019. The total unpaid principal balance of these long-term loans was approximately ~~$836.3~~$734.6 million and ~~$900.2~~$778.8 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. The fair value of these loans is included in total loans in the consolidated balance sheets and are grouped with commercial real estate, agricultural and commercial non-real estate loans in Note 4. As of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, there were loans with a fair value of ~~$20.7~~$9.1 million and ~~$30.9~~$16.5 million, respectively, which were greater than 90 days past due or in nonaccrual status with an unpaid principal balance of ~~$24.5~~$12.1 million and ~~$34.7~~$17.8 million, respectively.

~~26-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Changes in fair value for items for which the fair value option has been elected were an increase in fair value of $35.5 million and $20.6 million for the ~~line items~~three and six months ended March 31, 2020, respectively, and an increase in ~~which these changes are reported within the consolidated statements~~fair value of ~~income are as follows~~$14.0 million and $33.2 million for the three and six months ended March 31, 2019, ~~and 2018.~~

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
Noninterest Income (Loss) Total Changes in Fair Value Noninterest Income (Loss) Total Changes in Fair Value Noninterest Income (Loss) Total Changes in Fair Value Noninterest Income (Loss) Total Changes in Fair Value
(dollars in thousands)
Long-term loans $ 14,018
$ 14,018
$ (14,838 ) $ (14,838 ) $ 33,234
$ 33,234
$ (23,502 ) $ (23,502 )
respectively. These changes in fair value are reported in noninterest income (loss) within the consolidated statements of income.

For long-term loans, ~~$0.4~~$10.5 million and ~~$1.4~~$12.7 million for the three and six months ended March 31, ~~2019~~2020, respectively, and ~~2018~~$0.4 million and $0.8 million ~~and $0.3 million~~ for the three and six months ended March 31, 2019, ~~and 2018,~~ respectively, of the total change in fair value is attributable to changes in specific credit risk. The gains or losses attributable to changes in instrument-specific credit risk were determined based on an assessment of existing market conditions and credit quality of the underlying loan for the specific portfolio of loans.

10. Goodwill

The following table presents the Company's carrying amount of goodwill as of March 31, 2020 and September 30, 2019.


	March 31, 2020		September 30, 2019
	(dollars in thousands)
Balance, beginning of period	$	739,023	$	739,023
Goodwill acquired during the period	1,539		—
Goodwill impairment during the period	(740,562)		—
Balance, end of period	$	—	$	739,023

In accordance with ASC 350-20, the Company conducts a goodwill impairment test at least annually, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value below its carrying amount. In the second quarter of fiscal year 2020, the onset of the COVID-19 pandemic prompted the Company to assess qualitative and quantitative factors to determine whether it was more-likely-than-not the fair value of the Company was less than the carrying amount.

The Company assessed relevant events and circumstances, including macroeconomic conditions, industry and market considerations, overall financial performance, changes in the composition or carrying amount of assets and liabilities, the market price of the Company's common stock and other relevant facts. The Company performed both a market capitalization approach and a discounted cash flow approach to determine the fair value of the Company. As a result of the analysis, the Company recognized a goodwill impairment charge of $740.6 million for both the three and six months ended March 31, 2020. NaN goodwill impairment charge was recognized for the three and six months ended March 31, 2019.

26-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

11. Core Deposits and Other Intangibles

The following table presents a summary of intangible assets subject to amortization as of March 31, ~~2019~~2020 and September 30, ~~2018.~~

2019.


														Core Deposit Intangible		Brand Intangible		Customer Relationships Intangible		Other Intangible		Total
	Core Deposit Intangible			Brand Intangible			Other Intangible			Total				(dollars in thousands)
	(dollars in thousands)
As of March 31, 2019
As of March 31, 2020													As of March 31, 2020
Gross carrying amount	$	7,339		$	8,464		$	538		$	16,341		Gross carrying amount	$	7,339	$	—	$	3,172	$	538	$	11,049
Accumulated amortization	(3,083		)	(6,110		)	(224		)	(9,417		)	Accumulated amortization	(3,933)		—		(122)		(291)		(4,346)
Net intangible assets	$	4,256		$	2,354		$	314		$	6,924		Net intangible assets	$	3,406	$	—	$	3,050	$	247	$	6,703
As of September 30, 2018
As of September 30, 2019													As of September 30, 2019
Gross carrying amount	$	7,339		$	8,464		$	538		$	16,341		Gross carrying amount	$	7,339	$	8,464	$	—	$	538	$	16,341
Accumulated amortization	(2,610		)	(5,828		)	(191		)	(8,629		)	Accumulated amortization	(3,518)		(6,392)		—		(257)		(10,167)
Net intangible assets	$	4,729		$	2,636		$	347		$	7,712		Net intangible assets	$	3,821	$	2,072	$	—	$	281	$	6,174

Amortization expense of intangible assets ~~was~~were $0.4 ~~million for both the three months ended March 31, 2019 and 2018 and $0.8~~ million and $0.9 million for the three and six months ended March 31, 2020, respectively, and $0.4 million and $0.8 million for the three and six months ended March 31, 2019, respectively.

In the second quarter of fiscal year 2020, the onset of the COVID-19 pandemic prompted the Company to assess its intangible assets for impairment. The Company believed the brand intangible asset was closely aligned with the goodwill of the Company, which was determined to be impaired as of March 31, 2020. As a result, the Company recognized an intangible asset impairment of $1.8 million for both the three and ~~2018, respectively.~~six months ended March 31, 2020. NaN intangible asset impairment charge was recognized for the three and six months ended March 31, 2019.

The estimated amortization expense of intangible assets assumes no activities, such as acquisitions, which would result in additional amortizable intangible assets. Estimated amortization expense of intangible assets in subsequent fiscal years is as follows.


Fiscal year	Amount
	(dollars in thousands)
Remaining in 2020	$	538
2021	1,014
2022	929
2023	831
2024	742
2025 and thereafter	2,649
Total	$	6,703

12. Leases

ASC Topic 842, Leases ("ASC 842"), became effective for the Company on October 1, 2019. ASC 842 requires a lease, whether classified as an operating lease or a financing lease, be accounted for as a right-of-use asset ("ROU asset") with a related lease liability recorded at the present value of the lease payments. The ROU asset represents the Company's right to use an underlying asset for the lease term and is included in other assets on the Company's consolidated balance sheets. The lease liability represents the Company's obligation to make lease payments and is included in accrued expenses and other liabilities on the Company's consolidated balance sheets. The cost of the lease is recognized on a straight-line basis over the lease term as lease expense. As permitted by ASC 842, the Company elected not to reassess (i) whether any expired or existing contracts are leases or contain leases, (ii) the lease classification of any expired or existing leases, and (iii) the initial direct costs for existing leases.

Subsequent to the adoption of ASC 842, the Company assesses contracts at inception to determine whether the contract is a lease or contains an embedded lease. A ROU asset and lease liability is recorded on the consolidated balance sheet for all leases except those with an original lease term of twelve months or less. Most of these leases include one or more renewal options, and certain leases also include lessee termination options. As these renewal options are not generally considered reasonably certain of exercise, they are not included in the lease term.

The Company leases certain branch and corporate offices, land and ATM facilities through operating leases with terms typically ranging from 1 to 15 years, with the longest term having a lease expiration of March 31, 2034. The Company has no significant financing leases as of March 31, 2020.

27-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Fiscal year Amount
(dollars in thousands)
Remaining in 2019 $ 750
2020 1,430
2021 1,334
2022 1,249
2023 967
2024 and thereafter 1,194
Total $ 6,924
The following table summarizes the ROU asset and lease liability as of March 31, 2020.

March 31, 2020

(dollars in thousands)

ROU asset

23,143

Total lease liability

24,036

Weighted average remaining lease term

6.7 years

Weighted average discount rate ¹

1.98

¹The Company uses its incremental borrowing rate to calculate the present value of lease payments when the interest rate implicit in the lease is not disclosed.

~~11.~~Total lease expense incurred by the Company was $1.9 million and $3.6 million for the three and six months ended March 31, 2020, respectively, principally made up of contractual lease payments for operating leases.

As of March 31, 2020, the Company had 0 operating leases that had not yet commenced.

The following table presents supplemental cash flow information related to leases for the three and six months ended March 31, 2020:


	Three Months Ended March 31, 2020		Six Months Ended March 31, 2020
	(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	1,416	$	2,826
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases	$	5,007	$	5,631

The following table presents a maturity analysis of the Company's operating lease liability as of March 31, 2020.


Fiscal year	Amount
	(dollars in thousands)
Remaining in 2020	$	2,832
2021	4,741
2022	4,049
2023	3,580
2024	3,072
2025 and thereafter	7,500
Total undiscounted lease payments	25,774
Less: Amounts representing interest	(1,738)
Lease liability	$	24,036

13. Securities Sold Under Agreements to Repurchase

Securities sold under agreements to repurchase generally mature overnight following the transaction date. Securities underlying the agreements had an amortized cost of approximately ~~$101.2~~$81.4 million and ~~$109.9~~$94.7 million and fair value of approximately ~~$98.8~~$83.0 million and ~~$104.6~~$94.4 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. In most cases, in alignment with the repurchase agreements in place with ~~our~~ customers, the Company over-collateralizes the agreements at 102% of total funds borrowed to protect the purchaser from changes in market value. Additionally, the Company utilizes held-in-custody procedures to ensure the securities sold under repurchase agreements are unencumbered.

~~27-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

The following tables present the gross obligation by the class of collateral pledged and the remaining contractual maturity of the agreements at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	March 31, 2020
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(dollars in thousands)
Repurchase agreements

Mortgage-backed securities	$	64,809	$	—	$	—	$	—	$	64,809
Total repurchase agreements	$	64,809	$	—	$	—	$	—	$	64,809

28-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2019
Remaining Contractual Maturity of the Agreements
Overnight and Continuous Up to 30 Days 30-90 Days Greater than 90 Days Total
(dollars in thousands)
Repurchase agreements
Mortgage-backed securities 62,537
—
—
—
62,537
Total repurchase agreements $ 62,537
$ —
$ —
$ —
$ 62,537


	September 30, 2019
	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 Days		30-90 Days		Greater than 90 Days		Total
	(dollars in thousands)
Repurchase agreements

Mortgage-backed securities	$	68,992	$	—	$	—	$	—	$	68,992
Total repurchase agreements	$	68,992	$	—	$	—	$	—	$	68,992

September 30, 2018
Remaining Contractual Maturity of the Agreements
Overnight and Continuous Up to 30 Days 30-90 Days Greater than 90 Days Total
(dollars in thousands)
Repurchase agreements
Mortgage-backed securities 90,907
—
—
—
90,907
Total repurchase agreements $ 90,907
$ —
$ —
$ —
$ 90,907

~~12.~~14. FHLB Advances and Other Borrowings

FHLB advances and other borrowings consist of the following at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	March 31,		September 30,
	2019		2018			March 31, 2020		September 30, 2019
	(dollars in thousands)					(dollars in thousands)
Short-term borrowings:					Short-term borrowings:
FHLB fed funds advance, matured	$	—	$	100,000
Notes payable to FHLB, interest rates from 0.37% to 0.74%, maturing in April 2020 and May 2020					Notes payable to FHLB, interest rates from 0.37% to 0.74%, maturing in April 2020 and May 2020	$	400,000	$	—
FHLB fed funds advance, interest rate of 0.35%, matured in April 2020					FHLB fed funds advance, interest rate of 0.35%, matured in April 2020	75,000		15,000
Long-term borrowings:					Long-term borrowings:
Notes payable to FHLB, interest rates from 2.68% to 3.66% and maturity dates from March 2021 to September 2024, collateralized by real estate loans, with various call dates at the option of the FHLB	275,000		175,000
Notes payable to FHLB, interest rates from 2.36% to 3.66% and maturity dates from March 2021 to September 2024 collateralized by real estate loans, with various call dates at the option of the FHLB					Notes payable to FHLB, interest rates from 2.36% to 3.66% and maturity dates from March 2021 to September 2024 collateralized by real estate loans, with various call dates at the option of the FHLB	325,000		325,000
Total	$	275,000	$	275,000	Total	$	800,000	$	340,000

As of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, the Company had a borrowing capacity of ~~$1.64~~$1.23 billion and ~~$1.59~~$1.44 billion, respectively, with the FRB Discount Window. Principal balances of loans pledged to FRB Discount Window to collateralize the borrowing totaled ~~$1.94~~$1.48 billion at March 31, ~~2019~~2020 and ~~$1.89~~$1.72 billion at September 30, ~~2018.~~2019. The Company has secured this line for contingency funding.

As of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, based on its collateral pledged, the additional borrowing capacity of the Company with the FHLB was ~~$2.04~~$1.46 billion and ~~$1.82~~$1.80 billion, respectively.

Principal balances of loans pledged to the FHLB to collateralize notes payable totaled ~~$4.48~~$4.11 billion and ~~$3.95~~$4.20 billion at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. The Company purchased letters of credit from the FHLB to pledge as collateral on public deposits. The amount outstanding was ~~$217.0~~$0.0 million and ~~$150.0~~$170.0 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. The Company had additional letters of credit from the FHLB of $14.5 million and $14.9 million at March 31, 2020 and September 30, 2019, respectively, for other purposes.

As of March 31, ~~2019,~~2020, FHLB advances and other borrowings are due or callable (whichever is earlier) in subsequent fiscal years as follows.


Fiscal year	Amount		Fiscal year	Amount
	(dollars in thousands)			(dollars in thousands)
Remaining in 2019	$	—
2020	—
Remaining in 2020			Remaining in 2020	$	475,000
2021	70,000		2021	120,000
2022	60,000		2022	60,000
2023	85,000		2023	85,000
2024 and thereafter	60,000
2024			2024	60,000
2025 and thereafter			2025 and thereafter	—
Total	$	275,000	Total	$	800,000

~~28-~~

29-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

~~13.~~15. Subordinated Debentures and Subordinated Notes Payable

Junior Subordinated Deferrable Interest Debentures

The Company has ~~seven~~7 trusts which were created or assumed as part of prior acquisitions that as of March 31, ~~2019~~2020 have 73,400 shares in the aggregate issued and outstanding, ~~in the aggregate 73,400 shares,~~ $1,000 par value, of Company Obligated Mandatorily Redeemable Preferred Securities ("Preferred Securities"). These ~~seven~~7 trusts were established and exist for the sole purpose of issuing Preferred Securities and investing the proceeds in junior subordinated deferrable interest debentures ("Debentures") issued by the Company. The Debentures constitute the sole assets of the ~~seven~~7 trusts. The Preferred Securities provide for cumulative cash distributions calculated at a rate based on three month LIBOR plus a range from 1.48% to 3.35% adjusted quarterly. The Company may, at one or more times, defer interest payments on the Debentures for up to 20 consecutive quarters following suspension of dividends on all capital stock, but not beyond the respective maturity date. At the end of any deferral period, all accumulated and unpaid interest must be paid. The Debentures have redemption dates ranging from January 7, 2033 to October 1, 2037; however, the Company has the option to shorten the respective maturity date for all ~~seven~~7 Preferred Securities as the initial call option date has passed. Holders of the Preferred Securities have no voting rights. The Preferred Securities are unsecured and rank junior in priority of the payment to all of the Company's indebtedness and senior to the Company's common and preferred stock. The trusts’ ability to pay amounts due on the Preferred Securities is solely dependent upon the Company making payment on the related Debentures. The Company’s obligation under the Debentures and relevant trust agreements constitute a full, irrevocable, and unconditional guarantee on a subordinated basis by it of the obligations of the trusts under the Preferred Securities.

For regulatory purposes, the Debentures qualify as elements of capital. As of March 31, ~~2019~~2020 and September 30, ~~2018, $73.6 million of~~2019, Debentures, net of fair value adjustment, of $73.8 million and $73.7 million, respectively, were eligible for treatment as Tier 1 capital.

Relating to the trusts, the Company held as assets $2.5 million in common shares at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, which are included in other assets on the consolidated balance sheets.

Subordinated Notes Payable

In 2015, the Company issued $35.0 million of 4.875% fixed-to-floating rate subordinated notes that mature on August 15, 2025 through a private placement. The notes, which qualify as Tier 2 capital under Capital Rules in effect at March 31, ~~2019,~~2020, have an interest rate of 4.875% per annum, payable semi-annually on each February 15 and August 15, which commenced on February 15, 2016 until August 15, 2020, or the date of earlier redemption, and then from August 15, 2020 to the stated maturity date or earlier redemption, the notes will bear interest at a rate per annum equal to three month LIBOR for the related interest period plus 3.15%, payable quarterly on each November 15, February 15, April 15 and August 15. The notes are subordinated in right of payment to all of the Company's senior indebtedness and effectively subordinated to all existing and future debt and all other liabilities of the Company's subsidiary bank. The Company may elect to redeem the notes (subject to regulatory approval), in whole or in part, on any early redemption date which is any interest payment date on or after August 15, 2020 at a redemption price equal to 100% of the principal amount plus any accrued and unpaid interest. Other than on an early redemption date, the notes cannot be accelerated except ~~in the event of bankruptcy or the occurrence of~~upon certain ~~other~~ events of bankruptcy, insolvency or reorganization. Unamortized debt issuance costs related to these notes, which are included in Subordinated Debentures and Subordinated Notes Payable, ~~totaled~~were negligible and $0.1 million at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019, respectively. Proceeds from the private placement of subordinated notes repaid outstanding subordinated debt.

~~29-~~30-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Subordinated debentures and subordinated notes payable are summarized as follows.


	March 31, 2020						September 30, 2019
	Amount Outstanding		Common Shares Held in Other Assets		Amount Outstanding		Common Shares Held in Other Assets
	(dollars in thousands)
Junior subordinated debentures payable to non-consolidated trusts
GW Statutory Trust IV, variable rate of 2.85%, plus 3 month LIBOR	$	23,093	$	693	$	23,093	$	693
GW Statutory Trust VI, variable rate of 1.48%, plus 3 month LIBOR	30,928		928		30,928		928
SSB Trust II, variable rate of 1.85%, plus 3 month LIBOR	2,062		62		2,062		62
HF Capital Trust III, variable rate of 3.35%, plus 3 month LIBOR	5,155		155		5,155		155
HF Capital Trust IV, variable rate of 3.10%, plus 3 month LIBOR	7,217		217		7,217		217
HF Capital Trust V, variable rate of 1.83%, plus 3 month LIBOR	5,310		310		5,310		310
HF Capital Trust VI, variable rate of 1.65%, plus 3 month LIBOR	2,155		155		2,155		155
Total junior subordinated debentures payable	75,920		$	2,520	75,920		$	2,520
Less: fair value adjustment ¹	(2,155)				(2,223)
Total junior subordinated debentures payable, net of fair value adjustment	73,765				73,697
Subordinated notes payable
Fixed to floating rate, 4.875% per annum	35,000				35,000
Less: unamortized debt issuance costs	(25)				(61)
Total subordinated notes payable	34,975				34,939
Total subordinated debentures and subordinated notes payable	$	108,740			$	108,636
¹ Adjustment reflects the fair value adjustments related to the junior subordinated deferrable interest debentures assumed as part of the HF Financial acquisition.

March 31, 2019 September 30, 2018
Amount Outstanding Common Shares Held in Other Assets Amount Outstanding Common Shares Held in Other Assets
(dollars in thousands)
Junior subordinated debentures payable to non-consolidated trusts
GW Statutory Trust IV, variable rate of 2.85%, plus 3 month LIBOR $ 23,093
$ 693
$ 23,093
$ 693
GW Statutory Trust VI, variable rate of 1.48%, plus 3 month LIBOR 30,928
928
30,928
928
SSB Trust II, variable rate of 1.85%, plus 3 month LIBOR 2,062
62
2,062
62
HF Capital Trust III, variable rate of 3.35%, plus 3 month LIBOR 5,155
155
5,155
155
HF Capital Trust IV, variable rate of 3.10%, plus 3 month LIBOR 7,217
217
7,217
217
HF Capital Trust V, variable rate of 1.83%, plus 3 month LIBOR 5,310
310
5,310
310
HF Capital Trust VI, variable rate of 1.65%, plus 3 month LIBOR 2,155
155
2,155
155
Total junior subordinated debentures payable 75,920
$ 2,520
75,920
$ 2,520
Less: fair value adjustment ¹ (2,294 ) (2,317 )
Total junior subordinated debentures payable, net of fair value adjustment 73,626
73,603

Subordinated notes payable
Fixed to floating rate, 4.875% per annum 35,000
35,000

Less: unamortized debt issuance costs (98 ) (135 )
Total subordinated notes payable 34,902
34,865

Total subordinated debentures and subordinated notes payable $ 108,528
$ 108,468

¹ Adjustment reflects the fair value adjustments related to the junior subordinated deferrable interest debentures assumed as part of the HF Financial acquisition.

~~14.~~16. Profit Sharing Plan

The Company participates in a multiple employer 401(k) profit sharing plan ("401(k) Plan"). All employees are eligible to participate, beginning with the first day of the month coincident with or immediately following the completion of one year of service and having reached the age of 21. In addition to employee contributions, the Company may contribute discretionary amounts for eligible participants. Contribution rates for participating employees must be equal. The Company contributed ~~$1.1~~$1.6 million and ~~$1.2~~$3.3 million to the 401(k) Plan for the three and six months ended March 31, ~~2019~~2020, respectively, and ~~2018~~$1.1 million and $2.9 million ~~and $3.0 million~~ for the three and six months ended March 31, 2019, ~~and 2018,~~ respectively.

~~15.~~17. Stock-Based Compensation

On September 26, 2014, the Board of Directors adopted, and on October 10, 2014, NAB, at that time ~~our~~the Company's controlling shareholder, approved the Great Western Bancorp, Inc. 2014 Omnibus Incentive Compensation Plan ("2014 Plan"), the Great Western Bancorp, Inc. 2014 Non-Employee Director Plan ("2014 Director Plan"), and the Great Western Bancorp, Inc. Executive Incentive Compensation Plan ("Bonus Plan"), collectively ("the Plans"), which provide for the issuance of restricted share units and performance based share units to certain officers, employees and directors of the Company. On February 22, 2018, ~~our~~the Company's stockholders approved amendments to the 2014 Plan and the 2014 Director Plan to increase the number of shares available for future grants under the Plans. The Plans were primarily established to enhance the Company’s ability to attract, retain and motivate employees. The Company’s Board of Directors, the Compensation Committee of the Board of Directors ("Compensation Committee"), or executive management upon delegation of the Compensation Committee has exclusive authority to select the employees and others, including directors, to receive the awards and to establish the terms and conditions of each award made pursuant to the Company’s stock-based compensation plans.

Stock units issued under the Company’s restricted and performance based stock plans may not be sold or otherwise transferred until the vesting period has been met and, if applicable, performance objectives have been obtained. During the vesting periods, participants do not have voting rights and dividends are accumulated until the time upon which the award vests. Upon specified events, as defined in the Plans, stock unit awards that have not vested and/or performance hurdles that have not been met will be forfeited.

Based on the substantive terms of each award, restricted and performance-based awards are classified as equity awards and accounted for under the treasury stock method. The fair value of equity-classified awards is based on the market price of the stock on the measurement date and is amortized as compensation expense on a straight-line basis over the vesting or performance period.

~~30-~~31-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Stock compensation is recognized based on the number of awards to vest using actual forfeiture amounts. For performance-based stock awards, an estimate is made of the number of shares expected to vest as a result of actual performance against the performance targets to determine the amount of compensation expense to be recognized. The estimate is reevaluated quarterly and total compensation expense is adjusted for any change in the current period. Stock-based compensation expense is included in salaries and employee benefits expense in the consolidated statements of income. Stock compensation expense was ~~$1.4 million for both of the three months ended March 31, 2019 and 2018 and $3.1~~$1.3 million and $2.9 million for the three and six months ended March 31, 2020, respectively, and $1.4 million and $3.1 million for the three and six months ended March 31, 2019, ~~and 2018,~~ respectively. Related income tax benefits recognized were ~~$0.4~~$0.3 million and $0.7 million for ~~both of~~ the three ~~months ended March 31, 2019~~ and ~~2018 and $0.8 million and $1.0 million for the~~ six months ended March 31, ~~2019~~2020, respectively and ~~2018,~~$0.4 million and $0.8 million for the three and six months ended March 31, 2019, respectively.

The following is a summary of the Plans’ restricted share and performance-based stock award activity as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019. The number of performance shares granted in the following table are reflected at the amount of achievement of the pre-established targets.


	March 31, 2019				September 30, 2018					March 31, 2020				September 30, 2019
	Common Shares		Weighted-Average Grant Date Fair Value		Common Shares		Weighted-Average Grant Date Fair Value			Common Shares	Weighted-Average Grant Date Fair Value		Common Shares	Weighted-Average Grant Date Fair Value
Restricted Shares									Restricted Shares
Restricted shares, beginning of fiscal year	163,287		$	37.86	180,337		$	33.06	Restricted shares, beginning of fiscal year	190,805	$	37.20	163,287	$	37.86
Granted	106,364		37.29		89,376		41.07		Granted	134,185	32.34		106,753	37.27
Vested	(74,242	)	38.65		(97,682	)	32.11		Vested	(83,909)	38.61		(76,210)	38.64
Forfeited	(641	)	39.53		(8,744	)	35.99		Forfeited	(3,109)	36.61		(3,025)	38.67
Canceled	—		—		—		—		Canceled	—	—		—	—
Restricted shares, end of period	194,768		$	37.24	163,287		$	37.86	Restricted shares, end of period	237,972	$	33.97	190,805	$	37.20

Vested, but not issuable at end of period	50,770		$	33.88	39,514		$	32.90	Vested, but not issuable at end of period	62,992	$	33.98	50,770	$	33.88

Performance Shares									Performance Shares
Performance shares, beginning of fiscal year	175,196		$	36.29	133,604		$	33.39	Performance shares, beginning of fiscal year	173,332	$	38.50	175,196	$	36.29
Granted	70,107		28.55		53,682		29.52		Granted	(48,753)	(49.22)		60,583	32.77
Vested	(59,803	)	30.78		(7,017	)	18.00		Vested	(54,861)	39.43		(59,937)	30.79
Forfeited	(93	)	37.72		(5,073	)	37.75		Forfeited	(3,732)	38.14		(2,510)	39.25
Canceled	—		—		—		—		Canceled	—	—		—	—
Performance shares, end of period	185,407		$	38.50	175,196		$	36.29	Performance shares, end of period	65,986	$	34.61	173,332	$	38.50

Vested, but not issuable at end of period	5,612		$	18.00	5,612		$	18.00	Vested, but not issuable at end of period	5,612	$	18.00	5,612	$	18.00

As of March 31, ~~2019,~~2020, there was ~~$8.3~~$7.7 million of unrecognized compensation cost related to non-vested restricted stock awards expected to be recognized over a period of 2.7 years. The fair value of the vested, but not issued stock awards was ~~$1.8~~$1.4 million and $1.9 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

~~16.~~18. Fair Value Measurements

The Company measures, monitors and discloses certain of its assets and liabilities on a fair value basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes the following three levels of inputs that may be used to measure fair value:

Level 1 Quoted prices in active markets for identical assets or liabilities;

Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value ~~are as follows.~~


~~Level 1~~	~~Quoted prices in active markets for identical assets or liabilities~~


~~Level 2~~	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities


~~Level 3~~	~~Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities~~

of the assets or liabilities.

~~31-~~

32-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Level 1 inputs are considered to be the most transparent and reliable and Level 3 inputs are considered to be the least transparent and reliable. The Company assumes the use of the principal market to conduct a transaction of each particular asset or liability being measured and then considers the assumptions that market participants would use when pricing the asset or liability. Whenever possible, the Company first looks for quoted prices for identical assets or liabilities in active markets (Level 1 inputs) to value each asset or liability. However, when inputs from identical assets or liabilities on active markets are not available, the Company utilizes market observable data for similar assets and liabilities. The Company maximizes the use of observable inputs and limits the use of unobservable inputs to occasions when observable inputs are not available. The need to use unobservable inputs generally results from the lack of market liquidity of the actual financial instrument or of the underlying collateral. Although in some instances, third party price indications may be available, limited trading activity can challenge the observability of these quotations.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Securities Available for Sale

Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows and classified as Level 2 securities. Level 2 securities include mortgage-backed, states and political subdivisions, and other securities. Where Level 1 or Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy. Level 3 securities were immaterial at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.

Interest Rate Swaps and Loans

Interest rate swaps are valued by the Company's Swap Dealers using cash flow valuation techniques with observable market data inputs. The fair value of loans accounted for under the fair value option represents the net carrying value of the loan, plus the equal and opposite amount of the value of the swap needed to offset the interest rate risk and an adjustment for credit risk based on ~~our~~the Company's assessment of existing market conditions for the specific portfolio of loans. This is used due to the strict prepayment penalties put in the loan terms to cover the cost of exiting the interest rate swap of the loans in the case of early prepayment or termination. The adjustment for credit risk on loans accounted for under the fair value option is not significant to the overall fair value of the loans. The fair values estimated by the Company's Swap Dealers use interest rates that are observable or that can be corroborated by observable market data and, therefore, are classified within Level 2 of the valuation hierarchy. The Company has entered into Collateral Agreements with its Swap Dealers and Futures Clearing Merchant which entitle it to receive collateral to cover market values on derivatives which are in asset position, thus a credit risk adjustment on interest rate swaps is not warranted. The Company regularly enters into interest rate lock commitments on mortgage loans to be held for sale with corresponding forward sales contracts related to these interest rate lock commitments, the fair values of which are calculated by applying observable market values from Fannie Mae TBA pricing to each interest rate lock commitment and forward sales contract, therefore, are classified within Level 2 of the valuation hierarchy. The Company also has back-to-back swaps with loan customers, with corresponding swaps with an outside third party in exact offsetting terms.

Loan Servicing Rights

Fair value is determined at a tranche level, based on market prices for comparable mortgage servicing contracts (Level 3), when available, or alternatively based on a valuation model that calculates the present value of estimated future net servicing income. The valuation model utilizes interest rate, prepayment speed, and default rate assumptions that market participants would use in estimating future net servicing income and that can be validated against market data (Level 3).

~~32-~~33-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated balance sheets measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


										Fair Value		Level 1		Level 2		Level 3
	Fair Value		Level 1		Level 2		Level 3			(dollars in thousands)
	(dollars in thousands)
As of March 31, 2019
As of March 31, 2020									As of March 31, 2020
U.S. Treasury securities	$	93,819	$	93,819	$	—	$	—	U.S. Treasury securities	$	70,583	$	70,583	$	—	$	—
Mortgage-backed securities	1,605,616		—		1,605,616		—		Mortgage-backed securities	1,857,392		—		1,857,392		—
States and political subdivision securities	62,870		—		61,559		1,311		States and political subdivision securities	61,001		—		57,015		3,986
Other	1,000		—		1,000		—		Other	1,051		—		1,051		—
Total securities available for sale	$	1,763,305	$	93,819	$	1,668,175	$	1,311	Total securities available for sale	$	1,990,027	$	70,583	$	1,915,458	$	3,986
Derivatives-assets	$	25,843	$	—	$	25,843	$	—	Derivatives-assets	$	98,723	$	—	$	98,723	$	—
Derivatives-liabilities	58		—		58		—		Derivatives-liabilities	640		—		640		—
Fair value loans	835,822		—		835,822		—		Fair value loans	792,117		—		792,117		—
Loan servicing rights	2,674		—		—		2,674		Loan servicing rights	1,863		—		—		1,863
As of September 30, 2018
As of September 30, 2019									As of September 30, 2019
U.S. Treasury securities	$	167,172	$	167,172	$	—	$	—	U.S. Treasury securities	$	94,745	$	94,745	$	—	$	—
Mortgage-backed securities	1,149,707		—		1,149,707		—		Mortgage-backed securities	1,620,903		—		1,620,903		—
States and political subdivision securities	67,775		—		66,805		970		States and political subdivision securities	66,523		—		62,403		4,120
Other	996		—		996		—		Other	1,037		—		1,037		—
Total securities available for sale	$	1,385,650	$	167,172	$	1,217,508	$	970	Total securities available for sale	$	1,783,208	$	94,745	$	1,684,343	$	4,120
Derivatives-assets	$	1,911	$	—	$	1,911	$	—	Derivatives-assets	$	58,534	$	—	$	58,534	$	—
Derivatives-liabilities	2,188		—		2,188		—		Derivatives-liabilities	13		—		13		—
Fair value loans	865,386		—		865,386		—		Fair value loans	812,991		—		812,991		—
Loan servicing rights	3,087		—		—		3,087		Loan servicing rights	2,255		—		—		2,255

The following table presents the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended March 31,						Six Months Ended March 31,
	2019			2018			2019			2018				2020		2019		2020		2019
	(dollars in thousands)													(dollars in thousands)
Other securities available for sale													Other securities available for sale
Balance, beginning of period	$	961		$	965		$	970		$	1,069		Balance, beginning of period	$	3,986	$	961	$	4,120	$	970
Additions	350			—			350			—			Additions	—		350		—		350
Principal paydown	—			—			(9		)	(104		)	Principal paydown	—		—		(134)		(9)

Balance, end of period	$	1,311		$	965		$	1,311		$	965		Balance, end of period	$	3,986	$	1,311	$	3,986	$	1,311

Loan servicing rights													Loan servicing rights
Balance, beginning of period	$	2,862		$	3,799		$	3,087		$	4,074		Balance, beginning of period	$	2,054	$	2,862	$	2,255	$	3,087

Realized and unrealized loss ¹	(188		)	(213		)	(413		)	(488		)	Realized and unrealized loss ¹	(191)		(188)		(392)		(413)
Balance, end of period	$	2,674		$	3,586		$	2,674		$	3,586		Balance, end of period	$	1,863	$	2,674	$	1,863	$	2,674

¹ Realized and unrealized loss related to loan servicing rights are reported as a component of mortgage banking income, net on the consolidated statements of income.	¹ Realized and unrealized loss related to loan servicing rights are reported as a component of mortgage banking income, net on the consolidated statements of income.												¹ Realized and unrealized loss related to loan servicing rights are reported as a component of mortgage banking income, net on the consolidated statements of income.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Following is a description of the valuation methodologies used for assets and liabilities measured at fair value on a nonrecurring basis and recognized in the accompanying consolidated balance sheets, as well as the general classification of such assets and liabilities pursuant to the valuation hierarchy.

Other Repossessed Property

Other repossessed property consists of loan collateral that has been repossessed through foreclosure. This collateral is comprised of commercial and residential real estate and other repossessed assets. Other repossessed property is recorded initially at fair value of the collateral less estimated selling costs. Subsequent to foreclosure, valuations are updated periodically, and the assets may be marked down further to fair value less selling costs, reflecting a valuation allowance. Fair value measurements may be based upon appraisals, third-party price opinions, or internally developed pricing methods. These measurements are classified as Level 3.

~~33-~~34-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Impaired Loans (Collateral Dependent)

Loans for which it is probable that the Company will not collect all principal and interest due according to contractual terms are measured for impairment. Allowable methods for estimating fair value include using the fair value of the collateral for collateral dependent loans or, where a loan is determined not to be collateral dependent, using the discounted cash flow method.

If the impaired loan is identified as collateral dependent, then the fair value method of measuring the amount of the impairment is utilized. This method requires obtaining a current independent appraisal of the collateral and applying a discount factor, if necessary, to the appraised value and including costs to sell. Because many of these inputs are not observable, the measurements are classified as Level 3.

Mortgage Loans Held for Sale

Fair value of mortgage loans held for sale is based on either quoted prices for the same or similar loans, or values obtained from third parties, or are estimated for portfolios of loans with similar financial characteristics and are therefore considered a Level 2 valuation.

Property Held for Sale

This real estate property is carried in premises and equipment as property held for sale at fair value based upon the transactional price if available, or the appraised value of the property.

The following ~~tables present~~table presents the fair value measurement of assets and liabilities measured at fair value on a nonrecurring basis and the level within the fair value hierarchy in which the fair value measurements fall at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019.


	Fair Value		Level 1		Level 2		Level 3
	(dollars in thousands)
As of March 31, 2020
Other repossessed property	$	21,486	$	—	$	—	$	21,486
Impaired loans	559,155		—		—		559,155
Mortgage loans held for sale, at lower of cost or fair value	4,342		—		4,342		—
Property held for sale	706		—		—		706
As of September 30, 2019
Other repossessed property	$	34,721	$	—	$	—	$	34,721
Impaired loans	413,644		—		—		413,644
Mortgage loans held for sale, at lower of cost or fair value	7,351		—		7,351		—
Property held for sale	2,757		—		—		2,757

Fair Value Level 1 Level 2 Level 3
(dollars in thousands)
As of March 31, 2019
Other repossessed property $ 31,834
$ —
$ —
$ 31,834
Impaired loans 200,312
—
—
200,312
Loans held for sale, at lower of cost or fair value 3,648
—
3,648
—
Property held for sale 3,216
—
—
3,216
As of September 30, 2018
Other repossessed property $ 22,225
$ —
$ —
$ 22,225
Impaired loans 188,017
—
—
188,017
Loans held for sale, at lower of cost or fair value 5,456
—
5,456
—
Property held for sale 1,104
—
—
1,104

The valuation techniques and significant unobservable inputs used to measure Level 3 fair value measurements at March 31, ~~2019~~2020 were as follows.

Fair Value of Assets / (Liabilities) at March 31, 2019 Valuation
Technique(s) Unobservable
Input Range Weighted
Average
(dollars in thousands)
Other repossessed property $ 31,834
Appraisal value Property specific adjustment N/A N/A
Impaired loans 200,312
Appraisal value Property specific adjustment N/A N/A
Property held for sale 3,216
Appraisal value Property specific adjustment N/A N/A

Fair Value of Assets / (Liabilities) at March 31, 2020

Valuation
Technique(s)

Unobservable
Input

Range

Weighted
Average

(dollars in thousands)

Other repossessed property

21,486

Appraisal value

Property specific adjustment

N/A

Impaired loans

559,155

Appraisal value

Property specific adjustment

N/A

Property held for sale

706

Appraisal value

Property specific adjustment

N/A

Disclosures about Fair Value of Financial Instruments

~~The following section summarizes the estimated fair value for financial instruments accounted for at amortized cost as of as of March 31, 2019 and September 30, 2018.~~ Significant assets and liabilities that are not considered financial instruments are accounted for at amortized cost and include premises and equipment, deferred income taxes, goodwill, and core deposit and other intangibles. Additionally, in accordance with the disclosure guideline, receivables and payables due in one year or less, insurance contracts, equity investments not accounted for at fair value, and deposits with no defined or contractual maturities are excluded.

~~34-~~

~~GREAT WESTERN BANCORP, INC.~~

~~Notes to Consolidated Financial Statements (Unaudited)~~

Off-balance sheet instruments (commitments to extend credit and standby letters of credit) are generally short-term and at variable rates. Therefore, both the carrying amount and the estimated fair value associated with these instruments are immaterial.

35-

GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Fair values for on-balance sheet instruments as of March 31, ~~2019~~2020 and September 30, ~~2018~~2019 are as follows.


		March 31, 2020						September 30, 2019
	Level in Fair Value Hierarchy	Carrying Amount		Fair Value		Carrying Amount		Fair Value
		(dollars in thousands)
Assets
Cash and cash equivalents	Level 1	$	347,486	$	347,486	$	243,474	$	243,474
Loans, net, excluding fair valued loans, loans held for sale and impaired loans ¹	Level 3	8,337,681		8,498,042		8,472,777		8,533,612
Liabilities
Time deposits	Level 2	1,528,234		1,532,200		2,095,676		2,101,239
FHLB advances and other borrowings	Level 2	800,000		818,669		340,000		351,517
Securities sold under repurchase agreements	Level 2	64,809		64,809		68,992		68,992
Subordinated debentures and subordinated notes payable	Level 2	108,740		97,268		108,636		101,164
¹ Includes $13.7 million and $13.9 million of net deferred loan fees at March 31, 2020 and September 30, 2019, respectively, of which carrying value approximates fair value.

March 31, 2019 September 30, 2018
Level in Fair Value Hierarchy Carrying Amount Fair
Value Carrying Amount Fair
Value
(dollars in thousands)
Assets
Cash and cash equivalents Level 1 $ 282,638
$ 282,638
$ 298,696
$ 298,696
Loans, net, excluding fair valued loans, loans held for sale and impaired loans ¹ Level 3 8,731,128
8,721,910
8,357,065
8,231,829
Liabilities
Time deposits Level 2 2,087,558
2,086,538
1,847,078
1,848,550
FHLB advances and other borrowings Level 2 275,000
280,374
275,000
275,797
Securities sold under repurchase agreements Level 2 62,537
62,537
90,907
90,907
Subordinated debentures and subordinated notes payable Level 2 108,528
102,285
108,468
107,841
¹ Includes $13.5 million and $13.0 million of net deferred loan fees at March 31, 2019 and September 30, 2018, respectively, of which carrying value approximates fair value.

~~17.~~19. Earnings per Share

Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding determined for the basic earnings per share calculation plus the dilutive effect of stock compensation using the treasury stock method.

The following information was used in the computation of basic and diluted earnings per share (EPS) for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended March 31,						Six Months Ended March 31,
	2019		2018		2019		2018			2020		2019		2020		2019
	(dollars in thousands, except per share data)									(dollars in thousands, except per share data)
Net income	$	44,511	$	40,532	$	90,297	$	69,762	Net income	$	(740,618)	$	44,511	$	(697,344)	$	90,297

Weighted average common shares outstanding	56,994,817		58,941,315		57,484,838		58,921,972		Weighted average common shares outstanding	55,906,002		56,994,817		56,141,816		57,484,838
Dilutive effect of stock based compensation	79,857		204,802		72,146		194,951		Dilutive effect of stock based compensation	—		79,857		—		72,146
Weighted average common shares outstanding for diluted earnings per share calculation	57,074,674		59,146,117		57,556,984		59,116,923		Weighted average common shares outstanding for diluted earnings per share calculation	55,906,002		57,074,674		56,141,816		57,556,984

Basic earnings per share	$	0.78	$	0.69	$	1.57	$	1.18	Basic earnings per share	$	(13.25)	$	0.78	$	(12.42)	$	1.57
Diluted earnings per share	$	0.78	$	0.69	$	1.57	$	1.18	Diluted earnings per share	$	(13.25)	$	0.78	$	(12.42)	$	1.57

The Company had no5,037 and 0 shares of unvested performance stock as of March 31, 2020 and 2019, ~~and 2018,~~respectively, which were not included in the computation of diluted earnings per common share because performance conditions for vesting had not been met. The Company had ~~67,971~~63,076 and no67,971 shares of anti-dilutive stock awards outstanding as of March 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

20. Revenue Recognition

The Company recognizes revenue from contracts with customers in accordance with ASC Topic 606, Revenue from Contracts with Customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company's revenue-generating transactions are not subject to ASC Topic 606, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other GAAP and discussed elsewhere within Item 8. Financial Statements and Supplementary Data, "Note 1. Nature of Operations and Summary of Significant Accounting Policies" in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019. Descriptions of the Company's revenue-generating activities that are within the scope of ASC Topic 606, which are presented in the consolidated income statements as components of noninterest income, are as follows:

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GREAT WESTERN BANCORP, INC.

Notes to Consolidated Financial Statements (Unaudited)

Service charges and fees on deposit accounts.Service charges on deposit accounts are earned for account maintenance and overdraft, wire and treasury management services. Revenue is recognized at the time the services are performed and is included in service charges and other fees within noninterest income on the consolidated statements of income.

Interchange and merchant services income. Interchange and merchant services income are earned from credit and debit card payment processing through card association networks, merchant services and other card related services. Fees for these services are primarily based on interchange rates set by the networks and transaction volumes and are recognized as transactions are processed and settled with networks on behalf of card holders. These fees are presented net of direct expenses, including reward costs, associated with credit and debit card interchange income in service charges and other fees which are included in noninterest income on the consolidated statements of income.

Wealth management and trust fee income. Wealth management and trust fees are earned for asset management, custody and recordkeeping, investment advisory and administrative services. Revenue is recognized as the services are performed. Brokerage charges are recorded as a net reduction in wealth management fees which are included in noninterest income on the consolidated statements of income.

Other noninterest income.Other noninterest income primarily includes such items as letter of credit fees, gains on sale of loans held for sale and servicing fees, none of which are subject to the requirements of ASC Topic 606.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(dollars in thousands)
Noninterest income
Service charges and other fees	$	9,188	$	10,209	$	20,597	$	21,897
Wealth management fees	3,122		2,117		6,086		4,358
Other	664		1,118		1,332		1,700
Noninterest income from contracts with customers within the scope of ASC Topic 606	12,974		13,444		28,015		27,955
Noninterest income within the scope of other GAAP Topics ¹	(13,057)		4,779		(12,365)		6,988
Total noninterest income	$	(83)	$	18,223	$	15,650	$	34,943
¹ The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's consolidated statements of income.

21. Acquisition Activity

Effective October 1, 2019, the Company purchased and assumed the management of $306.0 million of trust assets managed in Colorado from Independent Bank, a wholly owned subsidiary of Independent Bank Group, Inc., for $4.7 million. The Company accounted for the purchase under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of acquisition. The following table summarizes the consideration paid and the allocation of the purchase price to net assets as of the acquisition date.


~~ITEM 2.~~			~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Amount
			(dollars in thousands)
Total consideration paid			$4,711
Customer relationship intangible			$3,172
Goodwill			$1,539

The foregoing purchase price allocation on the acquisition is considered final and no subsequent adjustments to the purchase price allocation are expected. Goodwill related to this acquisition was not deductible for tax purposes. See Note 10 for additional disclosure regarding goodwill. The customer relationship intangible is being amortized over an estimated useful life of 13 years. See Note 11 for additional disclosure regarding intangible assets.

37-

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 ended September 30, ~~2018,~~2019, previously filed with the SEC. 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 our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~2019.

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 ended March 31, ~~2019~~2020 and references to "the comparable period" or "the comparable quarter" refer to the fiscal quarter ended March 31, ~~2018.~~2019.

~~35-~~

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. In fiscal year 2018, the Tax Reform Act reduced the federal tax rate for corporations from 35% to 21%. Because of the Company's September 30 fiscal year end, a blended statutory rate of 24.5% was applied to all FTE non-GAAP adjusted financial measures for fiscal year 2018 and a fully phased in statutory federal tax rate of 21% was applied to all FTE non-GAAP adjusted financial measures beginning in fiscal year 2019.

Overview

We are a full-service regional bank holding company focused on relationship-based business and agri-business banking. We serve our customers through ~~174~~175 branches in attractive markets in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South 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 ending September 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;~~fees, including FDIC insurance assessments; (vi) business development; ~~(vii) FDIC insurance assessments;~~ and ~~(viii)~~(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, including Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota. Many of these states have placed or are considering placing significant restrictions on companies and individuals in March 2020 as a result of the COVID-19 pandemic. 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. Our bank lobbies are closed to the general public, although business is still being transacted through drive-up facilities, online, telephone or by appointment. Although we believe these arrangements will remain in effect until the restrictions are lifted 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.

38-

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. As of April 24th, we have more than 750 employees working remotely from home with those still in the office appropriately spaced, 97% of our branches open with limited access, increased functionality of ATM, online banking and mobile channels, and processed 2,300 applications approved for Paycheck Protection Program loans totaling over $600.0 million. We have also taken such other actions as social distancing, restrictions on in-person meetings and conferences, Company travel restrictions and increased sanitary protocols. We believe these actions offer the best protection for our employees and customers, an enhance our ability to continue providing our banking services.

Financial results this quarter included several items linked to the impact of the COVID-19 pandemic. Most significantly, we recognized 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. The expense was offset in part by a related benefit from income taxes of $29.3 million.

In addition, the COVID-19 impacts included $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 could 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 Company and its 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 due to the new volume of PPP loans under the CARES Act and other governmental programs established in response to the pandemic;

•The inability of our customers to meet their loan commitments and could result in increased risk of delinquencies, defaults, foreclosures, declining collateral values and ability of our borrowers to repay their loans resulting in losses to our Company;

•The COVID-19 pandemic restrictions have created significant volatility and disruption in the financial markets, and these conditions may require us to recognize an elevated level of other than temporary impairments on investment securities in our portfolio as issues of these securities are negatively impacted by the economic slowdown. Declines in fair value of investment securities in our portfolio could also reduce the unrealized gains reported as part of our consolidated comprehensive income (loss); and

•We and our Bank are required to comply with minimum capital and leverage requirements. Our capital strategy is primarily to maintain capital levels through the COVID-19 pandemic, and our Board of Directors could determine further future reductions or foregoing dividends in order to maintain and/or strengthen our capital and liquidity position.

Highlights for the Three and Six Months Ended March 31, ~~2019~~

Net income was $44.5 million, or $0.78 per diluted share, for the second quarter of fiscal year 2019, compared to $40.5 million, or $0.69 per diluted share, for the second quarter of fiscal year 2018, an increase of $4.0 million, or 9.8%. Compared to the second quarter of fiscal year 2018, total revenue (non-FTE) for the current period grew by 2.0%, provision for loan and lease losses was higher by 56.6% and noninterest expenses were reduced by 4.3%. Total revenue (non-FTE) is the sum of net interest income (non-FTE) and noninterest income. Net income was $90.3 million, or $1.57 per diluted share, for the first six months of fiscal year 2019, compared to $69.8 million, or $1.18 per diluted share, for the same period in fiscal year 2018. Excluding a deferred tax revaluation due to the Tax Reform Act, adjusted net income was $83.3 million, or $1.41 per diluted share, for the first six months of fiscal year 2018. Our efficiency ratio was 45.6% and 48.6% for the second quarter of fiscal year 2019 and 2018, respectively. Our efficiency ratio was 45.8% and 47.2% for the first six months of fiscal year 2019 and 2018, respectively. For more information on our adjusted net income and efficiency ratio, including a reconciliation to the most directly comparable GAAP financial measure, see "—Non-GAAP Financial Measures" section.

Net interest margin, which measures our ability to maintain interest rates on interest earning assets above those of interest bearing liabilities, was 3.75%, 3.81% and 3.92%, respectively, for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018. Adjusted net interest margin, which reflects the realized gain (loss) on interest rate swaps, was 3.76%, 3.81% and 3.86%, 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 17 and 10 basis points, respectively, compared to the same quarter in fiscal year 2018. Net interest margin decreased between the two periods primarily due to a 51 basis point increase in the cost of interest-bearing deposits, partially offset by a decrease in the yield on interest-earnings assets which increased 28 basis points, respectively, driven by higher average loan and investment balances as a proportion of earnings assets and improving yields. A $2.0 million reduction in the current quarter of the cost of interest rate swaps compared to the same period in fiscal year 2018 is the primary driver of the less 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.

~~36-~~

Total loans were $9.77 billion at March 31, 2019 compared to $9.42 billion at September 30, 2018, an increase of $355.0 million, or 3.8%. The net growth occurred predominately in the CRE category of the loan portfolio, which grew $420.5 million, mainly across the non-owner occupied and multifamily residential segments, partially offset by a decrease in the agriculture category of the loan portfolio of $60.8 million.

Deposits were $10.47 billion at March 31, 2019, an increase of $734.9 million, or 7.6%, compared to $9.73 billion at September 30, 2018. The growth was primarily driven by growth in interest-bearing demand deposits, which increased $512.6 million, or 8.5%, and time deposits, which increased $240.5 million, or 13.0%.

At March 31, 2019, loans graded "Watch" were $301.1 million, a decrease of $42.2 million, or 12.3%, compared to September 30, 2018 while loans graded "Substandard" were $258.9 million, an increase of $6.2 million, or 2.5%, over the same period. Nonaccrual loans, including ASC 310-30 loans, were $121.6 million as of March 31, 2019, a decrease of $21.6 million compared to September 30, 2018. Total other repossessed property balances were $32.5 million as of March 31, 2019, an increase of $9.4 million, or 40.6%, compared to September 30, 2018.

Provision for loan and lease losses was $7.7 million for the second quarter of fiscal year 2019, compared to $4.9 million for the same period of fiscal year 2018. Net charge-offs for the second quarter of fiscal year 2019 were $5.9 million, or 0.25% of average total loans on an annualized basis, with the majority of net charge-offs concentrated in the agricultural category of the loan portfolio. For the comparable period in fiscal year 2018, net charge-offs were $3.8 million, or 0.17% of average total loans on an annualized basis. The ratio of ALLL to total loans was 0.70% at March 31, 2019 compared to 0.69% at September 30, 2018. The balance of the ALLL increased to $68.0 million at March 31, 2019 from $64.5 million at September 30, 2018.2020

Tier 1 capital, total capital and Tier 1 leverage ratios were ~~11.4%~~11.3%, ~~12.4%~~12.9% and ~~10.2%~~9.2%, respectively, at March 31, ~~2019,~~2020, compared to ~~12.0%~~11.7%, ~~13.0%~~12.7% and ~~10.7%~~10.1%, respectively, at September 30, ~~2018.~~2019. In addition, our Common Equity Tier 1 ratio was ~~10.7%~~10.6% and ~~11.3%~~11.0% at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. Our tangible common equity to tangible assets ratio was ~~9.2%~~9.3% at March 31, ~~2019~~2020 and 9.6% at September 30, ~~2018.~~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.

During the second quarter of fiscal year 2020, $40.0 million was deployed to repurchase and retire approximately 1.4 million shares of Company's common stock under the repurchase program authorized by the Board of Directors at an average price of $29.45. These purchases occurred prior to the onset of the COVID-19 pandemic. In early March 2020, the Company determined to indefinitely suspend additional buybacks within its remaining authorization to support the Federal Reserve Board in actions taken to moderate the impact of COVID-19 by maintaining strong capital levels and liquidity to support customers and other stakeholders.

39-

With the many uncertainties of the COVID-19 pandemic, including the full impacts on the future financial results and operations of the Company, the Board of Directors has determined to reduce its regular quarterly dividend for the quarter ending March 31, 2020 to $0.15 per common share. The reduced dividend will help strengthen the Company's balance sheet and liquidity in light of the uncertainty surrounding the COVID-19 pandemic. The dividend will be payable on May 29, 2020 to stockholders of record as of close of business on May 15, 2020. The aggregate dividend payment will be approximately $8.3 million. The Board of Directors will continue to evaluate the impacts of the COVID-19 pandemic and the appropriateness of declaring future dividends throughout the year.

Net loss was $740.6 million, or $(13.25) per diluted share, for the second quarter of fiscal year 2020, compared to net income of $44.5 million, or $0.78 per diluted share, for the same period in fiscal year 2019, a decrease of $785.1 million. Adjusted net income which excludes the COVID-19 pandemic impact on goodwill, certain intangible assets and credit and other related charges, was $29.1 million, or $0.52 per diluted share, compared to $44.5 million, or $0.78 per diluted share. The decline in adjusted net income in the current quarter was due to lower net interest income primarily attributable to a decline in loan and securities yields were outpaced by a decline in deposit and funding yields, particularly in March 2020 following the Federal Reserve's emergency rate cutting of 150 basis points. Our efficiency ratio was 63.5% and 45.6% for the second quarter of fiscal year 2020 and 2019, respectively. For more information on our adjusted net income and efficiency ratio, including a reconciliation to the most directly comparable GAAP financial measures, see "—Non-GAAP Financial Measures" section.

Net interest margin, which measures our ability to maintain interest rates on interest earning assets above those of interest bearing liabilities, was 3.59%, 3.68% and 3.75%, respectively, for the three months ended March 31, 2020, December 31, 2019 and March 31, 2019. Adjusted net interest margin, which reflects the realized gain (loss) on interest rate swaps, was 3.55%, 3.65% and 3.76%, 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 16 and 21 basis points, respectively, compared to the same quarter in fiscal year 2019. Net interest margin decreased between the two periods primarily due to securities and loan yields, which decreased 23 and 39 basis points, respectively, reflecting the impact of repricing following the emergency rate cuts discussed previously, partially offset by a 33 basis point decrease in the cost of deposits to 0.75%. A $1.7 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 $9.69 billion at March 31, 2020 compared to $9.71 billion at September 30, 2019, a decrease of $13.5 million, or 0.1%. The decline in loans during the period was mainly attributable to a reduction in the agriculture segment of $126.9 million, or 6.3%, largely due to a seasonal decrease related to customer tax planning and a number of relationships refinanced elsewhere, a reduction of $20.8 million, or 1.2%, in the commercial non-real estate segment of the portfolio due to disbursement transaction timing within our mortgage warehouse lending, offset by an increase of $130.4 million, or 2.6%, in CRE attributable to growth from construction drawdowns and new relationships across the footprint.

Deposits were $10.18 billion at March 31, 2020, a decrease of $121.2 million, or 1.2%, compared to $10.30 billion at September 30, 2019, due a reduction in the use of brokered deposits offset by an increase in business deposits. Interest-bearing deposits were $8.21 billion, a 1.7% decrease, and noninterest-bearing deposits were $1.97 billion, a 0.9% increase. FHLB and other borrowings increased by $460.0 million, or 135.3%, as a result of more favorable rates during the quarter.

At March 31, 2020, nonaccrual loans, including ASC 310-30 loans, were $213.1 million, an increase of $105.9 million, or 98.8%, compared to September 30, 2019, related primarily to a small number of relationships in healthcare and agriculture industries as they progress through the workout process. Loans graded "Watch" were $420.3 million, an increase of $14.7 million, or 3.6%, compared to September 30, 2019 while loans graded "Substandard" were $627.7 million, an increase of $155.2 million, or 32.9%, 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, with a small number of downgrades in the commercial non-real estate segment. Total other repossessed property balances were $27.3 million as of March 31, 2020, a decrease of $9.5 million, or 25.8%, compared to September 30, 2019.

Provision for loan and lease losses was $71.8 million for the second quarter of fiscal year 2020, compared to $7.7 million for the same period of fiscal year 2019, an increase of $64.1 million due to incurred loss resulting from the COVID-19 pandemic. This increase did not contemplate the potential impact of CECL implementation, which is effective for the Company October 1, 2020. Net charge-offs for the second quarter of fiscal year 2020 were $8.6 million, or 0.36% of average total loans on an annualized basis, compared to net charge-offs of $5.9 million, or 0.25% 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 segment of the loan portfolio. The ratio of ALLL to total loans was 1.40% at March 31, 2020 compared to 0.73% at September 30, 2019. The balance of the ALLL increased to $136.0 million at March 31, 2020 from $70.8 million at September 30, 2019.

40-

Key Factors Affecting Our Business and Financial Performance

As discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018,~~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 this Quarterly Report on Form 10-Q for the quarterly period ended March 31, ~~2019 and within our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2018.~~2020.

~~37-~~

Results of Op~~erations—~~erations—Three and SixMonths EndedMarch 31, 2020 and 2019~~and2018~~

Overview

The following table highlights certain key financial and performance information for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended March 31,									Six Months Ended March 31,
	2019			2018			2019			2018				2020			2019			2020			2019
	(dollars in thousands, except share and per share amounts)													(dollars in thousands, except share and per share amounts)
Operating Data:													Operating Data:
Interest income (FTE)	$	135,328		$	118,849		$	268,879		$	235,368		Interest income (FTE)	$	126,757		$	135,328		$	259,817		$	268,879
Interest expense	30,411			16,680			57,578			31,011			Interest expense	23,260			30,411			49,624			57,578
Noninterest income	18,223			18,742			34,943			35,416			Noninterest income	(83)			18,223			15,650			34,943
Noninterest expense	56,580			59,144			113,686			114,012			Noninterest expense	808,453			56,580			865,383			113,686
Provision for loan and lease losses	7,673			4,900			12,888			9,457			Provision for loan and lease losses	71,795			7,673			79,898			12,888
Net income	44,511			40,532			90,297			69,762			Net income	(740,618)			44,511			(697,344)			90,297
Adjusted net income ¹	44,511			40,532			90,297			83,348			Adjusted net income ¹	29,080			44,511			72,354			90,297
Common shares outstanding	56,938,435			58,896,189			56,938,435			58,896,189			Common shares outstanding	55,013,928			56,938,435			55,013,928			56,938,435
Weighted average diluted common shares outstanding	57,074,674			59,146,117			57,556,984			59,116,923			Weighted average diluted common shares outstanding	55,906,002			57,074,674			56,141,816			57,556,984
Earnings per common share - diluted	$	0.78		$	0.69		$	1.57		$	1.18		Earnings per common share - diluted	$	(13.25)		$	0.78		$	(12.42)		$	1.57
Adjusted earnings per common share - diluted ¹	0.78			0.69			1.57			1.41			Adjusted earnings per common share - diluted ¹	0.52			0.78			1.29			1.57
Performance Ratios:													Performance Ratios:
Net interest margin (FTE) ¹ ²	3.75		%	3.92		%	3.78		%	3.91		%	Net interest margin (FTE) ¹ ²	3.59		%	3.75		%	3.63		%	3.78		%
Adjusted net interest margin (FTE) ¹ ²	3.76		%	3.86		%	3.79		%	3.83		%	Adjusted net interest margin (FTE) ¹ ²	3.55		%	3.76		%	3.60		%	3.79		%
Return on average total assets ²	1.44		%	1.40		%	1.46		%	1.20		%	Return on average total assets ²	(23.16)		%	1.44		%	(10.86)		%	1.46		%
Return on average common equity ²	9.9		%	9.3		%	10.0		%	7.9		%	Return on average common equity ²	(155.3)		%	9.9		%	(72.9)		%	10.0		%
Return on average tangible common equity ¹ ²	16.9		%	16.2		%	17.0		%	13.9		%	Return on average tangible common equity ¹ ²	(9.3)		%	16.9		%	2.8		%	17.0		%
Efficiency ratio ¹	45.6		%	48.6		%	45.8		%	47.2		%	Efficiency ratio ¹	63.5		%	45.6		%	54.1		%	45.8		%
¹This 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.	¹This 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.												¹This 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.	² Annualized for all partial-year periods.												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 six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,						Six Months Ended March 31,							Three Months Ended March 31,									Six Months Ended March 31,
	2019			2018			2019			2018				2020			2019			2020			2019
	(dollars in thousands)													(dollars in thousands)
Net interest income:													Net interest income:
Total interest income (FTE)	$	135,328		$	118,849		$	268,879		$	235,368		Total interest income (FTE)	$	126,757		$	135,328		$	259,817		$	268,879
Less: Total interest expense	30,411			16,680			57,578			31,011			Less: Total interest expense	23,260			30,411			49,624			57,578
Net interest income (FTE)	$	104,917		$	102,169		$	211,301		$	204,357		Net interest income (FTE)	$	103,497		$	104,917		$	210,193		$	211,301
Net interest margin (FTE) and adjusted net interest margin (FTE) ¹													Net interest margin (FTE) and adjusted net interest margin (FTE) ¹
Average interest-earning assets	11,345,559			10,571,300			11,216,179			10,492,091			Average interest-earning assets	$	11,590,453		$	11,345,559		$	11,567,032		$	11,216,179
Average interest-bearing liabilities	10,639,351			9,900,091			10,510,762			9,826,013			Average interest-bearing liabilities	10,850,104			10,639,351			10,827,113			10,510,762
Net interest margin (FTE)	3.75		%	3.92		%	3.78		%	3.91		%	Net interest margin (FTE)	3.59		%	3.75		%	3.63		%	3.78		%
Adjusted net interest margin (FTE) ¹	3.76		%	3.86		%	3.79		%	3.83		%	Adjusted net interest margin (FTE) ¹	3.55		%	3.76		%	3.60		%	3.79		%
¹This 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.	¹This 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.												¹This 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 ~~$104.9~~$103.5 million for the second quarter of fiscal year ~~2019,~~2020, compared to ~~$102.2~~$104.9 million for the same period in fiscal year ~~2018, an increase~~2019, a decrease of ~~$2.7~~$1.4 million, or ~~2.7%~~1.4%. Net interest income was ~~$211.3~~$210.2 million for the first six

41-

months of fiscal year ~~2019,~~2020, compared to ~~$204.4~~$211.3 million for the same period in fiscal year ~~2018, an increase~~2019, a decrease of ~~$6.9~~$1.1 million, or ~~3.4%~~0.5%. The ~~increase~~decrease in net interest income for both periods was primarily attributable to ~~higher~~a decline in loan and securities yields were outpaced by a decline in deposit and funding yields, particularly in March 2020 following the Federal Reserve's emergency rate cutting of 150 basis points, leading to a lower net interest income driven by 5.8% and 6.1%, respectively, of growth in average loans outstanding between the periods combined with higher yields on loans, partially offset by higher interest expense associated with interest-bearing deposits and borrowings.

~~38-~~

margins.

Net interest margin was ~~3.75%~~3.59% and ~~3.92%~~3.75% for the second quarter of fiscal year ~~2019~~2020 and ~~2018,~~2019, respectively, a decrease of 1716 basis points, while the adjusted net interest margin was ~~3.76%~~3.55% and ~~3.86%~~3.76% for the ~~second quarter of fiscal year 2019 and 2018,~~same periods, respectively, a decrease of 1021 basis points. Net interest margin was ~~3.78%~~3.63% and ~~3.91%~~3.78% for the first six months of fiscal year ~~2019 and 2018,~~2020, respectively, a decrease of 1315 basis points, while the adjusted net interest margin was ~~3.79%~~3.60% and ~~3.83%~~3.79% for the ~~first six months of fiscal year 2019 and 2018,~~same periods, respectively, a decrease of 419 basis points. The decreases in net interest margin for both the three and six month periods ~~were~~was primarily ~~due to a 51~~driven by securities yields, which decreased 23 and 4813 basis ~~point increase,~~points, respectively, inand loan yields, which decreased 39 and 28 basis points, respectively, resulting from the ~~cost~~impact of ~~interest-bearing deposits,~~repricing following the rate cuts discussed previously, partially offset by the yield on ~~interest-earnings assets~~deposits, which ~~increased 28~~decreased 33 and 3120 basis points, ~~respectively, driven by higher average loan and investment balances as a proportion of earnings assets and improving yields.~~respectively. A ~~$2.0~~$1.7 million and ~~$4.5~~$2.6 million ~~respectively, reduction~~increase in the cost of interest rate swaps between the three and six month periods in fiscal year ~~2019~~2020 and the comparable ~~periods~~period in fiscal year ~~2018~~2019, respectively, is the primary driver for the ~~less~~more pronounced decrease in adjusted net interest margin compared to the decrease in net interest ~~margin for both periods.~~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 six month periods, respectively. Loans on nonaccrual status that had interest accrued as of the date of nonaccrual isare 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 $743.0 million at March 31, 2020 and $753.2 million at March 31, 2019, ~~and $789.5 million at March 31, 2018,~~ 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.

42-

Three Months Ended
March 31, 2019 March 31, 2018
Average Balance Interest (FTE) Yield / Cost ¹ Average Balance Interest (FTE) Yield / Cost ¹
(dollars in thousands)
Assets
Interest-bearing bank deposits $ 63,546
$ 497
3.17 % $ 58,943
$ 227
1.56 %
Investment securities 1,603,038
9,957
2.52 % 1,365,152
7,013
2.08 %
Non-ASC 310-30 loans, net ² 9,615,096
122,970
5.19 % 9,064,899
108,427
4.85 %
ASC 310-30 loans, net 63,879
1,904
12.09 % 82,306
3,182
15.68 %
Loans, net 9,678,975
124,874
5.23 % 9,147,205
111,609
4.95 %
Total interest-earning assets 11,345,559
135,328
4.84 % 10,571,300
118,849
4.56 %
Noninterest-earning assets 1,186,286
1,155,481

Total assets $ 12,531,845
$ 135,328
4.38 % $ 11,726,781
$ 118,849
4.11 %
Liabilities and Stockholders' Equity
Noninterest-bearing deposits $ 1,800,307
$ 1,786,059

Interest-bearing deposits 6,363,730
$ 17,865
1.14 % 5,929,757
$ 9,490
0.65 %
Time deposits 2,039,208
9,233
1.84 % 1,315,209
3,168
0.98 %
Total deposits 10,203,245
27,098
1.08 % 9,031,025
12,658
0.57 %
Securities sold under agreements to repurchase 63,237
43
0.28 % 107,921
83
0.31 %
FHLB advances and other borrowings 264,347
1,880
2.88 % 652,787
2,732
1.70 %
Subordinated debentures and subordinated notes payable 108,522
1,390
5.19 % 108,358
1,207
4.52 %
Total borrowings 436,106
3,313
3.08 % 869,066
4,022
1.88 %
Total interest-bearing liabilities 10,639,351
$ 30,411
1.16 % 9,900,091
$ 16,680
0.68 %
Noninterest-bearing liabilities 69,554
56,573

Stockholders' equity 1,822,940
1,770,117

Total liabilities and stockholders' equity $ 12,531,845
$ 11,726,781

Net interest spread 3.22 % 3.43 %
Net interest income and net interest margin (FTE) $ 104,917
3.75 % $ 102,169
3.92 %
Less: Tax equivalent adjustment $ 1,442
$ 1,616

Net interest income and net interest margin - ties to Statements of Comprehensive Income $ 103,475
3.70 % $ 100,553
3.86 %
¹ Annualized for all partial-year periods.
² Interest income includes $0.4 million and $0.6 million for the second quarter of fiscal years 2019 and 2018, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.

~~39-~~


	Three Months Ended
	March 31, 2020										March 31, 2019
	Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹
	(dollars in thousands)
Assets
Interest-bearing bank deposits ²	$	56,883	$	558	3.95	%	$	63,546	$	497	3.17	%
Investment securities	1,987,045		11,329		2.29	%	1,603,038		9,957		2.52	%
Non-ASC 310-30 loans, net ³	9,496,153		113,484		4.81	%	9,615,096		122,970		5.19	%
ASC 310-30 loans, net	50,372		1,386		11.07	%	63,879		1,904		12.09	%
Loans, net	9,546,525		114,870		4.84	%	9,678,975		124,874		5.23	%
Total interest-earning assets	11,590,453		126,757		4.40	%	11,345,559		135,328		4.84	%
Noninterest-earning assets	1,273,143						1,186,286
Total assets	$	12,863,596	$	126,757	3.96	%	$	12,531,845	$	135,328	4.38	%
Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	1,942,686					$	1,800,307
Interest-bearing deposits	6,473,524		$	12,083	0.75	%	6,363,730		$	17,865	1.14	%
Time deposits	1,686,977		6,784		1.62	%	2,039,208		9,233		1.84	%
Total deposits	10,103,187		18,867		0.75	%	10,203,245		27,098		1.08	%
Securities sold under agreements to repurchase	56,369		24		0.17	%	63,237		43		0.28	%
FHLB advances and other borrowings	581,834		3,131		2.16	%	264,347		1,880		2.88	%
Subordinated debentures and subordinated notes payable	108,714		1,238		4.58	%	108,522		1,390		5.19	%
Total borrowings	746,917		4,393		2.37	%	436,106		3,313		3.08	%
Total interest-bearing liabilities	10,850,104		$	23,260	0.86	%	10,639,351		$	30,411	1.16	%
Noninterest-bearing liabilities	95,457						69,554
Stockholders' equity	1,918,035						1,822,940
Total liabilities and stockholders' equity	$	12,863,596					$	12,531,845
Net interest spread					3.10	%					3.22	%
Net interest income and net interest margin (FTE)			$	103,497	3.59	%			$	104,917	3.75	%
Less: Tax equivalent adjustment			1,514						1,442
Net interest income and net interest margin - ties to Statements of Comprehensive Income			$	101,983	3.54	%			$	103,475	3.70	%
¹ Annualized for all partial-year periods.
² Interest income includes $0.4 million and $0.1 million for the second 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 $0.4 million and $0.4 million for the second quarter of fiscal years 2020 and 2019, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.

43-


	Six Months Ended													Six Months Ended
	March 31, 2019						March 31, 2018							March 31, 2020										March 31, 2019
	Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹			Average Balance		Interest (FTE)		Yield / Cost ¹		Average Balance		Interest (FTE)		Yield / Cost ¹
	(dollars in thousands)													(dollars in thousands)
Assets													Assets
Interest-bearing bank deposits	$	77,663	$	1,039	2.68	%	$	62,439	$	458	1.47	%
Interest-bearing bank deposits ²													Interest-bearing bank deposits ²	$	44,843	$	1,166	5.20	%	$	77,663	$	1,039	2.68	%
Investment securities	1,547,161		19,145		2.48	%	1,390,665		14,055		2.03	%	Investment securities	1,945,698		22,827		2.35	%	1,547,161		19,145		2.48	%
Non-ASC 310-30 loans, net ²	9,525,498		244,821		5.15	%	8,952,914		214,927		4.81	%
Non-ASC 310-30 loans, net ³													Non-ASC 310-30 loans, net ³	9,525,157		232,716		4.89	%	9,525,498		244,821		5.15	%
ASC 310-30 loans, net	65,857		3,874		11.80	%	86,073		5,928		13.81	%	ASC 310-30 loans, net	51,334		3,108		12.11	%	65,857		3,874		11.80	%
Loans, net	9,591,355		248,695		5.20	%	9,038,987		220,855		4.90	%	Loans, net	9,576,491		235,824		4.93	%	9,591,355		248,695		5.20	%
Total interest-earning assets	11,216,179		268,879		4.81	%	10,492,091		235,368		4.50	%	Total interest-earning assets	11,567,032		259,817		4.49	%	11,216,179		268,879		4.81	%
Noninterest-earning assets	1,186,554						1,166,069						Noninterest-earning assets	1,270,562						1,186,554
Total assets	$	12,402,733	$	268,879	4.35	%	$	11,658,160	$	235,368	4.05	%	Total assets	$	12,837,594	$	259,817	4.05	%	$	12,402,733	$	268,879	4.35	%
Liabilities and Stockholders' Equity													Liabilities and Stockholders' Equity
Noninterest-bearing deposits	$	1,831,877					$	1,815,274					Noninterest-bearing deposits	$	1,959,885					$	1,831,877
Interest-bearing deposits	6,257,167		$	33,601	1.08	%	5,908,476		$	17,781	0.60	%	Interest-bearing deposits	6,390,193		$	25,456	0.80	%	6,257,167		$	33,601	1.08	%
Time deposits	1,988,251		17,291		1.74	%	1,291,255		5,875		0.91	%	Time deposits	1,767,465		15,351		1.74	%	1,988,251		17,291		1.74	%
Total deposits	10,077,295		50,892		1.01	%	9,015,005		23,656		0.53	%	Total deposits	10,117,543		40,807		0.81	%	10,077,295		50,892		1.01	%
Securities sold under agreements to repurchase	71,543		99		0.28	%	116,490		178		0.31	%	Securities sold under agreements to repurchase	61,448		55		0.18	%	71,543		99		0.28	%
FHLB advances and other borrowings	253,421		3,827		3.03	%	586,181		4,800		1.64	%	FHLB advances and other borrowings	539,434		6,213		2.30	%	253,421		3,827		3.03	%
Subordinated debentures and subordinated notes payable	108,503		2,760		5.10	%	108,337		2,377		4.40	%	Subordinated debentures and subordinated notes payable	108,688		2,549		4.69	%	108,503		2,760		5.10	%
Total borrowings	433,467		6,686		3.09	%	811,008		7,355		1.82	%	Total borrowings	709,570		8,817		2.49	%	433,467		6,686		3.09	%
Total interest-bearing liabilities	10,510,762		$	57,578	1.10	%	9,826,013		$	31,011	0.63	%	Total interest-bearing liabilities	10,827,113		$	49,624	0.92	%	10,510,762		$	57,578	1.10	%
Noninterest-bearing liabilities	71,975						66,525						Noninterest-bearing liabilities	97,204						71,975
Stockholders' equity	1,819,996						1,765,622						Stockholders' equity	1,913,277						1,819,996
Total liabilities and stockholders' equity	$	12,402,733					$	11,658,160					Total liabilities and stockholders' equity	$	12,837,594					$	12,402,733
Net interest spread					3.25	%					3.42	%	Net interest spread					3.13	%					3.25	%
Net interest income and net interest margin (FTE) ¹			$	211,301	3.78	%			$	204,357	3.91	%
Net interest income and net interest margin (FTE)													Net interest income and net interest margin (FTE)			$	210,193	3.63	%			$	211,301	3.78	%
Less: Tax equivalent adjustment			$	2,932					$	3,181			Less: Tax equivalent adjustment			3,037						2,932
Net interest income and net interest margin - ties to Statements of Comprehensive Income			$	208,369	3.73	%			$	201,176	3.85	%	Net interest income and net interest margin - ties to Statements of Comprehensive Income			$	207,156	3.58	%			$	208,369	3.73	%
¹ Annualized for all partial-year periods.	¹ Annualized for all partial-year periods.												¹ Annualized for all partial-year periods.
² Interest income includes $0.7 million and $1.2 million for the first six months of fiscal years 2019 and 2018, respectively, resulting from accretion of ASC 310-20 loan marks associated with acquired loans.
²Interest income includes $0.8 million and $0.1 million for the first six months of fiscal years 2020 and 2019, respectively, resulting from interest earned on derivative collateral included in other assets on the consolidated balance sheets.													²Interest income includes $0.8 million and $0.1 million for the first six 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 $1.0 million and $0.7 million for the first six months of fiscal years 2020 and 2019, respectively, resulting from accretion of purchase accounting discount associated with acquired loans.													³ Interest income includes $1.0 million and $0.7 million for the first six 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 six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,				Six Months Ended March 31,					Three Months Ended March 31,						Six Months Ended March 31,
	2019		2018		2019		2018			2020		2019		2020		2019
	(dollars in thousands)									(dollars in thousands)
Interest income:									Interest income:
Loans (FTE)	$	124,874	$	111,609	$	248,695	$	220,855	Loans (FTE)	$	114,870	$	124,874	$	235,824	$	248,695
Investment securities	9,957		7,013		19,145		14,055		Investment securities	11,329		9,957		22,827		19,145
Federal funds sold and other	497		227		1,039		458		Federal funds sold and other	558		497		1,166		1,039
Total interest income (FTE)	135,328		118,849		268,879		235,368		Total interest income (FTE)	126,757		135,328		259,817		268,879
Less: Tax equivalent adjustment	1,442		1,616		2,932		3,181		Less: Tax equivalent adjustment	1,514		1,442		3,037		2,932
Total interest income (GAAP)	$	133,886	$	117,233	$	265,947	$	232,187	Total interest income (GAAP)	$	125,243	$	133,886	$	256,780	$	265,947

Total interest income consists primarily of interest income on loans and interest income on our investment portfolio. Total interest income was ~~$135.3~~$126.8 million for the second quarter of fiscal year ~~2019,~~2020, compared to ~~$118.8~~$135.3 million for the same period of fiscal year ~~2018, an increase~~2019, a decrease of ~~$16.5~~$8.5 million, or ~~13.9%~~6.3%. Total interest income was ~~$268.9~~$259.8 million for the first six months of fiscal year ~~2019,~~2020, compared to ~~$235.4~~$268.9 million for the same period in fiscal year ~~2018, an increase~~2019, a decrease of ~~$33.5~~$9.1 million, or ~~14.2%~~3.4%. Significant components of interest income are described in further detail below.

~~40-~~44-

Loans. Interest income on all loans ~~increased~~decreased to ~~$124.9~~$114.9 million in second quarter of fiscal year ~~2019~~2020 from ~~$111.6~~$124.9 million in the same period in fiscal year ~~2018, an increase~~2019, a decrease of ~~$13.3~~$10.0 million, or ~~11.9%~~8.0%. Interest income on all loans ~~increased~~decreased to ~~$248.7~~$235.8 million for the first six months of fiscal year ~~2019~~2020, from ~~$220.9~~$248.7 million in the same period in fiscal year ~~2018, an increase~~2019, a decrease of ~~$27.8~~$12.9 million, or ~~12.6%~~5.2%. The ~~increases~~decreases in loan yields for both periods were primarily attributable to ~~higher~~lower loan interest income driven by ~~5.8%~~decreases of 39 and ~~6.1% growth in average loans outstanding~~28 basis points, respectively, between the ~~periods and increasing benchmark interest rates, which favorably impact the contractual interest rates on variable and adjustable rate loans.~~periods. For the three and six months ended March 31, ~~2019,~~2020, interest income on ASC 310-30 loans, which are purchased credit impaired loans with a different income recognition model, decreased ~~$1.3~~$0.5 million, or ~~40.2%~~27.2%, and ~~$2.1~~$0.8 million, or ~~34.6%~~19.8%, respectively, primarily driven by runoff of the acquired loan portfolios.

Our yield on loans is 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 ~~5.19%~~4.81% for the second quarter of fiscal year ~~2019, an increase~~2020, a decrease of 3438 basis points compared to the same period in fiscal year ~~2018.~~2019. The average tax equivalent yield on non-ASC 310-30 loans was ~~5.15%~~4.89% for the first six months of fiscal year ~~2019, an increase~~2020, a decrease of 3426 basis points compared to the same period in fiscal year ~~2018.~~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 ~~5.20%~~4.75% for the second quarter of fiscal year ~~2019,~~2020, a 4245 basis point ~~increase~~decrease compared to the same period in fiscal year ~~2018.~~2019. The adjusted yield on non-ASC 310-30 loans was ~~5.16%~~4.84% for the first six months of fiscal year ~~2019,~~2020, a 44decrease of 32 basis ~~point increase~~points, compared to the same period in fiscal year ~~2018. Starting in fiscal year 2016 and continuing through~~2019. For more information on our adjusted yield on non-ASC 310-30 loans, including a reconciliation to the first six months of fiscal year 2019, we have begun to benefit from a period-over-period increases in LIBOR rates which has reduced the net cost of pay fixed, receive floating interest rate swaps the Company utilizes related to certain fixed rate loans and benchmark rate hikes which have raised interest rates on many of our floating and variable rate loans.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 ~~1.3~~1.5 years as of March 31, ~~2019.~~2020. Approximately ~~47%~~48%, or ~~$4.59~~$4.64 billion, of the portfolio is comprised of fixed rate loans, of which ~~$835.8~~$792.1 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 ~~42%~~40% are indexed to Wall Street Journal Prime, ~~28%~~29% to 5-year Treasuries and the balance to various other indices. Approximately 2%22% of our total loans' rates are floored, with an average interest rate floor 57119 basis points above market ~~rates.~~rates as of March 31, 2020.

Loan-related fee income of ~~$1.6~~$1.9 million is included in interest income for the second quarter of fiscal year ~~2019~~2020, compared to ~~$0.9~~$1.6 million for the same period in fiscal year ~~2018.~~2019. Loan-related fee income of ~~$3.1~~$4.2 million is included in interest income for the first six months of fiscal year ~~2019~~2020, compared to ~~$2.9~~$3.1 million for the same period in fiscal year ~~2018.~~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 the FDIC indemnification assets of $0.4 million ~~and $0.7 million~~ for both of the second ~~quarter~~quarters of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~$0.9~~$0.6 million and ~~$1.7~~$0.9 million for the first six months of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively, is included as a reduction to interest income.

Investment Portfolio. The carrying value of investment securities and FHLB stock was ~~$1.79~~$2.03 billion as of March 31, ~~2019.~~2020. Interest income on investments includes income earned on investment securities and FHLB stock. Interest income on investments was ~~$10.0~~$11.3 million for the second quarter of fiscal year ~~2019,~~2020, an increase of ~~$3.0~~$1.3 million, or ~~42.0%~~13.8%, from ~~$7.0~~$10.0 million for the same period in fiscal year ~~2018,~~2019, driven by an increase in average investment balance of $384.0 million, or 24.0%, offset by a yield ~~increase~~decrease to 2.29% from 2.52% ~~from 2.08%.~~for the same periods. Interest income on investments was ~~$19.1~~$22.8 million for the first six months of fiscal year ~~2019,~~2020, an increase of ~~$5.0~~$3.7 million, or ~~36.2%~~19.2%, from ~~$14.1~~$19.1 million for the same period in fiscal year ~~2018,~~2019, primarily due to an increase in average investment balance of $398.5 million, or 25.8%, offset by a yield decrease to ~~2.48%~~2.35% from ~~2.03%~~2.48%.

The weighted average life of the investment portfolio was ~~3.9~~3.3 and 3.7 years at ~~both~~ March 31, ~~2019~~2020 and September 30, ~~2018.~~2019, respectively. Average investments represented ~~14.1%~~17.1% and ~~12.9%~~14.1% of total average interest-earning assets for the second quarter of fiscal years 2020 and 2019, ~~and 2018,~~ respectively.

Interest Expense

The following table presents interest expense for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(dollars in thousands)
Interest expense
Deposits	$	18,867	$	27,098	$	40,807	$	50,892
FHLB advances and other borrowings	3,155		1,923		6,268		3,926
Subordinated debentures and subordinated notes payable	1,238		1,390		2,549		2,760
Total interest expense	$	23,260	$	30,411	$	49,624	$	57,578

45-

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
(dollars in thousands)
Interest expense
Deposits $ 27,098
$ 12,658
$ 50,892
$ 23,656
FHLB advances and other borrowings 1,923
2,815
3,926
4,978
Subordinated debentures and subordinated notes payable 1,390
1,207
2,760
2,377
Total interest expense $ 30,411
$ 16,680
$ 57,578
$ 31,011

~~41-~~

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 ~~increased $13.7~~decreased $7.1 million, or ~~82.3%~~23.5%, to ~~$30.4~~$23.3 million in the second quarter of fiscal year ~~2019,~~2020, from ~~$16.7~~$30.4 million in the same period in fiscal year ~~2018.~~2019. Total interest expense ~~increased $26.6~~decreased $8.0 million, or ~~85.7%~~13.8%, to ~~$57.6~~$49.6 million ~~for~~in the first six months of fiscal year ~~2019~~2020, from ~~$31.0~~$57.6 million in the same period in fiscal year ~~2018.~~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 ~~$27.1~~$18.9 million and ~~$12.7~~$27.1 million for the second quarter of fiscal years 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$14.4~~$8.2 million, or ~~114.1%~~30.4%. Interest expense on deposits was ~~$50.9~~$40.8 million and ~~$23.7~~$50.9 million for the first six months of fiscal ~~years~~year 2020 and 2019, ~~and 2018,~~ respectively, ~~an increase~~a decrease of ~~$27.2~~$10.1 million, or ~~115.1%~~19.8%. The ~~increases~~decreases for both periods were a result of ~~growth in average interest-bearing deposits outstanding and increasing benchmark~~decreasing interest rates in the cost of deposits. Average deposit balances increased to ~~$10.20~~$10.12 billion for the ~~second quarter~~first six months of fiscal year ~~2019,~~2020, from ~~$9.03~~$10.08 billion for the comparable period in fiscal year ~~2018,~~2019, an increase of ~~$1.17 billion,~~$40.2 million, or ~~13.0%~~0.4%. The cost of deposits ~~increased~~decreased to ~~1.01%~~0.81% for the first six months of fiscal year ~~2019~~2020 from ~~0.53%~~1.01% for the same period of fiscal year ~~2018.~~2019.

Average noninterest-bearing demand account balances ~~decreased~~increased to ~~17.6%~~19.2% of average total deposits for the second quarter of fiscal year ~~2019~~2020 from ~~19.8%~~17.6% for the comparable period in fiscal year ~~2018.~~2019. Total average other liquid accounts, consisting of interest-bearing demand deposits, ~~decreased~~increased to ~~62.4%~~64.1% of total average deposits for the second quarter of fiscal year ~~2019,~~2020, compared to ~~65.7%~~62.4% of total average deposits for the comparable period in fiscal year ~~2018,~~2019, while time deposit accounts ~~increased~~decreased to ~~20.0%~~16.7% of average total deposits for the second quarter of fiscal year ~~2019,~~2020, compared to ~~14.6%~~20.0% in the comparable period in fiscal year ~~2018.~~2019.

FHLB Advances and Other Borrowings. Interest expense on FHLB advances and other borrowings was ~~$1.9~~$3.2 million for the second quarter of fiscal year ~~2019, a decrease~~2020, an increase of ~~$0.9~~$1.3 million, or ~~31.7%~~64.1%, compared to ~~$2.8~~$1.9 million for the comparable period in ~~2018,~~2019, reflecting a weighted average cost of ~~2.88%~~2.16% and ~~1.70%~~2.88%, respectively, for the same periods. ~~Our~~The average balance ~~for~~of FHLB advances and other borrowings was ~~$264.3~~$539.4 million infor the ~~current quarter~~first six months of fiscal year ~~2019~~2020 compared to ~~$652.8~~$253.4 million infor the same period in fiscal year ~~2018, a reduction of $388.5 million, or 59.5%.~~2019. Interest expense on FHLB advances and other borrowings was ~~$3.9~~$6.3 million for the first six months of fiscal year ~~2019~~2020 and ~~$5.0~~$3.9 million for the same period in fiscal year ~~2018, a decrease~~2019, an increase of ~~$1.1~~$2.3 million, or ~~21.1%~~59.7%, representing a weighted average cost of ~~3.03%~~2.30% and ~~1.64%~~3.03%, respectively, for the same periods. Average FHLB advances and other borrowings as a proportion of total average interest-bearing liabilities were 2.4% for the first six months of fiscal year 2019, compared to 6.0% for the comparable period in fiscal year 2018. 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 ~~2.85%~~1.46% and ~~1.90%~~2.85% at March 31, ~~2019~~2020 and ~~2018,~~2019, respectively, and the average tenor was 4514 and 1245 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. At March 31, ~~2019,~~2020, we had pledged ~~$4.48~~$4.11 billion of loans to the FHLB, against which we had borrowed ~~$275.0~~$800.0 million.

Subordinated Debentures and Subordinated Notes Payable. Interest expense on our outstanding junior subordinated debentures and subordinated notes payable was ~~$1.4~~$1.2 million in second quarter of fiscal year ~~2019~~2020 and ~~$1.2~~$1.4 million in the comparable period in fiscal year ~~2018, an increase~~2019, a decrease of $0.2 million, or ~~15.2%~~10.9%. Interest expense on our outstanding junior subordinated debentures and subordinated notes payable was ~~$2.8 million and $2.4~~$2.5 million for the first six months of fiscal ~~years~~year 2020 and $2.8 million in the comparable period in fiscal year 2019, ~~and 2018, respectively, or an increase~~a decrease of ~~$0.4~~$0.3 million, or ~~16.1%~~7.6%. The weighted average contractual rate on outstanding junior subordinated debentures was ~~4.87%~~3.29% and ~~4.55%~~4.87% at March 31, ~~2019~~2020 and ~~September 30, 2018,~~2019, respectively. The weighted average contractual rate on outstanding subordinated notes was 4.88% at both March 31, ~~2019~~2020 and ~~September 30, 2018.~~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.

~~42-~~

The following table presents for the current and comparable quarter and six 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.

46-


	Current Quarter vs Comparable Quarter									Current 6 month period vs Comparable 6 month period										Current Quarter vs Comparable Quarter										Current 6 month period vs Comparable 6 month period
	Volume			Rate			Total			Volume			Rate			Total				Volume		Rate		Total		Volume		Rate		Total
	(dollars in thousands)																			(dollars in thousands)
Increase (decrease) in interest income:																			Increase (decrease) in interest income:
Cash and cash equivalents	$	19		$	251		$	270		$	133		$	448		$	581		Cash and cash equivalents	$	(49)	$	110	$	61	$	(557)	$	684	$	127
Investment securities	1,338			1,606			2,944			1,700			3,390			5,090			Investment securities	2,313		(941)		1,372		4,796		(1,114)		3,682
Non-ASC 310-30 loans	6,794			7,749			14,543			14,207			15,687			29,894			Non-ASC 310-30 loans	(1,331)		(8,155)		(9,486)		(8)		(12,097)		(12,105)
ASC 310-30 loans	(632		)	(646		)	(1,278		)	(1,267		)	(787		)	(2,054		)	ASC 310-30 loans	(367)		(151)		(518)		(857)		91		(766)
Loans	6,162			7,103			13,265			12,940			14,900			27,840			Loans	(1,698)		(8,306)		(10,004)		(865)		(12,006)		(12,871)
Total increase	7,519			8,960			16,479			14,773			18,738			33,511
Total increase (decrease)																			Total increase (decrease)	566		(9,137)		(8,571)		3,374		(12,436)		(9,062)
Increase (decrease) in interest expense:																			Increase (decrease) in interest expense:
Interest-bearing deposits	736			7,639			8,375			1,094			14,726			15,820			Interest-bearing deposits	309		(6,091)		(5,782)		710		(8,855)		(8,145)
Time deposits	2,334			3,731			6,065			4,246			7,170			11,416			Time deposits	(1,437)		(1,012)		(2,449)		(1,829)		(111)		(1,940)
Securities sold under agreements to repurchase	(31		)	(9		)	(40		)	(63		)	(16		)	(79		)	Securities sold under agreements to repurchase	(4)		(15)		(19)		(12)		(32)		(44)
FHLB advances and other borrowings	(2,147		)	1,295			(852		)	(3,644		)	2,671			(973		)	FHLB advances and other borrowings	1,817		(566)		1,251		3,488		(1,102)		2,386
Subordinated debentures and subordinated notes payable	2			181			183			4			379			383			Subordinated debentures and subordinated notes payable	3		(155)		(152)		5		(216)		(211)
Total increase	894			12,837			13,731			1,637			24,930			26,567
Increase (decrease) in net interest income (FTE)	$	6,625		$	(3,877	)	$	2,748		$	13,136		$	(6,192	)	$	6,944
Total increase (decrease)																			Total increase (decrease)	688		(7,839)		(7,151)		2,362		(10,316)		(7,954)
(Decrease) increase in net interest income (FTE)																			(Decrease) increase in net interest income (FTE)	$	(122)	$	(1,298)	$	(1,420)	$	1,012	$	(2,120)	$	(1,108)

Provision for Loan and Lease Losses

We recognized provision for loan and lease losses of ~~$7.7~~$71.8 million for the second quarter of fiscal year ~~2019~~2020 compared to a provision for loan and lease losses of ~~$4.9~~$7.7 million for the comparable period in fiscal year ~~2018,~~2019, an increase of ~~$2.8~~$64.1 million, ~~or 56.6%~~ between the ~~periods.~~periods due to incurred loss resulting from the COVID-19 pandemic. This increase did not contemplate the potential impact of CECL implementation, which is effective for the Company October 1, 2020. Provision for loan and lease losses was ~~$12.9~~$79.9 million for the first six months of fiscal year ~~2019~~2020, compared to ~~$9.5~~$12.9 million for the comparable period in fiscal year ~~2018,~~2019, an increase of ~~$3.4~~$67.0 million ~~or 36.3%,~~ between the periods. ~~The increases~~See "—Overview—Impact and Response to COVID-19 Pandemic" section in this document for ~~both periods were mainly driven by a higher level of net charge offs between~~further discussion on the ~~periods, particularly in the agriculture portfolio. We recorded a $0.3 million net impairment~~increase in provision for ~~ASC 310-30 loans~~loan and lease losses for the second quarter of fiscal year 2019, compared to a $0.1 million net reversal in provision for the comparable period in fiscal year 2018. We recorded a $0.1 million net reversal in provision for ASC 310-30 loans for the first six months of fiscal year 2019 and the same period in fiscal year 2018.both periods.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(dollars in thousands)
Provision for loan and lease losses, non-ASC 310-30 loans *	$	71,699	$	7,406	$	79,750	$	13,006
Provision for (reduction in) loan and lease losses, ASC 310-30 loans	96		267		148		(118)
Provision for loan and lease losses, total	$	71,795	$	7,673	$	79,898	$	12,888
* 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.

47-

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
(dollars in thousands)
Provision for loan and lease losses, non-ASC 310-30 loans * $ 7,406
$ 4,996
$ 13,006
$ 9,600
Provision for (reduction in) loan and lease losses, ASC 310-30 loans 267
(96 ) (118 ) (143 )
Provision for loan and lease losses, total $ 7,673
$ 4,900
$ 12,888
$ 9,457
* 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 recognized other credit-related charges during the three and six months ended March 31, 2019 that were higher than the comparable periods in fiscal year 2018.~~ We believe that the following table, which summarizes each component of the total credit-related charges incurred during the current and comparable ~~period,~~quarters and six 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.~~portfolio of loans carried at fair value.


		Three Months Ended March 31,												Six Months Ended March 31,
Item	Included within F/S Line Item(s):	2020				2019				2020				2019
		(Dollars in thousands)
Pre-COVID-19 pandemic related
Provision for loan and lease losses	Provision for loan and lease losses	$	12,083			$	7,673			$	20,186			$	12,888
Net other repossessed property charges	Net loss on repossessed property and other related expenses	2,377				404				2,719				3,467
Net reversal of interest income on nonaccrual loans	Interest income on loans	1,088				337				3,094				296
Loan fair value adjustment related to credit	Net decrease (increase) in fair value of loans at fair value	3,423				(422)				5,557				762
Subtotal pre-COVID-19 pandemic related				$	18,971			$	7,992			$	31,556			$	17,413
COVID-19 pandemic related
Provision for loan and lease losses	Provision for loan and lease losses	$	59,712			$	—			$	59,712			$	—
Net other repossessed property charges	Net loss on repossessed property and other related expenses	3,314				—				3,314				—
Net reversal of interest income on nonaccrual loans	Interest income on loans	—				—				—				—
Loan fair value adjustment related to credit	Net decrease (increase) in fair value of loans at fair value	7,100				—				7,100				—
Subtotal COVID-19 pandemic related				$	70,126			$	—			$	70,126			$	—
Total credit-related charges		$	89,097			$	7,992			$	101,682			$	17,413

~~43-~~

Three Months Ended March 31, Six Months Ended March 31,
Item Included within F/S Line Item(s): 2019 2018 2019 2018
(Dollars in thousands)
Provision for loan and lease losses Provision for loan and lease losses $ 7,673
$ 4,900
$ 12,888
$ 9,457
Net other repossessed property charges Net loss on repossessed property and other related expenses 404
1,000
3,467
1,214
Reversal (recovery) of interest income on nonaccrual loans Interest income on loans 337
(157 ) 296
911
Loan fair value adjustment related to credit Net (decrease) increase in fair value of loans at fair value (422 ) 1,358
762
320
Total $ 7,992
$ 7,101
$ 17,413
$ 11,902
In determining the credit related charges attributable to the COVID-19 pandemic, we considered the impact upon our loan portfolio. Industries such as oil & energy, hotels & resorts, restaurants, retail malls, airlines and others have been cited as being at risk for significant revenue loss. Within our portfolio at March 31, 2020, $1.14 billion, or 11.8% relates to hotels & resorts, $109.8 million, or 1.1% relates to restaurants, with exposure in such other identified industries being immaterial. 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 March 31, 2020.

Noninterest Income

The following table presents noninterest income for the three and six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(dollars in thousands)
Noninterest income
Service charges and other fees	$	9,188	$	10,209	$	20,597	$	21,897
Wealth management fees	3,122		2,117		6,086		4,358
Mortgage banking income, net	1,145		991		2,757		2,311
Net loss on sale of securities	—		—		—		(513)
Other	1,135		1,920		2,300		3,004
Subtotal, product and service fees	14,590		15,237		31,740		31,057
Net increase in fair value of loans at fair value	35,541		14,018		20,608		33,234
Net realized and unrealized loss on derivatives	(50,214)		(11,032)		(36,698)		(29,348)
Subtotal, loans at fair value and related derivatives	(14,673)		2,986		(16,090)		3,886
Total noninterest income	$	(83)	$	18,223	$	15,650	$	34,943

48-

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
(dollars in thousands)
Noninterest income
Service charges and other fees $ 10,209
$ 12,047
$ 21,897
$ 25,224
Wealth management fees 2,117
2,335
4,358
4,519
Mortgage banking income, net 991
1,166
2,311
2,826
Net loss on sale of securities —
(8 ) (513 ) (9 )
Other 1,920
3,758
3,004
4,849
Subtotal, product and service fees 15,237
19,298
31,057
37,409
Net increase (decrease) in fair value of loans at fair value 14,018
(14,838 ) 33,234
(23,502 )
Net realized and unrealized (loss) gain on derivatives (11,032 ) 14,282
(29,348 ) 21,509
Subtotal, loans at fair value and related derivatives 2,986
(556 ) 3,886
(1,993 )
Total noninterest income $ 18,223
$ 18,742
$ 34,943
$ 35,416

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 ~~$18.2~~$(0.1) million for the second quarter of fiscal year ~~2019~~2020 compared to ~~$18.7~~$18.2 million for the same period in fiscal year ~~2018,~~2019, a decrease of ~~$0.5~~$18.3 million, or ~~2.8%~~100.5%. Noninterest income was ~~$34.9~~$15.7 million for the first six months of fiscal year ~~2019~~2020 compared to ~~$35.4~~$34.9 million for the same period in fiscal year ~~2018,~~2019, a decrease of ~~$0.5~~$19.2 million, or ~~1.3%~~55.2%. Significant components of noninterest income are described in further detail below.

Product and Service Fees. We recognized ~~$15.2~~$14.6 million of noninterest income related to product and service fees in the second quarter of fiscal year ~~2019,~~2020, a decrease of ~~$4.1~~$0.6 million, or ~~21.0%~~4.2%, compared to the same period in fiscal year 2018. The decrease was due to a $1.8 million decrease in service charges and other fees combined with a $1.8 million decrease in other income. The decrease in service charges and other fees was predominately due to the impact of adopting the revenue recognition accounting standard during the current quarter, which resulted in netting $1.82019. We recognized $31.7 million of ~~credit and debit card network expenses against related interchange income. The decrease in other income was due to a sign on bonus for a new contract in the prior period.~~

~~Noninterest~~noninterest income related to product and service fees ~~was $31.1 million for~~in the first six months of fiscal year ~~2019~~2020, an increase of $0.7 million, or 2.2%, compared to ~~$37.4 million for~~ the same period in fiscal year ~~2018, a decrease of $6.3 million, or 17.0%.~~2019. The ~~decrease~~decreases for both periods was ~~due~~primarily related to ~~a $3.3 million decrease~~declines in service charges and other fees combined with a $1.8 million decrease other income. The decrease in service charges and other fees was predominately due to the impact of adopting the revenue recognition accounting standard during the current period, which resulted in netting $3.2 million of credit and debit card network expenses against related interchange income. The decrease in other income was due to a sign on bonus for a new contract in the prior period as noted previously.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 second quarter of fiscal year ~~2019,~~2020, these items accounted for ~~$3.0~~$(14.7) million of noninterest income compared to ~~$(0.6)~~$3.0 million of noninterest income for the same period in fiscal year ~~2018.~~2019. The change was driven by a ~~$2.1~~$1.7 million ~~reduction~~increase in the current cost of interest rate swaps due to changes in the interest rate environment and a ~~$0.9~~$1.1 million decrease in swap fees, partially offset by a net favorable change in the credit risk adjustment of $(2.4) million. For the first six months of fiscal year 2019, these items accounted for $3.9 million of noninterest income compared to $(2.0) million for the same period in fiscal year

~~44-~~

~~2018. The change was driven by a $4.5 million reduction in the current cost of interest rate swaps~~ and ~~a $2.2 million increase in swap fees, partially offset by~~ a net unfavorable change in the credit risk adjustment of ~~$0.8 million.~~$14.9 million, $10.4 million of which was related to the COVID-19 pandemic impact on loan fair value adjustment related to credit. For the first six months of fiscal year 2020, these items accounted for $(16.1) million of noninterest income compared to $3.9 million of noninterest income for the same period in fiscal year 2019. The change was driven by a $2.6 million increase in the current cost of interest rate swaps due to changes in the interest rate environment and $3.0 million decrease in swap fees, and a net unfavorable change in credit risk adjustment of $14.5 million, $10.4 million of which was related to the COVID-19 pandemic impact on loan fair value adjustment related to credit. We believe that the current realized ~~gain~~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 six months ended March 31, ~~2019~~2020 and ~~2018.~~2019.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
	(dollars in thousands)
Noninterest expense
Salaries and employee benefits	$	37,312	$	34,537	$	73,217	$	69,307
Data processing and communication	6,123		5,964		11,896		11,242
Occupancy and equipment	5,597		5,539		10,690		10,665
Professional fees	5,263		3,970		9,027		7,258
Advertising	958		1,216		1,823		2,154
Net loss on repossessed property and other related expenses	5,691		404		6,033		3,467
Goodwill and intangible assets impairment	742,352		—		742,352		—
Other	5,157		4,950		10,345		9,593
Total noninterest expense	$	808,453	$	56,580	$	865,383	$	113,686

49-

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
(dollars in thousands)
Noninterest expense
Salaries and employee benefits $ 34,537
$ 33,672
$ 69,307
$ 66,539
Data processing and communication 5,964
9,190
11,242
16,074
Occupancy and equipment 5,539
5,290
10,665
10,138
Professional fees 3,970
4,027
7,258
8,267
Advertising 1,216
1,121
2,154
2,181
Net loss on repossessed property and other related expenses 404
1,000
3,467
1,214
Other 4,950
4,844
9,593
9,599
Total noninterest expense $ 56,580
$ 59,144
$ 113,686
$ 114,012

Our noninterest expense consists primarily of salaries and employee benefits, data processing and communication, occupancy and equipment, professional fees and ~~professional fees.~~net loss on repossessed property, goodwill and intangible assets impairment and other related expenses. Noninterest expense was ~~$56.6~~$808.5 million in the second quarter of fiscal year ~~2019 compared to $59.1 million for the same period in fiscal year 2018, a decrease of $2.5 million, or 4.3%. This decrease was driven by a $3.2 million decrease in data processing~~2020 and communication expense due to the impact of adopting the revenue recognition accounting standard as discussed in noninterest income above, partially offset by a $0.9 million increase in salaries and employee benefits, due mainly to annual merit increases in the current period.

~~Noninterest expense was $113.7~~$865.4 million for the first six months of fiscal year ~~2019~~2020. Included within these amounts are goodwill impairment of $740.6 million, impairment of certain intangible assets of $1.8 million, and the COVID-19 pandemic credit related charges of a $3.3 million charge 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 $62.3 million for the second quarter of fiscal year 2020, compared to ~~$114.0~~$56.6 million for the same period in fiscal year ~~2018, a decrease~~2019, an increase of ~~$0.3~~$5.8 million, or ~~0.3%~~10.2%, and $119.3 million for the first six months of fiscal year 2020, compared to $113.7 million for the same period in fiscal year 2019, an increase of $5.6 million, or 4.9%. ~~This decrease was~~The remaining increases were driven by a $4.8 million decrease in data processing and communication expense due to the impact of adopting the revenue recognition accounting standard as discussed in noninterest income above, partially offset by a $2.8 millionan increase in salaries and employee benefits ~~due mainly~~related to annual merit increases effective in ~~the current period~~January, a one-time bonus payment to retail staff of $0.5 million and ~~a $2.3 million increase in net loss~~elevated legal and administrative costs on ~~repossessed property and other related expenses due to an increase in other repossessed property in the current period.~~OREO assets.

Our efficiency ratio was ~~45.6%~~63.5% and ~~48.6%~~45.6% for the second quarter of fiscal years ~~2019~~2020 and ~~2018,~~2019, respectively and ~~45.8%~~54.1% and ~~47.2%~~45.8% for the first six 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 ~~2018, respectively.~~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. ~~In fiscal year 2019, the Company moved to a fully phased in statutory federal tax rate of 21% versus a blended statutory federal tax rate of 24.5% used in fiscal year 2018.~~ The ~~provision~~benefit for income taxes of ~~$12.9~~$37.7 million for the second quarter of fiscal year ~~2019~~2020 represents an effective tax rate of ~~22.5%~~4.8% compared to a provision of ~~$14.7~~$12.9 million, or an effective tax rate of ~~26.6%~~22.5%, for the comparable period of fiscal year ~~2018.~~2019. The ~~provision~~benefit for income taxes of ~~$26.4~~$25.1 million for the first six months of fiscal year ~~2019~~2020 represents an effective tax rate of ~~22.6%~~3.5%, compared to a provision of ~~$43.4~~$26.4 million or an effective tax rate of ~~38.3%~~22.6% for the same period in fiscal year ~~2018. Excluding the deferred taxes revaluation as a result of the Tax Reform Act of 2017,~~2019. The substantial drop in the effective tax rate for both periods was ~~26.3%~~due to the impairment of goodwill and certain intangible assets and provision for loan and lease losses in the current quarter. 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 23.3% and 22.8% for the second quarter and first six months of fiscal year ~~2018.~~2020, respectively.

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.


	Three Months Ended March 31,						Six Months Ended March 31,
	2020		2019		2020		2019
Return on average total assets	(23.16)	%	1.44	%	(10.86)	%	1.46	%
Return on average common equity	(155.3)	%	9.9	%	(72.9)	%	10.0	%
Return on average tangible common equity ¹	(9.3)	%	16.9	%	2.8	%	17.0	%
¹This 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.

Three Months Ended March 31, Six Months Ended March 31,
2019 2018 2019 2018
Return on average total assets 1.44 % 1.40 % 1.46 % 1.20 %
Return on average common equity 9.9 % 9.3 % 10.0 % 7.9 %
Return on average tangible common equity ¹ 16.9 % 16.2 % 17.0 % 13.9 %
¹This 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.

~~45-~~

50-

Analysis of Financial Condition

The following table highlights certain key financial and performance information as of the dates indicated.


	As of March 31,			As of September 30,
	2019			2018				As of March 31, 2020			As of September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Balance Sheet and Other Information:							Balance Sheet and Other Information:
Total assets	$	12,830,162		$	12,116,808		Total assets	$	12,387,808		$	12,788,301
Loans ³	9,770,911			9,415,924
Loans ¹							Loans ¹	9,693,295			9,706,763
Allowance for loan and lease losses	68,003			64,540			Allowance for loan and lease losses	135,950			70,774
Deposits	10,468,383			9,733,499			Deposits	10,179,115			10,300,339
Stockholders' equity	1,852,394			1,840,551			Stockholders' equity	1,153,464			1,900,249
Tangible common equity ¹	1,106,447			1,093,816
Tangible common equity ²							Tangible common equity ²	1,146,761			1,155,052
Tier 1 capital ratio	11.4		%	12.0		%	Tier 1 capital ratio	11.3		%	11.7		%
Total capital ratio	12.4		%	13.0		%	Total capital ratio	12.9		%	12.7		%
Tier 1 leverage ratio	10.2		%	10.7		%	Tier 1 leverage ratio	9.2		%	10.1		%
Common equity tier 1 ratio	10.7		%	11.3		%	Common equity tier 1 ratio	10.6		%	11.0		%
Tangible common equity / tangible assets ¹	9.2		%	9.6		%
Tangible common equity / tangible assets ²							Tangible common equity / tangible assets ²	9.3		%	9.6		%
Book value per share - GAAP	$	32.53		$	31.24		Book value per share - GAAP	$	20.97		$	33.76
Tangible book value per share ¹	$	19.43		$	18.57
Tangible book value per share ²							Tangible book value per share ²	$	20.84		$	20.52
Nonaccrual loans / total loans	1.24		%	1.52		%	Nonaccrual loans / total loans	2.20		%	1.10		%
Net charge-offs (recoveries) / average total loans ²	0.20		%	0.18		%
Net charge-offs (recoveries) / average total loans ³							Net charge-offs (recoveries) / average total loans ³	0.31		%	0.36		%
Allowance for loan and lease losses / total loans	0.70		%	0.69		%	Allowance for loan and lease losses / total loans	1.40		%	0.73		%
^¹This 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 partial-year periods, except for September 30, 2018, which was for the twelve month period.
³ Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.							¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
²This 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.							²This 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.
³ Annualized for partial-year periods, except for September 30, 2019, which was for the twelve month period.							³ Annualized for partial-year periods, except for September 30, 2019, which was for the twelve month period.

Our total assets were ~~$12.83~~$12.39 billion at March 31, ~~2019,~~2020, compared with ~~$12.12~~$12.79 billion at September 30, ~~2018, an increase~~2019, a decrease of ~~$713.4~~$400.5 million, or ~~5.9%~~3.1%. The ~~increase~~decrease in total assets during the first six months of fiscal year ~~2019~~2020 was principally attributable to ~~an increase~~a full impairment of goodwill of $739.0 million, or 100.0%, a decrease in net loans of ~~$351.5~~$78.6 million, or ~~3.8%~~0.8%, ~~combined with~~offset by an increase in investment securities of ~~$377.7~~$206.8 million, or ~~27.3%, for the same period.~~11.6%. At March 31, ~~2019,~~2020, loans were ~~$9.77~~$9.69 billion, compared to ~~$9.42~~$9.71 billion at September 30, ~~2018. Net loan growth was primarily driven by growth in~~2019. See "—Loan Portfolio" within this section for further discussion on the ~~CRE category of the portfolio, mainly across the non-owner occupied and multifamily residential segments, partially offset by a~~ decrease in ~~the agriculture segment of the loan portfolio.~~net loans. During the first six months of fiscal year ~~2019,~~2020, total deposits ~~increased~~decreased by ~~$734.9~~$121.2 million, or ~~7.6%. The growth was primarily driven~~1.2%, compared to September 30, 2019 due to a reduction in the use of brokered deposits offset by ~~growth~~an increase in ~~interest-bearing demand deposits, which increased $512.6 million, or 8.5%, and time deposits, which increased $240.5 million, or 13.0%.~~

business deposits.

~~46-~~

51-

Loan Portfolio

The following table presents our loan portfolio by category at each of the dates indicated.


	March 31,			September 30,
	2019			2018				March 31, 2020		September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Unpaid principal balance:							Unpaid principal balance:
Commercial real estate ¹							Commercial real estate ¹
Originated	$	4,713,138		$	4,255,272		Originated	$	5,009,438	$	4,824,827
Acquired	336,654			374,058			Acquired	213,381		267,583
Total	5,049,792			4,629,330			Total	5,222,819		5,092,410
Agriculture ¹							Agriculture ¹
Originated	2,043,614			2,082,778			Originated	1,814,630		1,932,722
Acquired	78,258			99,910			Acquired	67,162		75,922
Total	2,121,872			2,182,688			Total	1,881,792		2,008,644
Commercial non-real estate ¹							Commercial non-real estate ¹
Originated	1,686,209			1,656,563			Originated	1,657,077		1,691,026
Acquired	34,886			43,424			Acquired	42,120		28,930
Total	1,721,095			1,699,987			Total	1,699,197		1,719,956
Residential real estate							Residential real estate
Originated	680,256			682,615			Originated	721,122		696,403
Acquired	134,956			154,954			Acquired	99,637		115,805
Total	815,212			837,569			Total	820,759		812,208
Consumer							Consumer
Originated	39,758			43,325			Originated	48,815		47,324
Acquired	4,746			6,364			Acquired	3,825		4,601
Total	44,504			49,689			Total	52,640		51,925
Other lending							Other lending
Originated	46,163			46,487			Originated	39,908		47,541
Acquired	—			—			Acquired	—		—
Total	46,163			46,487			Total	39,908		47,541
Total originated	9,209,138			8,767,040			Total originated	9,290,990		9,239,843
Total acquired	589,500			678,710			Total acquired	426,125		492,841
Total unpaid principal balance	9,798,638			9,445,750			Total unpaid principal balance	9,717,115		9,732,684
Less: Unamortized discount on acquired loans	(15,255		)	(18,283		)	Less: Unamortized discount on acquired loans	(10,468)		(13,655)
Less: Unearned net deferred fees and costs and loans in process	(12,472		)	(11,543		)	Less: Unearned net deferred fees and costs and loans in process	(13,352)		(12,266)
Total loans	9,770,911			9,415,924			Total loans	9,693,295		9,706,763
Allowance for loan and lease losses	(68,003		)	(64,540		)	Allowance for loan and lease losses	(135,950)		(70,774)
Loans, net	$	9,702,908		$	9,351,384		Loans, net	$	9,557,345	$	9,635,989
¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to manage our interest rate risk.	¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to manage our interest rate risk.						¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to manage our interest rate risk.

During the first six months of fiscal year ~~2019,~~2020, total loans ~~increased~~decreased by ~~3.8%~~0.1%, or ~~$355.0 million.~~$13.5 million, compared to September 30, 2019. The ~~growth~~net loan reduction was ~~primarily focused~~mainly attributable to a reduction in ~~CRE category~~the agriculture segment of ~~the loan portfolio, which grew $420.5~~$126.9 million, or ~~9.1%~~6.3%, ~~partially~~a reduction in the commercial non-real estate segment of $20.8 million, or 1.2%, offset by aan increase in the CRE segment of $130.4 million, or 2.6%. The decrease in the agriculture ~~category~~segment was largely due to a seasonal decrease related to customer tax planning and a number of relationships financed elsewhere. The decrease in the ~~loan portfolio of $60.8 million, or 2.8%.~~commercial non-real estate segment was due to disbursement transaction timing within our mortgage warehouse lending to independent mortgage originators. The increase in the CRE segment was attributable to growth from construction drawdowns and new relationships across the footprint. Over the same time period, ~~commercial non-real estate,~~ residential real estate, consumer and other loan balances remained stable.

~~47-~~52-

The following table presents an analysis of the unpaid principal balance of our loan portfolio at March 31, ~~2019,~~2020, by borrower and collateral type and by each of the six major geographic areas we use to manage our markets.


	March 31, 2019																											March 31, 2020
	South Dakota			Iowa / Kansas / Missouri			Nebraska			Arizona			Colorado			North Dakota / Minnesota			Other ²			Total			%			South Dakota			Iowa / Missouri			Nebraska / Kansas			Arizona			Colorado			North Dakota / Minnesota			Other ²			Total			%
	(dollars in thousands)																											(dollars in thousands)
Commercial real estate ¹	$	1,137,143		$	1,382,163		$	902,477		$	589,546		$	816,033		$	215,835		$	6,595		$	5,049,792		51.5	%	Commercial real estate ¹	$	1,087,541		$	1,241,095		$	1,149,213		$	539,362		$	922,553		$	242,597		$	40,458		$	5,222,819		53.7	%
Agriculture ¹	628,990			405,062			150,735			752,693			185,233			2,201			(3,042		)	2,121,872			21.7	%	Agriculture ¹	554,250			342,397			127,061			705,235			141,993			1,516			9,340			1,881,792			19.4	%
Commercial non-real estate ¹	317,415			743,995			430,914			72,250			124,790			5,975			25,756			1,721,095			17.6	%	Commercial non-real estate ¹	300,086			568,771			541,070			80,327			111,204			5,247			92,492			1,699,197			17.5	%
Residential real estate	197,136			235,886			168,923			37,185			137,727			18,060			20,295			815,212			8.3	%	Residential real estate	216,427			227,743			185,824			37,792			116,682			20,204			16,087			820,759			8.5	%
Consumer	17,624			12,714			11,294			552			1,175			539			606			44,504			0.4	%	Consumer	15,206			17,652			15,153			421			3,277			440			491			52,640			0.5	%
Other lending	—			—			—			—			—			—			46,163			46,163			0.5	%	Other lending	—			—			—			—			—			—			39,908			39,908			0.4	%
Total	$	2,298,308		$	2,779,820		$	1,664,343		$	1,452,226		$	1,264,958		$	242,610		$	96,373		$	9,798,638		100.0	%	Total	$	2,173,510		$	2,397,658		$	2,018,321		$	1,363,137		$	1,295,709		$	270,004		$	198,776		$	9,717,115		100.0	%
% by location	23.4		%	28.4		%	17.0		%	14.8		%	12.9		%	2.5		%	1.0		%	100.0		%			% by location	22.4		%	24.7		%	20.8		%	14.0		%	13.3		%	2.8		%	2.0		%	100.0		%
¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to manage our interest rate risk.	¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to manage our interest rate risk.																										¹Unpaid principal balance for commercial non-real estate, agriculture and commercial real estate loans includes fair value adjustments associated with long-term fixed-rate loans where we have entered into interest rate swaps to manage our interest rate risk.
²Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.	²Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.																										²Balances in this column represent acquired workout loans and certain other loans managed by our staff, commercial and consumer credit card loans, fair value adjustments related to acquisitions and loans for which we have elected the fair value option, which could result in a negative carrying amount in the event of a net negative fair value adjustment.

The following table presents additional detail regarding our agriculture, CRE and residential real estate loans at March 31, ~~2019.~~2020.


	March 31, 2020
	(dollars in thousands)
Construction and development	$	434,264
Owner-occupied CRE	1,414,476
Non-owner-occupied CRE	2,910,516
Multifamily residential real estate	463,563
Commercial real estate	5,222,819
Agriculture real estate	916,106
Agriculture operating loans	965,686
Agriculture	1,881,792
Commercial non-real estate	1,699,197
Home equity lines of credit	169,121
Closed-end first lien	520,126
Closed-end junior lien	33,647
Residential construction	97,865
Residential real estate	820,759
Consumer	52,640
Other	39,908
Total unpaid principal balance	$	9,717,115

March 31, 2019
(dollars in thousands)
Construction and development $ 607,757
Owner-occupied CRE 1,366,844
Non-owner-occupied CRE 2,681,686
Multifamily residential real estate 393,505
Commercial real estate 5,049,792
Agriculture real estate 975,283
Agriculture operating loans 1,146,589
Agriculture 2,121,872
Commercial non-real estate 1,721,095
Home equity lines of credit 201,170
Closed-end first lien 470,815
Closed-end junior lien 40,251
Residential construction 102,976
Residential real estate 815,212
Consumer 44,504
Other 46,163
Total unpaid principal balance $ 9,798,638

Commercial Real Estate. CRE includes owner-occupied CRE, non-owner-occupied CRE, construction and development lending, and multi-family residential real estate. While CRE lending is a significant component of our overall loan portfolio, we are committed to managing our exposure to riskier construction and development lending specifically, and to CRE lending in general, by targeting relationships with sound management and financials, which are priced to reflect the amount of risk we accept as the lender.

Agriculture. Agriculture loans include farm operating loans and loans collateralized by farm land. According to the American Banker's Association, at December 31, ~~2018,~~2019, we were ranked the ~~sixth-largest~~fifth-largest farm lender bank in the United States measured by total dollar volume of farm loans. We consider agriculture lending one of our core ~~competencies.~~lending areas. We target a ~~20% to 30%~~ portfolio composition for agriculture loans not to exceed 225% of total capital according to our Risk Appetite Statement approved by our Board of Directors. Within our agriculture portfolio, loans are diversified across a wide range of subsectors with the majority of the portfolio concentrated within various types of grain, livestock and dairy products, and across different geographical segments within our footprint. Over recent years, our borrowers have experienced volatile commodity prices, ~~including~~and the adverse effects of recently imposed and proposed tariffs on the export of agricultural products, effects of waivers of the amount of ethanol to be blended into the country's gasoline production and isolated areas of flooding within parts of the Midwest in which certain of our agricultural borrowers conduct their operations. While these events, the impacts of the COVID-19 pandemic or a further downturn in the agriculture economy, could directly and adversely affect our agricultural loan portfolio and

53-

indirectly and adversely impact other lending categories including commercial non-real estate, CRE, residential real estate and consumer, we believe there continues to typically be strong secondary sources of repayment ~~and low borrower leverage~~ for the agriculture loan portfolio.

~~48-~~

Commercial Non-Real Estate. Commercial non-real estate, or business lending, represents one of our core competencies. We believe that providing a tailored range of integrated products and services, including lending, to small- and medium-enterprise customers is the business at which we excel and through which we can generate favorable returns for our stockholders. We offer a number of different products including working capital and other shorter-term lines of credit, fixed-rate loans and variable rate loans with interest rate swaps over a wide range of terms, and variable-rate loans with varying terms.

Residential Real Estate. Residential real estate lending reflects 1-to-4-family real estate construction loans, closed-end first-lien mortgages (primarily single-family long-term first mortgages resulting from acquisitions of other banks), closed-end junior-lien mortgages and HELOCs. Our closed-end first-lien mortgages include a small percentage of single-family first mortgages that we originate and do not subsequently sell into the secondary market, including some jumbo products, adjustable-rate mortgages and rural home mortgages. Conversely, a large percentage of our total single-family first mortgage originations are sold into the secondary market in order to meet our interest rate risk management objectives.

Consumer. Our consumer lending offering comprises a relatively small portion of our total loan portfolio, and predominantly reflects small-balance secured and unsecured products marketed by our ~~retail~~ branches.

Other Lending. Other lending includes all other loan relationships that do not fit within the categories above, primarily consumer and commercial credit cards, customer deposit account overdrafts, and lease receivables.

The following table presents the maturity distribution of our loan portfolio as of March 31, ~~2019.~~2020. The maturity dates were determined based on the contractual maturity date of the loan.


	March 31, 2019									March 31, 2020
	1 Year or Less		>1 Through 5 Years		>5 Years		Total			1 Year or Less		>1 Through 5 Years		>5 Years		Total
	(dollars in thousands)									(dollars in thousands)
Maturity distribution:									Maturity distribution:
Commercial real estate	$	544,633	$	2,128,173	$	2,376,986	$	5,049,792	Commercial real estate	$	621,604	$	2,139,467	$	2,461,748	$	5,222,819
Agriculture	1,039,321		688,304		394,247		2,121,872		Agriculture	902,870		631,222		347,700		1,881,792
Commercial non-real estate	818,097		551,971		351,027		1,721,095		Commercial non-real estate	832,875		505,318		361,004		1,699,197
Residential real estate	167,046		270,856		377,310		815,212		Residential real estate	161,211		235,799		423,749		820,759
Consumer	6,314		31,173		7,017		44,504		Consumer	9,062		35,725		7,853		52,640
Other lending	46,163		—		—		46,163		Other lending	39,908		—		—		39,908
Total	$	2,621,574	$	3,670,477	$	3,506,587	$	9,798,638	Total	$	2,567,530	$	3,547,531	$	3,602,054	$	9,717,115

The following table presents the distribution, as of March 31, ~~2019,~~2020, of our loans that were due after one year between fixed and variable interest rates.


	March 31, 2019							March 31, 2020
	Fixed		Variable		Total			Fixed		Variable		Total
	(dollars in thousands)							(dollars in thousands)
Maturity distribution:							Maturity distribution:
Commercial real estate	$	2,189,976	$	2,315,183	$	4,505,159	Commercial real estate	$	2,240,425	$	2,360,790	$	4,601,215
Agriculture	842,993		239,558		1,082,551		Agriculture	762,995		215,927		978,922
Commercial non-real estate	589,091		313,907		902,998		Commercial non-real estate	529,107		337,215		866,322
Residential real estate	254,983		393,183		648,166		Residential real estate	307,012		352,536		659,548
Consumer	32,796		5,394		38,190		Consumer	36,627		6,951		43,578
Total	$	3,909,839	$	3,267,225	$	7,177,064	Total	$	3,876,166	$	3,273,419	$	7,149,585

Other Repossessed Property

In the normal course of business, we obtain title to real estate and other assets when borrowers are unable to meet their contractual obligations and we initiate foreclosure proceedings, or via deed in lieu of foreclosure actions. Other repossessed property assets are considered nonperforming assets. When we obtain title to an asset, we evaluate how best to maintain and protect our interest in the property and seek to liquidate the asset at an acceptable price in a timely manner. Our total other repossessed property carrying value was ~~$32.5~~$27.3 million as of March 31, ~~2019, an increase~~2020, a decrease of ~~$9.4~~$9.5 million, or ~~40.6%~~25.8%, compared to September 30, ~~2018,~~2019, due primarily to one large relationship ~~moving into other repossessed property.~~

liquidation and the write down of the value of a hotel property negatively impacted by COVID-19 travel restrictions.

~~49-~~

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The following table presents our other repossessed property balances for the period indicated.


	Three Months Ended March 31, 2019		Six Months Ended March 31, 2019			Three Months Ended March 31, 2020		Six Months Ended March 31, 2020
	(dollars in thousands)					(dollars in thousands)
Balance, beginning of period	$	22,224	$	23,074	Balance, beginning of period	$	39,490	$	36,764
Additions to other repossessed property	15,938		17,919		Additions to other repossessed property	212		7,507
Valuation adjustments and other	(142)		(1,939)		Valuation adjustments and other	(4,756)		(4,756)
Sales	(5,570)		(6,604)		Sales	(7,657)		(12,226)
Balance, end of period	$	32,450	$	32,450	Balance, end of period	$	27,289	$	27,289

Asset Quality

We place an asset on nonaccrual status when management believes, after considering collection efforts and other factors, the ~~borrowers'~~borrower's condition is such that collection of interest is doubtful, which is generally 90 days past due. If a borrower has failed to comply with the original contractual terms, further action may be required, including a downgrade in the risk rating, movement to nonaccrual status, a ~~charge off~~charge-off or the establishment of a specific reserve. If there is a collateral shortfall, we generally work with the borrower for a principal reduction, pledge of additional collateral or guarantee. If these alternatives are not available, we engage in formal collection activities. Restructured loans for which we grant payment or significant interest rate concessions are placed on nonaccrual status until collectability improves and a satisfactory payment history is established, generally by the receipt of at least six consecutive payments.

The following table presents the dollar amount of nonaccrual loans, other repossessed property, restructured performing loans and accruing loans over 90 days past due, at the end of the dates indicated. We entered into a non-commercial loss-sharing agreement with the FDIC related to certain assets (loans and other repossessed property) acquired from TierOne Bank on June 4, 2010. Loans covered by a FDIC loss-sharing agreement are generally pooled with other similar loans and are accreting purchase discount into income each period. Subject to compliance with the applicable loss-sharing agreement, we are indemnified by the FDIC at a rate of 80% for any future credit losses for single-family real estate loans and other repossessed property covered by the FDIC loss-sharing agreement through June 4, 2020.


	March 31,			September 30,
	2019			2018				March 31, 2020			September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Nonaccrual loans ¹							Nonaccrual loans ¹
Commercial real estate ³	$	17,963		$	22,908
Agriculture ³	91,801			107,226
Commercial non-real estate ³	6,868			6,887
Commercial real estate ²							Commercial real estate ²	$	41,886		$	14,973
Agriculture ²							Agriculture ²	143,277			77,880
Commercial non-real estate ²							Commercial non-real estate ²	21,334			9,502
Residential real estate							Residential real estate
Loans covered by a FDIC loss-sharing agreement	2,440			2,699			Loans covered by a FDIC loss-sharing agreement	2,128			2,190
Loans not covered by a FDIC loss-sharing agreement	2,456			3,425			Loans not covered by a FDIC loss-sharing agreement	4,353			2,572
Total	4,896			6,124			Total	6,481			4,762
Consumer ³	88			61
Consumer ²							Consumer ²	97			74
Total nonaccrual loans covered by a FDIC loss-sharing agreement	2,440			2,699			Total nonaccrual loans covered by a FDIC loss-sharing agreement	2,128			2,190
Total nonaccrual loans not covered by a FDIC loss-sharing agreement	119,176			140,507			Total nonaccrual loans not covered by a FDIC loss-sharing agreement	210,947			105,001
Total nonaccrual loans	121,616			143,206			Total nonaccrual loans	213,075			107,191
Other repossessed property	32,450			23,074			Other repossessed property	27,289			36,764
Total nonperforming assets	154,066			166,280			Total nonperforming assets	240,364			143,955
Restructured performing loans	17,243			19,783
Performing TDRs							Performing TDRs	41,382			44,842
Total nonperforming and restructured assets	$	171,309		$	186,063		Total nonperforming and restructured assets	$	281,746		$	188,797
Accruing loans 90 days or more past due	$	—		$	156		Accruing loans 90 days or more past due	$	2,300		$	11,180
Nonperforming restructured loans included in total nonaccrual loans	$	48,541		$	77,156
Nonperforming TDRs included in total nonaccrual loans							Nonperforming TDRs included in total nonaccrual loans	28,042			30,073

Percent of total assets							Percent of total assets
Nonaccrual loans ¹
Loans not covered by a FDIC loss-sharing agreement	0.93		%	1.16		%
Total	0.95		%	1.18		%
Nonaccrual loans not covered by a FDIC loss-sharing agreement							Nonaccrual loans not covered by a FDIC loss-sharing agreement	1.70		%	0.82		%
Total nonaccrual loans							Total nonaccrual loans	1.72		%	0.84		%
Other repossessed property	0.25		%	0.19		%	Other repossessed property	0.22		%	0.29		%
Nonperforming assets ²	1.20		%	1.37		%
Nonperforming and restructured assets ²	1.34		%	1.54		%
Nonperforming assets ³							Nonperforming assets ³	1.94		%	1.13		%
Nonperforming and restructured assets ³							Nonperforming and restructured assets ³	2.27		%	1.48		%
¹ Includes nonperforming restructured loans.	¹ Includes nonperforming restructured loans.						¹ Includes nonperforming restructured loans.
²Includes nonaccrual loans, which includes nonperforming restructured loans.
³Loans not covered by a FDIC loss-sharing agreement.
²Loans not covered by a FDIC loss-sharing agreement.							²Loans not covered by a FDIC loss-sharing agreement.
³Includes nonaccrual loans, which includes nonperforming restructured loans.							³Includes nonaccrual loans, which includes nonperforming restructured loans.

~~50-~~

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At March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, our nonperforming assets were ~~1.20%~~1.94% and ~~1.37%~~1.13%, respectively, of total assets. Nonaccrual loans were ~~$121.6~~$213.1 million as of March 31, ~~2019,~~2020, with ~~$2.4~~$2.1 million of the balance covered by athe FDIC non-commercial loss-sharing agreement, which represented a total ~~decrease~~increase in nonaccrual loans of ~~$21.6~~$105.9 million, or ~~15.1%~~98.8%, compared to September 30, ~~2018.~~2019.

We recognized approximately ~~$0.3~~$1.0 million of interest income on loans that were on nonaccrual for the first six months of fiscal year ~~2019.~~2020. Excluding loans covered by athe FDIC non-commercial loss-sharing agreement, we had average nonaccrual loans (calculated as a two-point average) of ~~$129.8~~$158.0 million outstanding during the first six months of fiscal year ~~2019.~~2020. Based on the average loan portfolio yield for these loans for the first six months of fiscal year ~~2019,~~2020, we estimate that interest income would have been ~~$3.3~~$3.9 million higher during this period had these loans been accruing.

We consistently monitor all loans internally rated "watch" or worse because that rating indicates we have identified some potential weakness emerging; but loans rated "watch" will not necessarily become problem loans or become impaired. Aside from the loans on the watch list, we do not believe we have any potential problem loans that are not already identified as nonaccrual, past due or restructured as it is our policy to promptly reclassify loans as soon as we become aware of doubts as to the borrowers’ ability to meet repayment terms.

When we grant concessions to borrowers that we would not otherwise grant if not for the borrowers’ financial difficulties, such as reduced interest rates or extensions of loan periods, we consider these modifications TDRs.

The following table outlines total TDRs, split between performing and nonperforming loans, at each of the dates indicated.


	March 31,		September 30,
	2019		2018			March 31, 2020		September 30, 2019
	(dollars in thousands)					(dollars in thousands)
Commercial real estate					Commercial real estate
Performing TDRs	$	1,930	$	2,649	Performing TDRs	$	19,843	$	17,145
Nonperforming TDRs	1,068		2,616		Nonperforming TDRs	3,088		904
Total	2,998		5,265		Total	22,931		18,049
Agriculture					Agriculture
Performing TDRs	12,377		13,248		Performing TDRs	11,838		22,929
Nonperforming TDRs	46,592		73,741		Nonperforming TDRs	20,357		24,762
Total	58,969		86,989		Total	32,195		47,691
Commercial non-real estate					Commercial non-real estate
Performing TDRs	2,498		3,420		Performing TDRs	9,402		4,398
Nonperforming TDRs	705		656		Nonperforming TDRs	4,465		4,257
Total	3,203		4,076		Total	13,867		8,655
Residential real estate					Residential real estate
Performing TDRs	347		389		Performing TDRs	294		263
Nonperforming TDRs	115		143		Nonperforming TDRs	92		102
Total	462		532		Total	386		365
Consumer					Consumer
Performing TDRs	91		77		Performing TDRs	5		107
Nonperforming TDRs	61		—		Nonperforming TDRs	40		48
Total	152		77		Total	45		155
Total performing TDRs	17,243		19,783		Total performing TDRs	41,382		44,842
Total nonperforming TDRs	48,541		77,156		Total nonperforming TDRs	28,042		30,073
Total TDRs	$	65,784	$	96,939	Total TDRs	$	69,424	$	74,915

As of March 31, ~~2019,~~2020, total performing TDRs decreased ~~$2.5~~$3.5 million, or ~~12.8%~~7.7%, compared to September 30, ~~2018. Total nonperforming TDRs decreased $28.6 million, or 37.1%, compared to September 30, 2018~~2019, primarily due to the payoff of one large relationship in the agriculture ~~portfolio that moved into other repossessed property.~~

loan portfolio. Total nonperforming TDRs decreased $2.0 million, or 6.8%, compared to September 30, 2019 primarily due to paydowns in the agriculture portfolio.

~~51-~~

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The following table presents nonaccrual loans, TDRs, and other repossessed property covered by the loss-sharing agreement; a rollforward of the allowance for loan and lease losses for loans covered by the loss-sharing agreement; a rollforward of allowance for loan and lease losses for ASC 310-30 loans covered by the loss-sharing agreement; and a rollforward of other repossessed property covered by the loss-sharing agreement at and for the periods presented.


	At and for the Six Months Ended March 31, 2019			At and for the Fiscal Year Ended September 30, 2018				At and for the Six Months Ended March 31, 2020		At and for the Fiscal Year Ended September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Assets covered by a FDIC loss-sharing agreement							Assets covered by a FDIC loss-sharing agreement
Nonaccrual loans ¹	$	2,440		$	2,699		Nonaccrual loans ¹	$	2,128	$	2,190
TDRs	171			154			TDRs	33		43
Other repossessed property	—			131			Other repossessed property	—		—
Allowance for loan and lease losses, loans covered by a FDIC loss-sharing agreement							Allowance for loan and lease losses, loans covered by a FDIC loss-sharing agreement
Balance at beginning of period	$	262		$	196
Balance, beginning of period							Balance, beginning of period	$	113	$	262
Additional impairment recorded	301			386			Additional impairment recorded	442		309
Recoupment of previously-recorded impairment	—			(302		)	Recoupment of previously-recorded impairment	—		(379)
Charge-offs	—			(18		)	Charge-offs	(61)		(79)
Balance at end of period	$	563		$	262
Balance, end of period							Balance, end of period	$	494	$	113

Other repossessed property covered by a loss-sharing agreement							Other repossessed property covered by a loss-sharing agreement
Balance at beginning of period	$	131		$	—
Balance, beginning of period							Balance, beginning of period	$	—	$	131
Additions to other repossessed property	—			131			Additions to other repossessed property	—		—
Sales	(131		)	—			Sales	—		(131)
Balance at end of period	$	—		$	131
Balance, end of period							Balance, end of period	$	—	$	—
¹Includes nonperforming restructured loans.	¹Includes nonperforming restructured loans.						¹Includes nonperforming restructured loans.

Allowance for Loan and Lease Losses

We establish an allowance for the inherent risk of probable losses within our loan portfolio. The allowance for loan and lease losses is management’s best estimate of probable credit losses that are incurred in the loan portfolio. We determine the allowance for loan and lease losses based on an ongoing evaluation, driven primarily by monitoring changes in loan risk grades, delinquencies and other credit risk indicators, which is an inherently subjective process. We consider the uncertainty related to certain industry sectors and the extent of credit exposure to specific borrowers within the portfolio. In addition, we consider concentration risks associated with the various loan portfolios, ~~and~~ current economic conditions and other environmental factors that might impact the portfolio. All of these estimates are susceptible to significant change. Changes to the allowance for loan and lease losses are made by charges to the provision for loan and lease losses. Loans deemed to be uncollectible are charged off against the allowance for loan and lease losses. Recoveries of amounts previously charged-off are credited to the allowance for loan and lease losses.

Our allowance for loan and lease losses consists of two components. For non-impaired loans, we calculate a weighted average loss ratio of 12-, 36- and 60-month historical realized losses by collateral type; adjust as necessary for our interpretation of current economic conditions, environmental factors and current portfolio trends including credit quality, concentrations, aging of the portfolio and/or significant policy and underwriting changes not entirely covered by the calculated historical loss rates; and apply the loss rates to outstanding loan balances in each collateral category. We calculate the weighted average ratio of 12-, 36- and 60-month historical realized losses for each collateral type by dividing the average net annual charge-offs by the average outstanding loans of such type subject to the calculation for each of the 12-, 36- and 60-month periods, then averaging those three results. For impaired loans, we estimate our exposure for each individual relationship, given the current payment status of the loan and the value of the underlying collateral as supported by third party appraisals, broker’s price opinions, and/or the borrower’s financial statements and internal valuation assessments, each adjusted for liquidation costs. Any shortfall between the liquidation value of the underlying collateral and the recorded investment value of the loan is considered the required specific reserve amount. Actual losses in any period may exceed allowance amounts. We evaluate and adjust our allowance for loan and lease losses, and the allocation of the allowance between loan categories, each month.

~~52-~~57-

The following table presents an analysis of our allowance for loan and lease losses, including provisions for loan and lease losses, charge-offs and recoveries, for the periods indicated.


	At and for the Six Months Ended March 31, 2019			At and for the Fiscal Year Ended September 30, 2018				At and for the Six Months Ended March 31, 2020			At and for the Fiscal Year Ended September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Allowance for loan and lease losses:							Allowance for loan and lease losses:
Balance at beginning of period	$	64,540		$	63,503
Balance, beginning of period							Balance, beginning of period	$	70,774		$	64,540
Provision charged to expense	13,006			17,754			Provision charged to expense	79,750			41,506
(Improvement) impairment of ASC 310-30 loans	(118		)	232
Impairment (improvement) of ASC 310-30 loans							Impairment (improvement) of ASC 310-30 loans	148			(559)
Charge-offs:							Charge-offs:
Commercial real estate	(946		)	(3,925		)	Commercial real estate	(1,454)			(1,511)
Agriculture	(7,028		)	(9,473		)	Agriculture	(9,128)			(24,847)
Commercial non-real estate	(1,471		)	(3,813		)	Commercial non-real estate	(5,059)			(7,895)
Residential real estate	(642		)	(569		)	Residential real estate	(287)			(998)
Consumer	(334		)	(192		)	Consumer	(45)			(452)
Other lending	(394		)	(1,932		)	Other lending	(1,060)			(1,358)
Total charge-offs	(10,815		)	(19,904		)	Total charge-offs	(17,033)			(37,061)
Recoveries:							Recoveries:
Commercial real estate	259			533			Commercial real estate	234			567
Agriculture	357			332			Agriculture	1,408			385
Commercial non-real estate	228			994			Commercial non-real estate	172			392
Residential real estate	287			337			Residential real estate	312			468
Consumer	128			141			Consumer	48			174
Other lending	131			618			Other lending	137			362
Total recoveries	1,390			2,955			Total recoveries	2,311			2,348
Net loan charge-offs	(9,425		)	(16,949		)	Net loan charge-offs	(14,722)			(34,713)
Balance at end of period	$	68,003		$	64,540
Balance, end of period							Balance, end of period	$	135,950		$	70,774

Average total loans for the period ¹	$	9,591,355		$	9,187,624		Average total loans for the period ¹	$	9,648,678		$	9,741,293
Total loans at period end ¹	$	9,770,911		$	9,415,924		Total loans at period end ¹	9,693,295			9,706,763
Ratios							Ratios
Net charge-offs to average total loans ³	0.20		%	0.18		%	Net charge-offs to average total loans ³	0.31		%	0.36		%
Allowance for loan and lease losses to:							Allowance for loan and lease losses to:
Total loans	0.70		%	0.69		%	Total loans	1.40		%	0.73		%
Nonaccruing loans ²	57.06		%	45.93		%	Nonaccruing loans ²	64.45		%	67.40		%
¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.	¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.						¹Loans include unpaid principal balance net of unamortized discount on acquired loans and unearned net deferred fees and costs and loans in process.
²Nonaccruing loans excludes loans covered by a FDIC loss-sharing agreement.	²Nonaccruing loans excludes loans covered by a FDIC loss-sharing agreement.						²Nonaccruing loans excludes loans covered by a FDIC loss-sharing agreement.
³Annualized for partial-year periods.	³Annualized for partial-year periods.						³Annualized for partial-year periods.

In the first six months of fiscal year ~~2019,~~2020, net charge-offs were ~~$9.4~~$14.7 million, or ~~0.20%~~0.31%, of average total loans on an annualized basis, comprised of ~~$10.8~~$17.0 million of charge-offs and ~~$1.4~~$2.3 million of recoveries. The charge-offs were concentrated in the agriculture and commercial non-real estate segments in the loan portfolio. For fiscal year ~~2018,~~2019, net charge-offs were ~~$16.9~~$34.7 million, or ~~0.18%~~0.36%, of average total loans.

At March 31, ~~2019,~~2020, the allowance for loan and lease losses was ~~0.70%~~1.40% of our total loan portfolio, a 167 basis point increase, compared to ~~0.69%~~0.73% at September 30, ~~2018.~~2019. The balance of the ALLL increased to ~~$68.0~~$136.0 million from ~~$64.5~~$70.8 million over the same ~~period.~~period due to incurred loss resulting from COVID-19 pandemic. This increase did not contemplate the potential impact of CECL implementation, which is effective for the Company October 1, 2020. In determining the credit related charges attributable to the COVID-19 pandemic, we considered the impact upon our loan portfolio. Industries such as oil & energy, hotels & resorts, restaurants, retail malls, airlines and others have been cited as being at risk for significant revenue loss. Within our portfolio, $1.14 billion, or 11.8% relates to hotels & resorts, $109.8 million, or 1.1% relates to restaurants, with exposure in such other identified industries being immaterial. 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 March 31, 2020.

58-

Additionally, a portion of our loans which are carried at fair value, totaling ~~$835.8~~$792.1 million at March 31, ~~2019~~2020 and ~~$865.4~~$813.0 million at September 30, ~~2018,~~2019, respectively, have no associated allowance for loan and lease losses, but rather have a fair value adjustment related to credit risk included within their carrying value, thus driving the overall ratio of allowance for loan and lease losses to total loans lower. The amount of fair value adjustment related to credit risk on these loans was ~~$6.4~~$16.7 million and ~~$7.4~~$6.8 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively, or ~~0.07%~~0.17% and ~~0.08%~~0.07% of total loans, respectively. Finally, total purchase discount remaining on all acquired loans equates to ~~0.16%~~0.11% and ~~0.19%~~0.14% of total loans at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

~~53-~~

The following table presents management’s allocation of the allowance for loan and lease losses by loan category, in both dollars and percentage of our total allowance for loan and lease losses, to specific loans in those categories at the dates indicated.


	March 31, 2019				September 30, 2018					March 31, 2020						September 30, 2019
	Amount		Percent		Amount		Percent			Amount		Percent		Amount		Percent
	(dollars in thousands)									(dollars in thousands)
Allocation of allowance for loan and lease losses:									Allocation of allowance for loan and lease losses:
Commercial real estate	$	15,603	22.9	%	$	16,777	26.0	%	Commercial real estate	$	64,414	47.4	%	$	16,827	23.8	%
Agriculture	33,725		49.6	%	28,121		43.6	%	Agriculture	29,526		21.7	%	30,819		43.5	%
Commercial non-real estate	13,049		19.2	%	13,610		21.1	%	Commercial non-real estate	31,766		23.4	%	17,567		24.8	%
Residential real estate	4,326		6.4	%	4,749		7.3	%	Residential real estate	8,356		6.1	%	4,095		5.8	%
Consumer	374		0.5	%	257		0.4	%	Consumer	777		0.6	%	427		0.6	%
Other lending	926		1.4	%	1,026		1.6	%	Other lending	1,111		0.8	%	1,039		1.5	%
Total	$	68,003	100.0	%	$	64,540	100.0	%	Total	$	135,950	100.0	%	$	70,774	100.0	%

Management will continue to evaluate the loan portfolio and assess economic conditions in order to determine future allowance levels and the amount of loan and lease loss provisions. We review the appropriateness of our allowance for loan and lease losses on a monthly basis. Management monitors closely all past due and restructured loans in assessing the appropriateness of its allowance for loan and lease losses. In addition, we follow procedures for reviewing and grading all substantial commercial and agriculture relationships at least annually. Based predominantly upon the review and grading process, we determine the appropriate level of the allowance in response to our assessment of the probable risk of loss inherent in our loan portfolio. Management makes additional loan and lease loss provisions when the results of ~~its~~our problem loan assessment methodology or overall allowance testing of appropriateness ~~test indicate~~indicates additional provisions are required.

The review of problem loans is an ongoing process during which management may determine that additional charge-offs are required or additional loans should be placed on nonaccrual status. We have also recorded an allowance for unfunded lending-related commitments that represents our estimate of incurred losses on the portion of lending commitments that borrowers have not advanced. The balance of the allowance for unfunded lending-related commitments was $1.1 million and $0.5 million at March 31, ~~2019~~2020 and September 30, ~~2018.~~2019, respectively, and is recorded in accrued expenses and other liabilities in the consolidated balance sheet.

~~Investments~~Investment Securities

The following table presents the amortized cost of each category of our investment portfolio at the dates indicated.


	March 31,		September 30,
	2019		2018			March 31, 2020		September 30, 2019
	(dollars in thousands)					(dollars in thousands)
U.S. Treasury securities	$	93,696	$	168,394	U.S. Treasury securities	$	69,629	$	94,178
Mortgage-backed securities:					Mortgage-backed securities:
Government National Mortgage Association	491,888		442,458		Government National Mortgage Association	566,747		501,139
Federal Home Loan Mortgage Corporation	438,605		297,380		Federal Home Loan Mortgage Corporation	556,535		463,974
Federal National Mortgage Association	303,643		188,192		Federal National Mortgage Association	386,996		322,340
Small Business Assistance Program	382,165		260,458		Small Business Assistance Program	300,498		316,502
States and political subdivision securities	63,400		69,566		States and political subdivision securities	60,511		66,145
Other	1,006		1,006		Other	1,006		1,006
Total	$	1,774,403	$	1,427,454	Total	$	1,941,922	$	1,765,284

We generally invest excess deposits in high-quality, liquid investment securities including residential agency mortgage-backed securities and, to a lesser extent, U.S. Treasury securities, corporate debt securities and securities issued by U.S. states and political subdivisions. Our investment portfolio serves as a means to collateralize FHLB borrowings and public funds deposits, to earn net spread income on excess deposits, ~~and~~ to maintain liquidity and to balance interest rate risk. Since September 30, ~~2018,~~2019, the fair value of the portfolio has increased by ~~$377.7~~$206.8 million, or ~~27.3%~~11.6%.

~~54-~~59-

The following table presents the aggregate amortized cost of each investment category of the investment portfolio and the weighted average yield for each investment category for each maturity period held at March 31, ~~2019.~~2020. Maturities of mortgage-backed securities may differ from contractual maturities because the mortgages underlying the securities may be called or prepaid without any penalties. The weighted-average yield ("WA Yield") on these assets is presented in the following table based on the contractual rate, as opposed to a tax equivalent yield concept.


	March 31, 2019																													March 31, 2020
	Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years				Mortgage-backed securities				Securities without contractual maturities				Total					Due in one year or less						Due after one year through five years						Due after five years through ten years					Due after ten years						Mortgage-backed securities						Securities without contractual maturities	Total
	Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield			Amount		WA Yield		Amount		WA Yield		Amount		WA Yield			Amount		WA Yield		Amount		WA Yield		Amount		WA Yield		Amount		WA Yield
	(dollars in thousands)																													(dollars in thousands)
U.S. Treasury securities	$	24,889	1.72	%	$	68,807	2.50	%	$	—	—	%	$	—	—	%	$	—	—	%	$	—	—	%	$	93,696	2.29	%	U.S. Treasury securities	$	69,629	2.50	%	$	—	0.00	%	$	—	—	%		$	—	—	%	$	—	—	%	$	—	—	%	$	69,629	2.50	%
Mortgage-backed securities	—		—	%	—		—	%	—		—	%	—		—	%	1,616,301		2.59	%	—		—	%	1,616,301		2.59	%	Mortgage-backed securities	—		—	%	—		—	%	—		—	%		—		—	%	1,810,776		2.21	%	—		—	%	1,810,776		2.21	%
States and political subdivision securities ¹ ²	11,420		1.47	%	43,055		1.65	%	8,803		1.90	%	122		5.00	%	—		—	%	—		—	%	63,400		1.66	%	States and political subdivision securities ¹ ²	12,986		1.51	%	35,858		1.75	%	11,667		2.54	%		—		—	%	—		—	%	—		—	%	60,511		1.85	%
Other	—		—	%	—		—	%	—		—	%	—		—	%	—		—	%	1,006		—	%	1,006		—	%	Other	—		—	%	—		—	%	—		—	%		—		—	%	—		—	%	1,006		—	%	1,006		—	%
Total	$	36,309	1.64	%	$	111,862	2.17	%	$	8,803	1.90	%	$	122	5.00	%	$	1,616,301	2.59	%	$	1,006	—	%	$	1,774,403	2.54	%	Total	$	82,615	2.34	%	$	35,858	1.75	%	$	11,667	2.54	%		$	—	—	%	$	1,810,776	2.21	%	$	1,006	—	%	$	1,941,922	2.21	%
¹ Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a discount.	¹ Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a discount.																												¹ Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a discount.
² Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual maturity for securities with a fair value equal to or below par.	² Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual maturity for securities with a fair value equal to or below par.																												² Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual maturity for securities with a fair value equal to or below par.

Declines in the fair value of investment securities available for sale that are deemed to be other-than-temporary are recognized in earnings as a realized loss, and a new cost basis for the securities is established. In evaluating other-than-temporary impairment, we consider the length of time and extent to which the fair value has been less than amortized cost, the financial condition and near-term prospects of the issuer, and our intent and ability to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value in the near term. Declines in the fair value of debt securities below amortized cost are deemed to be other-than-temporary in circumstances where: (1) we have the intent to sell a security; (2) it is more-likely-than-not that we will be required to sell the security before recovery of its amortized cost basis; or (3) we do not expect to recover the entire amortized cost basis of the security. If we intend to sell a security or if it is more-likely-than-not that we will be required to sell the security before recovery, an other-than-temporary impairment loss is recognized in earnings equal to the difference between the security’s amortized cost basis and its fair value. If we do not intend to sell the security or it is not more-likely-than-not that it will be required to sell the security before recovery, the other-than-temporary impairment write-down is separated into an amount representing credit loss, which is recognized in earnings, and an amount related to all other factors, which is recognized in other comprehensive income (loss).

Deposits

We obtain funds from depositors by offering consumer and business interest-bearing accounts and term time deposits. At March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, our total deposits were ~~$10.47~~$10.18 billion and ~~$9.73~~$10.30 billion, respectively, representing a decrease of $121.2 million, or 1.2%, due to a reduction in the use of brokered deposits partially offset by an increase ~~of $734.9 million, or 7.6%, which was primarily concentrated~~ in ~~public deposit and consumer accounts.~~business deposits. Our accounts are federally insured by the FDIC up to the legal maximum.

The following table presents the balances and weighted average cost of our deposit portfolio at the following dates.


	March 31, 2019				September 30, 2018					March 31, 2020						September 30, 2019
	Amount		Weighted Avg. Cost		Amount		Weighted Avg. Cost			Amount		Weighted Avg. Cost		Amount		Weighted Avg. Cost
	(dollars in thousands)									(dollars in thousands)
Noninterest-bearing demand	$	1,824,507	—	%	$	1,842,704	—	%	Noninterest-bearing demand	$	1,973,629	—	%	$	1,956,025	—	%
Interest-bearing demand	6,556,318		1.20	%	6,043,717		0.95	%	Interest-bearing demand	6,677,252		0.61	%	6,248,638		1.00	%
Time deposits, greater than $250,000	494,117		2.26	%	383,868		1.89	%	Time deposits, greater than $250,000	416,361		1.98	%	493,530		2.30	%
Time deposits, less than or equal to $250,000	1,593,441		1.61	%	1,463,210		1.29	%	Time deposits, less than or equal to $250,000	1,111,873		1.20	%	1,602,146		1.68	%
Total	$	10,468,383	1.10	%	$	9,733,499	0.86	%	Total	$	10,179,115	0.61	%	$	10,300,339	0.98	%

At March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, we had ~~$669.7~~$464.0 million and ~~$600.2~~$706.5 million, respectively, in brokered deposits, ~~an increase~~a decrease of ~~$69.5~~$242.5 million, or ~~11.6%~~34.3%.

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Municipal public deposits constituted ~~$1.16~~$1.01 billion and ~~$959.4 million~~$1.04 billion of our deposit portfolio at March 31, ~~2019,~~2020, and September 30, ~~2018,~~2019, respectively, of which ~~$825.0~~$636.0 million and ~~$622.1~~$691.9 million, respectively, were required to be collateralized. Our top 10 depositors were responsible for ~~8.0%~~8.1% and ~~6.6%~~7.0% of our total deposits at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

The following table presents deposits by region.

March 31, September 30,
2019 2018
(dollars in thousands)
South Dakota $ 2,606,594
$ 2,422,208
Iowa / Kansas / Missouri 2,943,546
2,757,408
Nebraska 2,563,011
2,472,297
Arizona 459,245
399,212
Colorado 1,356,662
1,228,762
North Dakota / Minnesota 51,086
50,359
Corporate and other 488,239
403,253
Total deposits $ 10,468,383
$ 9,733,499

~~55-~~


	March 31, 2020		September 30, 2019
	(dollars in thousands)
South Dakota	$	2,634,144	$	2,575,833
Iowa / Missouri	2,925,216		2,799,597
Nebraska / Kansas	2,591,149		2,611,332
Arizona	479,846		508,308
Colorado	1,226,068		1,237,052
North Dakota / Minnesota	44,682		55,258
Corporate and other	278,010		512,959
Total deposits	$	10,179,115	$	10,300,339

We fund a portion of our assets with time deposits that have balances greater than $250,000 and that have maturities generally in excess of six months. At March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, our time deposits greater than $250,000 totaled ~~$494.1~~$416.4 million and ~~$383.9~~$493.5 million, respectively. The following table presents the maturities of our time deposits greater than $250,000 and less than or equal to $250,000 in size at March 31, ~~2019.~~2020.


	March 31, 2019							March 31, 2020
	Greater than $250,000			Less than or equal to $250,000				Greater than $250,000			Less than or equal to $250,000
	(dollars in thousands)							(dollars in thousands)
Remaining maturity:							Remaining maturity:
Three months or less	$	113,493		$	451,717		Three months or less	$	118,963		$	405,357
Over three through six months	66,898			262,782			Over three through six months	121,962			199,388
Over six through twelve months	130,662			588,500			Over six through twelve months	111,495			305,220
Over twelve months	183,064			290,442			Over twelve months	63,941			201,908
Total	$	494,117		$	1,593,441		Total	$	416,361		$	1,111,873
Percent of total deposits	4.7		%	15.2		%	Percent of total deposits	4.1		%	10.9		%

At both March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, the average remaining maturity of all time deposits was approximately ~~10 and 11 months, respectively.~~8 months. The average time deposits amount per account was approximately ~~$44,298~~$39,576 and ~~$39,896~~$45,936 at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively.

Derivatives

Beginning in the second quarter of fiscal year 2018, we entered into RPAs with some of our derivative counterparties to assume the credit exposure related to interest rate derivative contracts. Our loan customer enters into an interest rate swap directly with a derivative counterparty and we agree through an RPA to take on the counterparty's risk of loss on the interest rate swap due to a default by the customer. The notional amounts of RPAs sold were ~~$49.7~~$78.2 million and ~~$37.4~~$56.8 million as of March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively. Assuming all underlying loan customers defaulted on their obligation to perform under the interest rate swap with a derivative counterparty, the exposure from these RPAs would be ~~$4.9~~$0.6 million and ~~$0.4~~$0.1 million at March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, respectively, based on the fair value of the underlying swaps.

In 2017, we began a new program of selling interest swaps directly to customers. These interest rate swaps sales are used to enable customers to achieve a long-term fixed rate by selling the customer a long-term variable rate loan indexed to LIBOR plus a credit spread whereby the Bank enters into an interest rate swap with our customer where the customer pays a fixed rate of interest set at the time of origination on the interest rate swap and then the customer receives a floating rate equal to the rate paid on the loan, thus resulting in a fixed rate of interest over the life of the interest rate swap. We then enter into a mirrored interest rate swap with a swap dealer where we pay and receive the same fixed and floating rate as we pay and receive from the interest rate swap we have with our customer. As the interest paid and received by us on the two swaps net to zero, we are left with the variable rate of the long-term loan.

61-

Prior to 2017 we entered into fixed-rate loans having original maturities of 5 years or greater (typically between 5 and 15 years) with certain of our commercial and agri-business banking customers to assist them in facilitating their risk management strategies. We mitigated our interest rate risk associated with certain of these loans by entering into equal and offsetting fixed-to-floating interest rate swap agreements for these loans with swap counterparties. We elected to account for the loans at fair value under ASC 825, Fair ValueOption. Changes in the fair value of these loans are recorded in earnings as a component of noninterest income in the relevant period. The related interest rate swaps are recognized as either assets or liabilities in our financial statements and any gains or losses on these swaps, both realized and unrealized, are recorded in earnings as a component of noninterest income. The interest rate swaps are fully effective from an interest rate risk perspective, as gains and losses on our swaps are directly offset by changes in fair value of the fair value option loans (i.e., swap interest rate risk adjustments are directly offset by associated loan interest rate risk adjustments). Consequently, any changes in noninterest income associated with changes in fair value resulting from interest rate movement, as opposed to changes in credit quality, on the loans are directly offset by equal and opposite unrealized charges to or reductions in noninterest income for the related interest rate swap. Any changes in the fair value of the loans related to credit quality and the current realized gain (loss) on derivatives are not offsetting amounts within noninterest income. To ensure the correlation of movements in fair value between the interest rate swap and the related loan, we pass on all economic costs associated with our interest rate swap activity resulting from loan customer prepayments (partial or full) to the customer.

~~56-~~

Short-Term Borrowings

Our primary sources of short-term borrowings include securities sold under repurchase agreements and certain FHLB advances maturing within 12 months. The following table presents certain information with respect to only our borrowings with original maturities less than 12 months at and for the periods noted.


	At and for the Six Months Ended March 31, 2019			At and for the Fiscal Year Ended September 30, 2018				At and for the Six Months Ended March 31, 2020			At and for the Fiscal Year Ended September 30, 2019
	(dollars in thousands)							(dollars in thousands)
Short-term borrowings:							Short-term borrowings:
Securities sold under agreements to repurchase	$	62,537		$	90,907		Securities sold under agreements to repurchase	$	64,809		$	68,992
FHLB advances	—			100,000			FHLB advances	475,000			15,000
Total short-term borrowings	$	62,537		$	190,907		Total short-term borrowings	$	539,809		$	83,992

Maximum amount outstanding at any month-end during the period	$	324,717		$	808.325		Maximum amount outstanding at any month-end during the period	$	539,809		$	371,649
Average amount outstanding during the period	$	199,896		$	442.398		Average amount outstanding during the period	275,882			175,133
Weighted average rate for the period	1.62		%	1.32		%	Weighted average rate for the period	0.96		%	1.72		%
Weighted average rate as of date indicated	0.59		%	0.80		%	Weighted average rate as of date indicated	0.65		%	0.91		%

Other Borrowings

In addition to FHLB short-term advances, we also ~~have~~had FHLB long-term borrowings of ~~$275.0 million and $175.0~~$325.0 million outstanding as of both March 31, ~~2019~~2020 and September 30, ~~2018, respectively.~~2019.

We ~~have~~had outstanding ~~$73.6~~$73.8 million and $73.7 million of junior subordinated debentures to affiliated trusts in connection with the issuance of trust preferred securities by such trusts as of March 31, ~~2019~~2020 and September 30, ~~2018.~~2019, respectively. We are permitted under applicable laws and regulations to count these trust preferred securities as part of our Tier 1 capital.

We issued $35.0 million of fixed-to-floating rate subordinated notes that mature on August 15, 2025 through a private placement. The notes, which qualify as Tier 2 capital under Capital Rules in effect at March 31, ~~2019,~~2020, have an interest rate of 4.875% per annum, payable semi-annually on each February 15 and August 15, commencing on February 15, 2016 until August 15, 2020. During the second quarter of fiscal year ~~2019,~~2020, we incurred ~~$1.4~~$1.2 million in interest expense on all outstanding subordinated debentures and notes compared to ~~$1.2~~$1.4 million in the same period in fiscal year ~~2018.~~2019. During the first six months of fiscal ~~year~~years 2020 and 2019, ~~and 2018,~~ interest expense on all outstanding subordinated debentures and notes was ~~$2.8~~$2.5 million and ~~$2.4~~$2.8 million, respectively.

62-

Off-Balance Sheet Commitments, Commitments, Guarantees and Contractual Obligations

The following table summarizes the maturity of our contractual obligations and other commitments to make future payments at March 31, ~~2019.~~2020. Customer deposit obligations categorized as "not determined" include noninterest-bearing demand accounts and interest-bearing demand accounts with no stated maturity date.


	March 31, 2020
	Less Than 1 Year		1 to 2 Years		2 to 5 Years		>5 Years		Not Determined		Total
	(dollars in thousands)
Contractual Obligations:
Customer deposits	$	1,240,321	$	189,147	$	76,510	$	192	$	8,672,945	$	10,179,115
Securities sold under agreement to repurchase	64,809		—		—		—		—		64,809
FHLB advances and other borrowings	515,000		110,000		175,000		—		—		800,000
Subordinated debentures	—		—		—		75,920		—		75,920
Subordinated notes payable	—		—		—		35,000		—		35,000
Accrued interest payable	9,102		—		—		—		—		9,102
Interest on FHLB advances	9,176		6,481		7,471		—		—		23,128
Interest on subordinated debentures	2,495		2,495		7,484		23,906		—		36,380
Interest on subordinated notes payable	1,706		1,706		5,119		640		—		9,171
Other Commitments:
Commitments to extend credit—non-credit card	$	987,183	$	308,861	$	392,305	$	224,108	$	—	$	1,912,457
Commitments to extend credit—credit card	128,429		—		—		—		—		128,429
Letters of credit	69,768		—		—		—		—		69,768

March 31, 2019
Less Than 1 Year 1 to 2 Years 2 to 5 Years >5 Years Not Determined Total
(dollars in thousands)
Contractual Obligations:
Customer deposits $ 1,590,650
$ 345,115
$ 128,056
$ 335
$ 8,404,227
$ 10,468,383
Securities sold under agreement to repurchase 62,537
—
—
—
—
62,537
FHLB advances and other borrowings —
40,000
205,000
30,000
—
275,000
Subordinated debentures —
—
—
75,920
—
75,920
Subordinated notes payable —
—
—
35,000
—
35,000
Operating leases, net of sublease income 2,618
5,615
8,027
5,146
—
21,406
Accrued interest payable 13,799
—
—
—
—
13,799
Interest on FHLB advances 7,831
7,774
13,364
398
—
29,367
Interest on subordinated notes payable 3,694
3,694
11,083
39,606
—
58,077
Interest on subordinated debentures 1,706
1,706
5,119
2,346
—
10,877
Other Commitments:
Commitments to extend credit—non-credit card $ 961,712
$ 425,749
$ 504,193
$ 260,538
$ —
$ 2,152,192
Commitments to extend credit—credit card 124,995
—
—
—
—
124,995
Letters of credit 68,527
—
—
—
—
68,527

~~57-~~

We rent certain premises and equipment under operating leases. See Note 12 to the consolidated financial statements for additional information on long-term lease arrangements.

Instruments with Off-Balance Sheet Risk

In the normal course of business, we enter into various transactions that are not included in our consolidated financial statements in accordance with U.S. GAAP. These transactions include commitments to extend credit to our customers and letters of credit. Commitments to extend credit are agreements to lend to a customer provided there is no violation of any condition established in the commitment. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Letters of credit are conditional commitments issued primarily to support or guarantee the performance of a customer’s obligations to a third party. The credit risk involved in issuing letters of credit is essentially the same as originating a loan to the customer. We manage the risks associated with these arrangements by evaluating each customer’s creditworthiness prior to issuance through a process similar to that used by us in deciding whether to extend credit to the customer.

The following table presents the total notional amounts of all commitments by us to extend credit and letters of credit as of the dates indicated.


	March 31,		September 30,
	2019		2018			March 31, 2020		September 30, 2019
	(dollars in thousands)					(dollars in thousands)
Commitments to extend credit	$	2,277,187	$	2,344,550	Commitments to extend credit	$	2,040,886	$	2,229,678
Letters of credit	68,527		69,613		Letters of credit	69,768		68,983
Total	$	2,345,714	$	2,414,163	Total	$	2,110,654	$	2,298,661

Liquidity

Liquidity refers to our ability to maintain resources that are adequate to fund operations and meet present and future financial obligations through either the sale or maturity of existing assets or by obtaining additional funding through liability management. We consider the effective and prudent management of liquidity to be fundamental to our health and strength. Our objective is to manage our cash flow and liquidity reserves so that they are adequate to fund our obligations and other commitments on a timely basis and at a reasonable cost.

63-

Our liquidity risk is managed through a comprehensive framework of policies and limits overseen by our Bank’s asset and liability committee. We continuously monitor and make adjustments to our liquidity position by adjusting the balance between sources and uses of funds as we deem appropriate. Our primary measures of liquidity include monthly cash flow analyses under ordinary business activities and conditions and under situations simulating a severe run on our Bank. We also monitor our Bank’s deposit to loan ratio to ensure high quality funding is available to support our strategic lending growth objectives, and have internal management targets for the FDIC’s liquidity ratio, net short-term non-core funding dependence ratio and non-core liabilities to total assets ratio. The results of these measures and analyses are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity needs. We also acquire brokered deposits when the cost of funds is advantageous to other funding sources.

Great Western Bancorp, Inc. Our primary source of liquidity is cash obtained from dividends paid by our Bank. We primarily use our cash for the payment of dividends, when and if declared by our Board of Directors, and the payment of interest on our outstanding junior subordinated debentures and subordinated notes. We also use cash, as necessary, to satisfy the needs of our Bank through equity contributions and for acquisitions. At March 31, ~~2019,~~2020, our holding company had ~~$68.7~~$31.4 million of cash. During the second quarter of fiscal year ~~2019,~~2020, we declared and paid a dividend of ~~$0.25~~$0.30 per common share. The outstanding amount under our private placement subordinated capital notes was $35.0 million at March 31, ~~2019.~~2020. Our management believes that the sources of available liquidity are adequate to meet all reasonably foreseeable short-term and intermediate-term demands. We may consider raising additional capital in public or private offerings of debt or equity securities. To this end, in August 2018 we filed a shelf registration statement with the SEC registering an indeterminate amount of our common stock, debt securities and other securities which we may decide to issue in the future. The specific terms of any shares or other securities we choose to issue will be based on current market conditions and will be described in a supplement to the prospectus contained in the shelf registration statement.

Great Western Bank. Our Bank maintains sufficient liquidity by maintaining minimum levels of excess cash reserves (measured on a daily basis), a sufficient amount of unencumbered, highly liquid assets and access to contingent ~~funding with the FHLB.~~funding. At March 31, ~~2019,~~2020, our Bank had cash of ~~$282.6~~$347.5 million and ~~$1.76~~$1.99 billion of highly-liquid securities held in our investment portfolio, of which ~~$945.9~~$918.8 million were pledged as collateral on public deposits, securities sold under agreements to repurchase, and for other purposes as required or permitted by law. The balance could be sold to meet liquidity requirements. Our Bank ~~has letters of credit from the FHLB, which are pledged as collateral on public deposits, for $217.0 million. Our Bank~~ had ~~$275.0~~$800.0 million in FHLB borrowings at March 31, ~~2019,~~2020, with additional available lines of ~~$2.04~~$1.46 billion. Our Bank also had an additional borrowing capacity of ~~$1.64~~$1.23 billion with the FRB Discount Window. Our Bank primarily uses liquidity to meet loan requests and commitments (including commitments under letters of credit), to accommodate outflows in deposits and to take advantage of interest rate market opportunities. At March 31, ~~2019,~~2020, we had a total of ~~$2.35~~$2.11 billion of outstanding exposure under commitments to extend credit and issued letters of

~~58-~~

credit. Our management believes that the sources of available liquidity are adequate to meet all our Bank’s reasonably foreseeable short-term and intermediate-term demands.

Capital

As a bank holding company, we must comply with the capital requirements established by the Federal Reserve, and our Bank must comply with the capital requirements established by the FDIC. The current risk-based guidelines applicable to us and our Bank are based on the Basel III framework, as implemented by the federal bank regulators.

64-

The following table presents our regulatory capital ratios at March 31, ~~2019~~2020 and the standards for both well-capitalized depository institutions and minimum capital requirements. Our capital ratios exceeded applicable regulatory requirements as of that date.


	March 31, 2019									March 31, 2020
	Actual									Actual
	Capital Amount		Ratio		Minimum Capital Requirement Ratio⁽¹⁾		Well Capitalized Ratio			Capital Amount		Ratio		Minimum Capital Requirement Ratio ¹		Well Capitalized Ratio
	(dollars in thousands)									(dollars in thousands)
Great Western Bancorp, Inc.									Great Western Bancorp, Inc.
Tier 1 capital	$	1,198,454	11.4	%	6.0	%	8.0	%	Tier 1 capital	$	1,185,668	11.3	%	6.0	%	N/A
Total capital	1,301,940		12.4	%	8.0	%	10.0	%	Total capital	1,352,037		12.9	%	8.0	%	N/A
Tier 1 leverage	1,198,454		10.2	%	4.0	%	5.0	%	Tier 1 leverage	1,185,668		9.2	%	4.0	%	N/A
Common equity Tier 1	1,124,828		10.7	%	4.5	%	6.5	%	Common equity Tier 1	1,111,903		10.6	%	4.5	%	N/A
Risk-weighted assets	10,537,358								Risk-weighted assets	10,504,680
Great Western Bank									Great Western Bank
Tier 1 capital	$	1,162,719	11.0	%	6.0	%	8.0	%	Tier 1 capital	$	1,183,213	11.3	%	6.0	%	8.0	%
Total capital	1,231,205		11.7	%	8.0	%	10.0	%	Total capital	1,314,582		12.5	%	8.0	%	10.0	%
Tier 1 leverage	1,162,719		9.8	%	4.0	%	5.0	%	Tier 1 leverage	1,183,213		9.2	%	4.0	%	5.0	%
Common equity Tier 1	1,162,719		11.0	%	4.5	%	6.5	%	Common equity Tier 1	1,183,213		11.3	%	4.5	%	6.5	%
Risk-weighted assets	10,534,895								Risk-weighted assets	10,503,830
¹ Does not include capital conservation buffer, which was 2.5% at March 31, 2019.
¹ Does not include capital conservation buffer, which was 2.5% at March 31, 2020.									¹ Does not include capital conservation buffer, which was 2.5% at March 31, 2020.

At March 31, ~~2019~~2020 and September 30, ~~2018,~~2019, our Tier 1 capital included an aggregate of ~~$73.6~~$73.8 million and $73.7 million, respectively, of trust preferred securities issued by our subsidiaries, net of fair value adjustment. At March 31, ~~2019,~~2020, our Tier 2 capital included ~~$68.0~~$131.4 million of the allowance for loan and lease losses and $35.0 million of private placement subordinated capital notes. At September 30, ~~2018,~~2019, our Tier 2 capital included ~~$64.5~~$70.8 million of the allowance for loan and lease losses and $35.0 million of private placement subordinated capital notes. Our total risk-weighted assets were ~~$10.54~~$10.50 billion at March 31, ~~2019.~~2020.

Non-GAAP Financial Measures

We rely on certain non-GAAP financial measures in making financial and operational decisions about our business. We believe that each of the non-GAAP financial measures presented is helpful in highlighting trends in our business, financial condition and results of operations which might not otherwise be apparent when relying solely on our financial results calculated in accordance with U.S. GAAP. We disclose net interest income and related ratios and analysis on a taxable-equivalent basis, which may also be considered non-GAAP financial measures. We believe this presentation to be the preferred industry measurement of net interest income as it provides a relevant comparison of net interest income arising from taxable and tax-exempt sources. In addition, certain performance measures, including the efficiency ratio and net interest margin utilize net interest income on a taxable-equivalent basis.

In particular, we evaluate our profitability and performance based on our adjusted net income, adjusted earnings per common share, tangible net income and return on average tangible common equity. Our adjusted net income and adjusted earnings per common share exclude the after-tax effect of items with a significant impact to net income that we do not believe to be recurring in nature, (e.g., one-time acquisition expenses as well as the ~~effect~~COVID-19 impact on credit and other related charges and the impairment of ~~revaluation of deferred taxes)~~goodwill and certain intangible assets). Our tangible net income and return on average tangible common equity exclude the effects of amortization expense relating to intangible assets and related tax effects from the acquisition of us by NAB and our acquisitions of other institutions. We believe these measures help highlight trends associated with our financial condition and results of operations by providing net income and return information excluding significant nonrecurring items (for adjusted net income and adjusted earnings per common share) and based on our cash payments and receipts during the applicable period (for tangible net income and return on average tangible common equity).

~~59-~~

We also evaluate our profitability and performance based on our adjusted net interest income, adjusted net interest margin, adjusted interest income on non-ASC 310-30 loans and adjusted yield on non-ASC 310-30 loans. We adjust each of these four measures to include the current realized gain (loss) of derivatives we use to manage interest rate risk on certain of our loans, which we believe economically offsets the interest income earned on the loans. Similarly, we evaluate our operational efficiency based on our efficiency ratio, which excludes the effect of amortization of core deposit and other intangibles (a non-cash expense item) and includes the tax benefit associated with our tax-advantaged loans.

65-

We evaluate our financial condition based on the ratio of our tangible common equity to our tangible assets and the ratio of our tangible common equity to common shares outstanding. Our calculation of this ratio excludes the effect of our goodwill and other intangible assets. We believe this measure is helpful in highlighting the common equity component of our capital and because of its focus by federal bank regulators when reviewing the health and strength of financial institutions in recent years and when considering regulatory approvals for certain actions, including capital actions. We also believe the ratio of our tangible common equity to common shares outstanding is helpful in understanding our stockholders’ relative ownership position as we undertake various actions to issue and retire common shares outstanding.

Reconciliations for each of these non-GAAP financial measures to the closest GAAP financial measures are included in the following tables. Each of the non-GAAP financial measures presented should be considered in context with our GAAP financial results included in this filing.


	At or for the six months ended:						At or for the three months ended:																At or for the six months ended:									At or for the three months ended:
	March 31, 2019			March 31, 2018			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018				March 31, 2020			March 31, 2019			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
	(Dollars in thousands except share and per share amounts)																						(Dollars in thousands except share and per share amounts)
Adjusted net income and adjusted earnings per common share:																						Adjusted net income and adjusted earnings per common share:
Net income - GAAP	$	90,297		$	69,762		$	44,511		$	45,786		$	42,281		$	45,874		$	40,532
Add: Deferred taxes revaluation due to Tax Reform Act	—			13,586			—			—			—			—			—
Net (loss) income - GAAP																						Net (loss) income - GAAP	$	(697,344)		$	90,297		$	(740,618)		$	43,274		$	50,285		$	26,783		$	44,511
Add: COVID-19 related impairment of goodwill and certain intangible assets, net of tax																						Add: COVID-19 related impairment of goodwill and certain intangible assets, net of tax	713,013			—			713,013			—			—			—			—
Add: COVID-19 impact on credit and other related charges, net of tax																						Add: COVID-19 impact on credit and other related charges, net of tax	56,685			—			56,685			—			—			—			—
Adjusted net income	$	90,297		$	83,348		$	44,511		$	45,786		$	42,281		$	45,874		$	40,532		Adjusted net income	$	72,354		$	90,297		$	29,080		$	43,274		$	50,285		$	26,783		$	44,511

Weighted average diluted common shares outstanding	57,556,984			59,116,923			57,074,674			58,039,292			59,122,699			59,170,058			59,146,117			Weighted average diluted common shares outstanding	56,141,816			57,556,984			55,906,002			56,457,967			56,804,172			57,110,103			57,074,674
Earnings per common share - diluted	$	1.57		$	1.18		$	0.78		$	0.79		$	0.72		$	0.78		$	0.69		Earnings per common share - diluted	$	(12.42)		$	1.57		$	(13.25)		$	0.77		$	0.89		$	0.47		$	0.78
Adjusted earnings per common share - diluted	$	1.57		$	1.41		$	0.78		$	0.79		$	0.72		$	0.78		$	0.69		Adjusted earnings per common share - diluted	$	1.29		$	1.57		$	0.52		$	0.77		$	0.89		$	0.47		$	0.78

Tangible net income and return on average tangible common equity:																						Tangible net income and return on average tangible common equity:
Net income - GAAP	$	90,297		$	69,762		$	44,511		$	45,786		$	42,281		$	45,874		$	40,532
Add: Amortization of intangible assets, net of tax	687			751			343			344			343			366			376
Net (loss) income - GAAP																						Net (loss) income - GAAP	$	(697,344)		$	90,297		$	(740,618)		$	43,274		$	50,285		$	26,783		$	44,511
Add: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets, net of tax																						Add: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets, net of tax	713,817			687			713,440			377			315			335			343
Tangible net income	$	90,984		$	70,513		$	44,854		$	46,130		$	42,624		$	46,240		$	40,908		Tangible net income	$	16,473		$	90,984		$	(27,178)		$	43,651		$	50,600		$	27,118		$	44,854

Average common equity	$	1,819,996		$	1,765,622		$	1,822,940		$	1,817,052		$	1,825,312		$	1,796,066		$	1,770,117		Average common equity	$	1,913,277		$	1,819,996		$	1,918,035		$	1,908,519		$	1,885,785		$	1,864,132		$	1,822,940
Less: Average goodwill and other intangible assets	746,305			747,930			746,107			746,503			746,900			747,294			747,716			Less: Average goodwill and other intangible assets	744,702			746,305			741,257			748,146			745,349			745,718			746,107
Average tangible common equity	$	1,073,691		$	1,017,692		$	1,076,833		$	1,070,549		$	1,078,412		$	1,048,772		$	1,022,401		Average tangible common equity	$	1,168,575		$	1,073,691		$	1,176,778		$	1,160,373		$	1,140,436		$	1,118,414		$	1,076,833

Return on average common equity *	10.0		%	7.9		%	9.9		%	10.0		%	9.2		%	10.2		%	9.3		%	Return on average common equity *	(72.9)		%	10.0		%	(155.3)		%	9.0		%	10.6		%	5.8		%	9.9		%
Return on average tangible common equity **	17.0		%	13.9		%	16.9		%	17.1		%	15.7		%	17.7		%	16.2		%	Return on average tangible common equity **	2.8		%	17.0		%	(9.3)		%	15.0		%	17.6		%	9.7		%	16.9		%
* Calculated as net income - GAAP divided by average common equity. Annualized for partial-year periods.	* Calculated as net income - GAAP divided by average common equity. Annualized for partial-year periods.																					* Calculated as net income - GAAP divided by average common equity. Annualized for partial-year periods.
** Calculated as tangible net income divided by average tangible common equity. Annualized for partial-year periods.	** Calculated as tangible net income divided by average tangible common equity. Annualized for partial-year periods.																					** Calculated as tangible net income divided by average tangible common equity. Annualized for partial-year periods.


Adjusted net interest income and adjusted net interest margin (fully-tax equivalent basis):																						Adjusted net interest income and adjusted net interest margin (fully-tax equivalent basis):
Net interest income - GAAP	$	208,369		$	201,176		$	103,475		$	104,894		$	101,990		$	104,672		$	100,553		Net interest income - GAAP	$	207,156		$	208,369		$	101,983		$	105,173		$	106,709		$	105,629		$	103,475
Add: Tax equivalent adjustment	2,932			3,181			1,442			1,490			1,687			1,729			1,616			Add: Tax equivalent adjustment	3,037			2,932			1,514			1,523			1,487			1,424			1,442
Net interest income (FTE)	211,301			204,357			104,917			106,384			103,677			106,401			102,169			Net interest income (FTE)	210,193			211,301			103,497			106,696			108,196			107,053			104,917
Add: Current realized derivative gain (loss)	426			(4,116		)	405			21			(419		)	(830		)	(1,640		)	Add: Current realized derivative gain (loss)	(2,140)			426			(1,250)			(890)			(127)			321			405
Adjusted net interest income (FTE)	$	211,727		$	200,241		$	105,322		$	106,405		$	103,258		$	105,571		$	100,529		Adjusted net interest income (FTE)	$	208,053		$	211,727		$	102,247		$	105,806		$	108,069		$	107,374		$	105,322

Average interest-earning assets	$	11,216,179		$	10,492,091		$	11,345,559		$	11,086,800		$	10,857,168		$	10,748,078		$	10,571,300		Average interest-earning assets	$	11,567,032		$	11,216,179		$	11,590,453		$	11,543,610		$	11,609,823		$	11,617,521		$	11,345,559
Net interest margin (FTE) *	3.78		%	3.91		%	3.75		%	3.81		%	3.79		%	3.97		%	3.92		%	Net interest margin (FTE) *	3.63		%	3.78		%	3.59		%	3.68		%	3.70		%	3.70		%	3.75		%
Adjusted net interest margin (FTE) **	3.79		%	3.83		%	3.76		%	3.81		%	3.77		%	3.94		%	3.86		%	Adjusted net interest margin (FTE) **	3.60		%	3.79		%	3.55		%	3.65		%	3.69		%	3.71		%	3.76		%
* Calculated as net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.	* Calculated as net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.																					* Calculated as net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.
** Calculated as adjusted net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.	** Calculated as adjusted net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.																					** Calculated as adjusted net interest income (FTE) divided by average interest earning assets. Annualized for partial-year periods.

~~60-~~

66-


	At or for the six months ended:						At or for the three months ended:																At or for the six months ended:									At or for the three months ended:
	March 31, 2019			March 31, 2018			March 31, 2019			December 31, 2018			September 30, 2018			June 30, 2018			March 31, 2018				March 31, 2020			March 31, 2019			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
	(Dollars in thousands except share and per share amounts)																						(Dollars in thousands except share and per share amounts)
Adjusted interest income and adjusted yield (fully-tax equivalent basis), on non-ASC 310-30 loans:																						Adjusted interest income and adjusted yield (fully-tax equivalent basis), on non-ASC 310-30 loans:
Interest income - GAAP	$	241,889		$	211,746		$	121,528		$	120,361		$	115,284		$	112,760		$	106,811		Interest income - GAAP	$	229,679		$	241,889		$	111,970		$	117,709		$	124,923		$	124,098		$	121,528
Add: Tax equivalent adjustment	2,932			3,181			1,442			1,490			1,687			1,729			1,616			Add: Tax equivalent adjustment	3,037			2,932			1,514			1,523			1,487			1,424			1,442
Interest income (FTE)	244,821			214,927			122,970			121,851			116,971			114,489			108,427			Interest income (FTE)	232,716			244,821			113,484			119,232			126,410			125,522			122,970
Add: Current realized derivative gain (loss)	426			(4,116		)	405			21			(419		)	(830		)	(1,640		)	Add: Current realized derivative gain (loss)	(2,140)			426			(1,250)			(890)			(127)			321			405
Adjusted interest income (FTE)	$	245,247		$	210,811		$	123,375		$	121,872		$	116,552		$	113,659		$	106,787		Adjusted interest income (FTE)	$	230,576		$	245,247		$	112,234		$	118,342		$	126,283		$	125,843		$	123,375

Average non-ASC 310-30 loans	$	9,525,498		$	8,952,914		$	9,615,096		$	9,435,901		$	9,299,318		$	9,220,931		$	9,064,899		Average non-ASC 310-30 loans	$	9,525,157		$	9,525,498		$	9,496,153		$	9,554,161		$	9,693,395		$	9,699,433		$	9,615,096
Yield (FTE) *	5.15		%	4.81		%	5.19		%	5.12		%	4.99		%	4.98		%	4.85		%	Yield (FTE) *	4.89		%	5.15		%	4.81		%	4.96		%	5.17		%	5.19		%	5.19		%
Adjusted yield (FTE) **	5.16		%	4.72		%	5.20		%	5.12		%	4.97		%	4.94		%	4.78		%	Adjusted yield (FTE) **	4.84		%	5.16		%	4.75		%	4.93		%	5.17		%	5.20		%	5.20		%
* Calculated as interest income (FTE) divided by average loans. Annualized for partial-year periods.	* Calculated as interest income (FTE) divided by average loans. Annualized for partial-year periods.																					* Calculated as interest income (FTE) divided by average loans. Annualized for partial-year periods.
** Calculated as adjusted interest income (FTE) divided by average loans. Annualized for partial-year periods.	** Calculated as adjusted interest income (FTE) divided by average loans. Annualized for partial-year periods.																					** Calculated as adjusted interest income (FTE) divided by average loans. Annualized for partial-year periods.

Efficiency ratio:																						Efficiency ratio:
Total revenue - GAAP	$	243,312		$	236,592		$	121,698		$	121,614		$	121,245		$	123,611		$	119,295		Total revenue - GAAP	$	222,806		$	243,312		$	101,900		$	120,906		$	121,732		$	116,395		$	121,698
Add: Tax equivalent adjustment	2,932			3,181			1,442			1,490			1,687			1,729			1,616			Add: Tax equivalent adjustment	3,037			2,932			1,514			1,523			1,487			1,424			1,442
Total revenue (FTE)	$	246,244		$	239,773		$	123,140		$	123,104		$	122,932		$	125,340		$	120,911		Total revenue (FTE)	$	225,843		$	246,244		$	103,414		$	122,429		$	123,219		$	117,819		$	123,140

Noninterest expense	$	113,686		$	114,012		$	56,580		$	57,106		$	59,550		$	57,863		$	59,144		Noninterest expense	$	865,383		$	113,686		$	808,453		$	56,930		$	55,212		$	56,000		$	56,580
Less: Amortization of intangible assets	788			852			394			394			394			416			426
Less: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets																						Less: Amortization of intangible assets and COVID-19 related impairment of goodwill and certain intangible assets	743,206			788			742,779			427			366			385			394
Tangible noninterest expense	$	112,898		$	113,160		$	56,186		$	56,712		$	59,156		$	57,447		$	58,718		Tangible noninterest expense	$	122,177		$	112,898		$	65,674		$	56,503		$	54,846		$	55,615		$	56,186

Efficiency ratio *	45.8		%	47.2		%	45.6		%	46.1		%	48.1		%	45.8		%	48.6		%	Efficiency ratio *	54.1		%	45.8		%	63.5		%	46.2		%	44.5		%	47.2		%	45.6		%
* Calculated as the ratio of tangible noninterest expense to total revenue (FTE).	* Calculated as the ratio of tangible noninterest expense to total revenue (FTE).																					* Calculated as the ratio of tangible noninterest expense to total revenue (FTE).

Tangible common equity and tangible common equity to tangible assets:																						Tangible common equity and tangible common equity to tangible assets:
Total stockholders' equity	$	1,852,394		$	1,788,698		$	1,852,394		$	1,812,008		$	1,840,551		$	1,816,741		$	1,788,698		Total stockholders' equity	$	1,153,464		$	1,852,394		$	1,153,464		$	1,920,669		$	1,900,249		$	1,881,128		$	1,852,394
Less: Goodwill and other intangible assets	745,947			747,545			745,947			746,341			746,735			747,129			747,545			Less: Goodwill and other intangible assets	6,703			745,947			6,703			749,481			745,197			745,563			745,947
Tangible common equity	$	1,106,447		$	1,041,153		$	1,106,447		$	1,065,667		$	1,093,816		$	1,069,612		$	1,041,153		Tangible common equity	$	1,146,761		$	1,106,447		$	1,146,761		$	1,171,188		$	1,155,052		$	1,135,565		$	1,106,447

Total assets	$	12,830,162		$	11,992,317		$	12,830,162		$	12,573,641		$	12,116,808		$	12,009,048		$	11,992,317		Total assets	$	12,387,808		$	12,830,162		$	12,387,808		$	12,851,665		$	12,788,301		$	12,954,896		$	12,830,162
Less: Goodwill and other intangible assets	745,947			747,545			745,947			746,341			746,735			747,129			747,545			Less: Goodwill and other intangible assets	6,703			745,947			6,703			749,481			745,197			745,563			745,947
Tangible assets	$	12,084,215		$	11,244,772		$	12,084,215		$	11,827,300		$	11,370,073		$	11,261,919		$	11,244,772		Tangible assets	$	12,381,105		$	12,084,215		$	12,381,105		$	12,102,184		$	12,043,104		$	12,209,333		$	12,084,215

Tangible common equity to tangible assets	9.2		%	9.3		%	9.2		%	9.0		%	9.6		%	9.5		%	9.3		%	Tangible common equity to tangible assets	9.3		%	9.2		%	9.3		%	9.7		%	9.6		%	9.3		%	9.2		%

Tangible book value per share:																						Tangible book value per share:
Total stockholders' equity	$	1,852,394		$	1,788,698		$	1,852,394		$	1,812,008		$	1,840,551		$	1,816,741		$	1,788,698		Total stockholders' equity	$	1,153,464		$	1,852,394		$	1,153,464		$	1,920,669		$	1,900,249		$	1,881,128		$	1,852,394
Less: Goodwill and other intangible assets	745,947			747,545			745,947			746,341			746,735			747,129			747,545			Less: Goodwill and other intangible assets	6,703			745,947			6,703			749,481			745,197			745,563			745,947
Tangible common equity	$	1,106,447		$	1,041,153		$	1,106,447		$	1,065,667		$	1,093,816		$	1,069,612		$	1,041,153		Tangible common equity	$	1,146,761		$	1,106,447		$	1,146,761		$	1,171,188		$	1,155,052		$	1,135,565		$	1,106,447

Common shares outstanding	56,938,435			58,896,189			56,938,435			56,938,435			58,917,147			58,911,563			58,896,189			Common shares outstanding	55,013,928			56,938,435			55,013,928			56,382,915			56,283,659			56,939,032			56,938,435
Book value per share - GAAP	$	32.53		$	30.37		$	32.53		$	31.82		$	31.24		$	30.84		$	30.37		Book value per share - GAAP	$	20.97		$	32.53		$	20.97		$	34.06		$	33.76		$	33.04		$	32.53
Tangible book value per share	$	19.43		$	17.68		$	19.43		$	18.72		$	18.57		$	18.16		$	17.68		Tangible book value per share	$	20.84		$	19.43		$	20.84		$	20.77		$	20.52		$	19.94		$	19.43

Recent Accounting Pronouncements

See "Note 2. New Accounting Standards" in the accompanying "Notes to Consolidated Financial Statements (Unaudited)" included in this report for a discussion of new accounting pronouncements and their expected impact on our financial statements.

~~61-~~67-

Impact of Inflation and Changing Prices

Our financial statements included in this report have been prepared in accordance with U.S. GAAP, which requires us to measure financial position and operating results primarily in terms of historic dollars. Changes in the relative value of money due to inflation or recession generally are not considered. The primary effect of inflation on our operations is reflected in increased operating costs. In our management’s opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the inflation rate. While interest rates are greatly influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond our control, including changes in the expected rate of inflation, the influence of general and local economic conditions and the monetary and fiscal policies of the United States government, its agencies and various other governmental regulatory authorities.

Critical Accounting Policies and the Impact of Accounting Estimates

See "Note 1. Nature of Operations and Summary of Significant Policies" in the accompanying "Notes to Consolidated Financial Statements (Unaudited)" included in this report for a discussion of changes to our ~~revenue recognition~~lease accounting policies as a result of adopting ASU ~~2014-09,~~2016-02, "~~Revenue from Contracts with Customers~~Leases (Topic ~~606)~~842)" and subsequent related ASUs in the current fiscal year. The remainder of our critical accounting policies and accounting estimates have had no material changes from those disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~2019.


~~ITEM 3.~~	~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, ~~2019,~~2020, there have been no material changes in the quantitative and qualitative information about market risk provided pursuant to Item 305 of Regulation S-K as presented in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2018.~~2019.

Evaluation of Interest Rate Risk

We use a net interest income simulation model to measure and evaluate potential changes in our net interest income. We run various hypothetical interest rate scenarios ~~at least monthly~~regularly and compare these results against a scenario with no changes in interest rates. Our net interest income simulation model incorporates various assumptions, which we believe are reasonable but which may have a significant impact on results such as: (1) the timing of changes in interest rates, (2) shifts or rotations in the yield curve, (3) re-pricing characteristics for market-rate-sensitive instruments on and off balance sheet, (4) differing sensitivities of financial instruments due to differing underlying rate indices, (5) varying loan prepayment speeds for different interest rate scenarios, (6) the effect of interest rate limitations in our assets, such as floors and caps, (7) the effect of our interest rate swaps, and (8) overall growth and repayment rates and product mix of assets and liabilities. Because of limitations inherent in any approach used to measure interest rate risk, simulation results are not intended as a forecast of the actual effect of a change in market interest rates on our results but rather as a means to better plan and execute appropriate asset-liability management strategies and manage our interest rate risk.

Potential changes to our adjusted net interest income (i.e., GAAP net interest income plus current realized gain or loss on derivatives) in hypothetical rising and declining rate scenarios calculated as of March 31, ~~2019~~2020 are presented in the following table. The projections assume (1) immediate, parallel shifts downward of the yield curve of 100 and 200 basis points and immediate, parallel shifts upward of the yield curve of 100, 200, 300 and 400 basis points and (2) gradual shifts downward of 100 and 200 basis points over 12 months and gradual shifts upward of 100, 200, 300 and 400 basis points over 12 months. In the current interest rate environment, a downward shift of the yield curve of 300 and 400 basis points does not provide us with realistic results. In a downward parallel shift of the yield curve, interest rates at the short-end of the yield curve are not modeled to decline any further than 0%. For the immediate-shift scenarios, we assume short-term rates follow a forward yield curve throughout the forecast period that is dictated by the instantaneously shocked yield curve from the as of date. In the gradual-shift scenarios, we take each rate across the yield curve from the as of date and shock it by 1/12th of the total change in rates each month for twelve months.

~~62-~~68-


						Estimated Increase (Decrease) in Annualized Adjusted Net Interest Income for the Quarter Ended March 31, 2020
	Estimated Increase (Decrease) in Annualized Adjusted Net Interest Income for the Quarter Ended March 31, 2019
Change in Market Interest Rates as of March 31, 2019	Twelve Months Ending March 31, 2019		Twelve Months Ending March 31, 2020
Change in Market Interest Rates as of March 31, 2020					Change in Market Interest Rates as of March 31, 2020	Twelve Months Ending March 31, 2021		Twelve Months Ending March 31, 2022
Immediate Shifts					Immediate Shifts
+400 basis points	13.27	%	18.07	%	+400 basis points	7.76	%	13.24	%
+300 basis points	10.04	%	13.70	%	+300 basis points	5.86	%	10.33	%
+200 basis points	6.78	%	9.27	%	+200 basis points	3.87	%	7.27	%
+100 basis points	3.50	%	4.77	%	+100 basis points	1.86	%	3.97	%
-100 basis points	(5.38	)%	(7.02	)%	-100 basis points	(2.26)	%	(3.33)	%
-200 basis points	(11.62	)%	(15.50	)%	-200 basis points	(2.47)	%	(3.48)	%
Gradual Shifts					Gradual Shifts
+400 basis points	3.07	%			+400 basis points	(0.28)	%
+300 basis points	2.35	%			+300 basis points	(0.06)	%
+200 basis points	1.64	%			+200 basis points	0.14	%
+100 basis points	0.90	%			+100 basis points	0.25	%
-100 basis points	(1.78	)%			-100 basis points	(0.42)	%
-200 basis points	(3.94	)%			-200 basis points	(1.37)	%

We primarily use interest rate swaps to ensure that long-term fixed-rate loans are effectively re-priced as short-term rates change, which we believe would allow us to achieve these results. The results of this simulation analysis are hypothetical, and a variety of factors might cause actual results to differ substantially from what is depicted. For example, if the timing and magnitude of interest rate changes differ from those projected, our net interest income might vary significantly. Non-parallel yield curve shifts, such as a flattening or steepening of the yield curve or changes in interest rate spreads, would also cause our net interest income to be different from that depicted. An increasing interest rate environment could reduce projected net interest income if deposits and other short-term liabilities re-price faster than expected or faster than our assets re-price. Actual results could differ from those projected if we grow assets and liabilities faster or slower than estimated, if we experience a net outflow of deposit liabilities or if our mix of assets and liabilities otherwise changes. Actual results could also differ from those projected if we experience substantially different repayment speeds in our loan portfolio than those assumed in the simulation model. Finally, these simulation results do not contemplate all the actions that we may undertake in response to potential or actual changes in interest rates, such as changes to our loan, investment, deposit, funding or interest rate swap strategies.

For more information on our adjusted net interest income, including a reconciliation to the most directly comparable GAAP financial measures, see "—Non-GAAP Financial ~~Measures~~"Measures" above.


~~ITEM 4.~~	~~CONTROLS AND PROCEDURES~~

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Our management is responsible for establishing and maintaining effective disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the period covered by this report. Based on and as of the time of that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded our disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms.

(b) Changes in Internal Control over Financial Reporting. During the most recently completed fiscal quarter, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION


~~ITEM 1.~~	~~LEGAL PROCEEDINGS~~

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are a party to various litigation and regulatory matters incidental to the conduct of our business. We establish reserves for such matters when potential losses become probable and can be reasonably estimated. We believe the ultimate resolution of existing litigation and regulatory matters will not have a material adverse effect on our financial condition, results of operations or cash flows. However, changes in circumstances or additional information could result in additional accruals or resolution of these matters in excess of established accruals, which could adversely affect our financial condition, results of operations or cash flows, potentially materially.

~~63-~~69-


~~ITEM 1A.~~	~~RISK FACTORS~~

ITEM 1A. RISK FACTORS

There ~~have been no material changes~~are certain risks and uncertainties in ~~the risk factors as described in~~our business that could cause our actual results to differ materially from those anticipated. See "Part I, - Item 1A. Risk Factors" of ~~our~~the Annual Report on Form 10-K of Great Western Bancorp, Inc., for the fiscal year ended September 30, ~~2018.~~2019 (the “2019 Form 10-K”), which includes a detailed discussion of our risk factors. Other than as noted below, our risk factors have not changed significantly from those disclosed in our 2019 Form 10-K. These risk factors should be read carefully in connection with evaluating our business and in connection with the forward-looking statements and other information contained in this Quarterly Report on Form 10-Q. Any of the risks described in our 2019 Form 10-K could materially affect our business, consolidated financial condition or future results of operations and the actual outcome of matters as to which forward-looking statements are made. The risk factors described in our 2019 Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us, or that we currently deem to be immaterial, also may materially adversely affect our business, consolidated financial condition and/or future results of operations.

The outbreak of the COVID-19 pandemic has caused a significant global economic downturn which has adversely affected, and is expected to continue to adversely affect, our business and results of operations, and the future impacts of the COVID-19 pandemic on the global economy and our business, results of operations and financial condition remain uncertain.


~~ITEM 2.~~	~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

Health epidemics or pandemics (or expectations about them) such as COVID-19, have destabilized financial markets in which we operate. COVID-19, which has been identified as a pandemic by the World Health Organization, is causing worldwide concern and economic disruption. The ongoing COVID-19 global and national health emergency has caused and will likely continue to cause significant disruption in the international and United States economies and financial markets, including the capital markets, as well as locally in our markets. There are cases of COVID-19 in all of our states in which we have branches. The ultimate extent of the impact on our business, financial condition, liquidity, results of operations and prospects will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the pandemic, and actions taken to contain or prevent further spread. These and other potential impacts of epidemics, pandemics or other outbreaks of an illness, disease or virus could therefore materially and adversely affect our business, revenue, operations, financial condition, liquidity, results of operations and prospects. If the response to contain COVID-19 is unsuccessful, material adverse effects may be exacerbated.

COVID-19 and its associated impacts on economic activities have had, are currently having and may for some time continue to have a destabilizing effect on financial markets and economic activity and have coincided with heightened volatility and significant disruption in financial markets and economy in the United States and worldwide, which could have a material adverse effect on our business, cash flows, business and consumer confidence, consolidated financial condition, results of operations, profitability, and growth asset quality. The full extent of the impact of COVID-19 is currently uncertain, cannot be predicted and will depend on certain developments, including, among others, governmental, regulatory and private sector actions and responses. Market interest rates have declined significantly. We expect that these reductions in interest rates, especially if prolonged, could adversely affect our net interest income, margins and our profitability. Our assets and liabilities may be significantly impacted by changes in interest rates.

Our business is dependent upon the willingness and ability of our customers to conduct banking and other financial transactions. The spread of COVID-19 could disrupt the business, activities, and operations of our customers, cause a decline in demand for our products and services, including loans and deposits which may result in a significant decrease in business and would negatively impact our liquidity position, our growth strategy and our ability to make payments under our debt obligations as they become due. Our financial results could also be impacted due to an inability of our customers to meet their loan commitments because of their losses associated with impacts of the disease, and could also result in increased risk of delinquencies, defaults, foreclosures, declining collateral values and the ability of our borrowers to repay their loans resulting in losses to our Bank. Moreover, current and future governmental action may temporarily require the Company to conduct business related to foreclosures, repossessions, payments, deferrals and other customer-related transactions differently.

Although the Company has established a pandemic response plan and procedures, our workforce has been, is, and may continue to be impacted by COVID-19. We are taking precautions to protect the safety and well-being of our employees and customers, including temporary branch and office closures, but no assurance can be given that our actions will be adequate or appropriate, nor can we predict the level of disruption which will occur to our employees’ ability to provide customer support and service. The spread could also negatively impact availability of key personnel and employee productivity, as well as the business and operations of third-party service providers who perform critical services for us, which could adversely impact our ability to deliver products and services to our customers.

70-

Federal and state governments have enacted laws intending to stimulate the economy. President Trump has signed into law three economic stimulus packages, including the $2.0 trillion Coronavirus Relief and Economic Security Act on March 26, 2020, which, among other things, initiated the Small Business Administration PPP. On April 16, 2020 the original $349.0 billion of funding under the PPP ran out, however on April 24, 2020 the Federal Government added an additional $310.0 billion. Our Bank participated as a lender in both the initial and second rounds of the PPP which was designed to help small businesses maintain their workforce during the COVID-19 pandemic. As of April 24, 2020, we have made approximately 2,300 PPP loans totaling over $600.0 million. The Company understands that these loans are fully guaranteed by the U.S. government and believes the majority of these loans will be forgiven. However, in the event of a loss resulting from a default on a PPP loan and a determination by the SBA that there was a deficiency in the manner in which the PPP loan was originated, funded or serviced by the Bank, which may or may not be related to an ambiguity in the laws, rules or guidance regarding operation of the PPP, the SBA may deny its liability under the guaranty, reduce the amount of the guaranty, or, if it has already been paid under the guaranty, seek recovery of any loss related to the deficiency from the Company. In addition, there can be no assurance that the borrowers will use the funds appropriately to qualify for forgiveness.

Since the opening of the PPP, several other larger banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP. The Company and the Bank may be exposed to the risk of similar litigation, from both customers and non-customers that approached the Bank regarding PPP loans, regarding its processes and procedures used in processing applications for the PPP. If any such litigation is filed against the Bank and is not resolved in a manner favorable to the Bank, it may result in significant financial liability or adversely affect the Company's reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation could have a material adverse impact on our business, financial condition and results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Equity Securities

None.

Purchases of Equity Securities

~~We did not~~On September 1, 2019, our Board of Directors approved an amendment to our stock repurchase ~~any~~program originally approved on October 26, 2016, wherein we may repurchase up to $100.0 million of our common ~~stock~~stock. Pursuant to the amendment, we may repurchase up to an additional $75.0 million of our common stock. The plan does not have an expiration date. In early March 2020, the Company determined to indefinitely suspend additional buybacks within its remaining authorization to support the Federal Reserve Board in actions taken to moderate the impact of COVID-19 by maintaining strong capital levels and liquidity to support customers and other stakeholders. Information on the shares purchased during the second quarter of fiscal year ~~2019.~~2020 is as follows.


Period	Total number of shares (or units) purchased (a)	Average price paid per share (or unit) (b)		Total number of shares (or units) purchased as part of publicly announced plans or programs (c)	Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs (d)
1/1/2020 - 1/31/2020	298,400	$	30.46	298,400	$	66,030,076
2/1/2020 - 2/29/2020	830,387	30.07		830,387	41,422,294
3/1/2020 - 3/31/2020	242,283	26.07		242,283	35,089,719
Total	1,371,070	$	29.45	1,371,070	$	35,089,719

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

71-

ITEM 6. EXHIBITS


~~ITEM 3.~~Exhibit Number			~~DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~


~~ITEM 4.~~	~~MINE SAFETY DISCLOSURES~~

~~Not applicable.~~


~~ITEM 5.~~	~~OTHER INFORMATION~~

~~Not applicable.~~


~~ITEM 6.~~	~~EXHIBITS~~

Description

10.1 *	Employment Agreement, dated February 6, 2020, between Great Western Bancorp, Inc. and Mark Borrecco (incorporated by reference to Exhibit ~~Number~~	~~Description~~10.1 to the Current Report on Form 8-K filed by Great Western Bancorp, Inc. on February 11, 2020 (File No. 001-36688))

~~11.1~~ 10.2 *	Employment Agreement, dated April 20, 2020, between Great Western Bancorp, Inc. and Stephen W. Yose (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by Great Western Bancorp, Inc. on April 22, 2020 (File No. 001-36688))

11.1	Statement regarding Computation of Per Share Earnings (included as Note 1718 to the registrant's unaudited consolidated financial statements)

31.1**	Rule 13a-14(a) Certification of Chief Executive Officer of Great Western Bancorp, Inc. in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

31.2**	Rule 13a-14(a) Certification of Chief Financial Officer of Great Western Bancorp, Inc. in accordance with Section 302 of the Sarbanes-Oxley Act of 2002

32.1**	Section 1350 Certification of Chief Executive Officer of Great Western Bancorp, Inc. in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

32.2**	Section 1350 Certification of Chief Financial Officer of Great Western Bancorp, Inc. in accordance with Section 906 of the Sarbanes-Oxley Act of 2002

101.INS***	XBRL Instance Document

101.SCH***	XBRL Taxonomy Extension Schema Document

~~101.CAL~~101.CAL***	XBRL Taxonomy Extension Calculation Linkbase Document

~~101.DEF~~101.DEF***	XBRL Taxonomy Extension Definition Linkbase Document

~~101.LAB~~101.LAB***	XBRL Taxonomy Extension Label Linkbase Document

~~101.PRE~~101.PRE***	XBRL Taxonomy Extension Presentation Linkbase Document

* Indicates management contract or compensatory plan
** Filed herewith
*** Furnished, not filed

~~64-~~

72-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	Great Western Bancorp, Inc.
Date: ~~May 7, 2019~~April 30, 2020		By:	/s/ Peter Chapman
		Name:	Peter Chapman
		Title:	Chief Financial Officer and Executive Vice President (Principal Financial Officer and Authorized Officer)

~~65-~~

73-



EXPLANATORY NOTE
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			3538
Item 3. Quantitative and Qualitative Disclosures About Market Risk			6268
Item 4. Controls and Procedures			6369
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			6369
Item 1A. Risk Factors			6470
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			6471
Item 3. Defaults Upon Senior Securities			6471
Item 4. Mine Safety Disclosures			6471
Item 5. Other Information			6471
Item 6. Exhibits			6472
SIGNATURES			6573



Three Months Ended March 31, 2018	Commercial Real Estate			Agriculture			Commercial Non-Real Estate			Residential Real Estate			Consumer			Other			Total
	(dollars in thousands)
Beginning balance January 1, 2018	$	15,995		$	24,750		$	16,434		$	5,475		$	307		$	1,062		$	64,023
Charge-offs	(1,268		)	(783		)	(1,605		)	(20		)	(62		)	(557		)	(4,295		)
Recoveries	61			125			88			27			20			190			511
Provision	4,077			152			813			(341		)	14			281			4,996
Impairment (improvement) of ASC 310-30 loans	49			(115		)	—			(30		)	—			—			(96		)
Ending balance March 31, 2018	$	18,914		$	24,129		$	15,730		$	5,111		$	279		$	976		$	65,139



Six Months Ended March 31, 2018	Commercial Real Estate			Agriculture			Commercial Non-Real Estate			Residential Real Estate			Consumer			Other			Total
	(dollars in thousands)
Beginning balance January 1, 2018	$	16,941		$	25,757		$	14,114		$	5,347		$	329		$	1,015		$	63,503
Charge-offs	(1,597		)	(2,981		)	(2,844		)	(275		)	(116		)	(1,091		)	(8,904		)
Recoveries	209			172			209			117			42			334			1,083
Provision	3,322			1,296			4,251			(11		)	24			718			9,600
Impairment (improvement) of ASC 310-30 loans	39			(115		)	—			(67		)	—			—			(143		)
Ending balance March 31, 2018	$	18,914		$	24,129		$	15,730		$	5,111		$	279		$	976		$	65,139