Equity Bancshares, Inc. Expands Organically And With Mergers In 2017, Announces Fourth Quarter Record Income Before Merger Expense And Taxes

Completes Three Mergers, Adds Oklahoma Markets, Announces Two 2018 Mergers

WICHITA, Kan., Jan. 25, 2018 (GLOBE NEWSWIRE) -- Equity Bancshares, Inc. (NASDAQ:EQBK), (“Equity”, “we”, “us”, “our”), the Wichita-based holding company of Equity Bank, reported its unaudited results for the quarter and year ended December 31, 2017, including net income allocable to common stockholders for the year of $20.6 million, or $1.62 per diluted share, and $4.3 million, or $0.31 per diluted share, in the fourth quarter.

Brad Elliott, Chairman and CEO of Equity, said, “Our velocity continued throughout 2017, and our footprint has been strengthened by the addition of strong community banks in Oklahoma, including Ponca City, Newkirk, and Tulsa, as well as additional Western Kansas locations.  We have focused our sales and service teams on organic growth while integrating community banks within our network, and in 2017 our loans grew by 9.0% and core deposits grew by 9.6%, not including the addition of new markets.  In 2018, we will continue our strategy of building strong commercial and consumer relationships within our communities, while offering sophisticated banking services.  We continue to maintain an active merger pipeline, while serving customers in four states with our entrepreneurial spirit.”

Equity completed its merger of Prairie State Bancshares, Inc. (“Prairie”) of Hoxie, Kansas, on March 10, 2017. The merger added three bank locations in Western Kansas.  At merger, Prairie had assets of $153.1 million, net loans of $130.1 million and total deposits of $125.4 million.  Results of operations of Prairie were included in Equity’s results of operations beginning March 11, 2017.

Equity also expanded into Oklahoma during 2017, completing mergers on November 10 with Eastman National Bancshares, Inc. (“Eastman”) of Ponca City, Oklahoma, and Cache Holdings, Inc. (“Cache”) of Tulsa, Oklahoma.  Equity now has five bank offices in Oklahoma, including bank locations in Newkirk, Ponca City, and Tulsa.  Results of operations of Eastman and Cache are included in Equity’s 2017 results subsequent to each merger.  At the time of merger, Eastman had assets of $259.7 million, net loans of $177.9 million and total deposits of $224.6 million.  Cache had assets of $324.6 million, net loans of $287.2 million and total deposits of $278.7 million.

Notable Items:

  • Income before taxes for the fourth quarter of 2017 was $7.5 million, or $0.50 per diluted share, compared to $981 thousand, or $0.08 per diluted share, for the same time period in 2016.  Income before taxes, adjusted to exclude merger expense, was a record $10.7 million, or $0.72 per diluted share, for the fourth quarter of 2017, compared to $6.0 million, or $0.51 per diluted share, for the fourth quarter of 2016.
  • Stated diluted earnings per share in the fourth quarter of 2017 were $0.31.  Merger expenses, adjusted for estimated income tax, were $2.1 million in the fourth quarter of 2017, or $0.15 per diluted share. 
  • The impact on earnings in the fourth quarter for the Tax Cuts and Jobs Act (Tax Reform) resulted in additional income tax expense of $1.2 million, or $0.09 per diluted share. 
  • Net income allocable to common stockholders, adjusted for these two items, was a record $7.6 million, or $0.55 per diluted share in the fourth quarter of 2017, compared to 2016 fourth quarter net income allocable to common stockholders, adjusted for merger expenses of $4.1 million, or $0.41 per diluted share.

Highlights of Equity’s growth include:

  • Total loans held for investment of $2.10 billion at December 31, 2017, as compared to total loans held for investment of $1.38 billion at December 31, 2016.  The increase of $719.7 million includes organic growth of $124.5 million, or 9.0%, $130.1 million of loans added in the Prairie merger, $177.9 million of loans added in the Eastman merger, and $287.2 million of loans added in the Cache merger.
  • Total deposits were $2.38 billion at December 31, 2017, and $1.63 billion at December 31, 2016.  Signature Deposits, or core deposits comprised of checking accounts, savings accounts, and money market accounts, were $1.61 billion at December 31, 2017, compared to $1.08 billion at December 31, 2016.  Organic signature deposit growth was 9.6% for the year.  In addition, the Prairie merger added total deposits of $125.4 million, including core deposits of $80.1 million, the Eastman merger added total deposits of $224.6 million, including core deposits of $197.6 million, and the Cache merger added total deposits of $278.7 million, including core deposits of $146.6 million.
  • Total assets of $3.17 billion at December 31, 2017, compared to $2.19 billion at December 31, 2016.  The Prairie merger added total assets of $153.1 million, the Eastman merger added total assets of $259.7 million, and the Cache merger added total assets of $324.6 million.
  • Book value per common share of $25.62 at December 31, 2017 and $22.09 at December 31, 2016. Tangible book value per common share of $17.61 at December 31, 2017 and $16.64 at December 31, 2016.

Equity announced two mergers on December 18, 2017.  The first provides entry for Equity into Southwest Kansas, with a merger agreement with Kansas Bank Corporation (“KBC”) of Liberal, Kansas, parent company of First National Bank of Liberal/Hugoton.  The second merger is a natural fit into Equity’s Kansas City metropolitan market, and Equity will merge with Adams Dairy Bancshares, Inc. (“Adams”) of Blue Springs, Missouri, parent company of Adams Dairy Bank.  Equity expects to close and complete the mergers simultaneously in the second quarter of 2018.

After the mergers, Equity will operate 48 bank locations in four states, adding five bank locations in Southwest Kansas and having a total of seven bank offices in its Kansas City market, including three in Lee’s Summit, Missouri, two in Overland Park, Kansas, and one in Kansas City, Missouri.  The mergers mark Equity’s sixteenth and seventeenth integrations since 2003 and the mergers with KBC and Adams will be the sixth and seventh since the Company’s initial public offering in November 2015.

Financial Results For Year and Quarter Ended December 31, 2017

Net income allocable to common stockholders was $20.6 million for the year ended December 31, 2017, as compared to $9.4 million for the year ended December 31, 2016, an increase of $11.3 million or 120.3%.  Beginning November 11, 2016, financial results reflect the merger of Community First Bancshares, Inc. (“Community”).  The merger of Community added five locations in Arkansas with total assets of $462.9 million.  Results of operations of Prairie were included in Equity’s results of operations beginning March 11, 2017 and results of operations for both Eastman and Cache were included in Equity’s results of operations beginning November 11, 2017.  Merger expenses of $5.4 million, $3.5 million after tax, are included in 2017 results. These costs were incurred mostly in connection with the Prairie, Eastman, and Cache mergers, with a very small amount attributable to the pending KBC and Adams mergers. Merger expenses associated with the Community merger and the then pending Prairie merger totaling $5.3 million, $3.9 million after tax, are included in 2016 results.

Diluted earnings per share were $1.62 for the year ended December 31, 2017, as compared to $1.07 for the comparable period of 2016.  Weighted average fully diluted shares were 12,707,184 and 8,755,526 for the years ended December 31, 2017 and 2016.  The increase in weighted average fully diluted shares reflects the issuance of 479,465 shares in connection with Equity’s March 2017 merger of Prairie and issuance of 1,179,747 and 1,190,941 shares in connection with Equity’s November 2017 mergers of Eastman and Cache.

Net interest income was $86.0 million for the year ended December 31, 2017 as compared to $52.6 million for the year ended December 31, 2016, a $33.4 million or 63.5% increase. The increase in net interest income was primarily driven by growth in loan and securities balances, partially offset by an increase in interest expense as we funded the increase in earning assets with increased deposits and borrowings.

Our net interest margin was 3.83% for the year ended December 31, 2017 as compared to 3.30% for the year ended December 31, 2016.  The increase in net interest margin was primarily due to an increase in overall yield on interest-earning assets and the utilization of a “leverage” or “spread” opportunity during the first nine months of 2016.  The  spread opportunity, as more fully discussed in our 2016 Annual Report on Form 10-K, positively impacts net income but negatively impacts net interest margin due to investing in lower yielding interest-earning assets. Net interest margin excluding this spread opportunity was approximately 3.51% for the twelve months ended December 31, 2016.  Equity suspended the utilization of this strategy effective October 1, 2016.

The provision for loan losses was $3.0 million for the year ended December 31, 2017 as compared to $2.1 million for the year ended December 31, 2016.  Net charge-offs for the twelve months ended December 31, 2017 were $887 thousand compared to net charge-offs of $1.2 million for the comparable period of 2016.

Total non-interest income was $15.4 million for the year ended December 31, 2017 as compared to $10.5 million for the year ended December 31, 2016.  Increases in service charges and fees and in debit card income are principally attributable to the addition of accounts and higher transaction volumes associated with the Community and Prairie mergers and to a lesser extent the November 2017 Eastman and Cache mergers.  Non-interest income includes net gain from securities transactions of $271 thousand and $479 thousand for the twelve-month periods ended December 31, 2017 and 2016.

Total non-interest expense was $67.5 million for the year ended December 31, 2017 as compared to $47.1 million for the year ended December 31, 2016.  These results reflect the full-year effect of the Community merger, the March 2017 addition of three locations in western Kansas, the November 2017 additions of five locations in northern Oklahoma, as well as additions to lending, customer service, corporate and operations staff indirectly attributable to mergers and other growth. Non-interest expense also includes merger expenses of $5.4 million for the year ended December 31, 2017.  These costs were incurred mainly in connection with the Prairie, Eastman, and Cache mergers, with a small amount attributable to the pending KBC and Adams mergers.  Merger expenses for the year ended December 31, 2016 were associated with the Community and then pending Prairie mergers and totaled $5.3 million.

Equity’s effective tax rate for the twelve-month period ended December 31, 2017 was 33.4% as compared to 32.4% for the comparable period ended December 31, 2016.  The effective tax rates for each of the comparable periods reflect the levels of tax-exempt interest income, non-taxable life insurance income, non-deductible facilitative merger expenses, and other non-deductible expenses included in income before income taxes as well as federal income tax credits available to reduce Equity’s tax expense for the respective periods.  In addition, beginning with the first quarter 2017 adoption of ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, excess tax benefits, generated when the tax return deductible compensation expense exceeds cumulative compensation cost recognized for financial reporting purposes, have been recorded in the period in which they occur.  Prior to adoption of ASU 2016-09, excess tax benefits associated with the exercise of stock options were recognized as additional paid in capital.  The 2017 provision for income taxes also includes a fourth quarter charge of $1.2 million, or $0.10 per diluted share, related to Tax Reform.  The reduction of the statutory federal tax rate from 35% to 21%, provided for by Tax Reform, resulted in the re-measurement of Equity’s net deferred tax assets.

Fourth Quarter Financial Results

Net income allocable to common stockholders was $4.3 million for the three months ended December 31, 2017, as compared to $417 thousand for the three months ended December 31, 2016.  Diluted earnings per share were $0.31 for the three-month period ended December 31, 2017, as compared to $0.04 for the comparable period of 2016.  Weighted average fully diluted shares were 13,809,533 and 10,012,395 for the three-month periods ended December 31, 2017 and 2016.

Net interest income for the quarter ended December 31, 2017 was $24.6 million as compared to $15.7 million for the quarter ended December 31, 2016. Growth in loan and securities balances, partially offset by the increased deposits and borrowings required to fund that growth resulted in the increased net interest income.

Our net interest margin was 3.79% for the quarter ended December 31, 2017 and 3.60% for the comparable quarter of the prior year.

The provision for loan losses was $503 thousand for the quarter ended December 31, 2017 as compared to $760 thousand for the quarter ended December 31, 2016. Net recoveries for the three months ended December 31, 2017 were $26 thousand compared to net charge-offs of $405 thousand for the comparable period of 2016.

Total non-interest income for the quarter ended December 31, 2017 was $4.1 million, compared to $2.8 million for the quarter ended December 31, 2016.  Increases in service charges and fees and in debit card income are principally attributable to the addition of accounts and higher transaction volumes associated with the Community and Prairie mergers and to a lesser extent the November 2017 Eastman and Cache mergers.

Total non-interest expense for the quarter ended December 31, 2017 was $20.7 million, compared to $16.7 million for the quarter ended December 31, 2016.  Non-interest expense includes merger expenses of $3.3 million for the three-months ended December 31, 2017, compared to $5.1 million for the comparable period of 2016.  Increased non-interest expense reflects the effect of merger activity, as well as additions to lending, customer service, corporate and operations staff.

Equity’s provision for income taxes was $3.2 million for the quarter ended December 31, 2017, as compared to provision for income taxes of $564 thousand for the quarter ended December 31, 2016.

Loans, Deposits, And Total Assets

Loans held for investment were $2.10 billion at December 31, 2017, compared to $1.38 billion at December 31, 2016, an increase of $719.7 million.  The year-over-year increase in loans held for investment includes organic growth of $124.5 million, or 9.0%, $130.1 million of net loans acquired in the Prairie merger in the first quarter of 2017, $177.9 million of net loans acquired in the Eastman merger in the fourth quarter of 2017 and $287.2 million of net loans acquired in the Cache merger in the fourth quarter of 2017.

As of December 31, 2017, Equity’s allowance for loan losses to total loans was 0.40%, compared to 0.46% at December 31, 2016.  Total reserves, including purchase discounts, to total loans were approximately 1.21% as of December 31, 2017, compared to 1.37% at December 31, 2016.  Nonperforming assets of $48.2 million as of December 31, 2017 were 1.52% to total assets, and include $7.8 million of nonperforming assets acquired in the Prairie merger, $8.4 million of nonperforming assets acquired in the Eastman merger, and $520 thousand of nonperforming assets acquired in the Cache merger.  Nonperforming assets at December 31, 2016 were $31.3 million or 1.43% of total assets.

Total deposits were $2.38 billion at December 31, 2017, as compared to $1.63 billion at December 31, 2016.  Total deposits increased $751.6 million between December 31, 2016 and December 31, 2017, including $125.4 million of deposits assumed in the Prairie merger, $224.6 million of deposits assumed in the Eastman merger, $278.7 million of deposits assumed in the Cache merger, and $122.9 million, or 7.5%, of organic deposit growth.  Signature Deposits were $1.61 billion at December 31, 2017, as compared to $1.08 billion at December 31, 2016. 

At December 31, 2017, Equity had consolidated total assets of $3.17 billion, compared to $2.19 billion at December 31, 2016, an increase of $978.8 million.  The increase in total assets includes $153.1 million of total assets acquired in the Prairie merger, $259.7 million of total assets acquired in the Eastman merger, and $324.6 million of total assets acquired in the Cache merger.

Capital and Borrowings

In connection with the Prairie merger, Equity issued 479,465 shares valued at $31.79 per share, Equity’s closing price on March 10, 2017.  Net of $329 thousand of stock issuance costs, the Prairie merger added $14.9 million to stockholders’ equity. Related to the Eastman and Cache mergers, Equity issued 1,179,747 and 1,190,941 shares valued at $33.15 per share, Equity’s closing price on November 10, 2017.  Net of $299 thousand of stock issuance costs, the Eastman merger added $38.8 million to stockholders’ equity and net of $252 thousand of stock issuance costs, the Cache merger added $39.2 million to stockholders’ equity.

At December 31, 2017, common stockholders’ equity totaled $374.1 million, $25.62 per common share, compared to $258.0 million, $22.09 per common share, at December 31, 2016.  Tangible common equity was $257.2 million and tangible book value per common share was $17.61 at December 31, 2017. Tangible common equity was $194.4 million and tangible book value per common share was $16.64 at December 31, 2016.  The ratio of common equity tier 1 capital to risk-weighted assets was approximately 11.56% and the total capital to risk-weighted assets was approximately 12.54% at December 31, 2017.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided at the end of this press release.

Conference Call and Webcast

Equity Chairman and Chief Executive Officer, Brad Elliott, and Chief Financial Officer, Greg Kossover, will hold a conference call and webcast to discuss fourth quarter 2017 results on Friday, January 26, 2018 at 9 a.m. central time.

Investors, news media and other participants should register for the call or audio webcast at investor.equitybank.com. On Friday, January 26, 2018, participants may 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. 9667697.

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 February 2, 2018, accessible at (855) 859-2056 with conference ID no. 9667697 or 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, and treasury management services. As of December 31, 2017, Equity had $3.17 billion in consolidated total assets, with 42 locations throughout Kansas, Missouri, Arkansas and Oklahoma, including corporate headquarters in Wichita, a bank in Tulsa, and bank locations throughout the Kansas City metropolitan area. Learn more at www.equitybank.com.

Equity seeks to provide an enhanced banking experience for customers by providing a suite of sophisticated banking products and services tailored to their needs, 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.”

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 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 (“SEC”) on March 16, 2017 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, Form S-3 or Form S-4. 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, 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.

Important Additional Information

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed merger of Equity and each of KBC and Adams, Equity will file a registration statement on Form S-4 with the Securities and Exchange Commission (the “SEC”) with respect to the proposed merger. Each registration statement will include a proxy statement of KBC, and a proxy statement of Adams, respectively, and will constitute a prospectus of Equity, which KBC and Adams will send to their respective shareholders. Investors and shareholders are advised to read the proxy statement/prospectus when it becomes available because it will contain important information about Equity, KBC and Adams and the proposed transactions.

These documents will contain important information relating to the proposed transactions. When filed, this document and other documents relating to the merger filed by Equity can be obtained free of charge from the SEC's website at www.sec.gov. These documents also can be obtained free of charge by accessing Equity's website at www.equitybank.com under the tab “Investor Relations” and then under “Financials.” Alternatively, these documents, when available, can be obtained free of charge from Equity by directing a request to Equity Bancshares, Inc., 7701 East Kellogg, Wichita, Kansas 67207, Attention: John J. Hanley, SVP and Director of Investor Relations, Telephone: (316) 612-6000; or to Kansas Bank Corporation, 1700 North Lincoln Avenue, Liberal, Kansas 67901, Attention: Tina Call, President & CEO, Telephone: (620) 624-1971; or to Adams Dairy Bancshares, Inc.651 NE Coronado Drive, Blue Springs, Missouri, 64014, Attention: David Chinnery, Chairman & CEO, Telephone: (816) 655-3333.

Participants in the Transactions

Equity, KBC, Adams, and certain of their respective directors and executive officers may be deemed under the rules of the SEC to be participants in the solicitation of proxies from the respective shareholders of KBC or Adams in connection with the proposed transaction. Certain information regarding the interests of these participants and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the proxy statement/prospectus regarding each of the proposed transactions when it becomes available. Additional information about Equity and its directors and officers may be found in the definitive proxy statement of Equity relating to its 2017 Annual Meeting of Stockholders filed with the SEC on March 22, 2017 and Equity's annual report on Form 10-K for the year ended December 31, 2016 filed with the SEC on March 16, 2017. The definitive proxy statement and annual report can be obtained free of charge from the SEC's website at www.sec.gov.

No Offer or Solicitation

This press release shall not constitute an offer to sell, a solicitation of an offer to sell, or the solicitation or an offer to buy any securities. There will be no sale of securities in any jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirement of Section 10 of the Securities Act of 1933, as amended.

Unaudited Financial Tables
             

  • Table 1. Selected Financial Highlights
  • Table 2. Consolidated Balance Sheets
  • Table 3. Consolidated Statements of Income
  • Table 4. Non-GAAP Financial Measures


TABLE 1. SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share data)

  As of and for the three months ended
  December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
Statement of Income Data          
Net interest income $   24,589    $   20,321    $   21,199   $   19,893   $   15,663  
Provision for loan losses     503        727        628       1,095       760  
Net gains from securities transactions     —        175        83       13       —  
Total non-interest income     4,104        4,035        3,962       3,339       2,789  
Merger expenses     3,267        1,023        136       926       5,057  
Total non-interest expense     20,718        16,388        15,131       15,226       16,711  
Income before income taxes     7,472        7,241        9,402       6,911       981  
Provision for income taxes     3,198        2,084        3,048       2,047       564  
Net income     4,274        5,157        6,354       4,864       417  
Net income allocable to common stockholders     4,274        5,157        6,354       4,864       417  
Basic earnings per share     0.32        0.42        0.52       0.41       0.04  
Diluted earnings per share     0.31        0.41        0.51       0.40       0.04  
           
Balance Sheet Data (at period end)          
Securities available-for-sale $   162,272    $   81,116    $   92,435   $   103,178   $   95,732  
Securities held-to-maturity     535,462        528,944        532,159       519,239       465,709  
Gross loans held for investment   2,103,279      1,540,761      1,529,396     1,518,576     1,383,605  
Allowance for loan losses     8,498        7,969        7,568       7,048       6,432  
Intangible assets, net     116,922        71,353        71,608       71,790       63,612  
Total assets   3,170,509      2,405,426      2,408,624     2,399,256     2,192,192  
Total deposits   2,382,013      1,868,493      1,819,677     1,821,090     1,630,451  
Non-time deposits   1,605,514      1,223,244      1,163,904     1,199,266     1,077,293  
Borrowings     401,652        235,098        292,302       288,521       293,909  
Total liabilities   2,796,365      2,113,591      2,122,566     2,120,050     1,934,228  
Total stockholders’ equity     374,144        291,835        286,058       279,206       257,964  
Tangible common equity*     257,222        220,482        214,450       207,416       194,352  
           
Selected Average Balance Sheet Data (quarterly average)          
Total gross loans receivable $ 1,850,045    $ 1,528,658    $ 1,519,289   $ 1,403,076   $ 1,175,300  
Investment securities     669,220        621,055        613,914       580,467       516,988  
Interest-earning assets   2,573,043      2,192,275      2,175,517     2,036,177     1,729,927  
Total assets   2,820,548      2,402,599      2,382,886     2,236,252     1,886,002  
Interest-bearing deposits   1,821,850      1,584,618      1,539,763     1,458,107     1,210,571  
Borrowings     330,651        266,392        309,588       289,074       256,329  
Total interest-bearing liabilities   2,152,501      1,851,010      1,849,351     1,747,181     1,466,900  
Total deposits   2,140,490      1,837,726      1,781,181     1,673,249     1,412,587  
Total liabilities   2,483,029      2,113,592      2,099,698     1,971,518     1,681,226  
Total stockholders’ equity     337,519        289,007        283,187       264,736       204,773  
Tangible common equity     240,899        217,542        211,467       199,551       160,629  
           
Performance ratios          
Return on average assets (ROAA) annualized     0.60 %     0.85 %     1.07 %     0.88 %     0.09 %
Return on average equity (ROAE) annualized     5.02 %     7.08 %     9.00 %     7.45 %     0.81 %
Return on average tangible common equity (ROATCE) annualized*     7.41 %     9.71 %     12.36 %     10.17 %     1.28 %
Yield on loans annualized     5.40 %     5.30 %     5.45 %     5.61 %     5.21 %
Cost of interest-bearing deposits annualized     0.87 %     0.82 %     0.75 %     0.72 %     0.68 %
Cost of total deposits annualized     0.74 %     0.71 %     0.65 %     0.62 %     0.58 %
Net interest margin annualized     3.79 %     3.68 %     3.91 %     3.96 %     3.60 %
Efficiency ratio*     60.82 %     63.54 %     59.79 %     61.59 %     63.16 %
Non-interest income / average assets     0.58 %     0.67 %     0.67 %     0.61 %     0.59 %
Non-interest expense / average assets     2.91 %     2.71 %     2.55 %     2.76 %     3.52 %
           
Capital Ratios          
Tier 1 Leverage Ratio     10.33 %     10.32 %     10.15 %     10.52 %     11.81 %
Common Equity Tier 1 Capital Ratio     11.56 %     13.33 %     13.07 %     12.72 %     13.34 %
Tier 1 Risk Based Capital Ratio     12.17 %     14.15 %     13.89 %     13.54 %     14.25 %
Total Risk Based Capital Ratio     12.54 %     14.62 %     14.34 %     13.96 %     14.67 %
Total stockholders’ equity to total assets     11.80 %     12.13 %     11.88 %     11.64 %     11.77 %
Tangible common equity to tangible assets*     8.42 %     9.45 %     9.18 %     8.91 %     9.13 %
Book value per share $   25.62    $   23.86    $   23.44   $   22.88   $   22.09  
Tangible common book value per share* $   17.61    $   18.03    $   17.57   $   17.00   $   16.64  
Tangible book value per diluted common share* $   17.29    $   17.64    $   17.24   $   16.66   $   16.37  

* The value noted is considered a Non-GAAP financial measure.  For a reconciliation of Non-GAAP financial measures, see Table 4. Non-GAAP Financial Measures.


TABLE 2. CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)

  December 31,
2017
December 31,
2016
ASSETS    
Cash and due from banks $   48,034   $   34,137  
Federal funds sold     4,161       958  
     
Cash and cash equivalents     52,195       35,095  
     
Interest-bearing time deposits in other banks     3,496       3,750  
Available-for-sale securities     162,272       95,732  
Held-to-maturity securities, fair value of $532,744 and $461,156     535,462       465,709  
Loans held for sale     16,344       4,830  
Loans, net of allowance for loan losses of $8,498 and $6,432   2,094,781     1,377,173  
Other real estate owned, net     7,907       8,656  
Premises and equipment, net     63,449       50,515  
Bank owned life insurance     68,384       48,055  
Federal Reserve Bank and Federal Home Loan Bank stock     24,373       16,652  
Interest receivable     12,371       6,991  
Goodwill     104,907       58,874  
Core deposit intangible, net     10,738       4,715  
Other     13,830       15,445  
     
Total assets $ 3,170,509   $ 2,192,192  
     
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Deposits    
Demand $   366,530   $   207,668  
     
Total non-interest bearing deposits     366,530       207,668  
     
Savings, NOW, and money market   1,238,984       869,625  
Time     776,499       553,158  
     
Total interest-bearing deposits   2,015,483     1,422,783  
     
Total deposits   2,382,013     1,630,451  
     
Federal funds purchased and retail repurchase agreements     37,492       20,637  
Federal Home Loan Bank advances     347,692       259,588  
Bank stock loan     2,500      
Subordinated debentures     13,968       13,684  
Contractual obligations     1,967       2,504  
Interest payable and other liabilities     10,733       7,364  
Total liabilities   2,796,365     1,934,228  
     
     
Stockholders’ equity    
Common stock     161       132  
Additional paid-in capital     331,339       236,103  
Retained earnings     65,512       44,328  
Accumulated other comprehensive loss     (3,092 )     (2,702 )
Employee stock loans     (121 )     (242 )
Treasury stock     (19,655 )     (19,655 )
Total stockholders’ equity     374,144       257,964  
Total liabilities and stockholders’ equity $   3,170,509   $   2,192,192  


TABLE 3. CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share data)

  Three Months Ended
December 31,
Year Ended
December 31,
  2017 2016 2017 2016
Interest and dividend income        
Loans, including fees $   25,180 $   15,387 $   85,662 $   50,272  
Securities, taxable     3,378     2,060     12,308     8,111  
Securities, nontaxable     865     611     3,375     1,654  
Federal funds sold and other     385     249     1,348     1,762  
         
Total interest and dividend income   29,808   18,307   102,693   61,799  
         
Interest expense        
Deposits     3,982     2,058     12,722     7,042  
Federal funds purchased and retail repurchase agreements     24     16     64     58  
Federal Home Loan Bank advances     942     337     2,909     1,400  
Bank stock loan     16     31     16     31  
Subordinated debentures     255     202     980     671  
         
Total interest expense     5,219     2,644     16,691     9,202  
         
Net interest income   24,589   15,663    86,002   52,597  
Provision for loan losses     503     760     2,953     2,119  
         
Net interest income after provision for loan losses   24,086   14,903   83,049   50,478  
Non-interest income        
Service charges and fees     1,475     1,115     5,154     3,552  
Debit card income     1,162     771     4,547     2,898  
Mortgage banking     409     375     1,955     1,394  
Increase in value of bank owned life insurance     377     254     1,445     1,000  
Net gain from securities transactions     —     —     271     479  
Other     681     274     2,068     1,143  
         
Total non-interest income    4,104    2,789   15,440   10,466  
         
Non-interest expense        
Salaries and employee benefits   9,565   6,102    33,960   21,951  
Net occupancy and equipment     1,684     1,265     6,305     4,586  
Data processing     1,357     978     4,927     3,568  
Professional fees     626     531     2,363     2,075  
Advertising and business development     428     297     2,105     1,198  
Telecommunications     225     298     1,191     1,101  
FDIC insurance     330     141     945     894  
Courier and postage     251     201     935     683  
Free nation-wide ATM cost     249     184     932     672  
Amortization of core deposit intangible     338     153     1,025     413  
Loan expense     335     186     993     599  
Other real estate owned     29     222     523     386  
Loss on debt extinguishment     —     —     —     58  
Merger expenses     3,267     5,057     5,352     5,294  
Other     2,034     1,096     5,907     3,597  
         
Total non-interest expense   20,718   16,711   67,463   47,075  
         
Income before income taxes   7,472    981   31,026   13,869  
Provision for income taxes     3,198     564     10,377     4,495  
         
Net income     4,274     417     20,649     9,374  
Dividends and discount accretion on preferred stock     —     —     —     (1 )
         
Net income allocable to common stockholders $   4,274 $   417 $   20,649 $   9,373  
         
Basic earnings per share $   0.32 $   0.04 $   1.66 $   1.09  
         
Diluted earnings per share $   0.31 $   0.04 $   1.62 $   1.07  


TABLE 4. Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands, except per share data)

  As of and for the three months ended
  December 31,
2017
September 30,
2017
June 30,
2017
March 31,
2017
December 31,
2016
Total stockholders’ equity $   374,144    $   291,835    $   286,058    $   279,206    $   257,964   
Less: goodwill     104,907        64,587        64,587        64,521        58,874   
Less: core deposit intangibles, net     10,738        5,476        5,719        5,954        4,715   
Less: mortgage servicing asset, net     17        19        20        22        23   
Less: naming rights, net     1,260        1,271        1,282        1,293        —   
           
Tangible common equity $ 257,222    $  220,482    $  214,450    $  207,416    $   194,352   
           
Common shares outstanding at period end   14,605,607      12,230,319      12,206,319      12,202,237      11,680,308   
           
Diluted common shares outstanding at period end   14,873,257      12,501,484      12,441,429      12,450,315      11,873,480   
           
Book value per common share $   25.62    $   23.86    $   23.44    $   22.88    $   22.09   
           
Tangible book value per common share $   17.61    $   18.03    $   17.57    $   17.00    $   16.64   
           
Tangible book value per diluted common share $   17.29    $   17.64    $   17.24    $   16.66    $   16.37   
           
Total assets $  3,170,509    $  2,405,426    $ 2,408,624    $  2,399,256    $ 2,192,192   
Less: goodwill     104,907        64,587        64,587        64,521        58,874   
Less: core deposit intangibles, net     10,738        5,476        5,719        5,954        4,715   
Less: mortgage servicing asset, net     17        19        20        22        23   
Less: naming rights, net     1,260        1,271        1,282        1,293        —   
           
Tangible assets $  3,053,587    $  2,334,073    $  2,337,016    $   2,327,466    $ 2,128,580   
           
Equity to assets     11.80 %     12.13 %     11.88 %     11.64 %     11.77 %
           
Tangible common equity to tangible assets     8.42 %     9.45 %     9.18 %     8.91 %     9.13 %
           
Total average stockholders’ equity $   337,519    $   289,007    $   283,187    $   264,736    $   204,773   
Less: average intangible assets and preferred stock     96,620        71,465        71,720        65,185        44,144   
           
Average tangible common equity $   240,899    $   217,542    $   211,467    $   199,551    $   160,629   
           
Net income allocable to common stockholders $   4,274    $   5,157    $   6,354    $   4,864    $   417   
Amortization of intangible assets     349       256        247        218        155  
Less: Tax effect of intangible assets amortization     122        90        86        76        54   
           
Adjusted net income allocable to common stockholders $   4,501    $   5,323    $   6,515    $   5,006    $   518   
           
Return on total average stockholders’ equity (ROAE) annualized   5.02 %   7.08 %   9.00 %   7.45 %   0.81 %
           
Return on average tangible common equity (ROATCE) annualized     7.41 %     9.71 %     12.36 %     10.17 %     1.28 %
           
Non-interest expense $   20,718    $   16,388    $   15,131    $   15,226    $   16,711   
Less: merger expenses     3,267        1,023        136        926        5,057   
           
Non-interest expense, excluding merger expenses $   17,451    $   15,365    $   14,995    $   14,300    $   11,654   
           
Net interest income $   24,589    $   20,321    $   21,199    $   19,893    $   15,663   
           
Non-interest income $   4,104    $   4,035    $   3,962    $   3,339    $   2,789   
Less: net gain from securities transactions     —        175        83        13        —   
           
Non-interest income, excluding net gains on security transactions $   4,104    $   3,860    $   3,879    $   3,326    $   2,789   
           
Net interest income plus non-interest income, excluding net gains on security transactions $   28,693    $   24,181    $   25,078    $   23,219    $   18,452   
Non-interest expense to net interest income plus non-interest income     72.21 %     67.29 %     60.14 %     65.54 %     90.56 %
           
Efficiency ratio     60.82 %     63.54 %     59.79 %     61.59 %     63.16 %
           

Media and Investor Contact:

John Hanley, SVP, Director of Investor Relations

913-583-8004 / jhanley@equitybank.com

investor.equitybank.com

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Source: Equity Bancshares, Inc.