eqbk-8k_20220802.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  August 2, 2022

 

EQUITY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Kansas

001-37624

72-1532188

(State or other jurisdiction of

incorporation or organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

 

 

 

7701 East Kellogg Drive, Suite 300

Wichita, KS

 

 

67207

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: 316.612.6000

 

Former name or former address, if changed since last report: Not Applicable

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Class A, Common Stock, par value $0.01 per share

Trading Symbol

EQBK

Name of each exchange on which registered

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 


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Item 7.01Regulation FD Disclosure.

 

The Company will be meeting with certain analysts and institutional investors on August 2, 2022. The investor presentation to be used in these meetings is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

The information in this Item 7.01 is being furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, unless specifically identified therein as being incorporated therein by reference.

 

Item 9.01Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit No.

 

Description

 

 

 

99.1

 

Equity Bancshares, Inc. Investor Presentation

 

104

 

Cover Page Interactive Data File

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Equity Bancshares, Inc.

 

 

Date:  August 2, 2022

By: /s/ Eric R. Newell

 

Eric R. Newell

 

Executive Vice President and Chief Financial Officer


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Slide 1

KBW Community Bank Investor Conference Exhibit 99.1

Slide 2

Forward Looking Statements This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements reflect the current views of Equity’s management with respect to, among other things, future events and Equity’s financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature.  These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about Equity’s industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond Equity’s control. Accordingly, Equity cautions you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although Equity believes that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.  Factors that could cause actual results to differ materially from Equity’s expectations include COVID-19 related impacts; competition from other financial institutions and bank holding companies; the effects of and changes in trade, monetary and fiscal policies and laws, including interest rate policies of the Federal Reserve Board; changes in the demand for loans; fluctuations in value of collateral and loan reserves; inflation, interest rate, market and monetary fluctuations; changes in consumer spending, borrowing and savings habits; and acquisitions and integration of acquired businesses; and similar variables. The foregoing list of factors is not exhaustive. For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Equity’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2022, 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. NON-GAAP FINANCIAL MEASURES  This presentation contains certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures.  Reconciliations of non-GAAP financial measures to GAAP financial measures are provided at the end of this presentation.  Numbers in the presentation may not sum due to rounding. 2

Slide 3

Our Company 3 Committed to our Entrepreneurial Spirit Equity Bancshares, Inc. NASDAQ: EQBK Start-Up: 2002 - 2007 Brad Elliott, current Chairman and CEO, founded Equity Bancshares, Inc. in 2002. Closed 5 branch or whole bank acquisitions Opened 2 branches in Missouri Growth: 2008 - 2016 Opened branches in Lee’s Summit & Overland Park, Kansas Acquired Ellis State Bank $8.8MM of TARP issued and repaid with SBLF $20.0MM Capital Raise Purchased 4 branches from Citizens Bancshares (Topeka) $20.4MM Capital Raise Acquired First Community Bancshares Rationalized branch map, 3 closures, 1 opening Acquired First Independence and Community First $35.4MM private placement capital raise Scale: 2017-2022 Acquired Prairie State, Patriot Bank, and Eastman Acquired Kansas Bank Corporation, Adams Dairy Bank, and City Bank & Trust Launched ETWM Completed $75MM subordinated debt issuance Acquired Almena State Bank, 3 branches from Security Bank, and American State Bancshares Originated $650 million of PPP For the quarter ended June 30, 2022. As of 7/15/2022

Slide 4

Our Operating Footprint 4

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Strong Senior Leadership Team 5 Brad Elliott Chairman & CEO Years at Equity: 20 | Years in Banking: 33 Eric Newell Chief Financial Officer Years at Equity: 2 | Years in Banking: 20 Craig Anderson President Years at Equity: 4 | Years in Banking: 40 Greg Kossover Chief Operating Officer Years at Equity: 9 | Years in Banking: 22 Founded Equity Bank in 2002 2018 EY Entrepreneur of the Year National Finalist 2014 Most Influential CEO, Wichita Business Journal Became COO in April 2020 Served as CFO from 2013 to 2020  EQBK Board of Directors, 2011-current Became President in April 2020 Served as COO from 2018 to 2020 Served as President of UMBF Commercial Banking  Served as CFO at United Bank in Hartford, CT ($7.3B assets) Served as CFO and head of Treasury at Rockville Bank, Glastonbury, Conn. Julie Huber EVP, Strategic Initiatives Years at Equity: 19 | Years in Banking: 32 Served in variety of leadership roles in her time at Equity Bank John Creech EVP, Chief Credit Officer Years at Equity: <1 | Years in Banking: 13 Brett Reber EVP, General Counsel Years at Equity: 4 | Years in Law: 34 Greg Lawson EVP, Chief Information Officer Years at Equity: <1 | Years in Banking: 12 Prior to joining Equity Bank, practiced law for 30 years with Wise & Reber, L.C. Previously served as Chief Credit Policy and Administration Officer for Synovus Bank Previously served as Director, IT Solutions at BOK Financial, and Director of Infrastructure Engineering and Operations at Jack Henry and Associates

Slide 6

Our Value Proposition 6 Market Diversification and Strategy for Growth Experienced and Invested Management Team Conservative Credit Culture and Effective Risk Management and Mitigation Robust Funding Capacity, Anchored by a Diverse, Low-Cost Deposit Base Focus on Efficient Performance Throughout our Diversified Business Lines

Slide 7

Proven record of M&A execution 7 Pricing Multiples Transaction Impact

Slide 8

Our Opportunity 8 There are over 1000 bank offices with deposits less than $750MM in our operating market

Slide 9

Long Term Key Strategic Objectives 9 Grow Tangible Book Value Maximize Risk Adjusted Return on Assets Offer best-in-class banking products and services Drive organic fee income generation Efficiently grow core earnings Effectively deploy capital through share repurchases, dividends and whole bank m&a while maintaining strong capital ratios Re-mix cash flows into higher yielding instruments funded with low-cost core deposits Achieve 15% + ROATCE & 1.5% PTPP ROA Optimize revenue composition with 30% fee income to total revenue Explore diversification of earnings through strategic acquisitions of fee-based revenue businesses Invest in people, systems, and technology Tailor products to meet customers needs Deliver services through high quality, relationship-based delivery channels

Slide 10

Strong Core Deposit Franchise 10 Deposit Composition(1) Fully integrated digital banking platform with an adoption rate of 60.9% among core banking customers Continued emphasis on development of relationships to drive growth in non-interest bearing deposits. Cost of Deposits: 0.20%(1) Core Deposits(2) / Total Deposits Total Deposits & Loan to Deposit Ratio For the quarter ended June 30, 2022. Includes interest and non-interest bearing deposits. Core deposits excludes time deposits > $100K. Dollars in millions.

Slide 11

Core Deposit Growth 11 Cost of Deposits(1) 0.18% 0.22% 0.52% 0.91% 1.30% Year-to-date, Includes the impact of non-interest bearing deposits Dollars in millions

Slide 12

Asset Quality 12 Commentary Net charge-offs were $176 thousand for the quarter, or 2 bps of average loan assets annualized. ​ Reserve ratio, exclusive of PPP assets, is 1.50% remaining well positioned for any losses which materialize from the current economic uncertainty surrounding inflation and related effect on consumer liquidity, supply chain disruption, and input cost escalation concerns.​ ​ Overall, nonaccrual loans declined $1.8 million quarter over quarter.​ ​ ​ ​ ​ Nonperforming Assets Net Charge-Offs (NCO) / Average Loans Includes loans 90+ days past due which are not highlighted in the table. Excludes Bank owned branch assets, totaling $4.2M, classified as Other Real Estate Owned within the Statements of Condition. (1,2) (2)

Slide 13

Credit Quality 13 Total Reserve Ratio Classified Assets Nonaccrual Detail

Slide 14

Diversified Loan Portfolio 14 Year-to-Date Loan Yield 4.44% 5.19% 5.73% 5.74% For financial statement reporting, management considers other factors in addition to purpose when assessing risk and identifying reporting classes. As such, the above is not intended to reconcile to the Company’s loan disclosures within the applicable financial statement. Composition excludes the impact of PPP loans as of each applicable date. For the Year-to-Date periods ended December 31, 2020, December 31, 2021 and June 30, 2022, yield has been adjusted to exclude PPP loans, including these loans yield would be 5.00%, 4.77% and 4.60%, respectively. 4.56%

Slide 15

Allowance for Credit Loss (ACL) 15 ACL intra-quarter movement

Slide 16

We believe the structure in the portfolio outperforms peers through the cycle Portfolio average life is shorter than peer; effective duration equal to peer and hard final maturities of our bullet investments provide guaranteed cash flow Portfolio is nearly fully extended; future cash flow will be little affected by higher rates Investment Portfolio Strategy 16 Investment Portfolio Thesis Environment Shift: 2020 -> 2022 As we began 2020, investment portfolio was over 80% Agency MBS and CMOs As rates collapsed, the majority of the portfolio prepaid, leaving the bank with hundreds of millions in cash needed to be reinvested in the worst rate environment in history Private Label Mortgage Portfolio Predominantly front cash flow tranches of 30-year mortgage pools. Modeled to have 5-year average life, however, is currently prepaying faster and cash-flowing like a 2.5-year average life portfolio. 14% of investment portfolio but 20% of cash flow Barbell Strategy Private label front-load is combined with longer bullet investments in the 8-to-10-year part of the curve, encouraged by low short to medium term yields with a steep curve in 2021 Provided similar yields to Agency MBS options without similar extension risk Agency MBS virtually uninvestable in 2021; choice between 1.5%-2.0% coupons or 2.5%+ coupons with prepayments outpacing amortization of premium Current Investment Portfolio Mix

Slide 17

Capital Management 17 Capital Management Strategy Capital Targets EQBK establishes capital targets based on the following objectives: Maintain designation as a “well capitalized” institution under fully phased-in Basel III regulatory definitions Ensure capital levels are commensurate with the Company’s risk profile and strategic plan Capital Management Priorities Support organic growth Dividend payout ratio targeted at 10-20% Common stock repurchases Merger & acquisition activity Excess Capital Deployment EQBK’s Tangible Common Equity Ratio target is 8.5(1)%; TCE above 8.5% is considered excess capital assuming “well capitalized” regulatory capital ratios are maintained. Deployment of capital ideally has less than a 3-year tangible book value earnback using the crossover method; Excess capital can be deployed for: Shares repurchases, Higher shareholder dividends, and/or Acquisitions The Company’s capital ratios are comfortably above well capitalized levels as of 6/30/2022 2022 Capital Management Actions As of June 30, 2022 the tangible common equity ratio is being negatively impacted by ($77.4) million in accumulated other comprehensive income.  Adjusting for this temporary decline in fair value, would result in a Tangible Common Equity Ratio of 8.89%.​ ​ ​

Slide 18

Bank Liquidity 18 Liquidity Analysis Portfolio Characteristics Dividend Capacity from the Bank Description Amortized Cost Unrealized Gain / (Loss) Carrying Value

Slide 19

Revenue Mix 19 2022 YTD Operating Revenue(1) Noninterest Income 18.9% 2022 YTD operating revenue less PPP is equal to Noninterest Income of $18.7 million less gain on acquisition and branch sale of $540 thousand and net gain on securities transactions of $8 thousand plus net interest income of $78.9 million less PPP interest income of $1.2 million Other includes Loan repo obligation reversal of $1.2 million and gain on derivative swap of $1.1 million

Slide 20

Noninterest Income 20 Quarterly Results(1) (1) Excludes the impact of PPP loans, net gain on acquisition and branch sale, and net gain / (loss) on securities transactions Annual Results(1)

Slide 21

Net Interest Income 21 Quarterly Results Annual Results (1) Excludes the impact of PPP loans. Including these balances in the second, third, fourth quarter 2021 and first and second quarter 2022 results would be 3.50%, 3.86%, 3.13%, 3.38% and 3.39%, respectively, while YTD 2020 and 2021 results would be 3.63% and 3.44%, respectively. (1) (1)

Slide 22

Core Earnings per Share Contribution - PPP 22 Quarterly Results Note: Utilizes the quarterly effective tax rate.

Slide 23

Net Interest Margin 23 Key Net Interest Margin Drivers Government Programs PPP fee income due to forgiveness received by borrowers decreased during the quarter. Roughly $125 thousand in deferred fee balances remain on the books at quarter end. Non-Interest Bearing Deposits Non-interest bearing deposits now constitute 28% of total deposits, and core deposits / total deposits continues to increase. Loan / Deposit ratio increased each of the last two periods Day Count Day count in Q2 2022 vs Q1 2021 reduced net interest income roughly $430 thousand Rate Protection Proactive effort to book variable rate assets subject to floor levels. Investment Portfolio Bond portfolio designed to be short and positioned to take advantage of rate rise opportunities. Repositioning Earning Asset Base​ The Bank will continue to pursue enhancing the loan-to-deposit ratio to more closely mirror pre-pandemic levels and re-deploying cash flow into the loan portfolio Net Interest Income Period over Period Adjusted Second Quarter NIM

Slide 24

Performance Metrics 24 Return on Tangible Common Equity(1) Efficiency Ratio(1) Non-GAAP financial measure. Refer to the non-GAAP reconciliation at the end of this presentation.

Slide 25

Tangible Book Value 25 Tangible book value per share(1) decreased $0.82 in Q2 2022, driven by unrealized losses in the investment portfolio Non-GAAP financial measure. Refer to the non-GAAP reconciliation at the end of this presentation.

Slide 26

Robust Growth 26 Gross Loans 6.6% CAGR Total Deposits 9.4% CAGR

Slide 27

Second Quarter Highlights 27 Favorable (unfavorable) comparison to previous period. Year-over-Year is a comparison to comparable quarter end in previous year. Quarter-over-Quarter is a comparison to prior quarter end. Non-GAAP financial measure. See the non-GAAP reconciliation at the end of this presentation for additional detail. Excludes goodwill impairment, merger expenses and gain on acquisition and sale of branch. Adjusted to exclude the impact of PPP loans. Excludes gain / (loss) on sale of securities.

Slide 28

Adjusted Operating Performance 28 Adjusted Net Income(1) Adjusted Diluted Earnings Per Share(1) Efficiency Ratio & Adj. Non-Interest Expense / Average Assets Adjusted Pre-Tax, Pre-Provision Net Revenue(1) Non-GAAP financial measures. See the non-GAAP reconciliation at the end of this presentation. Does not include merger expense or gain on acquisition in any period presented, as applicable. See the non-GAAP reconciliation at the end of the presentation for additional detail on these balances. Adjustments utilize an effective tax rate of 21%. (1)

Slide 29

Outlook on Key Business Drivers 29 Consideration & Expectations Continued uncertainty of inflation, supply chain disruption and input cost escalation. Focus on continued balance sheet strength and security while continuing to pursue growth. NOTE: Figures presented in this outlook represent forward-looking statements and are not guarantees of future performance and are subject to risks, assumptions, and uncertainties that are difficult to predict. Please see Special Note Concerning Forward-Looking Statements. Excluding the impact of PPP loans Excluding Net Loss on Securities Transactions of $32K and Gain on Acquisition of $540K Excluding Merger Expenses of $88K and reserve for unfunded commitment of $289 thousand Q1’22 representative of year-to-date annual effective tax rate

Slide 30

Focus Variables for Outlook & Forecast 30 Our outlook requires clarity around certain variables, including:

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31 Appendix

Slide 32

Our Markets 32 Missouri 10 counties 16 branches Kansas 21 Counties 38 branches Source: S&P Market Intelligence. Equity Bancshares, Inc. operating market reported above includes all bank locations and counties in which Equity

Slide 33

Our Markets 33 Arkansas Benton | Boone | Carroll 5 branches Oklahoma Kay | Texas | Tulsa | Washita 10 branches Source: S&P Market Intelligence. Equity Bancshares, Inc. operating market reported above includes all bank locations and counties in which Equity

Slide 34

Selected Income Statement Data 34

Slide 35

Selected Balance Sheet Data 35 Includes interest-bearing deposits in other banks. Includes Federal Reserve Bank and Federal Home Loan Bank stock. Includes loans held-for-sale.

Slide 36

Capitalization 36 (1) Non-GAAP financial measure. See the non-GAAP reconciliation at the end of this presentation. Maintaining a strong regulatory capital position

Slide 37

37 The subsequent tables present non-GAAP reconciliations of the following calculations: Tangible Common Equity (TCE) to Tangible Assets (TA) Ratio Tangible Book Value per Common Share Return on Average Tangible Common Equity (ROATCE) Efficiency Ratio

Slide 38

38 TCE to TA and Tangible Book Value per Share

Slide 39

39 ROATCE and Efficiency Ratio

Slide 40

investor.equitybank.com