Equity Bancshares, Inc. Reports Second Quarter Results; Experienced Core Deposit Growth and Increased Net Interest Income

ソース: Nasdaq GlobeNewswire / 18 7 2023 18:05:59 America/Chicago

WICHITA, Kan., July 18, 2023 (GLOBE NEWSWIRE) -- Equity Bancshares, Inc. (NYSE: EQBK), (“Equity”, “the Company”, “we,” “us,” “our”), the Wichita-based holding company of Equity Bank, reported net income of $11.5 million and $0.74 earnings per diluted share for the quarter ended June 30, 2023. During the quarter, the Company recognized a $1.3 million loss through a repositioning of $50.6 million of investments into higher-yielding earning assets. When excluding the loss, net income would have been $12.4 million or $0.80 per diluted share.

"Our Company's success in attracting and retaining core customers during the quarter is a testament to the emphasis our community leaders place on building strong relationships with customers, providing exceptional customer service, and partnering with the communities we serve," said Brad S. Elliott, Chairman and CEO, Equity Bancshares, Inc.

Mr. Elliott continued, "We are confident that our strong community presence, healthy financial condition, and strong liquidity and capital will continue to drive profitability and make us an attractive partner for mergers and acquisitions in our region."

Notable Items:

Total transaction account deposits increased $29.4 million during the quarter or 3.5% linked quarter annualized while the loan-to-deposit ratio remained stable. Non-wholesale deposits increased $46 million during the quarter as brokered deposits declined $102 million.
Net Interest income increased $319 thousand during the second quarter, driven by an increase of $67.7 million in average earnings assets.
Cash and cash equivalents remained elevated, comprising 5.5% of Total Assets as management endeavored to maintain on-balance sheet liquidity.
Repositioned $50.6 million of investment securities into alternative earning investments, realizing a current period loss of $1.3 million during the quarter, while enhancing current and prospective period net interest margin. The Company calculates the earn-back to be less than 12 months.
Equity repurchased $8.2 million of common stock, totaling 349 thousand shares or 2.3% of outstanding shares as of the end of the second quarter.
The ratio of non-performing assets to total assets improved 2 basis points linked quarter to 0.3%, and the ratio of Classified Assets to Bank Regulatory Capital decreased to 7.9% from 10.1%.

During the second quarter, Equity announced it has transferred to the New York Stock Exchange (NYSE). The Company's common stock began trading on the NYSE on May 23, 2023. In addition to the transfer to the NYSE, the Company also announced two additions to its executive management team. Rick Sems joined in May as the President of Equity Bank, and Ann Knutson joined in June as the Chief Human Resources Officer.

Financial Results for the Quarter Ended June 30, 2023

Net income allocable to common stockholders was $11.5 million, or $0.74 per diluted share, for the three months ended June 30, 2023, as compared to $12.3 million, or $0.77 per diluted share, for the three months ended March 31, 2023. The decrease during the quarter was primarily driven by a decrease in non-interest income of $1.7 million and an increase in interest expense of $4.8 million, partially offset by an increase in interest income of $5.1 million.

Net Interest Income

Net interest income was $39.4 million for the three months ended June 30, 2023, as compared to $39.1 million for the three months ended March 31, 2023, an increase of $319 thousand, or 0.82%. The yield on interest-earning assets increased 31 basis points to 5.25%. The cost of interest-bearing deposits increased by 41 basis points during the quarter, moving from 1.73% at March 31, 2023, to 2.14% at June 30, 2023.

The Company maintained an enhanced liquidity position in response to the first quarter market disruption by adding on-balance sheet cash, resulting in a seven basis point adverse impact to net interest margin due to the increase in average earning assets and negligible impact to net interest income.

Average interest-bearing deposits declined slightly during the quarter and the Company continued to experience compositional shift from noninterest-bearing deposits into interest bearing categories. At June 30, 2023, non-interest bearing deposits declined $33.7 million from March 31, 2023 and $215.9 million from June 30, 2022. The majority of the decline over the last 12 months is primarily due to deposits migrating from non-interest bearing to interest-bearing deposit accounts and the continued spending of excess liquidity from pandemic related governmental support programs.

Provision for Credit Losses

During the three months ended June 30, 2023, there was a provision of $298 thousand compared to a net release of $366 thousand in the previous quarter. The provision for the quarter is the result of slight increases in projected losses over our economic forecast period and realized charge-offs; however, overall we continue to experience positive credit trends. The Company continues to estimate the allowance for credit loss with assumptions that anticipate slower prepayments rates and continued market disruption caused by elevated inflation, supply chain issues and the impact of monetary policy on consumers and businesses. For the three months ended June 30, 2023, we had net charge-offs of $858 thousand as compared to $377 thousand for the three months ended March 31, 2023.

Non-Interest Income

Total non-interest income was $7.0 million for the three months ended June 30, 2023, as compared to $8.6 million for the three months ended March 31, 2023, or a decrease of 19.2%, quarter-over-quarter. The $1.7 million decrease was primarily due to losses on sales of available-for-sale securities of $1.4 million and a decrease in value of bank owned life insurance of $826 thousand.

Non-Interest Expense

Total non-interest expense for the quarter ended June 30, 2023, was $33.1 million as compared to $33.2 million for the quarter ended March 31, 2023, a decrease of $99 thousand.

Income Tax Expense

At June 30, 2023, the effective tax rate for the quarter was 11.5% as compared 17.0% at March 31, 2023. The year-to-date tax rate is 14.5%. The reduction in rate from the first quarter to the second quarter of 2023 is associated with an increase in tax benefits related to the implementation of tax planning initiatives and associated reductions in state income tax expense when taken as a percentage of pre-tax income. These initiatives were anticipated and incorporated in our forecasted full year estimated effective tax rate at March 31, 2023. The impact of recognizing the year to date cumulative effect of these tax initiatives in the second quarter results in a lower tax rate quarter over quarter.

Loans, Total Assets and Funding

Loans held for investment were $3.32 billion at June 30, 2023, decreasing $7.9 million compared to previous quarter. During the quarter, the Company exited its last two remaining shared national credits and some larger loan payoffs were driven by asset sale dispositions by our borrowers. Excluding the impact of PPP loans, balances have increased $105.1 million, or 3.3% year-over-year. Included in the annual growth, is $126.2 million within the commercial and industrial and commercial real estate portfolios, or 5.7%. Total assets were $5.09 billion as of June 30, 2023 decreasing $61.8 million or 1.2% from March 31, 2023.

Total deposits were $4.23 billion at June 30, 2023, decreasing $56.0 million from the previous quarter end and decreasing $60.8 million from the same period end in 2022. During the second quarter, the Company reduced its brokered deposits by $102 million; improving the overall mix of the deposit portfolio during the second quarter. Of this balance, non-interest bearing accounts comprise approximately 23.1%. Advances from the FHLB declined $11.2 million to $100 million during the quarter, while borrowings from the Federal Reserve's Bank Term Funding Program remained unchanged from March 31, 2023.

Asset Quality

As of June 30, 2023, Equity’s allowance for credit losses to total loans remained materially consistent at 1.3% as compared to March 31, 2023. Nonperforming assets were $15.7 million as of June 30, 2023, or 0.3% of total assets, compared to $17.1 million at March 31, 2023, or 0.3% of total assets. Non-accrual loans were $15.0 million at June 30, 2023, as compared to $16.6 million at March 31, 2023. Total classified assets, including loans rated special mention or worse, other real estate owned, excluding previous branch locations, and other repossessed assets were $47.1 million, or 7.9% of regulatory capital, down from $59.9 million, or 10.1% of regulatory capital as of March 31, 2023.

Capital

During the quarter, the Company realized a decrease in both book and tangible capital but realized increases in book and tangible capital per share. The decrease in book and tangible capital is primarily due to dividends declared, costs incurred to repurchase shares and the fair value mark on the investment portfolio outpacing net income for the quarter.

The Company’s ratio of common equity tier 1 capital to risk-weighted assets was 12.2%, the total capital to risk-weighted assets was 16.0% and the total leverage ratio was 9.5% at June 30, 2023. At March 31, 2023, the Company’s common equity tier 1 capital to risk-weighted assets ratio was 12.2%, the total capital to risk-weighted assets ratio was 16.0% and the total leverage ratio was 9.6%.

The Company’s subsidiary, Equity Bank, had a ratio of common equity tier 1 capital to risk-weighted assets of 14.3%, a ratio of total capital to risk-weighted assets of 15.5% and a total leverage ratio of 10.6% at June 30, 2023. At March 31, 2023, Equity Bank’s ratio of common equity tier 1 capital to risk-weighted assets was 14.4%, the ratio of total capital to risk-weighted assets was 15.7% and the total leverage ratio was 10.8%.

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, Eric Newell, will hold a conference call and webcast to discuss first quarter results on Wednesday, July 19, 2023, 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 July 26, 2023, 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 COVID-19 related impacts; 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 9, 2023, 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.

Investor Contact:

Chris Navratil
SVP, Finance
Equity Bancshares, Inc.
(316) 612-6014
cnavratil@equitybank.com

Media Contact:

John J. Hanley
SVP, Senior Director of Marketing
Equity Bancshares, Inc.
(913) 583-8004
jhanley@equitybank.com

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, except per share data)

	Three months ended June 30,						Six months ended June 30,
	2023			2022			2023			2022
Interest and dividend income
Loans, including fees	$	52,748		$	36,849		$	101,129		$	73,155
Securities, taxable		5,813			5,584			11,760			10,975
Securities, nontaxable		568			678			1,237			1,333
Federal funds sold and other		2,127			513			3,253			813
Total interest and dividend income		61,256			43,624			117,379			86,276
Interest expense
Deposits		17,204			2,183			31,025			3,905
Federal funds purchased and retail repurchase agreements		192			46			387			79
Federal Home Loan Bank advances		953			176			1,971			185
Federal Reserve Bank borrowings		1,528			—			1,663			—
Subordinated debt		1,950			1,653			3,794			3,252
Total interest expense		21,827			4,058			38,840			7,421

Net interest income		39,429			39,566			78,539			78,855
Provision (reversal) for credit losses		298			824			(68	)		412
Net interest income after provision (reversal) for credit losses		39,131			38,742			78,607			78,443
Non-interest income
Service charges and fees		2,653			2,617			5,198			5,139
Debit card income		2,653			2,810			5,207			5,438
Mortgage banking		213			428			301			990
Increase in value of bank-owned life insurance		757			736			2,340			1,601
Net gain on acquisition and branch sales		—			540			—			540
Net gains (losses) from securities transactions		(1,322	)		(32	)		(1,290	)		8
Other		1,996			2,538			3,794			4,943
Total non-interest income		6,950			9,637			15,550			18,659
Non-interest expense
Salaries and employee benefits		15,237			15,383			31,929			30,451
Net occupancy and equipment		2,940			3,007			5,819			6,177
Data processing		4,493			3,642			8,409			7,411
Professional fees		1,645			1,111			3,029			2,282
Advertising and business development		1,249			972			2,408			1,948
Telecommunications		516			442			1,001			912
FDIC insurance		515			260			875			440
Courier and postage		463			489			921			912
Free nationwide ATM cost		524			541			1,049			1,042
Amortization of core deposit intangibles		918			1,111			1,836			2,161
Loan expense		136			207			253			392
Other real estate owned		71			14			190			13
Merger expenses		—			88			—			411
Other		4,423			4,169			8,640			6,343
Total non-interest expense		33,130			31,436			66,359			60,895
Income (loss) before income tax		12,951			16,943			27,798			36,207
Provision for income taxes		1,495			1,684			4,019			5,298
Net income (loss) and net income (loss) allocable to common stockholders	$	11,456		$	15,259		$	23,779		$	30,909
Basic earnings (loss) per share	$	0.74		$	0.95		$	1.52		$	1.88
Diluted earnings (loss) per share	$	0.74		$	0.94		$	1.51		$	1.86
Weighted average common shares		15,468,378			16,206,978			15,662,515			16,428,535
Weighted average diluted common shares		15,554,255			16,413,248			15,789,061			16,639,970

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, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
Interest and dividend income
Loans, including fees	$	52,748		$	48,381		$	46,149		$	41,555		$	36,849
Securities, taxable		5,813			5,947			5,946			5,792			5,584
Securities, nontaxable		568			669			678			687			678
Federal funds sold and other		2,127			1,126			651			514			513
Total interest and dividend income		61,256			56,123			53,424			48,548			43,624
Interest expense
Deposits		17,204			13,821			8,013			4,403			2,183
Federal funds purchased and retail repurchase agreements		192			195			82			71			46
Federal Home Loan Bank advances		953			1,018			1,500			409			176
Federal Reserve Bank borrowings		1,528			135			—			—			—
Subordinated debt		1,950			1,844			1,798			1,721			1,653
Total interest expense		21,827			17,013			11,393			6,604			4,058

Net interest income		39,429			39,110			42,031			41,944			39,566
Provision (reversal) for credit losses		298			(366	)		(151	)		(136	)		824
Net interest income after provision (reversal) for credit losses		39,131			39,476			42,182			42,080			38,742
Non-interest income
Service charges and fees		2,653			2,545			2,705			2,788			2,617
Debit card income		2,653			2,554			2,557			2,682			2,810
Mortgage banking		213			88			116			310			428
Increase in value of bank-owned life insurance		757			1,583			758			754			736
Net gain on acquisition and branch sales		—			—			422			—			540
Net gains (losses) from securities transactions		(1,322	)		32			14			(17	)		(32	)
Other		1,996			1,798			1,757			2,452			2,538
Total non-interest income		6,950			8,600			8,329			8,969			9,637
Non-interest expense
Salaries and employee benefits		15,237			16,692			16,113			15,442			15,383
Net occupancy and equipment		2,940			2,879			2,919			3,127			3,007
Data processing		4,493			3,916			4,334			4,138			3,642
Professional fees		1,645			1,384			1,404			1,265			1,111
Advertising and business development		1,249			1,159			1,903			1,191			972
Telecommunications		516			485			517			487			442
FDIC insurance		515			360			360			340			260
Courier and postage		463			458			533			436			489
Free nationwide ATM cost		524			525			510			551			541
Amortization of core deposit intangibles		918			918			924			957			1,111
Loan expense		136			117			262			174			207
Other real estate owned		71			119			388			188			14
Merger expenses		—			—			68			115			88
Other		4,423			4,217			5,014			3,825			4,169
Total non-interest expense		33,130			33,229			35,249			32,236			31,436
Income (loss) before income tax		12,951			14,847			15,262			18,813			16,943
Provision for income taxes (benefit)		1,495			2,524			3,654			3,642			1,684
Net income (loss) and net income (loss) allocable to common stockholders	$	11,456		$	12,323		$	11,608		$	15,171		$	15,259
Basic earnings (loss) per share	$	0.74		$	0.78		$	0.73		$	0.94		$	0.95
Diluted earnings (loss) per share	$	0.74		$	0.77		$	0.72		$	0.93		$	0.94
Weighted average common shares		15,468,378			15,858,808			15,948,360			16,056,658			16,206,978
Weighted average diluted common shares		15,554,255			16,028,051			16,204,185			16,273,231			16,413,248

TABLE 3. CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)

	June 30, 2023			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022
ASSETS
Cash and due from banks	$	262,604		$	249,982		$	104,013		$	155,039		$	103,126
Federal funds sold		15,495			384			415			374			458
Cash and cash equivalents		278,099			250,366			104,428			155,413			103,584
Available-for-sale securities		1,094,748			1,183,247			1,184,390			1,198,962			1,288,180
Held-to-maturity securities		2,216			1,944			1,948			—			—
Loans held for sale		2,456			648			349			1,518			1,714
Loans, net of allowance for credit losses⁽¹⁾		3,278,126			3,285,515			3,265,701			3,208,524			3,175,208
Other real estate owned, net		4,362			4,171			4,409			10,412			12,969
Premises and equipment, net		106,186			104,789			101,492			100,566			101,212
Bank-owned life insurance		123,451			122,971			123,176			122,418			121,665
Federal Reserve Bank and Federal Home Loan Bank stock		21,129			33,359			21,695			24,428			21,479
Interest receivable		21,360			20,461			20,630			18,497			16,519
Goodwill		53,101			53,101			53,101			53,101			53,101
Core deposit intangibles, net		8,760			9,678			10,596			11,598			12,554
Other		100,889			86,466			89,736			94,978			93,971
Total assets	$	5,094,883		$	5,156,716		$	4,981,651		$	5,000,415		$	5,002,156
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand	$	978,968		$	1,012,671		$	1,097,899		$	1,217,094		$	1,194,863
Total non-interest-bearing deposits		978,968			1,012,671			1,097,899			1,217,094			1,194,863
Demand, savings and money market		2,397,524			2,334,463			2,329,584			2,335,847			2,445,545
Time		854,458			939,799			814,324			673,670			651,363
Total interest-bearing deposits		3,251,982			3,274,262			3,143,908			3,009,517			3,096,908
Total deposits		4,230,950			4,286,933			4,241,807			4,226,611			4,291,771
Federal funds purchased and retail repurchase agreements		44,770			45,098			46,478			47,443			52,750
Federal Home Loan Bank advances and Federal Reserve Bank borrowings		240,000			251,222			138,864			186,001			80,000
Subordinated debt		96,653			96,522			96,392			96,263			96,135
Contractual obligations		29,608			19,372			15,218			15,562			15,813
Interest payable and other liabilities		34,467			32,446			32,834			32,729			37,572
Total liabilities		4,676,448			4,731,593			4,571,593			4,604,609			4,574,041
Commitments and contingent liabilities
Stockholders’ equity
Common stock		207			206			205			204			204
Additional paid-in capital		487,225			486,658			484,989			482,668			480,897
Retained earnings		160,715			150,810			140,095			130,114			116,576
Accumulated other comprehensive income (loss), net of tax		(110,225	)		(101,238	)		(113,511	)		(120,918	)		(77,426	)
Treasury stock		(119,487	)		(111,313	)		(101,720	)		(96,262	)		(92,136	)
Total stockholders’ equity		418,435			425,123			410,058			395,806			428,115
Total liabilities and stockholders’ equity	$	5,094,883		$	5,156,716		$	4,981,651		$	5,000,415		$	5,002,156

⁽¹⁾ Allowance for credit losses	$	44,544		$	45,103		$	45,847		$	46,499		$	48,238

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,
	2023			2023			2022			2022			2022
Loans Held For Investment by Type
Commercial real estate	$	1,764,460		$	1,746,834		$	1,721,269		$	1,655,646		$	1,643,068
Commercial and industrial		583,664			605,576			594,862			607,722			578,899
Residential real estate		560,389			563,791			570,550			573,431			578,936
Agricultural real estate		202,317			202,274			199,189			200,415			197,938
Agricultural		104,510			106,169			120,003			115,048			124,753
Consumer		107,330			105,974			105,675			102,761			99,852
Total loans held-for-investment		3,322,670			3,330,618			3,311,548			3,255,023			3,223,446
Allowance for credit losses		(44,544	)		(45,103	)		(45,847	)		(46,499	)		(48,238	)
Net loans held for investment	$	3,278,126		$	3,285,515		$	3,265,701		$	3,208,524		$	3,175,208


Asset Quality Ratios
Allowance for credit losses on loans to total loans		1.34	%		1.35	%		1.38	%		1.43	%		1.50	%
Past due or nonaccrual loans to total loans		0.78	%		0.66	%		0.72	%		0.94	%		0.78	%
Nonperforming assets to total assets		0.31	%		0.33	%		0.37	%		0.59	%		0.74	%
Nonperforming assets to total loans plus other real estate owned		0.47	%		0.51	%		0.55	%		0.91	%		1.14	%
Classified assets to bank total regulatory capital		7.94	%		10.09	%		9.98	%		11.03	%		13.08	%


Selected Average Balance Sheet Data (QTD Average)
Investment securities	$	1,155,971		$	1,185,482		$	1,184,452		$	1,272,414		$	1,319,099
Total gross loans receivable		3,337,497			3,305,681			3,275,284			3,240,998			3,216,853
Interest-earning assets		4,678,744			4,611,019			4,538,177			4,602,568			4,675,967
Total assets		5,064,912			4,994,417			4,930,231			4,988,755			5,067,686
Interest-bearing deposits		3,226,965			3,235,557			3,032,902			3,081,245			3,112,300
Borrowings		385,504			247,932			299,191			221,514			238,062
Total interest-bearing liabilities		3,612,469			3,483,489			3,335,557			3,302,759			3,350,362
Total deposits		4,204,334			4,279,451			4,185,904			4,283,855			4,340,196
Total liabilities		4,640,051			4,573,918			4,531,959			4,552,564			4,630,204
Total stockholders' equity		424,862			420,500			398,270			436,191			437,483
Tangible common equity^*		361,409			356,053			332,820			369,746			368,505


Performance ratios
Return on average assets (ROAA) annualized		0.91	%		1.00	%		0.93	%		1.21	%		1.21	%
Return on average assets before income tax and provision for loan losses*		1.05	%		1.18	%		1.22	%		1.49	%		1.41	%
Return on average equity (ROAE) annualized		10.82	%		11.89	%		11.57	%		13.80	%		13.99	%
Return on average equity before income tax and provision for loan losses*		12.51	%		13.97	%		15.05	%		16.99	%		16.29	%
Return on average tangible common equity (ROATCE) annualized^*		13.55	%		14.89	%		14.74	%		17.12	%		17.60	%
Yield on loans annualized		6.34	%		5.94	%		5.59	%		5.09	%		4.59	%
Cost of interest-bearing deposits annualized		2.14	%		1.73	%		1.05	%		0.57	%		0.28	%
Cost of total deposits annualized		1.64	%		1.31	%		0.76	%		0.41	%		0.20	%
Net interest margin annualized		3.38	%		3.44	%		3.67	%		3.62	%		3.39	%
Efficiency ratio^*		69.44	%		70.00	%		70.47	%		63.07	%		64.38	%
Non-interest income / average assets		0.55	%		0.74	%		0.67	%		0.71	%		0.76	%
Non-interest expense / average assets		2.62	%		2.74	%		2.84	%		2.56	%		2.49	%


Capital Ratios
Tier 1 Leverage Ratio		9.54	%		9.60	%		9.61	%		9.46	%		9.11	%
Common Equity Tier 1 Capital Ratio		12.23	%		12.21	%		12.26	%		12.15	%		12.08	%
Tier 1 Risk Based Capital Ratio		12.84	%		12.83	%		12.88	%		12.77	%		12.71	%
Total Risk Based Capital Ratio		15.96	%		15.98	%		16.08	%		15.99	%		15.97	%
Total stockholders' equity to total assets		8.21	%		8.24	%		8.23	%		7.92	%		8.56	%
Tangible common equity to tangible assets^*		7.06	%		7.09	%		7.02	%		6.68	%		7.32	%
Dividend payout ratio		13.53	%		10.49	%		14.01	%		10.78	%		8.61	%
Book value per common share	$	27.18		$	27.03		$	25.74		$	24.71		$	26.58
Tangible book value per common share^*	$	23.08		$	22.96		$	21.67		$	20.59		$	22.42
Tangible book value per diluted common share^*	$	22.98		$	22.83		$	21.35		$	20.33		$	22.17

^* 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, 2023							June 30, 2022
	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	$	584,081	$	20,519		7.08	%	$	581,880	$	15,244		5.28	%
Commercial real estate		1,324,010		40,987		6.24	%		1,200,212		27,972		4.70	%
Real estate construction		434,793		14,926		6.92	%		363,542		7,596		4.21	%
Residential real estate		568,710		11,848		4.20	%		615,035		10,872		3.56	%
Agricultural real estate		202,742		6,501		6.47	%		202,091		5,306		5.29	%
Agricultural		100,795		3,183		6.37	%		142,210		3,849		5.46	%
Consumer		106,546		3,165		5.99	%		101,409		2,316		4.60	%
Total loans		3,321,677		101,129		6.14	%		3,206,379		73,155		4.60	%
Securities
Taxable securities		1,076,108		11,760		2.20	%		1,248,178		10,975		1.77	%
Nontaxable securities		94,538		1,237		2.64	%		109,866		1,333		2.45	%
Total securities		1,170,646		12,997		2.24	%		1,358,044		12,308		1.83	%
Federal funds sold and other		152,747		3,253		4.29	%		131,148		813		1.25	%
Total interest-earning assets	$	4,645,070		117,379		5.10	%	$	4,695,571		86,276		3.71	%
Interest-bearing liabilities
Demand, savings and money market deposits	$	2,336,791		18,957		1.64	%	$	2,507,707		2,342		0.19	%
Time deposits		894,446		12,068		2.72	%		630,189		1,563		0.50	%
Total interest-bearing deposits		3,231,237		31,025		1.94	%		3,137,896		3,905		0.25	%
FHLB advances		95,497		1,971		4.16	%		45,299		185		0.82	%
Other borrowings		221,601		5,844		5.32	%		153,995		3,331		4.36	%
Total interest-bearing liabilities	$	3,548,335		38,840		2.21	%	$	3,337,190		7,421		0.45	%

Net interest income			$	78,539						$	78,855
Interest rate spread						2.89	%						3.26	%

Net interest margin ⁽²⁾						3.41	%						3.39	%

⁽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, 2023							June 30, 2022
	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	$	590,634	$	10,885		7.39	%	$	588,126	$	7,483		5.10	%
Commercial real estate		1,303,520		20,875		6.42	%		1,210,185		14,521		4.81	%
Real estate construction		465,231		8,231		7.10	%		384,317		4,297		4.48	%
Residential real estate		567,297		6,048		4.28	%		597,680		5,206		3.49	%
Agricultural real estate		202,584		3,387		6.71	%		202,038		2,643		5.25	%
Agricultural		101,333		1,704		6.74	%		134,826		1,533		4.56	%
Consumer		106,898		1,618		6.07	%		99,680		1,166		4.69	%
Total loans		3,337,497		52,748		6.34	%		3,216,852		36,849		4.59	%
Securities
Taxable securities		1,068,653		5,813		2.18	%		1,210,828		5,584		1.85	%
Nontaxable securities		87,318		568		2.61	%		108,271		678		2.51	%
Total securities		1,155,971		6,381		2.21	%		1,319,099		6,262		1.90	%
Federal funds sold and other		185,276		2,127		4.61	%		140,016		513		1.47	%
Total interest-earning assets	$	4,678,744		61,256		5.25	%	$	4,675,967		43,624		3.74	%
Interest-bearing liabilities
Demand, savings and money market deposits	$	2,323,685		10,503		1.81	%	$	2,481,602		1,346		0.22	%
Time deposits		903,280		6,701		2.98	%		630,698		837		0.53	%
Total interest-bearing deposits		3,226,965		17,204		2.14	%		3,112,300		2,183		0.28	%
FHLB advances		101,845		952		3.75	%		80,266		176		0.88	%
Other borrowings		283,659		3,671		5.19	%		157,796		1,699		4.32	%
Total interest-bearing liabilities	$	3,612,469		21,827		2.42	%	$	3,350,362		4,058		0.49	%

Net interest income			$	39,429						$	39,566
Interest rate spread						2.83	%						3.25	%

Net interest margin ⁽²⁾						3.38	%						3.39	%

⁽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.

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, 2023							March 31, 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	$	590,634	$	10,885		7.39	%	$	577,452	$	9,634		6.77	%
Commercial real estate		1,303,520		20,875		6.42	%		1,344,727		20,112		6.07	%
Real estate construction		465,231		8,231		7.10	%		404,016		6,695		6.72	%
Residential real estate		567,297		6,048		4.28	%		570,139		5,802		4.13	%
Agricultural real estate		202,584		3,387		6.71	%		202,901		3,114		6.22	%
Agricultural		101,333		1,704		6.74	%		100,251		1,478		5.98	%
Consumer		106,898		1,618		6.07	%		106,195		1,546		5.91	%
Total loans		3,337,497		52,748		6.34	%		3,305,681		48,381		5.94	%
Securities
Taxable securities		1,068,653		5,813		2.18	%		1,083,645		5,947		2.23	%
Nontaxable securities		87,318		568		2.61	%		101,837		669		2.67	%
Total securities		1,155,971		6,381		2.21	%		1,185,482		6,616		2.26	%
Federal funds sold and other		185,276		2,127		4.61	%		119,856		1,126		3.81	%
Total interest-earning assets	$	4,678,744		61,256		5.25	%	$	4,611,019		56,123		4.94	%
Interest-bearing liabilities
Demand savings and money market deposits	$	2,323,685		10,503		1.81	%	$	2,350,042		8,453		1.46	%
Time deposits		903,280		6,701		2.98	%		885,515		5,368		2.46	%
Total interest-bearing deposits		3,226,965		17,204		2.14	%		3,235,557		13,821		1.73	%
FHLB advances		101,845		952		3.75	%		89,078		1,018		4.64	%
Other borrowings		283,659		3,671		5.19	%		158,854		2,174		5.55	%
Total interest-bearing liabilities	$	3,612,469		21,827		2.42	%	$	3,483,489		17,013		1.98	%

Net interest income			$	39,429						$	39,110
Interest rate spread						2.83	%						2.96	%

Net interest margin ⁽²⁾						3.38	%						3.44	%

⁽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.

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,
	2023			2023			2022			2022			2022

Total stockholders' equity	$	418,435		$	425,123		$	410,058		$	395,806		$	428,115
Less: goodwill		53,101			53,101			53,101			53,101			53,101
Less: core deposit intangibles, net		8,760			9,678			10,596			11,598			12,554
Less: mortgage servicing rights, net		126			151			176			201			226
Less: naming rights, net		1,022			1,033			1,044			1,054			1,065
Tangible common equity	$	355,426		$	361,160		$	345,141		$	329,852		$	361,169
Common shares outstanding at period end		15,396,739			15,730,257			15,930,112			16,017,834			16,106,818
Diluted common shares outstanding at period end		15,468,319			15,822,536			16,163,253			16,225,591			16,289,635
Book value per common share	$	27.18		$	27.03		$	25.74		$	24.71		$	26.58
Tangible book value per common share	$	23.08		$	22.96		$	21.67		$	20.59		$	22.42
Tangible book value per diluted common share	$	22.98		$	22.83		$	21.35		$	20.33		$	22.17

Total assets	$	5,094,883		$	5,156,716		$	4,981,651		$	5,000,415		$	5,002,156
Less: goodwill		53,101			53,101			53,101			53,101			53,101
Less: core deposit intangibles, net		8,760			9,678			10,596			11,598			12,554
Less: mortgage servicing rights, net		126			151			176			201			226
Less: naming rights, net		1,022			1,033			1,044			1,054			1,065
Tangible assets	$	5,031,874		$	5,092,753		$	4,916,734		$	4,934,461		$	4,935,210
Total stockholders' equity to total assets		8.21	%		8.24	%		8.23	%		7.92	%		8.56	%
Tangible common equity to tangible assets		7.06	%		7.09	%		7.02	%		6.68	%		7.32	%

Total average stockholders' equity	$	424,862		$	420,500		$	398,270		$	436,191		$	437,483
Less: average intangible assets		63,453			64,447			65,450			66,445			68,978
Average tangible common equity	$	361,409		$	356,053		$	332,820		$	369,746		$	368,505
Net income (loss) allocable to common stockholders	$	11,456		$	12,323		$	11,608		$	15,171		$	15,259
Add: amortization of intangible assets		954			954			961			992			1,148
Less: tax effect of intangible assets amortization		200			200			202			208			241
Adjusted net income (loss) allocable to common stockholders	$	12,210		$	13,077		$	12,367		$	15,955		$	16,166
Return on total average stockholders' equity (ROAE) annualized		10.82	%		11.89	%		11.56	%		13.80	%		13.99	%
Return on average tangible common equity (ROATCE) annualized		13.55	%		14.89	%		14.74	%		17.12	%		17.60	%

Non-interest expense	$	33,130		$	33,229		$	35,248		$	32,236		$	31,436
Less: loss on debt extinguishment		—			—			—			—			—
Less: merger expense		—			—			68			115			88
Adjusted non-interest expense	$	33,130		$	33,229		$	35,180		$	32,121		$	31,348
Net interest income	$	39,429		$	39,110		$	42,031		$	41,944		$	39,566
Non-interest income		6,950			8,600			8,330			8,969			9,637
Less: net gain on acquisition and branch sales		—			—			422			—			540
Less: net gains (losses) from securities transactions		(1,322	)		32			14			(17	)		(32	)
Adjusted non-interest income	$	8,272		$	8,568		$	7,894		$	8,986		$	9,129
Net interest income plus adjusted non-interest income	$	47,701		$	47,678		$	49,925		$	50,930		$	48,695
Non-interest expense to net interest income plus non-interest income		71.43	%		69.65	%		69.99	%		63.32	%		63.89	%
Efficiency ratio		69.45	%		69.69	%		70.47	%		63.07	%		64.38	%
Net income (loss) allocable to common stockholders	$	11,456		$	12,323		$	11,608		$	15,171		$	15,259
Add: income tax provision		1,495			2,524			3,654			3,642			1,684
Add: provision (reversal) of credit losses		298			(366	)		(151	)		(136	)		824
Pre-tax, pre-provision income	$	13,249		$	14,481		$	15,111		$	18,677		$	17,767
Total average assets	$	5,064,912		$	4,994,417		$	4,930,231		$	4,988,755		$	5,067,687
Total average stockholders' equity	$	424,862		$	420,500		$	398,270		$	436,191		$	437,483
Return on average assets (ROAA) annualized		0.91	%		1.00	%		0.93	%		1.21	%		1.21	%
Adjusted return on average assets		1.05	%		1.18	%		1.22	%		1.49	%		1.41	%
Adjusted return on average equity		12.51	%		13.97	%		15.05	%		16.99	%		16.29	%

Equity Bancshares, Inc. Reports Second Quarter Results; Experienced Core Deposit Growth and Increased Net Interest Income

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