Press Release

Equity continues stakeholder support programs during pandemic, 
while deferring less than 1% of commercial loans, maintains Tier 1 Capital ratio of 13.3%
and adds $2.97 tangible book per share year-to-date in 2020

WICHITA, Kan., Oct. 20, 2020 (GLOBE NEWSWIRE) -- Equity Bancshares, Inc. (NASDAQ: EQBK), (“Equity”, “the Company”, “we”, “us”, “our”), the Wichita-based holding company of Equity Bank, reported its unaudited results for the third quarter ended September 30, 2020.

Equity recorded a $104.8 million impairment in the value of goodwill and a resulting net loss of $90.4 million or $6.01 per diluted share in the quarter ended September 30, 2020, while maintaining a Tier 1 capital ratio of 13.3%, growing tangible book value by $2.43 per share and continuing to grow core deposits and relationships. Net income, adjusted to exclude the impairment charge on goodwill, was $9.1 million, or $0.60 per diluted share.

“I’m very proud of our relationship bankers in each of our markets for their continued collaboration and support of our communities. As a result of our collaborative approach with our customers, we currently have approximately 1% of loans on deferral as of September 30, 2020, down from approximately 24% on June 30, 2020. We continue to be positioned for loan opportunities in all regional pipelines,” said Brad Elliott, Chairman and CEO of Equity.

“Despite the non-recurring impact of goodwill impairment on our earnings during the third quarter, our regulatory capital ratios and tangible book value, which grew to $23.72 during the third quarter, are the highest levels we’ve reported as a publicly-traded company and are indicative of a safe and sound bank under the regulatory capital framework. Our capital levels position Equity to support continued growth, long-term stability and core earnings. We continue to support our small business, commercial and family customers and we are confident that our leadership during the pandemic crisis indicates the resolve and importance of community banking and will be a key component of our Equity story.”

Through September 30, 2020, Equity reported net growth of more than 3,389 new consumer core deposit customers and $279.9 million in core deposit growth. Equity’s digital adoption among core banking customers through September 30, 2020, was 48.4% compared to 42.4% at September 30, 2019, with online bill payment and mobile deposit totals of $30.1 million, an 11.0% increase compared to the nine-month period ended September 30, 2019.

“We continue to be responsive and adaptive to our changing customer bases and upgrades to our online banking platform have resulted in continued customer satisfaction, as well as increased treasury service relationships and Equity Trust and Wealth Management customers,” said Mr. Elliott. “Our mission is to deliver sophisticated banking products to customers throughout a diverse range of markets. Upgraded online tools and savvy relationship bankers have helped us provide value to small businesses in our regions as well as consumers accessing their money in new and different ways.

Equity received two local honors for work within our regions and collaboration by our team members. The Company earned the honor of Leaders in Diversity and Inclusion 2020, its second straight year and third overall earning the honor from the Wichita Business Journal. Companies recognized are leading efforts to develop inclusive working environments, products and delivery that are impactful to their communities. Equity was also recognized as one of the Top Innovative Companies in Wichita in 2020, also awarded by the Wichita Business Journal, for its improvement in processes and outcomes for customers, including its digital upgrades and PPP implementation.

Notable Items:

• Tangible book value per common share was $23.72 at September 30, 2020, as compared to $20.75 at December 31, 2019, representing an increase of 14.3% or $2.97. During the quarter ended September 30, 2020, the Company repurchased 383,523 shares at a weighted average cost of $15.48, totaling $5.9 million
• At September 30, 2020, $40.2 million of loans were under deferment in connection to the COVID-19 crisis, as compared to $673.9 million, or 24.0% of total loans, under deferment at June 30, 2020.

Equity’s Balance Sheet Highlights:

• Total loans held for investment of $2.73 billion at September 30, 2020, as compared to total loans held for investment of $2.56 billion at December 31, 2019.
• Total deposits of $3.13 billion at September 30, 2020, as compared to $3.06 billion at December 31, 2019.  Signature deposits, including core deposits comprised of checking, savings and money market accounts, were $2.51 billion at September 30, 2020, relative to $2.23 billion at December 31, 2019.
• Total assets were $3.87 billion at September 30, 2020, as compared to $3.95 billion at December 31, 2019.

Financial Results for the Quarter Ended September 30, 2020

Net loss allocable to common stockholders was $90.4 million, or $6.01 per diluted share, for the three months ended September 30, 2020, as compared to net income allocable to common stockholders of $1.7 million, or $0.11 per diluted share, for the three months ended June 30, 2020, a decrease of $92.1 million. This decrease was primarily attributable to a goodwill impairment charge of $104.8 million taken during the quarter. Net income, excluding the goodwill impairment, using a projected 22.5% effective tax rate, for the quarter ended September 30, 2020 totaled $9.1 million, or $0.60 per diluted share.

Net Interest Income

Net interest income was $32.1 million for the three months ended September 30, 2020, as compared to $32.9 million for the three months ended June 30, 2020, a $784 thousand, or 2.4% decrease. The decrease in net interest income was driven by a decrease in net interest margin of two basis points, declining to 3.47% for the three months ended September 30, 2020 from 3.49% for the three months ended June 30, 2020. The yield on earning assets declined two basis points to 4.01% for the quarter ended September 30, 2020 from 4.03% from the previous quarter. The cost of interest-bearing liabilities declined to 0.70% or one basis point for the quarter ended September 30, 2020 from 0.71% in the quarter ended June 30, 2020. The cost of interest-bearing deposits declined 13 basis points to 0.50% for the three months ended September 30, 2020 from 0.63% in the previous quarter primarily attributed to the decline in the cost of time deposits, which declined 28 basis points between the quarters. The cost of other borrowings increased to 4.45% in the three months ended September 30, 2020 from 2.09% from the quarter ended June 30, 2020, due the addition of subordinated debt issued by the Company in late June and late July, cumulatively adding $75 million of debt with a coupon of 7.0%.

Provision for Loan Losses

The provision for loan losses was $815 thousand for the three months ended September 30, 2020, as compared to $12.5 million for the three months ended June 30, 2020. For the three months ended September 30, 2020, we had net charge-offs of $806 thousand as compared to $337 thousand for three months ended June 30, 2020.

Non-Interest Income

Total non-interest income was $6.5 million for the three months ended September 30, 2020 increasing $753 thousand from the $5.7 million reported for the three months ended June 30, 2020. Service charges and fees were $1.7 million representing an increase of $341 thousand, or 25.0%, from the quarter ended June 30, 2020. The most significant driver of the increase was an improvement in overdraft fees. Debit card income totaled $2.5 million in the quarter ended September 30, 2020, increasing $290 thousand, or 13.2%, from the quarter ended June 30, 2020. Debit card transaction volume increased approximately 12% in the third quarter as compared to the second quarter of 2020.

Non-Interest Expense

Total non-interest expense for the quarter ended September 30, 2020 was $130.8 million; when the goodwill impairment charge of $104.8 million is excluded, pro-forma non-interest expense totals $26.0 million, compared to $23.9 million in the previous quarter. The $2.1 million increase is primarily attributed to a $1.2 million increase in salaries and employee benefits. The most significant contributor to the increase in salaries and benefits was a $791 thousand unfavorable change, due to the effect of salaries and benefits deferred as loan origination costs recognized in the three months ended June 30, 2020, related to PPP loan originations.

Asset Quality

As of September 30, 2020, Equity’s allowance for loan losses to total loans was 1.25%, as compared to 0.48% at December 31, 2019. Total reserves, including purchase discounts, to total loans were approximately 1.61% as of September 30, 2020, as compared to 0.85% at December 31, 2019. Nonperforming assets were $61.7 million as of September 30, 2020, or 1.60% of total assets. Nonperforming assets were $46.9 million at December 31, 2019, or 1.19% of total assets.

Regulatory Capital

The Company’s ratio of common equity tier 1 capital to risk-weighted assets was 12.8%, the total capital to risk-weighted assets was 17.4% and the total leverage ratio was 8.8% at September 30, 2020. At December 31, 2019, the Company’s common equity tier 1 capital to risk-weighted assets ratio was 11.6%, the total capital to risk-weighted assets ratio was 12.6% and the total leverage ratio was 9.0%. The Company’s subsidiary, Equity Bank, had a ratio of common equity tier 1 capital to risk-weighted assets of 14.2%, a ratio of total capital to risk-weighted assets of 15.4% and a total leverage ratio of 9.3% at September 30, 2020. At December 31, 2019, Equity Bank’s ratio of common equity tier 1 capital to risk-weighted assets was 12.0%, their ratio of total capital to risk-weighted assets was 12.5% and their total leverage ratio was 8.9%.

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 we recognize, how much of that dollar is expended. In order to improve the comparability of the ratio to our peers, we remove non-core items. 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 we believe it can be used 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 third quarter 2020 results on Wednesday, October 21, 2020, 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. On Wednesday, October 21, 2020, 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. 4668766.

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, 2020, accessible at (855) 859-2056 with conference ID no. 4668766 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 10, 2020, 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.
(816) 505-4063
jhanley@equitybank.com

Unaudited Financial Tables

• Table 1. Consolidated Statements of Operations
• Table 2. Quarterly Consolidated Statements of Operations
• 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 OPERATIONS (Unaudited)
(Dollars in thousands, except per share data)

	Three months ended September 30,								Nine months ended September 30,
	2020				2019				2020				2019
Interest and dividend income
Loans, including fees	$	32,278			$	38,051			$	99,281			$	112,611
Securities, taxable		3,476				4,673				12,113				14,724
Securities, nontaxable		923				1,045				2,769				3,143
Federal funds sold and other		405				780				1,409				2,037
Total interest and dividend income		37,082				44,549				115,572				132,515
Interest expense
Deposits		3,064				10,507				13,827				32,381
Federal funds purchased and retail repurchase agreements		25				50				80				116
Federal Home Loan Bank advances		471				1,957				2,198				5,103
Federal Reserve Bank discount window		—				—				6				—
Bank stock loan		—				198				415				507
Subordinated debentures		1,415				311				1,953				955
Total interest expense		4,975				13,023				18,479				39,062
Net interest income		32,107				31,526				97,093				93,453
Provision for loan losses		815				679				23,255				17,299
Net interest income after provision for loan losses		31,292				30,847				73,838				76,154
Non-interest income
Service charges and fees		1,706				2,268				5,097				6,431
Debit card income		2,491				2,205				6,735				6,129
Mortgage banking		877				820				2,298				1,699
Increase in value of bank-owned life insurance		489				507				1,452				1,494
Net gains from securities transactions		—				4				12				17
Other		922				768				1,929				2,577
Total non-interest income		6,485				6,572				17,523				18,347
Non-interest expense
Salaries and employee benefits		13,877				13,039				40,076				40,204
Net occupancy and equipment		2,224				2,177				6,578				6,332
Data processing		2,817				2,673				8,243				7,436
Professional fees		877				991				3,187				3,375
Advertising and business development		598				806				1,697				2,174
Telecommunications		486				523				1,363				1,593
FDIC insurance		360				111				1,291				1,119
Courier and postage		366				352				1,103				1,020
Free nationwide ATM cost		439				459				1,186				1,240
Amortization of core deposit intangibles		1,030				784				2,806				2,348
Loan expense		107				165				628				608
Other real estate owned		133				(88	)			710				326
Merger expenses		—				—				—				915
Goodwill impairment		104,831				—				104,831				—
Other		2,690				2,231				6,831				6,099
Total non-interest expense		130,835				24,223				180,530				74,789
Income (loss) before income tax		(93,058	)			13,196				(89,169	)			19,712
Provision for income taxes (benefit)		(2,653	)			2,790				(1,711	)			4,147
Net income (loss) and net income (loss) allocable to common stockholders	$	(90,405	)		$	10,406			$	(87,458	)		$	15,565
Basic earnings (loss) per share	$	(6.01	)		$	0.67			$	(5.75	)		$	0.99
Diluted earnings (loss) per share	$	(6.01	)		$	0.66			$	(5.75	)		$	0.98
Weighted average common shares		15,040,407				15,514,042				15,211,901				15,679,556
Weighted average diluted common shares		15,040,407				15,708,038				15,211,901				15,896,605

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

	As of and for the three months ended
	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
Interest and dividend income
Loans, including fees	$	32,278			$	32,627			$	34,376			$	36,687			$	38,051
Securities, taxable		3,476				4,017				4,620				4,615				4,673
Securities, nontaxable		923				880				966				1,037				1,045
Federal funds sold and other		405				409				595				645				780
Total interest and dividend income		37,082				37,933				40,557				42,984				44,549
Interest expense
Deposits		3,064				3,899				6,864				8,533				10,507
Federal funds purchased and retail repurchase agreements		25				24				31				39				50
Federal Home Loan Bank advances		471				552				1,175				1,564				1,957
Federal Reserve Bank discount window		—				6				—				—				—
Bank stock loan		—				306				109				147				198
Subordinated debentures		1,415				255				283				296				311
Total interest expense		4,975				5,042				8,462				10,579				13,023
Net interest income		32,107				32,891				32,095				32,405				31,526
Provision for loan losses		815				12,500				9,940				1,055				679
Net interest income after provision for loan losses		31,292				20,391				22,155				31,350				30,847
Non-interest income
Service charges and fees		1,706				1,365				2,026				2,241				2,268
Debit card income		2,491				2,201				2,043				2,101				2,205
Mortgage banking		877				831				590				769				820
Increase in value of bank-owned life insurance		489				481				482				504				507
Net gains (losses) from securities transactions		—				4				8				(3	)			4
Other		922				850				157				1,029				768
Total non-interest income		6,485				5,732				5,306				6,641				6,572
Non-interest expense
Salaries and employee benefits		13,877				12,695				13,504				11,918				13,039
Net occupancy and equipment		2,224				2,119				2,235				2,342				2,177
Data processing		2,817				2,763				2,663				2,688				2,673
Professional fees		877				943				1,367				1,359				991
Advertising and business development		598				403				696				901				806
Telecommunications		486				390				487				486				523
FDIC insurance		360				414				517				109				111
Courier and postage		366				353				384				328				352
Free nationwide ATM cost		439				327				420				440				459
Amortization of core deposit intangibles		1,030				974				802				820				784
Loan expense		107				287				234				267				165
Other real estate owned		133				269				308				381				(88	)
Goodwill impairment		104,831				—				—				—				—
Other		2,690				2,000				2,141				2,807				2,231
Total non-interest expense		130,835				23,937				25,758				24,846				24,223
Income (loss) before income tax		(93,058	)			2,186				1,703				13,145				13,196
Provision for income taxes (benefit)		(2,653	)			497				445				3,131				2,790
Net income (loss) and net income (loss) allocable to common stockholders	$	(90,405	)		$	1,689			$	1,258			$	10,014			$	10,406
Basic earnings (loss) per share	$	(6.01	)		$	0.11			$	0.08			$	0.65			$	0.67
Diluted earnings (loss) per share	$	(6.01	)		$	0.11			$	0.08			$	0.64			$	0.66
Weighted average common shares		15,040,407				15,209,483				15,387,697				15,442,841				15,514,042
Weighted average diluted common shares		15,040,407				15,304,009				15,595,024				15,684,673				15,708,038

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

	September 30, 2020				June 30, 2020				March 31, 2020				December 31, 2019				September 30, 2019
ASSETS
Cash and due from banks	$	65,534			$	178,045			$	141,989			$	88,973			$	167,895
Federal funds sold		305				245				263				318				158
Cash and cash equivalents		65,839				178,290				142,252				89,291				168,053
Interest-bearing time deposits in other banks		499				2,248				2,498				2,498				3,497
Available-for-sale securities		798,576				177,228				187,812				142,067				152,680
Held-to-maturity securities(1)		—				662,522				721,992				769,059				764,163
Loans held for sale		9,053				4,802				6,494				5,933				8,784
Loans, net of allowance for loan losses(2)		2,691,626				2,772,256				2,485,208				2,544,420				2,583,049
Other real estate owned, net		8,727				7,374				5,870				8,293				5,944
Premises and equipment, net		86,087				87,055				84,732				84,478				84,481
Bank-owned life insurance		76,555				76,066				75,585				75,103				74,599
Federal Reserve Bank and Federal Home Loan Bank stock		32,545				31,832				31,662				31,137				31,710
Interest receivable		18,110				19,598				15,549				15,738				16,994
Goodwill		31,601				136,432				136,432				136,432				136,432
Core deposit intangibles, net		17,101				18,131				19,105				19,907				20,727
Other		29,252				31,435				28,641				25,222				23,550
Total assets	$	3,865,571			$	4,205,269			$	3,943,832			$	3,949,578			$	4,074,663
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand	$	693,967			$	756,613			$	508,441			$	481,298			$	488,214
Total non-interest-bearing deposits		693,967				756,613				508,441				481,298				488,214
Savings, NOW and money market		1,816,307				1,800,132				1,668,145				1,749,048				1,689,606
Time		623,344				690,522				783,811				833,170				929,109
Total interest-bearing deposits		2,439,651				2,490,654				2,451,956				2,582,218				2,618,715
Total deposits		3,133,618				3,247,267				2,960,397				3,063,516				3,106,929
Federal funds purchased and retail repurchase agreements		46,295				51,557				37,113				35,708				40,652
Federal Home Loan Bank advances		167,862				344,900				389,620				324,373				410,093
Bank stock loan		—				—				40,000				8,990				14,770
Subordinated debentures		87,537				55,575				14,638				14,561				14,485
Contractual obligations		5,478				5,571				5,781				5,836				3,744
Interest payable and other liabilities		22,609				20,633				18,932				18,534				16,940
Total liabilities		3,463,399				3,725,503				3,466,481				3,471,518				3,607,613
Commitments and contingent liabilities
Stockholders’ equity
Common stock		174				174				174				174				174
Additional paid-in capital		386,016				384,955				383,850				382,731				382,155
Retained earnings		38,300				128,704				127,015				125,757				115,743
Accumulated other comprehensive income (loss)		21,074				3,390				3,769				(3	)			(423	)
Employee stock loans		(43	)			(43	)			(43	)			(77	)			(77	)
Treasury stock		(43,349	)			(37,414	)			(37,414	)			(30,522	)			(30,522	)
Total stockholders’ equity		402,172				479,766				477,351				478,060				467,050
Total liabilities and stockholders’ equity	$	3,865,571			$	4,205,269			$	3,943,832			$	3,949,578			$	4,074,663
(1) Fair market value of held-to-maturity securities	$	—			$	689,206			$	750,900			$	783,911			$	778,966
(2) Allowance for loan losses		34,087				34,078				21,915				12,232				17,875

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,
	2020				2020				2020				2019				2019
Loans Held-For-Investment by Type
Commercial real estate	$	1,188,329			$	1,191,336			$	1,200,762			$	1,158,022			$	1,183,305
Commercial and industrial		857,244				883,355				542,571				592,052				585,797
Residential real estate		402,242				442,486				480,603				503,439				531,257
Agricultural real estate		127,349				129,080				130,795				141,868				143,718
Consumer		67,465				71,037				64,799				68,378				70,944
Agricultural		83,084				89,040				87,593				92,893				85,903
Total loans held-for-investment		2,725,713				2,806,334				2,507,123				2,556,652				2,600,924
Allowance for loan losses		(34,087	)			(34,078	)			(21,915	)			(12,232	)			(17,875	)
Net loans held-for-investment	$	2,691,626			$	2,772,256			$	2,485,208			$	2,544,420			$	2,583,049
Asset Quality Ratios
Allowance for loan losses to total loans		1.25	%			1.21	%			0.87	%			0.48	%			0.69	%
Past due or nonaccrual loans to total loans		2.12	%			1.88	%			2.47	%			1.66	%			2.23	%
Nonperforming assets to total assets		1.60	%			1.37	%			1.22	%			1.19	%			1.40	%
Nonperforming assets to total loans plus other real estate owned		2.26	%			2.05	%			1.92	%			1.83	%			2.19	%
Classified assets to bank total regulatory capital		18.85	%			20.81	%			19.50	%			21.24	%			29.79	%
Selected Average Balance Sheet Data (QTD Average)
Investment securities	$	802,525			$	877,308			$	907,910			$	911,923			$	926,839
Total gross loans receivable		2,758,680				2,806,865				2,525,344				2,568,301				2,646,454
Interest-earning assets		3,679,168				3,786,629				3,519,267				3,563,642				3,657,970
Total assets		4,041,187				4,159,336				3,888,205				3,932,909				4,030,606
Interest-bearing deposits		2,430,407				2,487,187				2,531,508				2,563,519				2,673,007
Borrowings		377,158				384,727				355,303				377,561				390,562
Total interest-bearing liabilities		2,807,565				2,871,914				2,886,811				2,941,080				3,063,569
Total deposits		3,145,810				3,257,631				3,021,181				3,055,275				3,152,785
Total liabilities		3,558,099				3,675,731				3,405,638				3,459,347				3,567,354
Total stockholders' equity		483,088				483,605				482,567				473,562				463,252
Tangible common equity*		329,039				327,411				325,470				315,569				304,492
Performance ratios
Return on average assets (ROAA) annualized		(8.90	)%			0.16	%			0.13	%			1.01	%			1.02	%
Return on average assets before income tax, provision for loan losses and goodwill impairment*		1.24	%			1.42	%			1.20	%			1.43	%			1.37	%
Return on average equity (ROAE) annualized		(74.45	)%			1.40	%			1.05	%			8.39	%			8.91	%
Return on average equity before income tax, provision for loan losses and goodwill impairment*		10.37	%			12.21	%			9.70	%			11.90	%			11.88	%
Return on average tangible common equity (ROATCE) annualized*		(108.31	)%			3.03	%			2.35	%			13.42	%			14.38	%
Return on average tangible common equity adjusted for goodwill impairment*		12.02	%			3.03	%			2.35	%			13.42	%			14.38	%
Yield on loans annualized		4.65	%			4.68	%			5.47	%			5.67	%			5.70	%
Cost of interest-bearing deposits annualized		0.50	%			0.63	%			1.09	%			1.32	%			1.56	%
Cost of total deposits annualized		0.39	%			0.48	%			0.91	%			1.11	%			1.32	%
Net interest margin annualized		3.47	%			3.49	%			3.67	%			3.61	%			3.42	%
Efficiency ratio*		67.38	%			61.98	%			68.88	%			63.63	%			63.59	%
Non-interest income / average assets		0.64	%			0.55	%			0.55	%			0.67	%			0.65	%
Non-interest expense / average assets		12.88	%			2.31	%			2.66	%			2.51	%			2.38	%
Capital Ratios
Tier 1 Leverage Ratio		8.76	%			8.52	%			9.02	%			9.02	%			8.49	%
Common Equity Tier 1 Capital Ratio		12.76	%			12.02	%			11.67	%			11.63	%			11.08	%
Tier 1 Risk Based Capital Ratio		13.32	%			12.57	%			12.20	%			12.15	%			11.59	%
Total Risk Based Capital Ratio		17.35	%			15.33	%			13.00	%			12.59	%			12.21	%
Total stockholders' equity to total assets		10.40	%			11.41	%			12.10	%			12.10	%			11.46	%
Tangible common equity to tangible assets*		9.23	%			8.00	%			8.47	%			8.45	%			7.88	%
Book value per common share	$	27.08			$	31.53			$	31.41			$	30.95			$	30.25
Tangible book value per common share*	$	23.72			$	21.29			$	21.10			$	20.75			$	19.99
Tangible book value per diluted common share*	$	23.57			$	21.13			$	20.96			$	20.39			$	19.73

* The value noted is considered a Non-GAAP financial measure. For a reconciliation of Non-GAAP financial measures, see Table 6. 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, 2020												September 30, 2019
	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	$	757,772			$	26,788				4.72	%		$	566,658			$	28,221				6.66	%
Commercial real estate		942,478				36,533				5.18	%			1,035,634				41,401				5.34	%
Real estate construction		245,167				8,644				4.71	%			204,642				10,449				6.83	%
Residential real estate		464,340				14,528				4.18	%			518,110				18,192				4.69	%
Agricultural real estate		133,302				5,574				5.59	%			138,861				6,105				5.88	%
Consumer		67,255				3,461				6.87	%			70,529				4,060				7.70	%
Agricultural		86,874				3,753				5.77	%			86,463				4,183				6.47	%
Total loans		2,697,188				99,281				4.92	%			2,620,897				112,611				5.74	%
Securities
Taxable securities		737,010				12,113				2.20	%			780,813				14,724				2.52	%
Nontaxable securities		125,352				2,769				2.95	%			142,735				3,143				2.94	%
Total securities		862,362				14,882				2.31	%			923,548				17,867				2.59	%
Federal funds sold and other		102,202				1,409				1.84	%			84,045				2,037				3.24	%
Total interest-earning assets	$	3,661,752				115,572				4.22	%		$	3,628,490				132,515				4.88	%
Interest-bearing liabilities
Savings, NOW and money market deposits	$	1,754,759				4,923				0.37	%		$	1,705,612				16,914				1.33	%
Time deposits		728,083				8,904				1.63	%			997,270				15,467				2.07	%
Total interest-bearing deposits		2,482,842				13,827				0.74	%			2,702,882				32,381				1.60	%
FHLB advances		271,548				2,198				1.08	%			266,118				5,103				2.56	%
Other borrowings		100,864				2,454				3.25	%			70,044				1,578				3.01	%
Total interest-bearing liabilities	$	2,855,254				18,479				0.86	%		$	3,039,044				39,062				1.72	%
Net interest income					$	97,093											$	93,453
Interest rate spread										3.36	%											3.16	%
Net interest margin (2)										3.54	%											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.
(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, 2020												September 30, 2019
	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	$	848,096			$	8,400				3.94	%		$	562,399			$	8,845				6.24	%
Commercial real estate		979,775				12,886				5.23	%			1,012,393				14,678				5.75	%
Real estate construction		214,775				2,233				4.14	%			211,235				3,191				6.00	%
Residential real estate		429,965				4,733				4.38	%			561,423				6,402				4.52	%
Agricultural real estate		131,725				1,718				5.19	%			140,693				2,115				5.96	%
Consumer		69,485				1,104				6.32	%			71,688				1,441				7.97	%
Agricultural		84,859				1,204				5.65	%			86,623				1,379				6.32	%
Total loans		2,758,680				32,278				4.65	%			2,646,454				38,051				5.70	%
Securities
Taxable securities		683,630				3,476				2.02	%			782,994				4,673				2.37	%
Nontaxable securities		118,895				923				3.09	%			143,845				1,045				2.88	%
Total securities		802,525				4,399				2.18	%			926,839				5,718				2.45	%
Federal funds sold and other		117,963				405				1.36	%			84,677				780				3.66	%
Total interest-earning assets	$	3,679,168				37,082				4.01	%		$	3,657,970				44,549				4.83	%
Interest-bearing liabilities
Savings, NOW and money market deposits	$	1,784,891				875				0.19	%		$	1,707,459				5,389				1.25	%
Time deposits		645,516				2,189				1.35	%			965,548				5,118				2.10	%
Total interest-bearing deposits		2,430,407				3,064				0.50	%			2,673,007				10,507				1.56	%
FHLB advances		248,437				471				0.75	%			320,528				1,957				2.42	%
Other borrowings		128,721				1,440				4.45	%			70,034				559				3.17	%
Total interest-bearing liabilities	$	2,807,565				4,975				0.70	%		$	3,063,569				13,023				1.69	%
Net interest income					$	32,107											$	31,526
Interest rate spread										3.31	%											3.14	%
Net interest margin (2)										3.47	%											3.42	%
(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, 2020												June 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	$	848,096			$	8,400				3.94	%		$	868,302			$	8,378				3.88	%
Commercial real estate		979,775				12,886				5.23	%			934,186				12,192				5.25	%
Real estate construction		214,775				2,233				4.14	%			253,672				2,837				4.50	%
Residential real estate		429,965				4,733				4.38	%			467,246				4,854				4.18	%
Agricultural real estate		131,725				1,718				5.19	%			130,533				1,955				6.02	%
Consumer		69,485				1,104				6.32	%			65,096				1,145				7.07	%
Agricultural		84,859				1,204				5.65	%			87,830				1,266				5.80	%
Total loans		2,758,680				32,278				4.65	%			2,806,865				32,627				4.68	%
Securities
Taxable securities		683,630				3,476				2.02	%			753,332				4,017				2.14	%
Nontaxable securities		118,895				923				3.09	%			123,976				880				2.86	%
Total securities		802,525				4,399				2.18	%			877,308				4,897				2.24	%
Federal funds sold and other		117,963				405				1.36	%			102,456				409				1.61	%
Total interest-earning assets	$	3,679,168				37,082				4.01	%		$	3,786,629				37,933				4.03	%
Interest-bearing liabilities
Savings, NOW and money market deposits	$	1,784,891				875				0.19	%		$	1,754,280				923				0.21	%
Time deposits		645,516				2,189				1.35	%			732,907				2,976				1.63	%
Total interest-bearing deposits		2,430,407				3,064				0.50	%			2,487,187				3,899				0.63	%
FHLB advances		248,437				471				0.75	%			270,785				552				0.82	%
Other borrowings		128,721				1,440				4.45	%			113,942				591				2.08	%
Total interest-bearing liabilities	$	2,807,565				4,975				0.70	%		$	2,871,914				5,042				0.71	%
Net interest income					$	32,107											$	32,891
Interest rate spread										3.31	%											3.32	%
Net interest margin (2)										3.47	%											3.49	%
(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,
	2020				2020				2020				2019				2019
Income before income taxes	$	(93,058	)		$	2,186			$	1,703			$	13,145			$	13,196
Add: goodwill impairment		104,831				—				—				—				—
Less: tax effect		2,649				497				445				3,131				2,790
Adjusted income	$	9,124			$	1,689			$	1,258			$	10,014			$	10,406
Weighted average common shares outstanding		15,040,407				15,209,483				15,387,697				15,442,841				15,514,042
Effect of weighted average dilutive shares assuming positive net income		82,804				94,526				207,327				241,832				193,996
Weighted average diluted shares		15,123,211				15,304,009				15,595,024				15,684,673				15,708,038
Diluted earnings per share adjusted for goodwill impairment	$	0.60			$	0.11			$	0.08			$	0.64			$	0.66
Total stockholders' equity	$	402,172			$	479,766			$	477,351			$	478,060			$	467,050
Less: goodwill		31,601				136,432				136,432				136,432				136,432
Less: core deposit intangibles, net		17,101				18,131				19,105				19,907				20,727
Less: mortgage servicing asset, net		1				2				4				5				7
Less: naming rights, net		1,141				1,152				1,163				1,174				1,184
Tangible common equity	$	352,328			$	324,049			$	320,647			$	320,542			$	308,700
Common shares issued at period end		14,853,487				15,218,301				15,198,986				15,444,434				15,440,334
Diluted common shares outstanding at period end		14,945,282				15,333,977				15,297,319				15,719,810				15,647,456
Book value per common share	$	27.08			$	31.53			$	31.41			$	30.95			$	30.25
Tangible book value per common share	$	23.72			$	21.29			$	21.10			$	20.75			$	19.99
Tangible book value per diluted common share	$	23.57			$	21.13			$	20.96			$	20.39			$	19.73
Total assets	$	3,865,571			$	4,205,269			$	3,943,832			$	3,949,578			$	4,074,663
Less: goodwill		31,601				136,432				136,432				136,432				136,432
Less: core deposit intangibles, net		17,101				18,131				19,105				19,907				20,727
Less: mortgage servicing asset, net		1				2				4				5				7
Less: naming rights, net		1,141				1,152				1,163				1,174				1,184
Tangible assets	$	3,815,727			$	4,049,552			$	3,787,128			$	3,792,060			$	3,916,313
Total stockholders' equity to total assets		10.40	%			11.41	%			12.10	%			12.10	%			11.46	%
Tangible common equity to tangible assets		9.23	%			8.00	%			8.47	%			8.45	%			7.88	%
Total average stockholders' equity	$	483,088			$	483,605			$	482,567			$	473,562			$	463,252
Less: average intangible assets		154,049				156,194				157,097				157,993				158,760
Average tangible common equity	$	329,039			$	327,411			$	325,470			$	315,569			$	304,492
Net income (loss) allocable to common stockholders	$	(90,405	)		$	1,689			$	1,258			$	10,014			$	10,406
Add: goodwill impairment	$	104,831			$	—			$	—			$	—			$	—
Less: tax effect of goodwill impairment	$	5,305			$	—			$	—			$	—			$	—
Adjusted net income (loss) plus goodwill impairment	$	9,121			$	1,689			$	1,258			$	10,014			$	10,406
Amortization of intangible assets		1,043				986				814				833				797
Less: tax effect of intangible assets amortization		234				207				171				175				167
Adjusted net income (loss) allocable to common stockholders	$	9,930			$	2,468			$	1,901			$	10,672			$	11,036
Return on total average stockholders' equity (ROAE) annualized		(74.45	)%			1.40	%			1.05	%			8.39	%			8.91	%
Return on average tangible common equity (ROATCE) annualized		(108.31	)%			3.03	%			2.35	%			13.42	%			14.38	%
Adjusted return on average tangible common equity		12.01	%			3.03	%			2.35	%			13.42	%			14.38	%
Non-interest expense	$	130,835			$	23,937			$	25,758			$	24,846			$	24,223
Less: goodwill impairment		104,831				—				—				—				—
Non-interest expense, excluding goodwill impairment	$	26,004			$	23,937			$	25,758			$	24,846			$	24,223
Net interest income	$	32,107			$	32,891			$	32,095			$	32,405			$	31,526
Non-interest income		6,485				5,732				5,306				6,641				6,572
Less: net gains (losses) from securities transactions		—				4				8				(3	)			4
Non-interest income, excluding gains (losses) from securities transactions	$	6,485			$	5,728			$	5,298			$	6,644			$	6,568
Net interest income plus non-interest income, excluding net gains (losses) from securities transactions	$	38,592			$	38,619			$	37,393			$	39,049			$	38,094
Non-interest expense to net interest income plus non-interest income		339.02	%			61.98	%			68.87	%			63.63	%			63.58	%
Efficiency ratio		67.38	%			61.98	%			68.88	%			63.63	%			63.59	%
Net income (loss) allocable to common stockholders	$	(90,405	)		$	1,689			$	1,258			$	10,014			$	10,406
Add: income tax provision		(2,653	)			497				445				3,131				2,790
Add: provision for loan losses		815				12,500				9,940				1,055				679
Add: goodwill impairment		104,831				—				—				—				—
Adjusted net income	$	12,588			$	14,686			$	11,643			$	14,200			$	13,875
Total average assets	$	4,041,187			$	4,159,336			$	3,888,205			$	3,932,909			$	4,030,606
Total average stockholders' equity	$	483,088			$	483,605			$	482,567			$	473,562			$	463,252
Return on average assets (ROAA) annualized		(8.90	)%			0.16	%			0.13	%			1.01	%			1.02	%
Adjusted return on average assets		1.24	%			1.42	%			1.20	%			1.43	%			1.37	%
Adjusted return on average equity		10.37	%			12.21	%			9.70	%			11.90	%			11.88	%

 

 

 

Source: Equity Bancshares, Inc.