**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

**(MarkOne)**

 
| **ý** | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**                                                                                                                                                                                                                                              |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       | **for the quarterly period ended September 30, 2003**                                                                                                                                                                                                                                                                                     |
|       |                                                                                                                                                                                                                                                                                                                                      |
| **o**      | **TRANSITION REPORT UNDER SECTION 13  OR 15(D) OF THE EXCHANGE ACT**                                                                                                                                                                                                                                                                      |
|       | **For the transition period from                            to                         ** |

 

**Commission File Number: 001-15215**

 

| **GREAT WESTERN BANCORPORATION, INC.**                              |
|---------------------------------------------------------------------|
| (Exact name of registrant as specified in its charter)              |
|                                                                |
| **Iowa**                                                            |   | **42-0867112** |
| (State or other jurisdiction  of incorporation or organization)     |   | (I.R.S. Employer  Identification No.) |
|                                                                |
| **10834 Old Mill Road, Suite One, Omaha, NE  68154**                |
| (Address of principal executive office)   (Zip code) |
|                                                                |
| **(402) 333-8330**                                                  |
| (Registrant’s telephone number, including area code)           |

 

Indicate bycheck mark whether the registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepast 12 months (or for such shorter period that the registrant was required tofile such reports), and (2) has been subject to such filing requirements forpast 90 days. Yes ýNo o

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined in Rule12b-2 of the Act).  Yes oNo ý

 

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practical date.

 
| **Class**                     |   | **Outstanding at November 10, 2003** |
|-------------------------------|--------|--------------------------------------|
|                          |   |                                 |
| Common Stock, $1.00 par value |   | 124,952 shares                       |

 

 

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GREAT WESTERN BANCORPORATION, INC.INDEX TO FORM 10-Q FOR THE QUARTERLYPERIOD ENDED SEPTEMBER 30, 2003

 
| **FORWARD-LOOKING STATEMENTS** |
|--------------------------------|
|                           |
| **PART I:**                    | **FINANCIAL INFORMATION** |
|                           |
|                           | ITEM 1: | FINANCIAL STATEMENTS |
|                           |
|                           | Consolidated Balance Sheets at September 30, 2003(unaudited) and June  30, 2003 |
|                           |
|                           | Consolidated Statements of Income - Three  months ended September 30, 2003 and September 30, 2002(unaudited) |
|                           |
|                           | Consolidated Statements of Cash Flows –  Three months ended September 30, 2003 and September 30, 2002 (unaudited) |
|                           |
|                           | Notes to Consolidated Financial Statements |
|                           |
|                           | ITEM 2: | MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|                           |
|                           | ITEM 3: | QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK |
|                           |
|                           | ITEM 4: | CONTROLS AND PROCEDURES |
|                           |
| **PART  II:**                  | **OTHER  INFORMATION** |
|                           |
|                           | ITEM 1: | LEGAL PROCEEDINGS |
|                           |
|                           | ITEM 2: | CHANGES IN SECURITIES AND USE OF PROCEEDS |
|                           |
|                           | ITEM 3: | DEFAULTS UPON SENIOR SECURITIES |
|                           |
|                           | ITEM 4: | SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS |
|                           |
|                           | ITEM 5: | OTHER INFORMATION |
|                           |
|                           | ITEM 6: | EXHIBITS AND REPORTS ON FORM 8-K |
|                           |
|                           | SIGNATURES |
|                           | CERTIFICATION  BY CHIEF EXECUTIVE OFFICER |
|                           | CERTIFICATION  BY CHIEF FINANCIAL OFFICER |
|                           | CERTIFICATION  BY CHIEF EXECUTIVE OFFICER |
|                           | CERTIFICATION  BY CHIEF FINANCIAL OFFICER |
|                                |  |  |  |

 

2

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**FORWARD-LOOKING STATEMENTS**

 

This report includes certain forward-lookingstatements within the meaning of the Private Securities Litigation Reform Actof 1995. Such statements can include words such as “may”, “believe”, “will”,“anticipated”, “estimated”, “projected”, “could”, “should”, “plan” or similar expressions.  Forward-looking statements are based onmanagement’s current expectations. Factors that might cause future results to differ from management’sexpectations include, but are not limited to: fluctuations in interest rates,inflation, the effect of regulatory or government legislative changes, expectedcost savings and revenue growth not fully realized, the progress of strategicinitiatives and whether realized within expected time frames, general economicconditions, adequacy of allowance for loan losses, costs or difficultiesassociated with restructuring initiatives, changes in accounting policies orguidelines, changes in the quality or composition of Great Western’s loans andinvestment portfolios, technology changes and competitive pressures in thegeographic and business areas where the Great Western conducts its operations.

 

These risks and uncertainties should beconsidered in evaluating forward-looking statements and undue reliance shouldnot be placed on such statements. Additional information concerning Great Western and its business,including other factors that could materially affect the Great Western’s financialresults, is included in Great Western’s filings with the Securities andExchange Commission.

 

3

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**PART I****FINANCIAL INFORMATION**

 
| **ITEM 1:** | **FINANCIAL STATEMENTS** |
|-------------|--------------------------|

 

**GREAT WESTERNBANCORPORATION, INC.****ConsolidatedBalance Sheets**(In thousands, except share data)

 
|                                                                                                                                                                                                                                            |   | **September  30,  2003** |      | **June 30,  2003** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|-----------|--------------------|--------|
|                                                                                                                                                                                                                                            |   | **(unaudited)**          |      |               |   |
| **Assets**                                                                                                                                                                                                                                      |   |                     |      |               |   |
| Cash and due from banks                                                                                                                                                                                                                         |   | $                        | 56,015    |               | $      | 64,637 |   |
| Federal funds sold and FHLB overnight  deposits                                                                                                                                                                                                 |   | 15,090                   |      | 42,522             |   |
| Cash and cash equivalents                                                                                                                                                                                                                       |   | 71,105                   |      | 107,159            |   |
|                                                                                                                                                                                                                                            |   |                     |      |               |   |
| Certificate of deposit                                                                                                                                                                                                                          |   | 99                       |      | 99                 |   |
| Securities available for sale                                                                                                                                                                                                                   |   | 323,529                  |      | 313,136            |   |
| Loans, net of allowance for loan losses of  $21,784****and $21,251                                                                                                                                                                              |   | 1,631,783                |      | 1,599,961          |   |
| Premises and equipment                                                                                                                                                                                                                          |   | 44,628                   |      | 43,675             |   |
| Accrued interest receivable                                                                                                                                                                                                                     |   | 15,339                   |      | 13,679             |   |
| Core deposit and other intangibles                                                                                                                                                                                                              |   | 2,941                    |      | 3,371              |   |
| Goodwill                                                                                                                                                                                                                                        |   | 45,930                   |      | 45,930             |   |
| Mortgage servicing rights                                                                                                                                                                                                                       |   | 6,582                    |      | 5,274              |   |
| Other assets                                                                                                                                                                                                                                    |   | 17,739                   |      | 15,785             |   |
| Total assets                                                                                                                                                                                                                                    |   | $                        | 2,159,675 |               | $      | 2,148,069 |   |
|                                                                                                                                                                                                                                            |   |                     |      |               |   |
| **Liabilities and Stockholders’ Equity**                                                                                                                                                                                                   |   |                     |      |               |   |
| **Liabilities**                                                                                                                                                                                                                                 |   |                     |      |               |   |
| Deposits                                                                                                                                                                                                                                        |   |                     |      |               |   |
| Noninterest bearing                                                                                                                                                                                                                             |   | $                        | 258,032   |               | $      | 262,161 |   |
| Interest bearing                                                                                                                                                                                                                                |   | 1,463,753                |      | 1,472,869          |   |
| Total deposits                                                                                                                                                                                                                                  |   | 1,721,785                |      | 1,735,030          |   |
| Federal funds purchased and securities sold  under agreements to repurchase                                                                                                                                                                     |   | 71,845                   |      | 60,163             |   |
| FHLB advances and other borrowings                                                                                                                                                                                                              |   | 111,616                  |      | 103,380            |   |
| Notes payable                                                                                                                                                                                                                                   |   | 43,700                   |      | 43,700             |   |
| Company obligated mandatorily redeemable  preferred securities of subsidiary trusts holding solely junior subordinated  debentures                                                                                                              |   | 58,000                   |      | 58,000             |   |
| Accrued interest and other liabilities                                                                                                                                                                                                          |   | 20,666                   |      | 17,558             |   |
| Total liabilities                                                                                                                                                                                                                               |   | 2,027,612                |      | 2,017,831          |   |
|                                                                                                                                                                                                                                            |   |                     |      |               |   |
| Minority interest in subsidiaries                                                                                                                                                                                                               |   | 3,908                    |      | 3,864              |   |
|                                                                                                                                                                                                                                            |   |                     |      |               |   |
| **Stockholders’ equity**                                                                                                                                                                                                                   |   |                     |      |               |   |
| Preferred stock, $100 par value; 500,000  shares authorized; issued and outstanding:   9,000 shares of 8% cumulative, nonvoting; 8,000 shares of 10%  noncumulative, nonvoting; 100,000 shares of variable rate, noncumulative,  nonvoting |   | 11,700                   |      | 11,700             |   |
| Common stock, $1.00 par value, authorized  1,000,000 shares, issued and outstanding 124,952 shares                                                                                                                                              |   | 125                      |      | 125                |   |
| Additional paid-in capital                                                                                                                                                                                                                      |   | 2,051                    |      | 2,051              |   |
| Retained earnings                                                                                                                                                                                                                               |   | 112,743                  |      | 106,433            |   |
| Accumulated other comprehensive income                                                                                                                                                                                                          |   | 1,536                    |      | 6,065              |   |
| Total stockholders’ equity                                                                                                                                                                                                                 |   | 128,155                  |      | 126,374            |   |
|                                                                                                                                                                                                                                            |   |                     |      |               |   |
| Total liabilities and stockholders’ equity                                                                                                                                                                                                 |   | $                        | 2,159,675 |               | $      | 2,148,069 |   |

 

See Notes to Consolidated Financial Statements.

 

4

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**GREAT WESTERNBANCORPORATION, INC.****ConsolidatedStatements of Income****For The Three Months Ended**(In thousands, except share and per share data)(unaudited)

 
|                                                                          |   | **September  30,  2003** |   | **September  30,  2002** |   |
|-------------------------------------------------------------------------------|--------|--------------------------|--------|--------------------------|--------|
| **Interest and Dividend Income**                                              |   |                     |   |                     |   |
| Loans                                                                         |   | $                        | 27,190 |                     | $      | 28,189 |   |
| Taxable securities                                                            |   | 2,440                    |   | 3,731                    |   |
| Nontaxable securities                                                         |   | 442                      |   | 422                      |   |
| Dividends on securities                                                       |   | 63                       |   | 61                       |   |
| Federal funds sold and other                                                  |   | 110                      |   | 156                      |   |
| Total interest and dividend income                                            |   | 30,245                   |   | 32,559                   |   |
|                                                                          |   |                     |   |                     |   |
| **Interest Expense**                                                          |   |                     |   |                     |   |
| Deposits                                                                      |   | 7,643                    |   | 10,158                   |   |
| Federal funds purchased and securities sold  under agreements to repurchase   |   | 177                      |   | 254                      |   |
| FHLB advances and other borrowings                                            |   | 1,022                    |   | 1,073                    |   |
| Notes payable                                                                 |   | 521                      |   | 628                      |   |
| Company obligated mandatorily redeemable  preferred securities                |   | 1,301                    |   | 1,183                    |   |
| Total interest expense                                                        |   | 10,664                   |   | 13,296                   |   |
|                                                                          |   |                     |   |                     |   |
| **Net Interest Income**                                                       |   | 19,581                   |   | 19,263                   |   |
| **Provision for Loan Losses**                                                 |   | 955                      |   | 1,241                    |   |
| **Net Interest Income After Provision for  Loan Losses**                      |   | 18,626                   |   | 18,022                   |   |
|                                                                          |   |                     |   |                     |   |
| **Noninterest Income**                                                        |   |                     |   |                     |   |
| Service charges and other fees                                                |   | 3,493                    |   | 3,212                    |   |
| Net gains from sale of loans                                                  |   | 2,592                    |   | 1,345                    |   |
| Loan servicing fees                                                           |   | 744                      |   | 916                      |   |
| Gain on securities, net                                                       |   | 1,067                    |   | 84                       |   |
| Trust department income                                                       |   | 468                      |   | 412                      |   |
| Other                                                                         |   | 948                      |   | 784                      |   |
| Total noninterest income                                                      |   | 9,312                    |   | 6,753                    |   |
|                                                                          |   |                     |   |                     |   |
| **Noninterest Expense**                                                       |   |                     |   |                     |   |
| Salaries and employee benefits                                                |   | 8,851                    |   | 7,627                    |   |
| Occupancy expenses                                                            |   | 1,083                    |   | 1,059                    |   |
| Data processing                                                               |   | 771                      |   | 767                      |   |
| Equipment expenses                                                            |   | 776                      |   | 694                      |   |
| Advertising                                                                   |   | 1,117                    |   | 909                      |   |
| Professional fees                                                             |   | 900                      |   | 758                      |   |
| Communication expenses                                                        |   | 549                      |   | 482                      |   |
| Amortization of core deposits and other  intangibles                          |   | 370                      |   | 475                      |   |
| Amortization and valuation adjustments of  mortgage servicing rights acquired |   | 717                      |   | 4,403                    |   |
| Other                                                                         |   | 1,819                    |   | 1,845                    |   |
| Total noninterest expense                                                     |   | 16,953                   |   | 19,019                   |   |
|                                                                          |   |                     |   |                     |   |
| **Income Before Income Taxes and Minority  Interest**                         |   | 10,985                   |   | 5,756                    |   |
| **Provision for Income Taxes**                                                |   | 4,025                    |   | 2,242                    |   |
|                                                                          |   |                     |   |                     |   |
| **Income Before Minority Interest**                                           |   | 6,960                    |   | 3,514                    |   |
| **Minority Interest in Net Income of  Subsidiaries**                          |   | 144                      |   | 196                      |   |
|                                                                          |   |                     |   |                     |   |
| **Net Income**                                                                |   | $                        | 6,816  |                     | $      | 3,318 |   |
|                                                                          |   |                     |   |                     |   |
| **Basic Earnings Per Common Share**                                           |   | $                        | 52.15  |                     | $      | 23.93 |   |
|                                                                          |   |                     |   |                     |   |
| **Cash Dividends Per Share Declared on Common  Stock**                        |   | $                        | 1.65   |                     | $      | 1.50 |   |
|                                                                          |   |                     |   |                     |   |
| **Weighted Average Shares Outstanding**                                       |   | 124,952                  |   | 125,132                  |   |

 

See Notes to Consolidated Financial Statements.

 

5

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**GREAT WESTERNBANCORPORATION, INC.****ConsolidatedStatements of Cash Flows****For The Three Months Ended**(In thousands)(unaudited)

 
|                                                                                                   |   | **September  30,  2003** |       | **September  30,  2002** |       |
|--------------------------------------------------------------------------------------------------------|--------|--------------------------|------------|--------------------------|------------|
| **Cash Flow from Operating Activities**                                                                |   |                     | ** ** |                     | ** ** |
| Net cash used in operating activities                                                                  |   | $                        | (670       | )                        | $          | (3,408 | ) |
|                                                                                                   |   |                     |       |                     |       |
| **Cash Flow from Investing Activities**                                                                |   |                     |       |                     |       |
| Proceeds from sales and maturities of  securities available for sale                                   |   | 38,466                   |       | 46,969                   |       |
| Purchase of securities available for sale                                                              |   | (55,151                  | )          | (12,057                  | )          |
| Proceeds from sale of other real estate  owned                                                         |   | 1,982                    |       | 1,030                    |       |
| Net increase in loans                                                                                  |   | (22,808                  | )          | (37,685                  | )          |
| Proceeds from sale of premises and  equipment                                                          |   | 62                       |       | 50                       |       |
| Purchase of premises and equipment                                                                     |   | (1,963                   | )          | (875                     | )          |
| Purchase of mortgage servicing rights                                                                  |   | (973                     | )          | (42                      | )          |
| Net cash used in investing activities                                                                  |   | (40,385                  | )          | (2,610                   | )          |
|                                                                                                   |   |                     |       |                     |       |
| **Cash Flows from Financing Activities**                                                               |   |                     |       |                     |       |
| Net increase (decrease) in deposits                                                                    |   | (13,245                  | )          | 28,848                   |       |
| Net increase (decrease) in federal funds  purchased and securities sold under agreements to repurchase |   | 23,282                   |       | (13,835                  | )          |
| Proceeds from notes payable                                                                            |   | 3,370                    |       | 22,501                   |       |
| Payment of other liabilities                                                                           |   | (1,125                   | )          | (837                     | )          |
| Principal payments on notes payable                                                                    |   | (6,734                   | )          | (1,841                   | )          |
| Purchase of minority interest in  subsidiaries                                                         |   | 0                        |       | (673                     | )          |
| Dividends paid, including $44 and $69 paid  to minority interest, respectively                         |   | (547                     | )          | (580                     | )          |
| Net cash provided by financing activities                                                              |   | 5,001                    |       | 33,583                   |       |
| Net Increase (Decrease) in Cash and Cash  Equivalents                                                  |   | (36,054                  | )          | 27,565                   |       |
|                                                                                                   |   |                     |       |                     |       |
| **Cash and Cash Equivalents**                                                                          |   |                     |       |                     |       |
| Beginning                                                                                              |   | 107,159                  |       | 69,278                   |       |
| Ending                                                                                                 |   | $                        | 71,105     |                     | $          | 96,843 |   |
|                                                                                                   |   |                     |       |                     |       |
| **Supplemental Disclosures of Cash Flow  Information**                                                 |   |                     |       |                     |       |
| Cash payments for interest                                                                             |   | $                        | 11,379     |                     | $          | 14,434 |   |
| Cash payments for income taxes                                                                         |   | 1,065                    |       | 1,641                    |       |
|                                                                                                   |   |                     |       |                     |       |
| **Supplemental Schedules of Noncash Investing  and Financing Activities**                              |   |                     |       |                     |       |
| Net change in unrealized gain (loss) on  securities available for sale, net of deferred income taxes   |   | (4,529                   | )          | 1,938                    |       |
| Purchase of mortgage servicing rights for  other liabilities                                           |   | 1,053                    |       | 1,750                    |       |
| Loans transferred to  other real estate owned and other assets                                         |   | 435                      |       | 368                      |       |

 

See Notes to Consolidated Financial Statements.

 

6

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**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

1.                                       Basisof Presentation.

 

Theconsolidated financial statements include the accounts of Great Western and itssubsidiaries.  All material intercompanyaccounts and transactions with subsidiaries are eliminated in consolidation.

 

Theconsolidated subsidiaries are as follows: Great Western Bank (100.0% owned),which is chartered in Omaha, Nebraska; Great Western Bank, (96.1% owned), whichis chartered in Watertown, South Dakota; Great Western Bank, (100.0% owned),which is chartered in Clive, Iowa; Great Western Service Corporation, (100.0%owned by bank subsidiaries, excluding Great Western Bank, Omaha), a dataprocessing organization; GWB Capital Trust I (100.0% owned); GWB Capital TrustII (100.0% owned) and GWB Capital Trust III (100.0% owned). Great Western Bank,Omaha also owns 100.0% of GWB Leasing, Inc., a leasing company.

 

The June 30,2003 consolidated balance sheet has been derived from Great Western’s auditedbalance sheet as of that date. The consolidated financial statements as ofSeptember 30, 2003 and for the three months ended September 30, 2003 and 2002are unaudited but include all adjustments (consisting only of normal recurringadjustments), which Great Western considers necessary for a fair presentationof financial position and results of its operation and its cash flows for thoseperiods. Certain information and note disclosures normally included in GreatWestern’s annual financial statements prepared in accordance with generallyaccepted accounting principles have been condensed or omitted.  These consolidated financial statementsshould be read in conjunction with the consolidated financial statements andnotes thereto included in Great Western’s Form 10-K annual report for 2003filed with the Securities and Exchange Commission.  Results for the three months ended September 30, 2003 are notnecessarily indicative of the results to be expected for future periods.

 

2.                                       EarningsPer Common Share.

 

Earnings pershare have been computed on the basis of weighted average number of commonshares outstanding during each period presented. Dividends accumulated ordeclared on cumulative and noncumulative preferred stock, which totaled$300,000 and $323,000 in the three months ended September 30, 2003 and 2002respectively, reduced earnings available to common stockholders in thecomputation.

 

3.                                       ComprehensiveIncome.

 

Comprehensiveincome was $2,287,000****and$5,256,000 for the three months ended September 30, 2003 and September 30, 2002respectively. The difference between comprehensive income and net incomepresented in the Consolidated Statements of Income is attributed solely tochange in unrealized gains and losses on securities available for sale duringthe periods presented.

 

4.                                       IntangibleAssets.

 

On October 1,2002, Great Western elected adoption of Statement of Financial AccountingStandards No. 147,  “Acquisitions ofCertain Financial Institutions.”  ThisStatement addresses the financial accounting and reporting for the acquisitionof all or part of a financial institution, except for a transaction between twoor more mutual enterprises.  ThisStatement removes acquisitions of financial institutions, other thantransactions between two or more mutual enterprises, from the scope of FASBStatement No. 72, “Accounting for Certain Acquisitions of Banking or ThriftInstitutions”, and FASB Interpretation No. 9, “Applying APB Opinions No. 16 and17 When a Savings and Loan Association or a Similar Institution Is Acquired ina Business Combination Accounted for by the Purchase Method.”  Transaction provisions for previously recognizedunidentifiable intangible assets are effective on October 1, 2002, with earlierapplication permitted.  The carryingamount of an unidentifiable intangible asset shall continue to be amortized asset forth in paragraph 5 of Statement 72 after October 1, 2002, unless thetransaction in which the asset arose was a business combination.  If the transaction that gave rise to theunidentifiable intangible asset was a business combination, the carrying amountof the asset shall be reclassified to goodwill as of the later of the date ofacquisition or the date Statement 142 was applied in its entirety.

 

7

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Great Westernhas identified those unidentifiable intangible assets that arose from abusiness combination.  In applying SFAS147, Great Western has reclassified the carrying amount of unidentifiableintangible assets of $4,598,000 to goodwill as of July 1, 2002.  As of September 30, 2003, total goodwill(including reclassified unidentifiable intangible assets of $4,598,000) was$45,930,000 and core deposit intangible and other was $2,941,000.

 

5.                                       LegalProceedings.

 

Great Westernand its subsidiary banks are from time to time parties to various legal actionsarising in the normal course of business. Management believes there is noproceeding threatened or pending against Great Western or its subsidiaries,which, if determined adversely, would have a material adverse effect on itsfinancial condition or results of operation.

 

6.                                       SubsequentEvents.

 

On October 30,2003, Great Western Bank, Clive entered into a contract to acquire fivebranches located in Bethany, Grant City, Milan, Sheridan, and Unionville,Missouri from a national bank headquartered in Missouri.  Approximately $22,000,000 in loans,$1,000,000 of fixed assets, and $98,000,000 in deposits will be acquired.  Expected intangible assets of $6,100,000will be recorded by Great Western Bank, Clive. The five branches are located in or near the geographic operating marketof Great Western Bank, Clive.  Subjectto regulatory approval, Great Western expects the purchase to close in thequarter ending March 31, 2004.

 

7.                                       RecentAccounting Pronouncements.

 

Effective January 1, 2003, the initialrecognition and measurement provisions of FASB Interpretation No. 45“Guarantor’s Accounting and Disclosure Requirements for Guarantees, IncludingGuarantees of Indebtedness of Others” applied to Great Western.  This Interpretation elaborates on thedisclosures to be made by a guarantor about its obligations under certainguarantees issued.  It also clarifiesthat a guarantor is required to recognize, at the inception of a guarantee, aliability for the fair value of the obligation undertaken in issuing theguarantee.  The Interpretation alsoidentifies several situations where the recognition of a liability at inceptionfor a guarantor’s obligation is not required. The Interpretation expands on the accounting guidance of SFAS No. 5“Accounting for Contingencies,” SFAS No. 57 “Related Party Disclosures” andSFAS No. 107 “Disclosures about Indirect Guarantees of Indebtedness of Others,”which it supersedes.  The adoption ofthis Interpretation did not have a material effect on Great Western’s financialposition, liquidity or results of operations.

 

In January 2003, the FASB issuedInterpretation No. 46 “Consolidation of Variable Interest Entities.”  This Interpretation was issued in an effortto expand upon and strengthen existing accounting guidance that addresses whena company should include in its financial statements the assets, liabilitiesand activities of another entity.  Ingeneral, a variable interest entity is a corporation, partnership, trust, orany other legal structure used for business purposes that either (i) does nothave equity investors with voting rights or (ii) has equity investors that donot provide sufficient financial resources for the entity to support itsactivities.  A variable interest entityoften holds financial assets, including loans or receivables, real estate orother property.  To further assistfinancial statement users in assessing a company’s risks, the Interpretationalso requires disclosures about variable interest entities that the company isnot required to consolidate but in which it has a significant variableinterest.  The consolidated requirementsof Interpretation No. 46 apply immediately to interest entities created after January 31, 2003.  The consolidation requirements apply toolder entities in the first fiscal year or interim period regardless of whenthe variable interest entity was established. On October 9, 2003, the FASB deferred the implementation date ofInterpretation No. 46 to the first period ending after December 15, 2003.  Management does not believe that thisInterpretation will have a material effect on Great Western’s financialposition, liquidity or results of operations; however, management continues toreview guidance from the FASB and Federal Reserve.

 

In May 2003, FASB issued Statement ofFinancial Accounting Standards No. 150, “Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity”.  This Statement establishes standards for howan issuer classifies and measures certain financial instruments withcharacteristics of both liabilities and equity.

 

8

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It requires that an issuer classify a financial instrument that iswithin its scope as a liability (or an asset in some circumstances). ThisStatement is effective for financial instruments entered into or modified afterMay 31, 2003, and otherwise is effective at the beginning of the first interimperiod beginning after June 15, 2003, except for mandatorily redeemablefinancial instruments of nonpublic entities. The adoption of the above pronouncement did not have a material effecton Great Western’s financial position, liquidity or results of operations.

 
| **ITEM 2:** | **MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL****CONDITION AND RESULTS OF OPERATIONS** |
|-------------|----------------------------------------------------------------------------------------------------|

 

**GENERAL**

 

Great Westernis a multi-bank holding company organized under the laws of Iowa whose primarybusiness is providing trust, commercial, consumer, and mortgage bankingservices through its Nebraska, South Dakota and Iowa based subsidiarybanks.  Substantially all of GreatWestern’s income is generated from banking operations.

 

GreatWestern’s fiscal year end is June 30.

 

**CRITICALACCOUNTING POLICIES**

 

GreatWestern’s critical accounting policies involving the more significant judgmentsand assumptions used in the preparation of the consolidated financialstatements as of September 30, 2003, have remained unchanged from June 30,2003.  These policies involve theprovision and allowance for loan losses, and valuation of mortgage servicingrights and intangibles.  Disclosure ofthese critical accounting policies is incorporated by reference under Item 7,“Management’s Discussion and Analysis of Financial Condition and Results ofOperation” in Great Western’s Annual report on Form 10-K for Great Western’sfiscal year ended June 30, 2003.

 

 

**FINANCIALCONDITION, LIQUIDITY AND CAPITAL RESOURCES**

 

Average assetswere $2,177,358,000 for the three months ended September 30, 2003, compared to$2,042,608,000 for the three months ended September 30, 2002, a 6.60% increase.Average interest-earning assets were $2,007,104,000 for the three months endedSeptember 30, 2003 and $1,871,561,000 for the three months ended September 30,2002, representing a 7.24% increase. Average assets and average interest-earning assets increased due tointernal growth and acquisitions.

 

Total assetswere $2,159,675,000 at September 30, 2003, an increase of $11,606,000 or 0.54%from June 30, 2003. The increase in total assets is due to a $31,822,000 or1.99% increase in loans, net of unearned fees, and an increase of $10,393,000or 3.31% in securities available for sale; offset by a decrease of $27,432,000or 64.51% in federal funds sold.

 

Loans, netunearned fees, grew $31,822,000 or 1.99% during the three months endedSeptember 30, 2003 due to internal growth.

 

Loansoriginated for resale were $162,998,000 for the three months ended September30, 2003; an increase of  $96,376,000when compared to $66,622,000 for the three months ended September 30, 2002. Theincrease in loans originated for resale is due to the decline in mortgagerates.

 

Securitiesavailable for sale were $323,529,000 at September 30, 2003, an increase of$10,393,000 or 3.31% from June 30, 2003. The increase in securities availablefor sale is a result of investing the proceeds from federal funds sold in USTreasury and US Government Agency securities.

 

Mortgageservicing rights, net, were $6,582,000 at September 30, 2003, an increase of$1,308,000 or 24.80%, from June 30, 2003. Mortgage servicing rights increased due to purchases of $2,025,000 anddecreased by $717,000 due to amortization expense, net of valuationadjustments.  See “Noninterest Expense”.

 

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The allowancefor loan losses increased to $21,784,000 at September 30, 2003 from $21,251,000at June 30, 2003. The allowance represented 1.32% and 1.31% of loans, netunearned fees as of September 30, 2003 and June 30, 2003.  The increase in allowance for loan losseswas due to a greater increase in loan loss provisions when compared to netcharge-offs during the period.  See“Provision for Loan Losses”.

 

For the threemonths ended September 30, 2003, Great Western’s annualized return on averageassets (“ROA”) was 1.25%, compared to 0.65% for the three months endedSeptember 30, 2002. Return on average stockholders’ equity (“ROE”) for thethree months ended September 30, 2003 and 2002 was 21.42% and 11.79%,respectively.  The increases in ROA andROE are due to a 105.42% increase in net income for the three months endingSeptember 30, 2003, when compared to the same period a year ago.

 

Cash and cashequivalents, certificates of deposit, and securities available for sale totaled$394,733,000 or 18.28% of total assets at September 30, 2003, compared to$420,394,000 or 19.57% of total assets at June 30, 2003.  The decrease occurred primarily in federal fundssold.  Federal funds sold decreased$27,432,000, or 64.51%, due to a reduction of funds received from mortgageservicing loan payoffs as interest rates have increased and the investment ofthe proceeds from federal funds sold in US Treasury and US Government Agencysecurities.

 

At September30, 2003, Great Western’s leverage ratio was 5.84%, Tier 1 risk-based capitalratio was 7.25%, and total risk-based capital ratio was 11.54%, compared tominimum required levels of 4% for leverage and Tier 1 risk-based capital ratiosand 8% for total risk-based capital ratio, subject to change at the discretionof regulatory authorities to impose higher standards in individual cases. AtSeptember 30, 2003, Great Western had net risk-weighted assets of $1,709,553,000.

 

 

**RESULTS OF OPERATIONS**

 

# **Comparison of theThree Months Ended September 30, 2003 and September 30, 2002.**

 

Net Interest Income

 

Total interest and dividend income for thethree months ended September 30, 2003 was $30,245,000, a 7.11% decrease from$32,559,000 for the three months ended September 30, 2002. The slight decreaseis the result of lower interest rates earned on interest bearing assets duringthe current period when compared to the same period September 30, 2002, despitean overall growth in average interest earning assets of 7.24%.

 

Total interest expense for the three monthsended September 30, 2003 was $10,664,000, a 19.80% decrease from $13,296,000for the three months ended September 30, 2002. The decrease was the result oflower interest rates paid for interest bearing liabilities for the currentperiod when compared to the same period a year ago.

 

Average interest-bearing liabilities were$1,748,846,000 and $1,696,308,000 for the three month periods endedSeptember 30, 2003 and September 30, 2002 respectively.  Average interest-bearing liabilitiesincreased $55,538,000 or 3.10% between periods. This increase is primarily dueto acquisitions and an increase in average interest-bearing deposits.

 

Net interest income was $19,581,000 for thethree months ended September 30, 2003, compared to $19,263,000 for thesame period in 2002, an increase of 1.65%. Great Western’s net interestmargin decreased to 3.90% for the three months ended September 30, 2003 from

 

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4.09% for the three months ended September 30, 2002. The decrease inthe net interest margin was caused by the downward repricing ofinterest-earning assets and interest bearing liabilities for the three monthsended September 20, 2003 compared to September 30, 2002.

 

Provision for Loan Losses

 

The provision for loan losses for the threemonths ended September 30, 2003, was $955,000, compared to $1,241,000 for thethree months ended September 30, 2002. The decrease was due to a decline in estimated loan losses.

 

Noninterest Income

 

Noninterestincome for the three months ended September 30, 2003 was $9,312,000, anincrease of $2,559,000, or 37.89%, over the same period last fiscal year. Theincrease resulted primarily from a $281,000 increase in service charges andother fees, a $1,247,000 increase in net gains from the sale of loans and a$983,000 increase in net gains from the sale of securities.

 

NoninterestExpense

 

Noninterestexpense for the three months ended September 30, 2003 was $16,953,000, adecrease of $2,066,000 or 10.86% over the same period last fiscal year.  The decrease resulted primarily from a$3,686,000 decrease in amortization and valuation adjustment of mortgageservicing rights; offset by a $1,224,000 increase in salaries and employeebenefits.

 

The amortization and valuation adjustmentexpense of mortgage servicing rights decreased $3,686,000 to $717,000 for thethree months ended September 30, 2003 from $4,403,000 for the three monthsended September 30, 2002.  The decreasein the amortization and the valuation adjustment expense is a result of theimpact of the declining interest rates on the value of the mortgage servicingrights recognized during the three months ended September 30, 2002, compared tomore stable interest rates during the three months ended September 30, 2003,and the reduction of the net book value of the mortgage servicing rights atSeptember 30, 2003, from September 30, 2002.

 

A change in mortgage interest rates in futureperiods may result in further changes in prepayment rates and further changesin amortization expenses, the result of which will be estimated at the end ofeach quarter.

 

Income Taxes

 

Income taxes for the three months endedSeptember 30, 2003 and September 30, 2002 were $4,025,000 and $2,242,000respectively. The increase is due to a 90.87% or $5,229,000, increase in pretaxincome; offset by a decrease in the effective rate to 36.64% from 38.95% in theprevious period.  These effective taxrates are impacted by items of income and expense that are not subject tofederal or state taxation.

 

 
| **ITEM 3:** | **QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK** |
|-------------|-----------------------------------------------------------------|

 

Asset/liabilitymanagement refers to management’s efforts to minimize fluctuations in netinterest income caused by interest rate changes. This is accomplished bymanaging the repricing of interest rate sensitive interest-earning assets andinterest-bearing liabilities. Controlling the maturity or repricing of aninstitution’s liabilities and assets in order to minimize interest rate risk iscommonly referred to as gap management. Close matching of the repricing ofassets and liabilities will normally result in little change in net interestincome when interest rates change. A mismatched gap position will normallyresult in changes in net interest income as interest rates change.

 

Managementregularly monitors the interest sensitivity position and considers thisposition in its decisions with regard to Great Western’s interest rates andmaturities for interest-earning assets acquired and interest-bearingliabilities accepted.

 

There has notbeen a material change in the interest rate sensitivity of Great Western duringthe three months ended September 30, 2003.

 

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| **ITEM 4:** | **CONTROLS AND PROCEDURES** |
|-------------|-----------------------------|

 

GreatWestern’s principal executive officer and principal financial officer haveconcluded that Great Western’s disclosure controls and procedures as defined inExchange Act Rule 13a-14(c), based on their evaluation of such controls andprocedures conducted within 90 days prior to the date hereof, are effective toensure that information required to be disclosed by Great Western in thereports it files under the Securities Exchange Act of 1934, as amended, isrecorded, processed, summarized and reported within the time periods specifiedin the rules and forms of the Securities and Exchange Commission and that suchinformation is accumulated and communicated to Great Western’s management,including its principal executive officer and principal financial officer, asappropriate to allow timely decisions regarding required disclosure.

 

There havebeen no significant changes in Great Western’s internal controls or in otherfactors that could significantly affect these controls subsequent to the date ofthe evaluation referred to above.

 

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**PARTII****OTHER INFORMATION**

 

ITEM 1:                             LEGALPROCEEDINGS

None

 

ITEM 2:                             CHANGES IN SECURITIES ANDUSE OF PROCEEDS

None

 

ITEM 3:                             DEFAULTS UPON SENIORSECURITIES

None

 

ITEM 4:                             SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS

None

 

ITEM 5:                             OTHERINFORMATION

None

 

ITEM 6:                             EXHIBITS AND REPORTS ONFORM 8-K

 

(a).                               Exhibits:

 

31.1 -                    ChiefExecutive Officer’s Certificate Pursuant to Rule 13(a) – 14 of the Securitiesand Exchange Act of 1934, as Amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)

 

31.2 -                    ChiefFinancial Officer’s Certificate Pursuant to Rule 13(a) – 14 of the Securitiesand Exchange Act of 1934, as Amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(1)

 

32.1 -                    ChiefExecutive Officer’s Certificate Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

 

32.2 -                    ChiefFinancial Officer’s Certificate Pursuant to 18 U.S.C. Section 1350, as AdoptedPursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)

 

(b).                              Reportson Form 8-K:

 

The Companyfiled a current report on Form 8-K (Item 1) subsequent to the quarter endedSeptember 30, 2003.  The Form 8-K wasfiled on October 14, 2003, and reported the resignation of Deryl F. Hamann astrustee of four family trusts which holds control of Great WesternBancorporation, Inc. (Great Western); and through exercise and acceptance ofSpecial Power and Appointment of Successor Trustees, Daniel A. Hamann, EstherHamann Brabec, and Julie Hamann Hodgson will serve as trustees of the fourfamily trusts.  The change in trusteesresulted in a change in control of Great Western, with Daniel A. Hamannbeneficially owning directly or indirectly 43.54% of the voting stock, EstherHamann Brabec beneficially owning directly or indirectly 45.32% of the votingstock, and Julie Hamann Hodgson beneficially owning directly or indirectly47.58% of the voting stock.  After thechange in control, Deryl F. Hamann owns 22.91% of the voting stock of GreatWestern.

 

The Companyfiled a current report on Form 8-K (Item 5) subsequent to the quarter endedSeptember 30, 2003.  The Form 8-K wasfiled on October 14, 2003, and reported that all of the holders of Common orPreferred Stock of the Company, excluding the current holder of Series 3Preferred Stock, entered into a Stock Purchase Agreement.  This Agreement supersedes in its entiretythe Common Stock Purchase Agreement dated December 31, 1992.

 

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**SIGNATURES**

 

 

Pursuant tothe requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                                                                    | GREAT  WESTERN BANCORPORATION, INC.                  |
|-------------------------------------------------------------------------|------------------------------------------------------|
|                                                                    |
| Date:    November  10, 2003                         | By:                                                  | /s/ Deryl F.  Hamann |   |
|                                                                    | Deryl F.  Hamann, Chairman and Chief                 |
|                                                                    | Executive  Officer  (Duly Authorized Representative) |
|                                                                    |
| (Authorized  officer and principal financial officer of the registrant) |
|                                                                    |
|                                                                    |
| Date:  November 10, 2003                                           | By:                                                  | /s/ James R.  Clark |   |
|                                                                    | James R.  Clark, CFO, Secretary  and Treasurer       |

 

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