Equity Bancshares Inc.

07/16/2024 | Press release | Distributed by Public on 07/16/2024 14:54

Equity Bancshares, Inc. Second Quarter Results Highlighted by Record Net Interest Income and Net Interest Margin Expansion

07/16/2024

Reports NIM of 3.94%, Announces Merger with KansasLand Bancshares, Inc., Adding to Kansas Franchise

WICHITA, Kan.--(BUSINESS WIRE)-- Equity Bancshares, Inc. (NYSE: EQBK), ("Equity", "the Company", "we," "us," "our"), the Wichita-based holding company of Equity Bank, reported net income of $11.7 million or $0.76 earnings per diluted share for the quarter ended June 30, 2024. Adjusting to exclude $2.3 million in costs associated with mergers and $1.7 million in costs associated with the surrender and re-positioning of bank owned life insurance ("BOLI"), net income was $15.3 million or $0.99 per diluted share.

"Our Company realized another excellent quarter driven by a continued increase in margin," said Brad S. Elliott, Chairman and CEO of Equity. "Our team continued to capitalize on opportunities to enhance customer relationships and build stockholder value as we look to leverage our balance sheet position to grow our franchise."

"In addition, during the quarter, our team effectively merged core systems following the Bank of Kirksville transaction while also analyzing, negotiating, and subsequently closing our acquisition of KansasLand Bank," Mr. Elliott said. "We continue to be positioned to facilitate strategic M&A. We have the teams, the processes and the experience to be the preferred consolidation partner in our geography."

Notable Items:

  • The Company realized earnings per diluted share of $0.99, adjusted to exclude merger expenses of $2.3 million and $1.7 million in surrender costs related to repositioning of BOLI contracts.
  • The Company integrated the operations of its previously completed merger with Rockhold Bancshares, Inc., while also announcing and subsequently closing (July 1) its merger with KansasLand Bancshares, Inc.
  • The Company realized expansion in net interest income and net interest margin, as the benefits of previously announced strategic transactions continued to be realized. Total net interest income for the quarter was $46.5 million, an all-time high for the Company.
  • The Company was active in its share repurchase plan during the quarter, purchasing 152,982 shares at a weighted average cost of $33.35. Under the repurchase plan announced in the fourth quarter of 2023, 637,427 shares remain available for purchase.
  • Classified assets as a percentage of total risk based capital at Equity Bank closed the period at 8.5% while non-performing assets remained historically low. The allowance for credit losses closed the quarter at 1.3% of total loans.

Financial Results for the Quarter Ended June 30, 2024

Net income allocable to common stockholders was $11.7 million, or $0.76 per diluted share. Excluding merger expenses and the costs associated with repositioning a portion of our BOLI portfolio, net income was $15.3 million, or $0.99 per diluted share. Excluding the impact of the merger expenses and opening balance sheet provisioning for Bank of Kirksville balances, operating net income for the previous quarter was $16.1 million. The drivers of the periodic change are discussed in detail in the following sections.

Net Interest Income

Net interest income was $46.5 million for the period, as compared to $44.2 million for the three months ended March 31, 2024, the increase was driven by increasing average assets as well as a positive trend in margin. Net interest margin increased to 3.94% from 3.75% as the yield on interest-earning assets increased 28 basis points to 6.37% and the cost of interest-bearing deposits remained materially consistent at 2.78%. Total cost of deposits declined during the quarter to 2.14%, while utilization of debt and associated costs increased. Total cost of interest-bearing liabilities expanded 10 bps to 3.09%.

The earning asset improvement was driven by the continued increase in originated and re-priced loan coupons, loan and investment assets added through the Bank of Kirksville merger and the expiration of a receive-fixed swap during the quarter. Deposits acquired from the Bank of Kirksville contributed to maintaining cost of interest-bearing deposits and dropping total cost of deposits.

Provision for Credit Losses

During the quarter, there was a provision of $265 thousand compared to a provision of $1.0 million in the previous quarter. The provision was attributable to charge-offs realized during the period. The Company continues to estimate the allowance for credit loss with assumptions that anticipate slower prepayment rates and continued market disruption caused by elevated inflation, supply chain issues and the impact of monetary policy on consumers and businesses. During the quarter, we realized net charge-offs of $1.2 million as compared to $667 thousand for the previous quarter.

Non-Interest Income

Total non-interest income was $9.0 million for the quarter, as compared to $11.7 million for the three months ended March 31, 2024. The previous quarter included $1.2 million in gain on acquisition and $2.3 million in gains on resolution of special assets that did not repeat in the current quarter. Excluding these items non-interest income increased $777 thousand during the quarter, driven by increased service fee revenue including deposit services, treasury, debit card, credit card, insurance and wealth management.

Non-Interest Expense

Total non-interest expense for the quarter was $38.9 million as compared to $37.1 million for the previous quarter. Adjusting for merger expenses in both periods, the increase quarter over quarter was $1.0 million driven by the addition of Bank of Kirksville, including $320 thousand in intangible amortization as well as additional salary, technology and facility expenses.

The conversion of systems following the acquisition of Bank of Kirksville was completed in the second quarter.

Income Tax Expense

The effective tax rate for the quarter was 28.1% as compared to 20.8% for the quarter ended March 31, 2024. The increase in rate during the quarter was the result of an $11.5 million tax gain and related penalty recognized in our annual effective tax rate due to the surrender of BOLI. The impact of this transaction was partially offset by tax benefit related to a new investment in tax credit structures made by the Company in the quarter. The tax rate in the second quarter, normalized to exclude the impact of the BOLI surrender, would have been 17.5%.

Loans, Total Assets and Funding

Loans held for investment were $3.5 billion at June 30, 2024, decreasing $27.8 million during the quarter. Total assets were $5.2 billion as of the end of the period, increasing $6.5 million during the quarter.

Total deposits were $4.3 billion at June 30, 2024, decreasing $29.6 million from the previous quarter end. Of the total deposit balance, non-interest-bearing accounts comprise approximately 22.7%. Total Federal Home Loan Bank borrowings were $250.3 million as of the end of the quarter, up $30.4 million as compared to March 31, 2024.

Asset Quality

As of June 30, 2024, Equity's allowance for credit losses to total loans remained materially consistent at 1.3% as compared to March 31, 2024. Nonperforming assets were $27.2 million as of June 30, 2024, or 0.5% of total assets, compared to $25.4 million at March 31, 2024, or 0.5% of total assets. Non-accrual loans were $26.6 million at June 30, 2024, as compared to $24.2 million at March 31, 2024. Total classified assets, including loans rated special mention or worse, other real estate owned, excluding previous branch locations, and other repossessed assets were $48.4 million, or 8.47% of regulatory capital, up from $39.2 million, or 6.9% of regulatory capital as of March 31, 2024.

Capital

Quarter over quarter, book capital increased $4.7 million to $461.4 million and tangible capital increased $5.9 million to $390.7 million. The increase in capital is primarily due to earnings, partially offset by treasury share purchases of $5.2 million, increase in unrealized loss on bonds and cash flow hedges of $1.2 million and dividends declared of $1.9 million. Tangible capital was also positively affected by the amortization of core deposit intangibles during the quarter.

The Company's ratio of common equity tier 1 capital to risk-weighted assets was 11.1%, the total capital to risk-weighted assets was 14.6% and the total leverage ratio was 9.1% at June 30, 2024. At March 31, 2024, the Company's common equity tier 1 capital to risk-weighted assets ratio was 11.1%, the total capital to risk-weighted assets ratio was 14.7% and the total leverage ratio was 9.1%.

Equity Bank's ratio of common equity tier 1 capital to risk-weighted assets was 12.9%, total capital to risk-weighted assets was 14.0% and the total leverage ratio was 10.1% at June 30, 2024. At March 31, 2024, Equity Bank's ratio of common equity tier 1 capital to risk-weighted assets was 13.2%, the ratio of total capital to risk-weighted assets was 14.3% and the total leverage ratio was 10.2%.

Non-GAAP Financial Measures

In addition to evaluating the Company's results of operations in accordance with accounting principles generally accepted in the United States of America ("GAAP"), management periodically supplements this evaluation with an analysis of certain non-GAAP financial measures that are intended to provide the reader with additional perspectives on operating results, financial condition and performance trends, while facilitating comparisons with the performance of other financial institutions. Non-GAAP financial measures are not a substitute for GAAP measures, rather, they should be read and used in conjunction with the Company's GAAP financial information.

The efficiency ratio is a common comparable metric used by banks to understand the expense structure relative to total revenue. In other words, for every dollar of total revenue recognized, how much of that dollar is expended. To improve the comparability of the ratio to our peers, non-core items are excluded. To improve transparency and acknowledging that banks are not consistent in their definition of the efficiency ratio, we include our calculation of this non-GAAP measure.

Return on average assets before income tax provision and provision for loan losses is a measure that the Company uses to understand fundamental operating performance before these expenses. Used as a ratio relative to average assets, we believe it demonstrates "core" performance and can be viewed as an alternative measure of how efficiently the Company services its asset base. Used as a ratio relative to average equity, it can function as an alternative measure of the Company's earnings performance in relationship to its equity.

Tangible common equity and related measures are non-GAAP financial measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These financial measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Return on average tangible common equity is used by management and readers of our financial statements to understand how efficiently the Company is deploying its common equity. Companies that are able to demonstrate more efficient use of common equity are more likely to be viewed favorably by current and prospective investors.

The Company believes that disclosing these non-GAAP financial measures is both useful internally and is expected by our investors and analysts in order to understand the overall performance of the Company. Other companies may calculate and define their non-GAAP financial measures and supplemental data differently. A reconciliation of GAAP financial measures to non-GAAP measures and other performance ratios, as adjusted, are included in Table 6 in the following press release tables.

Conference Call and Webcast

Equity's Chairman and Chief Executive Officer, Brad Elliott, and Chief Financial Officer, Chris Navratil, will hold a conference call and webcast to discuss second quarter results on Wednesday, July 17, 2024, at 10 a.m. eastern time or 9 a.m. central time.

A live webcast of the call will be available on the Company's website at investor.equitybank.com. To access the call by phone, please go to this registration link, and you will be provided with dial in details. Investors, news media, and other participants are encouraged to dial into the conference call ten minutes ahead of the scheduled start time.

A replay of the call and webcast will be available two hours following the close of the call until August 1, 2024, accessible at investor.equitybank.com.

About Equity Bancshares, Inc.

Equity Bancshares, Inc. is the holding company for Equity Bank, offering a full range of financial solutions, including commercial loans, consumer banking, mortgage loans, trust and wealth management services and treasury management services, while delivering the high-quality, relationship-based customer service of a community bank. Equity's common stock is traded on the NYSE National, Inc. under the symbol "EQBK." Learn more at www.equitybank.com.

Special Note Concerning Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements reflect the current views of Equity's management with respect to, among other things, future events and Equity's financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "project," "positioned," "forecast," "goal," "target," "would" and "outlook," or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about Equity's industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond Equity's control. Accordingly, Equity cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although Equity believes 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. Factors that could cause actual results to differ materially from Equity's expectations include competition from other financial institutions and bank holding companies; the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; changes in the demand for loans; fluctuations in value of collateral and loan reserves; inflation, interest rate, market and monetary fluctuations; changes in consumer spending, borrowing and savings habits; and acquisitions and integration of acquired businesses; and similar variables. The foregoing list of factors is not exhaustive.

For discussion of these and other risks that may cause actual results to differ from expectations, please refer to "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in Equity's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 7, 2024, and any updates to those risk factors set forth in Equity's subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Equity's underlying assumptions prove to be incorrect, actual results may differ materially from what Equity anticipates. 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 Equity does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. New risks and uncertainties arise from time to time and it is not possible for us to predict those events or how they may affect us. In addition, Equity cannot assess the impact of each factor on Equity's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Equity or persons acting on Equity's behalf may issue.

Unaudited Financial Tables

  • Table 1. Consolidated Statements of Income
  • Table 2. Quarterly Consolidated Statements of Income
  • Table 3. Consolidated Balance Sheets
  • Table 4. Selected Financial Highlights
  • Table 5. Year-To-Date Net Interest Income Analysis
  • Table 6. Quarter-To-Date Net Interest Income Analysis
  • Table 7. Quarter-Over-Quarter Net Interest Income Analysis
  • Table 8. Non-GAAP Financial Measures

TABLE 1. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands)

Three months ended
June 30,

Six months ended
June 30,

2024

2023

2024

2023

Interest and dividend income

Loans, including fees

$

61,518

$

52,748

$

120,347

$

101,129

Securities, taxable

10,176

5,813

20,053

11,760

Securities, nontaxable

401

568

792

1,237

Federal funds sold and other

3,037

2,127

5,707

3,253

Total interest and dividend income

75,132

61,256

146,899

117,379

Interest expense

Deposits

22,662

17,204

45,517

31,025

Federal funds purchased and retail repurchase agreements

306

192

632

387

Federal Home Loan Bank advances

3,789

953

4,933

1,971

Federal Reserve Bank borrowings

-

1,528

1,361

1,663

Subordinated debt

1,899

1,950

3,798

3,794

Total interest expense

28,656

21,827

56,241

38,840

Net interest income

46,476

39,429

90,658

78,539

Provision (reversal) for credit losses

265

298

1,265

(68

)

Net interest income after provision (reversal) for credit losses

46,211

39,131

89,393

78,607

Non-interest income

Service charges and fees

2,541

2,653

5,110

5,198

Debit card income

2,621

2,653

5,068

5,207

Mortgage banking

245

213

433

301

Increase in value of bank-owned life insurance

911

757

1,739

2,340

Net gain on acquisition and branch sales

60

-

1,300

-

Net gains (losses) from securities transactions

(27

)

(1,322

)

16

(1,290

)

Other

2,607

1,996

7,023

3,794

Total non-interest income

8,958

6,950

20,689

15,550

Non-interest expense

Salaries and employee benefits

17,827

15,237

35,924

31,929

Net occupancy and equipment

3,787

2,940

7,322

5,819

Data processing

5,036

4,493

9,864

8,409

Professional fees

1,778

1,645

3,170

3,029

Advertising and business development

1,291

1,249

2,529

2,408

Telecommunications

572

516

1,227

1,001

FDIC insurance

590

515

1,161

875

Courier and postage

620

463

1,226

921

Free nationwide ATM cost

531

524

1,025

1,049

Amortization of core deposit intangibles

1,218

918

2,117

1,836

Loan expense

195

136

304

253

Other real estate owned

17

71

(67

)

190

Merger expenses

2,287

-

3,843

-

Other

3,122

4,423

6,378

8,640

Total non-interest expense

38,871

33,130

76,023

66,359

Income (loss) before income tax

16,298

12,951

34,059

27,798

Provision for income taxes

4,582

1,495

8,275

4,019

Net income (loss) and net income (loss) allocable to common stockholders

$

11,716

$

11,456

$

25,784

$

23,779

Basic earnings (loss) per share

$

0.77

$

0.74

$

1.68

$

1.52

Diluted earnings (loss) per share

$

0.76

$

0.74

$

1.66

$

1.51

Weighted average common shares

15,248,703

15,468,378

15,337,206

15,662,515

Weighted average diluted common shares

15,377,980

15,554,255

15,473,386

15,789,061

TABLE 2. QUARTERLY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

(Dollars in thousands, except per share data)

As of and for the three months ended

June 30,
2024

March 31,
2024

December 31,
2023

September 30,
2023

June 30,
2023

Interest and dividend income

Loans, including fees

$

61,518

$

58,829

$

54,932

$

55,152

$

52,748

Securities, taxable

10,176

9,877

6,417

5,696

5,813

Securities, nontaxable

401

391

354

369

568

Federal funds sold and other

3,037

2,670

2,591

3,822

2,127

Total interest and dividend income

75,132

71,767

64,294

65,039

61,256

Interest expense

Deposits

22,662

22,855

20,074

19,374

17,204

Federal funds purchased and retail repurchase agreements

306

326

298

246

192

Federal Home Loan Bank advances

3,789

1,144

1,005

968

953

Federal Reserve Bank borrowings

-

1,361

1,546

1,546

1,528

Subordinated debt

1,899

1,899

1,904

1,893

1,950

Total interest expense

28,656

27,585

24,827

24,027

21,827

Net interest income

46,476

44,182

39,467

41,012

39,429

Provision (reversal) for credit losses

265

1,000

711

1,230

298

Net interest income after provision (reversal) for credit losses

46,211

43,182

38,756

39,782

39,131

Non-interest income

Service charges and fees

2,541

2,569

2,299

2,690

2,653

Debit card income

2,621

2,447

2,524

2,591

2,653

Mortgage banking

245

188

125

226

213

Increase in value of bank-owned life insurance

911

828

925

794

757

Net gain on acquisition and branch sales

60

1,240

-

-

-

Net gains (losses) from securities transactions

(27

)

43

(50,618

)

(1

)

(1,322

)

Other

2,607

4,416

1,331

2,435

1,996

Total non-interest income

8,958

11,731

(43,414

)

8,735

6,950

Non-interest expense

Salaries and employee benefits

17,827

18,097

16,598

15,857

15,237

Net occupancy and equipment

3,787

3,535

3,244

3,262

2,940

Data processing

5,036

4,828

4,471

4,553

4,493

Professional fees

1,778

1,392

1,413

1,312

1,645

Advertising and business development

1,291

1,238

1,598

1,419

1,249

Telecommunications

572

655

460

502

516

FDIC insurance

590

571

660

660

515

Courier and postage

620

606

577

548

463

Free nationwide ATM cost

531

494

508

516

524

Amortization of core deposit intangibles

1,218

899

739

799

918

Loan expense

195

109

155

132

136

Other real estate owned

17

(84

)

224

128

71

Merger expenses

2,287

1,556

297

-

-

Other

3,122

3,256

4,054

4,556

4,423

Total non-interest expense

38,871

37,152

34,998

34,244

33,130

Income (loss) before income tax

16,298

17,761

(39,656

)

14,273

12,951

Provision for income taxes (benefit)

4,582

3,693

(11,357

)

1,932

1,495

Net income (loss) and net income (loss) allocable to common stockholders

$

11,716

$

14,068

$

(28,299

)

$

12,341

$

11,456

Basic earnings (loss) per share

$

0.77

$

0.91

$

(1.84

)

$

0.80

$

0.74

Diluted earnings (loss) per share

$

0.76

$

0.90

$

(1.84

)

$

0.80

$

0.74

Weighted average common shares

15,248,703

15,425,709

15,417,200

15,404,992

15,468,378

Weighted average diluted common shares

15,377,980

15,569,225

15,417,200

15,507,172

15,554,255

TABLE 3. CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)

June 30,
2024

March 31,
2024

December 31,
2023

September 30,
2023

June 30,
2023

ASSETS

Cash and due from banks

$

244,321

$

217,611

$

363,289

$

183,404

$

262,604

Federal funds sold

15,945

17,407

15,810

15,613

15,495

Cash and cash equivalents

260,266

235,018

379,099

199,017

278,099

Available-for-sale securities

1,042,176

1,091,717

919,648

1,057,009

1,094,748

Held-to-maturity securities

5,226

2,205

2,209

2,212

2,216

Loans held for sale

1,959

1,311

476

627

2,456

Loans, net of allowance for credit losses(1)

3,410,920

3,437,714

3,289,381

3,237,932

3,278,126

Other real estate owned, net

2,989

1,465

1,833

3,369

4,362

Premises and equipment, net

114,264

116,792

112,632

110,271

106,186

Bank-owned life insurance

130,326

125,693

124,865

124,245

123,451

Federal Reserve Bank and Federal Home Loan Bank stock

33,171

27,009

20,608

20,780

21,129

Interest receivable

27,381

27,082

25,497

23,621

21,360

Goodwill

53,101

53,101

53,101

53,101

53,101

Core deposit intangibles, net

16,636

17,854

7,222

7,961

8,760

Other

147,102

102,075

98,021

105,122

100,889

Total assets

$

5,245,517

$

5,239,036

$

5,034,592

$

4,945,267

$

5,094,883

LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits

Demand

$

984,872

$

981,623

$

898,129

$

936,217

$

978,968

Total non-interest-bearing deposits

984,872

981,623

898,129

936,217

978,968

Demand, savings and money market

2,560,091

2,574,871

2,483,807

2,397,003

2,397,524

Time

796,474

814,532

763,519

748,950

854,458

Total interest-bearing deposits

3,356,565

3,389,403

3,247,326

3,145,953

3,251,982

Total deposits

4,341,437

4,371,026

4,145,455

4,082,170

4,230,950

Federal funds purchased and retail repurchase agreements

38,031

43,811

43,582

39,701

44,770

Federal Home Loan Bank advances and Federal Reserve Bank borrowings

250,306

219,931

240,000

240,000

240,000

Subordinated debt

97,196

97,058

96,921

96,787

96,653

Contractual obligations

23,770

18,493

19,315

29,019

29,608

Interest payable and other liabilities

33,342

31,941

36,459

39,460

34,467

Total liabilities

4,784,082

4,782,260

4,581,732

4,527,137

4,676,448

Commitments and contingent liabilities

Stockholders' equity

Common stock

208

208

207

207

207

Additional paid-in capital

491,709

490,533

489,187

488,137

487,225

Retained earnings

163,068

153,201

141,006

171,188

160,715

Accumulated other comprehensive income (loss), net of tax

(62,005

)

(60,788

)

(57,920

)

(122,047

)

(110,225

)

Treasury stock

(131,545

)

(126,378

)

(119,620

)

(119,355

)

(119,487

)

Total stockholders' equity

461,435

456,776

452,860

418,130

418,435

Total liabilities and stockholders' equity

$

5,245,517

$

5,239,036

$

5,034,592

$

4,945,267

$

5,094,883

(1) Allowance for credit losses

$

43,487

$

44,449

$

43,520

$

44,186

$

44,544

TABLE 4. SELECTED FINANCIAL HIGHLIGHTS (Unaudited)

(Dollars in thousands, except per share data)

As of and for the three months ended

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2024

2023

2023

2023

Loans Held For Investment by Type

Commercial real estate

$

1,793,545

$

1,797,192

$

1,759,855

$

1,721,761

$

1,764,460

Commercial and industrial

663,718

649,035

598,327

585,129

583,664

Residential real estate

572,523

581,988

556,328

558,188

560,389

Agricultural real estate

219,226

198,291

196,114

205,865

202,317

Agricultural

104,341

149,312

118,587

103,352

104,510

Consumer

101,054

106,345

103,690

107,823

107,330

Total loans held-for-investment

3,454,407

3,482,163

3,332,901

3,282,118

3,322,670

Allowance for credit losses

(43,487

)

(44,449

)

(43,520

)

(44,186

)

(44,544

)

Net loans held for investment

$

3,410,920

$

3,437,714

$

3,289,381

$

3,237,932

$

3,278,126

Asset Quality Ratios

Allowance for credit losses on loans to total loans

1.26

%

1.28

%

1.31

%

1.35

%

1.34

%

Past due or nonaccrual loans to total loans

1.15

%

1.10

%

1.10

%

1.03

%

0.78

%

Nonperforming assets to total assets

0.52

%

0.49

%

0.53

%

0.42

%

0.31

%

Nonperforming assets to total loans plus other
real estate owned

0.79

%

0.73

%

0.79

%

0.63

%

0.47

%

Classified assets to bank total regulatory capital

8.47

%

6.85

%

7.09

%

6.27

%

7.94

%

Selected Average Balance Sheet Data (QTD Average)

Investment securities

$

1,065,979

$

1,074,101

$

985,591

$

1,085,905

$

1,155,971

Total gross loans receivable

3,459,476

3,452,553

3,293,755

3,281,483

3,337,497

Interest-earning assets

4,745,713

4,742,200

4,480,279

4,635,384

4,678,744

Total assets

5,196,258

5,152,915

4,892,712

5,046,179

5,064,912

Interest-bearing deposits

3,275,765

3,319,907

3,092,637

3,206,300

3,226,965

Borrowings

450,178

390,166

391,691

385,125

385,504

Total interest-bearing liabilities

3,725,943

3,710,073

3,484,328

3,591,425

3,612,469

Total deposits

4,250,843

4,254,883

4,019,362

4,177,332

4,204,334

Total liabilities

4,740,936

4,692,671

4,469,505

4,619,919

4,640,050

Total stockholders' equity

455,322

460,244

423,207

426,260

424,862

Tangible common equity*

383,899

398,041

361,451

363,625

361,409

Performance ratios

Return on average assets (ROAA) annualized

0.91

%

1.10

%

(2.29

)%

0.97

%

0.91

%

Return on average assets before income tax and
provision for loan losses*

1.28

%

1.46

%

(3.16

)%

1.22

%

1.05

%

Return on average equity (ROAE) annualized

10.35

%

12.29

%

(26.53

)%

11.49

%

10.82

%

Return on average equity before income tax and
provision for loan losses*

14.63

%

16.39

%

(36.51

)%

14.43

%

12.51

%

Return on average tangible common equity
(ROATCE) annualized*

13.31

%

14.96

%

(30.39

)%

14.18

%

13.55

%

Yield on loans annualized

7.15

%

6.85

%

6.62

%

6.67

%

6.34

%

Cost of interest-bearing deposits annualized

2.78

%

2.77

%

2.58

%

2.40

%

2.14

%

Cost of total deposits annualized

2.14

%

2.16

%

1.98

%

1.84

%

1.64

%

Net interest margin annualized

3.94

%

3.75

%

3.49

%

3.51

%

3.38

%

Efficiency ratio*

66.03

%

65.16

%

74.35

%

68.83

%

69.44

%

Non-interest income / average assets

0.69

%

0.92

%

(3.52

)%

0.69

%

0.55

%

Non-interest expense / average assets

3.01

%

2.90

%

2.84

%

2.69

%

2.62

%

Capital Ratios

Tier 1 Leverage Ratio

9.14

%

9.10

%

9.46

%

9.77

%

9.54

%

Common Equity Tier 1 Capital Ratio

11.12

%

11.14

%

11.74

%

12.65

%

12.23

%

Tier 1 Risk Based Capital Ratio

11.70

%

11.73

%

12.36

%

13.28

%

12.84

%

Total Risk Based Capital Ratio

14.61

%

14.71

%

15.48

%

16.42

%

15.96

%

Total stockholders' equity to total assets

8.80

%

8.72

%

8.99

%

8.46

%

8.21

%

Tangible common equity to tangible assets*

7.55

%

7.45

%

7.87

%

7.29

%

7.06

%

Dividend payout ratio

15.79

%

13.31

%

(6.65

)%

15.13

%

13.53

%

Book value per common share

$

30.36

$

29.80

$

29.35

$

27.13

$

27.18

Tangible book value per common share*

$

25.70

$

25.10

$

25.37

$

23.09

$

23.08

Tangible book value per diluted common share*

$

25.44

$

24.87

$

25.05

$

22.96

$

22.98

* The value noted is considered a Non-GAAP financial measure. For a reconciliation of Non-GGAP financial measures, see Table 8. Non-GAAP Financial Measures.

TABLE 5. YEAR-TO-DATE NET INTEREST INCOME ANALYSIS (Unaudited)

(Dollars in thousands)

For six months ended

For six months ended

June 30, 2024

June 30, 2023

Average Outstanding
Balance

Interest Income/
Expense

Average
Yield/Rate(3)(4)

Average Outstanding
Balance

Interest Income/
Expense

Average
Yield/Rate(3)(4)

Interest-earning assets

Loans (1)

Commercial and industrial

$

634,879

$

25,194

7.98%

$

584,081

$

20,519

7.08%

Commercial real estate

1,425,143

49,142

6.93%

1,324,010

40,987

6.24%

Real estate construction

378,815

16,618

8.82%

434,793

14,926

6.92%

Residential real estate

580,382

13,024

4.51%

568,710

11,848

4.20%

Agricultural real estate

201,520

7,412

7.40%

202,742

6,501

6.47%

Agricultural

129,167

5,493

8.55%

100,795

3,183

6.37%

Consumer

106,107

3,464

6.57%

106,546

3,165

5.99%

Total loans

3,456,013

120,347

7.00%

3,321,677

101,129

6.14%

Securities

Taxable securities

1,008,742

20,053

4.00%

1,076,108

11,760

2.20%

Nontaxable securities

61,298

792

2.60%

94,538

1,237

2.64%

Total securities

1,070,040

20,845

3.92%

1,170,646

12,997

2.24%

Federal funds sold and other

217,902

5,707

5.27%

152,747

3,253

4.29%

Total interest-earning assets

$

4,743,955

146,899

6.23%

$

4,645,070

117,379

5.10%

Interest-bearing liabilities

Demand, savings and money market deposits

$

2,525,710

31,605

2.52%

$

2,336,791

18,957

1.64%

Time deposits

772,126

13,912

3.62%

894,446

12,068

2.72%

Total interest-bearing deposits

3,297,836

45,517

2.78%

3,231,237

31,025

1.94%

FHLB advances

208,160

4,933

4.77%

95,497

1,971

4.16%

Other borrowings

212,013

5,791

5.48%

221,601

5,844

5.32%

Total interest-bearing liabilities

$

3,718,009

56,241

3.04%

$

3,548,335

38,840

2.21%

Net interest income

$

90,658

$

78,539

Interest rate spread

3.19%

2.89%

Net interest margin (2)

3.84%

3.41%

(1) Average loan balances include nonaccrual loans.

(2) Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets for the period.

(3) Tax exempt income is not included in the above table on a tax-equivalent basis.

(4) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

TABLE 6. QUARTER-TO-DATE NET INTEREST INCOME ANALYSIS (Unaudited)

(Dollars in thousands)

For the three months ended

For the three months ended

June 30, 2024

June 30, 2023

Average Outstanding
Balance

Interest Income/
Expense

Average
Yield/Rate(3)(4)

Average Outstanding
Balance

Interest Income/
Expense

Average
Yield/Rate(3)(4)

Interest-earning assets

Loans (1)

Commercial and industrial

$

635,123

$

12,782

8.09%

$

590,634

$

10,885

7.39%

Commercial real estate

1,401,109

24,541

7.04%

1,303,520

20,875

6.42%

Real estate construction

402,831

8,843

8.83%

465,231

8,231

7.10%

Residential real estate

580,338

6,563

4.55%

567,297

6,048

4.28%

Agricultural real estate

206,018

3,944

7.70%

202,584

3,387

6.71%

Agricultural

127,298

3,102

9.80%

101,333

1,704

6.74%

Consumer

106,759

1,743

6.57%

106,898

1,618

6.07%

Total loans

3,459,476

61,518

7.15%

3,337,497

52,748

6.34%

Securities

Taxable securities

1,006,018

10,176

4.07%

1,068,653

5,813

2.18%

Nontaxable securities

59,961

401

2.70%

87,318

568

2.61%

Total securities

1,065,979

10,577

3.99%

1,155,971

6,381

2.21%

Federal funds sold and other

220,258

3,037

5.54%

185,276

2,127

4.61%

Total interest-earning assets

$

4,745,713

75,132

6.37%

$

4,678,744

61,256

5.25%

Interest-bearing liabilities

Demand, savings and money market deposits

$

2,530,899

15,946

2.53%

$

2,323,685

10,503

1.81%

Time deposits

744,866

6,716

3.63%

903,280

6,701

2.98%

Total interest-bearing deposits

3,275,765

22,662

2.78%

3,226,965

17,204

2.14%

FHLB advances

302,972

3,789

5.03%

101,845

953

3.75%

Other borrowings

147,206

2,205

6.03%

283,659

3,670

5.19%

Total interest-bearing liabilities

$

3,725,943

28,656

3.09%

$

3,612,469

21,827

2.42%

Net interest income

$

46,476

$

39,429

Interest rate spread

3.28%

2.83%

Net interest margin (2)

3.94%

3.38%

(1) Average loan balances include nonaccrual loans.

(2) Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets for the period.

(3) Tax exempt income is not included in the above table on a tax-equivalent basis.

(4) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

TABLE 7. QUARTER-OVER-QUARTER NET INTEREST INCOME ANALYSIS (Unaudited)

(Dollars in thousands)

For the three months ended

For the three months ended

June 30, 2024

March 31, 2024

Average Outstanding
Balance

Interest Income/
Expense

Average
Yield/Rate(3)(4)

Average Outstanding
Balance

Interest Income/
Expense

Average
Yield/Rate(3)(4)

Interest-earning assets

Loans (1)

Commercial and industrial

$

635,123

$

12,782

8.09%

$

634,637

$

12,412

7.87%

Commercial real estate

1,401,109

24,541

7.04%

1,449,177

24,601

6.83%

Real estate construction

402,831

8,843

8.83%

354,801

7,775

8.81%

Residential real estate

580,338

6,563

4.55%

580,426

6,461

4.48%

Agricultural real estate

206,018

3,944

7.70%

197,023

3,468

7.08%

Agricultural

127,298

3,102

9.80%

131,035

2,391

7.34%

Consumer

106,759

1,743

6.57%

105,454

1,721

6.56%

Total loans

3,459,476

61,518

7.15%

3,452,553

58,829

6.85%

Securities

Taxable securities

1,006,018

10,176

4.07%

1,011,466

9,877

3.93%

Nontaxable securities

59,961

401

2.70%

62,635

391

2.51%

Total securities

1,065,979

10,577

3.99%

1,074,101

10,268

3.84%

Federal funds sold and other

220,258

3,037

5.54%

215,546

2,670

4.98%

Total interest-earning assets

$

4,745,713

75,132

6.37%

$

4,742,200

71,767

6.09%

Interest-bearing liabilities

Demand savings and money market deposits

$

2,530,899

15,946

2.53%

$

2,520,521

15,660

2.50%

Time deposits

744,866

6,716

3.63%

799,386

7,195

3.62%

Total interest-bearing deposits

3,275,765

22,662

2.78%

3,319,907

22,855

2.77%

FHLB advances

302,972

3,789

5.03%

113,348

1,144

4.06%

Other borrowings

147,206

2,205

6.03%

276,818

3,586

5.21%

Total interest-bearing liabilities

$

3,725,943

28,656

3.09%

$

3,710,073

27,585

2.99%

Net interest income

$

46,476

$

44,182

Interest rate spread

3.28%

3.10%

Net interest margin (2)

3.94%

3.75%

(1) Average loan balances include nonaccrual loans.

(2) Net interest margin is calculated by dividing annualized net interest income by average interest-earning assets for the period.

(3) Tax exempt income is not included in the above table on a tax-equivalent basis.

(4) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

TABLE 8. NON-GAAP FINANCIAL MEASURES (Unaudited)

(Dollars in thousands, except per share data)

As of and for the three months ended

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2024

2023

2023

2023

Total stockholders' equity

$

461,435

$

456,776

$

452,860

$

418,130

$

418,435

Less: goodwill

53,101

53,101

53,101

53,101

53,101

Less: core deposit intangibles, net

16,636

17,854

7,222

7,961

8,760

Less: mortgage servicing rights, net

25

50

75

100

126

Less: naming rights, net

979

989

1,000

1,011

1,022

Tangible common equity

$

390,694

$

384,782

$

391,462

$

355,957

$

355,426

Common shares outstanding at period end

15,200,194

15,327,799

15,428,251

15,413,064

15,396,739

Diluted common shares outstanding at period end

15,358,396

15,469,531

15,629,185

15,500,749

15,468,319

Book value per common share

$

30.36

$

29.80

$

29.35

$

27.13

$

27.18

Tangible book value per common share

$

25.70

$

25.10

$

25.37

$

23.09

$

23.08

Tangible book value per diluted common share

$

25.44

$

24.87

$

25.05

$

22.96

$

22.98

Total assets

$

5,245,517

$

5,239,036

$

5,034,592

$

4,945,267

$

5,094,883

Less: goodwill

53,101

53,101

53,101

53,101

53,101

Less: core deposit intangibles, net

16,636

17,854

7,222

7,961

8,760

Less: mortgage servicing rights, net

25

50

75

100

126

Less: naming rights, net

979

989

1,000

1,011

1,022

Tangible assets

$

5,174,776

$

5,167,042

$

4,973,194

$

4,883,094

$

5,031,874

Total stockholders' equity to total assets

8.80

%

8.72

%

8.99

%

8.46

%

8.21

%

Tangible common equity to tangible assets

7.55

%

7.45

%

7.87

%

7.29

%

7.06

%

Total average stockholders' equity

$

455,322

$

460,244

$

423,207

$

426,260

$

424,862

Less: average intangible assets

71,423

62,203

61,756

62,635

63,453

Average tangible common equity

$

383,899

$

398,041

$

361,451

$

363,625

$

361,409

Net income (loss) allocable to common stockholders

$

11,716

$

14,068

$

(28,299

)

$

12,341

$

11,456

Add: amortization of intangible assets

1,254

935

775

835

954

Less: tax effect of intangible assets amortization

263

196

163

175

200

Adjusted net income (loss) allocable to common
stockholders

$

12,707

$

14,807

$

(27,687

)

$

13,001

$

12,210

Return on total average stockholders' equity
(ROAE) annualized

10.35

%

12.29

%

(26.53

)%

11.49

%

10.82

%

Return on average tangible common equity
(ROATCE) annualized

13.31

%

14.96

%

(30.39

)%

14.18

%

13.55

%

Non-interest expense

$

38,871

$

37,152

$

34,998

$

34,244

$

33,130

Less: merger expense

2,287

1,556

297

-

-

Adjusted non-interest expense

$

36,584

$

35,596

$

34,701

$

34,244

$

33,130

Net interest income

$

46,476

$

44,182

$

39,467

$

41,012

$

39,429

Non-interest income

8,958

11,731

(43,414

)

8,735

6,950

Less: net gain on acquisition and branch sales

60

1,240

-

-

-

Less: net gains (losses) from securities transactions

(27

)

43

(50,618

)

(1

)

(1,322

)

Adjusted non-interest income

$

8,925

$

10,448

$

7,204

$

8,736

$

8,272

Net interest income plus adjusted non-interest income

$

55,401

$

54,630

$

46,671

$

49,748

$

47,701

Non-interest expense to
net interest income plus non-interest income

70.12

%

66.45

%

-886.70

%

68.84

%

71.43

%

Efficiency ratio

66.03

%

65.16

%

74.35

%

68.83

%

69.45

%

Net income (loss) allocable to common stockholders

$

11,716

$

14,068

$

(28,299

)

$

12,341

$

11,456

Add: income tax provision

4,582

3,693

(11,357

)

1,932

1,495

Add: provision (reversal) of credit losses

265

1,000

711

1,230

298

Pre-tax, pre-provision income

$

16,563

$

18,761

$

(38,945

)

$

15,503

$

13,249

Total average assets

$

5,196,258

$

5,152,915

$

4,892,712

$

5,046,179

$

5,064,912

Total average stockholders' equity

$

455,322

$

460,244

$

423,207

$

426,620

$

424,862

Return on average assets (ROAA) annualized

0.91

%

1.10

%

(2.29

)%

0.97

%

0.91

%

Adjusted return on average assets

1.28

%

1.46

%

(3.16

)%

1.22

%

1.05

%

Adjusted return on average equity

14.63

%

16.39

%

(36.51

)%

14.43

%

12.51

%

Net income (loss) allocable to common stockholders

$

11,716

$

14,068

$

(28,299

)

$

12,341

$

11,456

Add: Day 1 -Provision

-

1,000

-

-

-

Less: Gain (loss) from securities transactions

(27

)

43

(50,618

)

(1

)

(1,322

)

Add: Merger expense

2,287

1,556

297

-

-

Adjusted non-core items

2,314

2,513

50,915

1

1,322

Tax effected non-core items

1,828

1,985

40,223

1

1,044

BOLI tax adjustment

1,730

-

-

-

-

Adjusted operating net income

$

15,274

$

16,053

$

11,924

$

12,342

$

12,500

GAAP earnings (loss) per diluted share

$

0.76

$

0.90

$

(1.84

)

$

0.80

$

0.74

Adjusted earnings (loss) per diluted share

$

0.99

$

1.03

$

0.77

$

0.80

$

0.81

Total average assets

$

5,196,258

$

5,152,915

$

4,892,712

$

5,046,179

$

5,064,912

Adjusted Operating ROAA

1.18

%

1.25

%

0.97

%

0.97

%

1.00

%

Weighted average diluted common shares

15,377,980

15,569,225

15,417,200

15,507,172

15,554,255

Investor Contact:

Brian J. Katzfey
VP, Director of Corporate Development and Investor Relations
Equity Bank
(316) 858-3128
[email protected]

Media Contact:

John J. Hanley
Chief Marketing Officer
Equity Bancshares, Inc.
(913) 583-8004
[email protected]

Source: Equity Bancshares

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