Equity Bancshares, Inc. Reports Third Quarter Results

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 %

 

 

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Source: Equity Bancshares, Inc.