Equity Bancshares, Inc. Results Include Strong Organic Growth While Expanding Kansas Franchise

ソース: Nasdaq GlobeNewswire / 19 10 2021 17:17:22 America/Chicago

WICHITA, Kan., Oct. 19, 2021 (GLOBE NEWSWIRE) -- Equity Bancshares, Inc. (NASDAQ: EQBK), (“Equity”, “the Company”, “we”, “us”, “our”), the Wichita-based holding company of Equity Bank, reported net income of $11.8 million and $0.80 earnings per diluted share for the quarter ended September 30, 2021. Equity’s results occurred as the Company completed its acquisition of American State Bancshares, Inc. on October 1, 2021.

“As the founder of Equity Bank, our results this quarter are particularly satisfying, as we celebrate continued loan growth, excellent earnings and our first cash stock dividend while simultaneously closing the largest acquisition in our history. I am grateful to our loyal employees and stockholders as we continue to grow and improve Equity Bank,” said Brad S. Elliott, Chairman and CEO of Equity.

“I’m pleased with the growth of the Equity Bank brand and the hard work and collaboration of our team members throughout our regions, including our bank employees, lenders, and operations professionals who placed the customer first and executed with open doors, expertise, and availability,” said Mr. Elliott. “We’ve successfully integrated American State Bank & Trust Company into our platform while continuing to provide momentum, support and expertise to our customers throughout our franchise.”

Equity customers successfully had $175.7 million of Paycheck Protection Program (“PPP”) loans forgiven during the quarter, resulting in the recognition of fee income totaling $7.7 million in the three-month period ended September 30, 2021. At September 30, 2021, the total unrecognized fee income associated with PPP loans was $3.0 million.

“Our entrepreneurial culture drives the efficiency of our merger process, assists in building a solid community banking network that is responsive to a diverse customer base and excels at adding core deposits and new households in a changing environment. Our mission as a community bank is to continue to prioritize local customers, local service, and bankers willing to go above and beyond. As we continue to grow, expand and deliver, our focus will drive value for our shareholders,” said Mr. Elliott.

Notable Items:

Diluted earnings per share of $0.80, adjusted to reflect core operating results, was $0.96 per diluted share. The adjustments to earnings were comprised of the exclusion of merger expenses of $4.0 million, non-accrual interest income of $1.4 million, bank-owned life insurance death benefit of $486 thousand and additional reserving for repurchase obligations associated with the Company’s Federal Deposit Insurance Corporation (“FDIC”) assisted transaction of $771 thousand.
Linked quarter service fee revenue, including deposit services, mortgage banking, trust and wealth and insurance services increased to $6.7 million from $6.4 million, or 3.7%.
The Company authorized a second stock repurchase program in the third quarter of 2020 totaling 800,000 shares. During the quarter ended September 30, 2021, the Company repurchased 57,239 shares at a weighted average cost of $30.64 per share, totaling $1.8 million. At the end of the quarter, capacity of 123,448 shares remained under the current repurchase program. The Board authorized the repurchase of up to an additional 1,000,000 shares of Equity’s outstanding common stock, beginning October 29, 2021, and concluding October 28, 2022, subject to non-objection by the Company’s primary regulators.
The Company announced and paid its first common stock dividend of $0.08 per share to shareholders of record as of September 30, 2021.

Equity’s Balance Sheet Highlights:

During the quarter total loans decreased from $2.82 billion to $2.69 billion, including a reduction in PPP assets of $175.7 million. Excluding the impact of PPP, organic growth linked quarter was $41.8 million, or 7.1% annualized.
Total deposits of $3.66 billion at September 30, 2021, as compared to $3.69 billion at June 30, 2021. Checking, savings and money market accounts were $3.08 billion at September 30, 2021, relative to $3.03 billion at June 30, 2021. As compared to December 31, 2020, the Bank has increased non-interest-bearing deposits by $192.8 million, or 24.4%.
As excess liquidity continues to impact the operating environment at quarter end, securities and interest-earning cash and cash equivalents comprise 31.4% of average earnings assets, up from 28.0% at the end of the linked quarter and 25.0% at the end of the comparable quarter in the previous year.

Financial Results for the Quarter Ended September 30, 2021

Net income allocable to common stockholders was $11.8 million, or $0.80 per diluted share, for the three months ended September 30, 2021, as compared to $15.2 million, or $1.03 per diluted share, for the three months ended June 30, 2021, a decrease of $3.4 million. This third quarter decrease was attributable to an increase in non-interest expense of $4.9 million, an increase in provision for credit losses of $2.7 million and a decrease of $1.3 million in non-interest income, partially offset by an increase in net interest income $4.3 million and a decrease in provision for income taxes of $1.1 million.

Net Interest Income

Net interest income was $39.0 million for the three months ended September 30, 2021, as compared to $34.6 million for the three months ended June 30, 2021, an increase of $4.3 million, or 12.6%. The increase in net interest income was primarily driven by an increase in loan fees, due to the forgiveness of PPP assets, of $2.0 million for the quarter ended September 30, 2021, compared to the quarter ended June 30, 2021. The yield on interest-earning assets increased 32-basis points to 4.20% during the quarter ended September 30, 2021, as compared to 3.88% for the quarter ended June 30, 2021. The cost of interest-bearing deposits declined by 3-basis points to 0.28% for the three months ended September 30, 2021, from 0.31% in the previous quarter.

Provision for Credit Losses

During the three months ended September 30, 2021, there was a provision of $1.1 million in the allowance for credit losses recognized through the provision for credit losses as compared to a net release of $1.7 million of provision for credit losses for the three months ended June 30, 2021. The comparative increase was primarily driven by an increase in reserves on specifically assessed assets which was partially offset by improving trends in the Company’s loss experience and moderating economic impacts. For the three months ended September 30, 2021, we had net charge-offs of $129 thousand as compared to $567 thousand for the three months ended June 30, 2021.

Non-Interest Income

Total non-interest income was $7.8 million for the three months ended September 30, 2021, as compared to $9.1 million for the three months ended June 30, 2021, or a decline of 14.0% quarter over quarter. Other non-interest income was $546 thousand, a decrease of $1.5 million, or 73.6%, from the quarter ended June 30, 2021. The decrease in other non-interest income was primarily due to the accounting for potential repurchase obligations associated with assets previously purchased through a FDIC assisted transaction. In the second quarter, the Company trued up the guarantee on a number of assets resulting in income recognition of $917 thousand. In the third quarter, two unrelated assets were identified to have experienced deterioration requiring the recognition of a reserve, resulting in $771 thousand in expense. The net change in these inputs account for the change in the line item.

During the quarter, service fee revenue, including deposit services, mortgage banking, trust and wealth management, credit cards and insurance increased to $6.7 million from $6.4 million during the second quarter. The growth was driven by increasing transaction activity and insurance commissions and fees.

Non-Interest Expense

Total non-interest expense for the quarter ended September 30, 2021, was $30.7 million as compared to $25.8 million for the quarter ended June 30, 2021. The $4.9 million change is primarily attributed to increases of $3.6 million in merger expenses, $819 thousand in salaries and employee benefits, driven by a comparative reduction in the deferral of cost associated with loan originations, and $372 thousand loss on debt extinguishment, related to the repayment of fixed-rate term advances with Federal Home Loan Bank that were acquired through a prior merger.

Asset Quality

As of September 30, 2021, Equity’s allowance for credit losses to total loans was 2.0%, as compared to 1.8% at June 30, 2021. Nonperforming assets were $74.3 million as of September 30, 2021, or 1.7% of total assets, compared to $66.7 million at June 30, 2021, or 1.6% of total assets. Total classified assets, including loans rated special mention or worse, other real estate owned and other repossessed assets were $112.4 million, or 24.3% of regulatory capital, up from $103.5 million, or 23.2% of regulatory capital as of June 30, 2021.

During the quarter non-performing assets increased by $7.5 million due to the transition of one significant relationship to non-accrual. The Company provided $1.1 million to the allowance for credit losses, comprised of an increase in specific reserves, primarily driven by the migration of this asset to non-accrual, partially offset by improving historical loss performance and the continued moderation of economic conditions following the height of the pandemic.

Regulatory Capital

The Company’s ratio of common equity tier 1 capital to risk-weighted assets was 12.4%, the total capital to risk-weighted assets was 16.6% and the total leverage ratio was 9.0% at September 30, 2021. At December 31, 2020, the Company’s common equity tier 1 capital to risk-weighted assets ratio was 12.8%, the total capital to risk-weighted assets ratio was 17.4% and the total leverage ratio was 9.3%.

The Company’s subsidiary, Equity Bank, had a ratio of common equity tier 1 capital to risk-weighted assets of 14.5%, a ratio of total capital to risk-weighted assets of 15.8% and a total leverage ratio of 10.1% at September 30, 2021. At December 31, 2020, Equity Bank’s ratio of common equity tier 1 capital to risk-weighted assets was 14.5%, the ratio of total capital to risk-weighted assets was 15.7% and the total leverage ratio was 10.1%.

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 used as a common measure by banks as a comparable metric to understand the Company’s expense structure relative to its 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, provision for loan losses and goodwill impairment 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 the “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 8 in the following press release tables.

Conference Call and Webcast

Equity Chairman and Chief Executive Officer, Brad Elliott, and Executive Vice President and Chief Financial Officer, Eric Newell, will hold a conference call and webcast to discuss the 2021 third quarter results on Wednesday, October 20, 2021, at 10:00 a.m. eastern time, 9:00 a.m. central time.

Investors, news media and other participants should register for the call or audio webcast at investor.equitybank.com. On Wednesday, October 20, 2021, participants may also dial into the call toll-free at (844) 534-7311 from anywhere in the U.S. or (574) 990-1419 internationally, using conference ID no. 7698604.

Participants are encouraged to dial into the call or access the webcast approximately 10 minutes prior to the start time. Presentation slides to pair with the call or webcast will be posted one hour prior to the call at investor.equitybank.com.

A replay of the call and webcast will be available two hours following the close of the call until October 27, 2021, accessible at (855) 859-2056 with conference ID no. 7698604 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 NASDAQ Global Select Market 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,” “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, 2021, 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. New risks and uncertainties arise from time to time, such as COVID-19, 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 September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Interest and dividend income
Loans, including fees	$	37,581		$	32,278		$	102,392		$	99,281
Securities, taxable		3,920			3,476			11,242			12,113
Securities, nontaxable		655			923			2,096			2,769
Federal funds sold and other		290			405			846			1,409
Total interest and dividend income		42,446			37,082			116,576			115,572
Interest expense
Deposits		1,881			3,064			6,316			13,827
Federal funds purchased and retail repurchase agreements		24			25			72			80
Federal Home Loan Bank advances		10			471			155			2,198
Federal Reserve Bank discount window		—			—			—			6
Bank stock loan		—			—			—			415
Subordinated debt		1,556			1,415			4,669			1,953
Total interest expense		3,471			4,975			11,212			18,479

Net interest income		38,975			32,107			105,364			97,093
Provision (reversal) for credit losses		1,058			815			(6,355	)		23,255
Net interest income after provision (reversal) for credit losses		37,917			31,292			111,719			73,838
Non-interest income
Service charges and fees		2,360			1,706			6,125			5,097
Debit card income		2,574			2,491			7,603			6,735
Mortgage banking		801			877			2,584			2,298
Increase in value of bank-owned life insurance		1,169			489			2,446			1,452
Net gain on acquisition		—			—			585			—
Net gains (losses) from securities transactions		381		—				398			12
Other		546			922			3,902			1,929
Total non-interest income		7,831			6,485			23,643			17,523
Non-interest expense
Salaries and employee benefits		13,588			13,877			39,079			40,076
Net occupancy and equipment		2,475			2,224			7,170			6,578
Data processing		3,257			2,817			9,394			8,243
Professional fees		1,076			877			3,148			3,187
Advertising and business development		760			598			2,241			1,697
Telecommunications		439			486			1,531			1,363
FDIC insurance		465			360			1,305			1,291
Courier and postage		344			366			1,040			1,103
Free nationwide ATM cost		519			439			1,504			1,186
Amortization of core deposit intangibles		1,030			1,030			3,094			2,806
Loan expense		207			107			626			628
Other real estate owned		(342	)		133			(805	)		710
Loss on debt extinguishment		372			—			372			—
Merger expenses		4,015			—			4,627			—
Goodwill impairment		—			104,831			—			104,831
Other		2,484			2,690			7,050			6,831
Total non-interest expense		30,689			130,835			81,376			180,530
Income (loss) before income tax		15,059			(93,058	)		53,986			(89,169	)
Provision for income taxes		3,286			(2,653	)		11,972			(1,711	)
Net income (loss) and net income (loss) allocable to common stockholders	$	11,773		$	(90,405	)	$	42,014		$	(87,458	)
Basic earnings (loss) per share	$	0.82		$	(6.01	)	$	2.92		$	(5.75	)
Diluted earnings (loss) per share	$	0.80		$	(6.01	)	$	2.86		$	(5.75	)
Weighted average common shares		14,384,302			15,040,407			14,397,146			15,211,901
Weighted average diluted common shares		14,669,312			15,040,407			14,688,092			15,211,901

TABLE 2. QUARTERLY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)

	As of and for the three months ended
	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
Interest and dividend income
Loans, including fees	$	37,581		$	33,810		$	31,001		$	35,383		$	32,278
Securities, taxable		3,920			3,523			3,799			3,408			3,476
Securities, nontaxable		655			717			724			913			923
Federal funds sold and other		290			268			288			285			405
Total interest and dividend income		42,446			38,318			35,812			39,989			37,082
Interest expense
Deposits		1,881			2,025			2,410			2,755			3,064
Federal funds purchased and retail repurchase agreements		24			26			22			25			25
Federal Home Loan Bank advances		10			80			65			94			471
Subordinated debt		1,556			1,557			1,556			1,556			1,415
Total interest expense		3,471			3,688			4,053			4,430			4,975

Net interest income		38,975			34,630			31,759			35,559			32,107
Provision (reversal) for credit losses		1,058			(1,657	)		(5,756	)		1,000			815
Net interest income after provision (reversal) for credit losses		37,917			36,287			37,515			34,559			31,292
Non-interest income
Service charges and fees		2,360			2,169			1,596			1,759			1,706
Debit card income		2,574			2,679			2,350			2,401			2,491
Mortgage banking		801			848			935			855			877
Increase in value of bank-owned life insurance		1,169			676			601			489			489
Net gain on acquisition		—			663			(78	)		2,145			—
Net gains (losses) from securities transactions		381			—			17			(1	)		—
Other		546			2,065			1,291			852			922
Total non-interest income		7,831			9,100			6,712			8,500			6,485
Non-interest expense
Salaries and employee benefits		13,588			12,769			12,722			14,053			13,877
Net occupancy and equipment		2,475			2,327			2,368			2,206			2,224
Data processing		3,257			3,474			2,663			2,748			2,817
Professional fees		1,076			999			1,073			1,095			877
Advertising and business development		760			799			682			801			598
Telecommunications		439			512			580			510			486
FDIC insurance		465			425			415			797			360
Courier and postage		344			327			369			338			366
Free nationwide ATM cost		519			513			472			423			439
Amortization of core deposit intangibles		1,030			1,030			1,034			1,044			1,030
Loan expense		207			181			238			161			107
Other real estate owned		(342	)		(468	)		5			1,600			133
Loss on debt extinguishment		372			—			—			—			—
Merger expenses		4,015			460			152			299			—
Goodwill impairment		—			—			—			—			104,831
Other		2,484			2,458			2,108			2,385			2,690
Total non-interest expense		30,689			25,806			24,881			28,460			130,835
Income (loss) before income tax		15,059			19,581			19,346			14,599			(93,058	)
Provision for income taxes (benefit)		3,286			4,415			4,271			2,111			(2,653	)
Net income (loss) and net income (loss) allocable to common stockholders	$	11,773		$	15,166		$	15,075		$	12,488		$	(90,405	)
Basic earnings (loss) per share	$	0.82		$	1.06		$	1.04		$	0.85		$	(6.01	)
Diluted earnings (loss) per share	$	0.80		$	1.03		$	1.02		$	0.84		$	(6.01	)
Weighted average common shares		14,384,302			14,356,958			14,464,291			14,760,810			15,040,407
Weighted average diluted common shares		14,669,312			14,674,838			14,734,083			14,934,058			15,040,407

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

	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
ASSETS
Cash and due from banks	$	141,645		$	138,869		$	136,190		$	280,150		$	65,534
Federal funds sold		673			452			498			548			305
Cash and cash equivalents		142,318			139,321			136,688			280,698			65,839
Interest-bearing time deposits in other banks		—			—			249			249			499
Available-for-sale securities		1,157,423			1,041,613			998,100			871,827			798,576
Loans held for sale		4,108			6,183			8,609			12,394			9,053
Loans, net of allowance for credit losses⁽¹⁾		2,633,148			2,763,227			2,740,215			2,557,987			2,691,626
Other real estate owned, net		10,267			10,861			10,559			11,733			8,727
Premises and equipment, net		90,727			90,876			90,322			89,412			86,087
Bank-owned life insurance		103,431			103,321			102,645			77,044			76,555
Federal Reserve Bank and Federal Home Loan Bank stock		14,540			18,454			15,174			16,415			32,545
Interest receivable		15,519			15,064			16,655			15,831			18,110
Goodwill		31,601			31,601			31,601			31,601			31,601
Core deposit intangibles, net		12,963			13,993			15,023			16,057			17,101
Other		47,223			33,702			30,344			32,108			29,252
Total assets	$	4,263,268		$	4,268,216		$	4,196,184		$	4,013,356		$	3,865,571
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand	$	984,436		$	992,565		$	972,364		$	791,639		$	693,967
Total non-interest-bearing deposits		984,436			992,565			972,364			791,639			693,967
Savings, NOW and money market		2,092,849			2,035,496			2,074,261			2,029,097			1,816,307
Time		585,492			659,494			587,905			626,854			623,344
Total interest-bearing deposits		2,678,341			2,694,990			2,662,166			2,655,951			2,439,651
Total deposits		3,662,777			3,687,555			3,634,530			3,447,590			3,133,618
Federal funds purchased and retail repurchase agreements		39,137			47,184			40,339			36,029			46,295
Federal Home Loan Bank advances		—			9,208			9,926			10,144			167,862
Subordinated debt		88,030			87,908			87,788			87,684			87,537
Contractual obligations		18,771			4,469			4,856			5,189			5,478
Interest payable and other liabilities		36,804			18,897			20,930			19,071			22,609
Total liabilities		3,845,519			3,855,221			3,798,369			3,605,707			3,463,399
Commitments and contingent liabilities
Stockholders’ equity
Common stock		178			176			175			174			174
Additional paid-in capital		392,321			389,394			387,939			386,820			386,017
Retained earnings		79,226			68,625			53,459			50,787			38,299
Accumulated other comprehensive income, net of tax		9,475			13,450			12,019			19,781			21,074
Employee stock loans		—			—			—			(43	)		(43	)
Treasury stock		(63,451	)		(58,650	)		(55,777	)		(49,870	)		(43,349	)
Total stockholders’ equity		417,749			412,995			397,815			407,649			402,172
Total liabilities and stockholders’ equity	$	4,263,268		$	4,268,216		$	4,196,184		$	4,013,356		$	3,865,571

⁽¹⁾ Allowance for credit losses	$	52,763		$	51,834		$	55,525		$	33,709		$	34,087

TABLE 4. SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share data)

	As of and for the three months ended
	September 30,			June 30,			March 31,			December 31,			September 30,
	2021			2021			2021			2020			2020
Loans Held For Investment by Type
Commercial real estate	$	1,308,707		$	1,261,214		$	1,218,537		$	1,188,696		$	1,188,329
Commercial and industrial		569,513			732,126			820,736			734,495			857,244
Residential real estate		490,633			503,110			438,503			381,958			402,242
Agricultural real estate		138,793			129,020			134,944			133,693			127,349
Agricultural		93,767			97,912			93,764			94,322			83,084
Consumer		84,498			91,679			89,256			58,532			67,465
Total loans held-for-investment		2,685,911			2,815,061			2,795,740			2,591,696			2,725,713
Allowance for credit losses		(52,763	)		(51,834	)		(55,525	)		(33,709	)		(34,087	)
Net loans held for investment	$	2,633,148		$	2,763,227		$	2,740,215		$	2,557,987		$	2,691,626


Asset Quality Ratios
Allowance for credit losses on loans to total loans		1.96	%		1.84	%		1.99	%		1.30	%		1.25	%
Past due or nonaccrual loans to total loans		2.78	%		2.09	%		2.30	%		1.99	%		2.12	%
Nonperforming assets to total assets		1.74	%		1.56	%		1.67	%		1.36	%		1.55	%
Nonperforming assets to total loans plus other real estate owned		2.76	%		2.36	%		2.50	%		2.10	%		2.19	%
Classified assets to bank total regulatory capital		24.25	%		23.20	%		26.45	%		25.50	%		18.35	%


Selected Average Balance Sheet Data (QTD Average)
Investment securities	$	1,061,178		$	986,986		$	947,453		$	814,114		$	802,525
Total gross loans receivable		2,748,202			2,853,145			2,736,918			2,692,223			2,758,680
Interest-earning assets		4,005,509			3,964,633			3,891,140			3,647,730			3,679,168
Total assets		4,275,298			4,231,439			4,143,752			3,910,628			4,041,187
Interest-bearing deposits		2,702,040			2,656,052			2,690,159			2,551,219			2,430,407
Borrowings		132,581			171,658			139,360			172,730			377,158
Total interest-bearing liabilities		2,834,621			2,827,710			2,829,519			2,723,949			2,807,565
Total deposits		3,686,169			3,624,950			3,577,625			2,960,791			3,145,810
Total liabilities		3,852,419			3,827,400			3,748,114			3,501,056			3,558,099
Total stockholders' equity		422,879			404,039			395,638			409,572			483,088
Tangible common equity^*		376,544			356,705			347,262			355,025			329,039


Performance ratios
Return on average assets (ROAA) annualized		1.09	%		1.44	%		1.48	%		1.27	%		(8.90	)%
Return on average assets before income tax, provision for loan losses and goodwill impairment*		1.50	%		1.70	%		1.33	%		1.59	%		1.24	%
Return on average equity (ROAE) annualized		11.05	%		15.06	%		15.45	%		12.13	%		(74.45	)%
Return on average equity before income tax, provision for loan losses and goodwill impairment*		15.12	%		17.79	%		13.93	%		15.15	%		10.37	%
Return on average tangible common equity (ROATCE) annualized^*		13.27	%		17.98	%		18.57	%		14.93	%		(108.31	)%
Return on average tangible common equity adjusted for goodwill impairment*		13.27	%		17.98	%		18.57	%		14.93	%		12.01	%
Yield on loans annualized		5.43	%		4.75	%		4.59	%		5.23	%		4.65	%
Cost of interest-bearing deposits annualized		0.28	%		0.31	%		0.36	%		0.43	%		0.50	%
Cost of total deposits annualized		0.20	%		0.22	%		0.27	%		0.37	%		0.39	%
Net interest margin annualized		3.86	%		3.50	%		3.31	%		3.88	%		3.47	%
Efficiency ratio^*		56.65	%		58.85	%		64.18	%		67.19	%		67.38	%
Non-interest income / average assets		0.73	%		0.86	%		0.66	%		0.86	%		0.64	%
Non-interest expense / average assets		2.85	%		2.45	%		2.44	%		2.90	%		12.88	%


Capital Ratios
Tier 1 Leverage Ratio		9.02	%		8.88	%		8.73	%		9.30	%		8.76	%
Common Equity Tier 1 Capital Ratio		12.39	%		12.41	%		12.53	%		12.82	%		12.76	%
Tier 1 Risk Based Capital Ratio		12.90	%		12.93	%		13.08	%		13.37	%		13.32	%
Total Risk Based Capital Ratio		16.63	%		16.73	%		17.02	%		17.35	%		17.35	%
Total stockholders' equity to total assets		9.80	%		9.68	%		9.48	%		10.16	%		10.40	%
Tangible common equity to tangible assets^*		8.82	%		8.68	%		8.44	%		9.05	%		9.23	%
Book value per common share	$	29.08		$	28.76		$	27.66		$	28.04		$	27.08
Tangible book value per common share^*	$	25.90		$	25.51		$	24.34		$	24.68		$	23.72
Tangible book value per diluted common share^*	$	25.42		$	24.98		$	23.87		$	24.32		$	23.57

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

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

	For the nine months ended							For the nine months ended
	September 30, 2021							September 30, 2020
	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	$	752,795	$	34,609		6.15	%	$	757,773	$	26,789		4.72	%
Commercial real estate		990,803		34,943		4.72	%		942,478		36,533		5.18	%
Real estate construction		264,344		7,195		3.64	%		245,167		8,644		4.71	%
Residential real estate		457,761		14,167		4.14	%		464,340		14,528		4.18	%
Agricultural real estate		135,795		5,203		5.12	%		133,302		5,574		5.59	%
Agricultural		93,680		3,432		4.90	%		86,873		3,752		5.77	%
Consumer		84,285		2,843		4.51	%		67,255		3,461		6.87	%
Total loans		2,779,463		102,392		3.94	%		2,697,188		99,281		4.92	%
Securities
Taxable securities		898,461		11,242		1.67	%		737,009		12,113		2.20	%
Nontaxable securities		100,495		2,096		2.79	%		125,352		2,769		2.95	%
Total securities		998,956		13,338		1.79	%		862,361		14,882		2.31	%
Federal funds sold and other		175,761		846		0.64	%		102,202		1,409		1.84	%
Total interest-earning assets	$	3,954,180		116,576		3.94	%	$	3,661,751		115,572		4.22	%
Interest-bearing liabilities
Savings, NOW and money market deposits	$	2,076,643		2,728		0.18	%	$	1,754,759		4,923		0.37	%
Time deposits		606,151		3,588		0.79	%		728,083		8,904		1.63	%
Total interest-bearing deposits		2,682,794		6,316		0.31	%		2,482,842		13,827		0.74	%
FHLB advances		16,325		155		1.27	%		271,548		2,198		0.24	%
Other borrowings		131,516		4,741		4.82	%		100,865		2,454		3.25	%
Total interest-bearing liabilities	$	2,830,635		11,212		0.53	%	$	2,855,255		18,479		0.86	%

Net interest income			$	105,364						$	97,093
Interest rate spread						3.41	%						3.36	%

Net interest margin ⁽²⁾						3.56	%						3.54	%

⁽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
	September 30, 2021							September 30, 2020
	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	$	630,622	$	13,646		8.59	%	$	848,096	$	8,400		3.94	%
Commercial real estate		1,009,141		12,072		4.75	%		979,775		12,886		5.23	%
Real estate construction		283,106		2,664		3.73	%		214,775		2,233		4.14	%
Residential real estate		512,135		5,073		3.93	%		429,965		4,733		4.38	%
Agricultural real estate		134,673		1,819		5.36	%		131,725		1,718		5.19	%
Agricultural		91,878		1,370		5.92	%		84,859		1,204		5.65	%
Consumer		86,647		937		4.29	%		69,485		1,104		6.32	%
Total loans		2,748,202		37,581		5.43	%		2,758,680		32,278		4.65	%
Securities
Taxable securities		966,651		3,920		1.61	%		683,630		3,476		2.02	%
Nontaxable securities		94,527		655		2.75	%		118,895		923		3.09	%
Total securities		1,061,178		4,575		1.71	%		802,525		4,399		2.18	%
Federal funds sold and other		196,129		290		0.59	%		117,963		405		1.36	%
Total interest-earning assets	$	4,005,509		42,446		4.20	%	$	3,679,168		37,082		4.01	%
Interest-bearing liabilities
Savings, NOW and money market deposits	$	2,082,515		862		0.16	%	$	1,784,891		875		0.19	%
Time deposits		619,525		1,019		0.65	%		645,516		2,189		1.35	%
Total interest-bearing deposits		2,702,040		1,881		0.28	%		2,430,407		3,064		0.50	%
FHLB advances		1,401		10		2.78	%		248,437		471		0.75	%
Other borrowings		131,180		1,580		4.78	%		128,721		1,440		4.45	%
Total interest-bearing liabilities	$	2,834,621		3,471		0.49	%	$	2,807,565		4,975		0.70	%

Net interest income			$	38,975						$	32,107
Interest rate spread						3.71	%						3.31	%

Net interest margin ⁽²⁾						3.86	%						3.47	%

⁽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
	September 30, 2021							June 30, 2021
	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	$	630,622	$	13,646		8.59	%	$	826,647	$	11,729		5.69	%
Commercial real estate		1,009,141		12,072		4.75	%		991,033		11,433		4.63	%
Real estate construction		283,106		2,664		3.73	%		253,947		2,352		3.71	%
Residential real estate		512,135		5,073		3.93	%		465,525		4,642		4.00	%
Agricultural real estate		134,673		1,819		5.36	%		131,906		1,687		5.13	%
Agricultural		91,878		1,370		5.92	%		94,407		1,024		4.35	%
Consumer		86,647		937		4.29	%		89,680		943		4.22	%
Total loans		2,748,202		37,581		5.43	%		2,853,145		33,810		4.75	%
Securities
Taxable securities		966,651		3,920		1.61	%		887,983		3,523		1.59	%
Nontaxable securities		94,527		655		2.75	%		99,003		717		2.90	%
Total securities		1,061,178		4,575		1.71	%		986,986		4,240		1.72	%
Federal funds sold and other		196,129		290		0.59	%		124,502		268		0.86	%
Total interest-earning assets	$	4,005,509		42,446		4.20	%	$	3,964,633		38,318		3.88	%
Interest-bearing liabilities
Savings, NOW and money market deposits	$	2,082,515		862		0.16	%	$	2,068,319		895		0.17	%
Time deposits		619,525		1,019		0.65	%		587,733		1,130		0.77	%
Total interest-bearing deposits		2,702,040		1,881		0.28	%		2,656,052		2,025		0.31	%
FHLB advances		1,401		10		2.78	%		37,656		80		0.86	%
Other borrowings		131,180		1,580		4.78	%		134,002		1,583		4.74	%
Total interest-bearing liabilities	$	2,834,621		3,471		0.49	%	$	2,827,710		3,688		0.52	%

Net interest income			$	38,975						$	34,630
Interest rate spread						3.71	%						3.36	%

Net interest margin ⁽²⁾						3.86	%						3.50	%

⁽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
	September 30,			June 30,			March 31,			December 31,			September 30,
	2021			2021			2021			2020			2020

Income before income taxes	$	15,059		$	19,581		$	19,346		$	14,599		$	(93,058	)
Add: goodwill impairment		—			—			—			—			104,831
Less: tax effect		3,286			4,415			4,271			2,111			2,652
Adjusted income	$	11,773		$	15,166		$	15,075		$	12,488		$	9,121
Weighted average common shares outstanding		14,384,302			14,356,958			14,464,291			14,760,810			15,040,407
Effect of weighted average dilutive shares assuming positive net income		285,010			317,880			269,792			173,248			82,804
Weighted average diluted shares		14,669,312			14,674,838			14,734,083			14,934,058			15,123,211
Diluted earnings per share adjusted for goodwill impairment	$	0.80		$	1.03		$	1.02		$	0.84		$	0.60

Total stockholders' equity	$	417,749		$	412,995		$	397,815		$	407,649		$	402,172
Less: goodwill		31,601			31,601			31,601			31,601			31,601
Less: core deposit intangibles, net		12,963			13,993			15,023			16,057			17,101
Less: mortgage servicing asset, net		—			—			—			—			1
Less: naming rights, net		1,098			1,109			1,119			1,130			1,141
Tangible common equity	$	372,087		$	366,292		$	350,072		$	358,861		$	352,328
Common shares issued at period end		14,365,785			14,360,172			14,383,913			14,540,556			14,853,487
Diluted common shares outstanding at period end		14,637,306			14,664,603			14,668,287			14,756,378			14,945,282
Book value per common share	$	29.08		$	28.76		$	27.66		$	28.04		$	27.08
Tangible book value per common share	$	25.90		$	25.51		$	24.34		$	24.68		$	23.72
Tangible book value per diluted common share	$	25.42		$	24.98		$	23.87		$	24.32		$	23.57

Total assets	$	4,263,268		$	4,268,216		$	4,196,184		$	4,013,356		$	3,865,571
Less: goodwill		31,601			31,601			31,601			31,601			31,601
Less: core deposit intangibles, net		12,963			13,993			15,023			16,057			17,101
Less: mortgage servicing asset, net		—			—			—			—			1
Less: naming rights, net		1,098			1,109			1,119			1,130			1,141
Tangible assets	$	4,217,606		$	4,221,513		$	4,148,441		$	3,964,568		$	3,815,727
Total stockholders' equity to total assets		9.80	%		9.68	%		9.48	%		10.16	%		10.40	%
Tangible common equity to tangible assets		8.82	%		8.68	%		8.44	%		9.05	%		9.23	%

Total average stockholders' equity	$	422,879		$	404,039		$	395,638		$	409,572		$	483,088
Less: average intangible assets		46,335			47,334			48,376			54,547			154,049
Average tangible common equity	$	376,544		$	356,705		$	347,262		$	355,025		$	329,039
Net income (loss) allocable to common stockholders	$	11,773		$	15,166		$	15,075		$	12,488		$	(90,405	)
Add: goodwill impairment		—			—			—			—			104,831
Less: tax effect of goodwill impairment		—			—			—			—			5,305
Adjusted net income (loss) plus goodwill impairment		11,773			15,166			15,075			12,488			9,121
Amortization of intangible assets		1,040			1,041			1,045			1,055			1,043
Less: tax effect of intangible assets amortization		218			219			219			222			234
Adjusted net income (loss) allocable to common stockholders	$	12,595		$	15,988		$	15,901		$	13,321		$	9,930
Return on total average stockholders' equity (ROAE) annualized		11.05	%		15.06	%		15.45	%		12.13	%		(74.45	)%
Return on average tangible common equity (ROATCE) annualized		13.27	%		17.98	%		18.57	%		14.93	%		(108.31	)%
Adjusted return on average tangible common equity		13.27	%		17.98	%		18.57	%		14.93	%		12.01	%

Non-interest expense	$	30,689		$	25,806		$	24,881		$	28,460		$	130,835
Less: merger expense		4,015			460			152			299			—
Less: loss on debt extinguishment		372			—			—			—			—
Less: goodwill impairment		—			—			—			—			104,831
Non-interest expense, excluding merger expense, loss on debt extinguishment and goodwill impairment	$	26,302		$	25,346		$	24,729		$	28,161		$	26,004
Net interest income	$	38,975		$	34,630		$	31,759		$	35,559		$	32,107
Non-interest income		7,831			9,100			6,712			8,500			6,485
Less: net gain on acquisition		—			663			(78	)		2,145			—
Less: net gains (losses) from securities transactions		381			—			17			(1	)		—
Non-interest income, excluding gains (losses) from securities transactions	$	7,450		$	8,437		$	6,773		$	6,356		$	6,485
Net interest income plus non-interest income, excluding net gain on acquisition and net gains (losses) from securities transactions	$	46,425		$	43,067		$	38,532		$	41,915		$	38,592
Non-interest expense less goodwill impairment to net interest income plus non-interest income		65.57	%		59.01	%		64.67	%		64.60	%		67.38	%
Efficiency ratio		56.65	%		58.85	%		64.18	%		67.19	%		67.38	%
Net income (loss) allocable to common stockholders	$	11,773		$	15,166		$	15,075		$	12,488		$	(90,405	)
Add: income tax provision		3,286			4,415			4,271			2,111			(2,653	)
Add: provision (reversal) of credit losses		1,058			(1,657	)		(5,756	)		1,000			815
Add: goodwill impairment		—			—			—			—			104,831
Adjusted net income	$	16,117		$	17,924		$	13,590		$	15,599		$	12,588
Total average assets	$	4,275,298		$	4,231,439		$	4,143,752		$	3,910,628		$	4,041,187
Total average stockholders' equity	$	422,879		$	404,039		$	395,638		$	409,572		$	483,088
Return on average assets (ROAA) annualized		1.09	%		1.44	%		1.48	%		1.27	%		(8.90	)%
Adjusted return on average assets		1.50	%		1.70	%		1.33	%		1.59	%		1.24	%
Adjusted return on average equity		15.12	%		17.79	%		13.93	%		15.15	%		10.37	%

Equity Bancshares, Inc. Results Include Strong Organic Growth While Expanding Kansas Franchise

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