Equity Bancshares, Inc. Second Quarter Results Include Strong Organic Loan Growth, Company to Acquire St. Joseph Bank Locations, Expanding Missouri Network

Annualized organic non-PPP loan growth contributes to $1.03 per diluted share, Company will acquire three Security Bank of KC branch locations in St. Joseph, Missouri

WICHITA, Kan., July 19, 2021 (GLOBE NEWSWIRE) — Equity Bancshares, Inc. (NASDAQ: EQBK), (“Equity”, “the Company”, “we”, “us”, “our”), the Wichita-based holding company of Equity Bank, reported net income of $15.2 million and $1.03 per diluted share for the second quarter ended June 30, 2021.

“Our Equity Bank team had an excellent quarter serving our customers, expanding our delivery channels and adding shareholder value. Exclusive of the Paycheck Protection Program, we organically grew gross loans by $81.8 million, an annualized rate of 14.75%, through the focused efforts of our sales and operational teams,” said Brad S. Elliott, Chairman and CEO of Equity. “A key component of our results is growth in our core deposit customer base, with new banking products contributing to a $1.1 million increase in service fee revenue, as well as the continued addition of trust and wealth management customer relationships.”

Equity customers successfully had $99.7 million of Paycheck Protection Program (“PPP”) loans forgiven during the quarter, resulting in the recognition of fee income totaling $5.7 million in the three-month period ended June 30, 2021. At June 30, 2021, the total unrecognized fee income associated with PPP loans was $10.7 million. Through two rounds of PPP, Equity originated more than $610.0 million in PPP loans.

Further driving results this quarter was customer and relationship growth within Equity Trust and Wealth Management and Equity’s consumer deposit base, expansion of non-interest income with Equity’s debit card platform and increased transaction activity within our deposit customer base.

The Company has announced its expansion into St. Joseph, Missouri, with a definitive branch purchase and assumption agreement to acquire the assets and assume the deposits of three bank locations from Security Bank of Kansas City (“Security”), a subsidiary of Valley View Financial Co. (“Valley”) of Overland Park, Kansas. Equity anticipates closing the transaction in the fourth quarter of 2021.

“We are pleased with the opportunity to offer Equity Bank products and services to customers in Northwest Missouri, and St. Joseph is a great fit within our network,” said Mr. Elliott. “We have been able to grow loans, fee income and our core deposit base effectively in Western Missouri with a focus on local community banking and we believe this approach will serve customers well in our new St. Joseph region.”

“Our recent merger announcement with American State Bancshares, Inc. is a great cultural fit for us as well as an expansion of our Kansas market, and our teams have worked diligently alongside one another. We remain on target for a closing and conversion of data systems in early October,” said Mr. Elliott. “I thank everyone on both the Equity and American State Bancshares, Inc. teams for their collaboration and hard work to make sure we continue to deliver excellent customer service while increasing shareholder value.”

Notable Items:

  • Quarter over quarter, service fee revenue, including deposit services, mortgage banking, trust and wealth and insurance services increased to $6.4 million from $5.3 million, or 20.77%.

  • The Company authorized a second stock repurchase program in the third quarter of 2020 totaling 800,000 shares. During the quarter ended June 30, 2021, the Company repurchased 73,070 shares at a weighted average cost of $28.94 per share, totaling $2.1 million. At the end of the quarter, capacity of 180,687 shares remained under the current repurchase program.

  • Additional information attained on the assets purchased through the Almena State Bank (“Almena”) transaction indicated a more positive outcome than originally expected, resulting in a net reduction in reserves on the balance sheet and an increase in gain on acquisition of $663 thousand during the quarter.

  • During the quarter ended June 30, 2021, there was a release of allowance for credit losses of $1.7 million as compared to a release of $5.8 million in the quarter ended March 31, 2021. The release in the second quarter was driven primarily by improvement in assets specifically assessed for impairment as asset quality improved quarter over quarter.

Equity’s Balance Sheet Highlights:

  • Total loans held for investment of $2.82 billion at June 30, 2021, as compared to total loans held for investment of $2.80 billion at March 31, 2021. The periodic change included organic loan production of $81.8 million, or 14.75%.

  • Total deposits of $3.69 billion at June 30, 2021, as compared to $3.63 billion at March 31, 2021. Checking, savings and money market accounts were $3.03 billion at June 30, 2021, relative to $3.05 billion at March 31, 2021. Included in the periodic change was a $20.2 million increase in non-interest-bearing deposits. As compared to December 31, 2020, the Bank has increased non-interest-bearing deposits by $200.9 million, or 25.38%.

  • The allowance for credit losses as of June 30, 2021, was $51.8 million, or 1.84% of total loans and 2.04% of total loans excluding PPP assets.

Acquisition of Three Bank Locations in St. Joseph, Missouri

Equity will operate each of the three Security locations in St. Joseph as Equity Bank locations following completion of the acquisition, expected in December of 2021. Joshua J. Means, President of Western Missouri, will oversee the St. Joseph community bank locations. Equity will operate a total of 16 locations in Missouri, including the three Security locations, eight bank locations in legacy Western Missouri communities and five bank locations on the Missouri side of the Kansas City metropolitan area.

In Equity’s Western Missouri region, notable for communities like Warrensburg, Sedalia and Higginsville, deposits as of June 30, 2018, were $478.4 million, compared to $614.8 million as of June 30, 2021. Total loans in Equity’s Western Missouri region were $147.0 million as of June 30, 2018, compared to $218.3 million as of June 30, 2021, growing by 48.5% during the three-year period.

“Each of our Missouri locations delivers outstanding service to our consumer, mortgage and business customers and we expect St. Joseph to serve as a key market for us in Northwest Missouri. Josh Means and his regional leadership team have helped our local banks grow in loans, fee income and deposits, one relationship at a time,” said Mr. Elliott. “We are pleased to welcome talented community bankers to our Equity team and to offer St. Joseph-area consumers enhanced commercial and business banking solutions.”

Equity announced in May its merger with American State Bancshares, Inc. (“ASBI”), the holding company of American State Bank, a $779 million bank with headquarters in Wichita, Kansas, and 17 locations in its Kansas footprint. Equity expects to complete the merger with ASBI in October 2021. Pro forma Equity Bank, including ASBI and Security deposits and locations, will comprise more than 70 locations throughout our four-state footprint and hold more than $5 billion in assets.

Pursuant to the terms of the Branch Purchase and Assumption Agreement, between Equity Bank and Security, Equity will acquire certain loans and other branch-related assets and assume certain deposits and other liabilities associated with the Security branches.

Financial Results for the Quarter Ended June 30, 2021

Net income allocable to common stockholders was $15.2 million, or $1.03 per diluted share, for the three months ended June 30, 2021, as compared to $15.1 million, or $1.02 per diluted share, for the three months ended March 31, 2021, an increase of $91 thousand. This second quarter increase was attributable to a net interest income increase of $2.9 million and a non-interest income increase of $2.4 million, partially offset by a $4.1 million decrease in reversal of provision for credit losses, a $925 thousand increase in non-interest expense and a $144 thousand increase in provision for income taxes.

Net Interest Income

Net interest income was $34.6 million for the three months ended June 30, 2021, as compared to $31.8 million for the three months ended March 31, 2021, an increase of $2.9 million, or 9.0%. The increase in net interest income was primarily driven by a 15-basis point increase in the average yield earned on interest-earning assets, to 3.88% for the quarter ended June 30, 2021, from 3.73% for the quarter ended March 31, 2021. In addition, there was a 6-basis point decrease in average rate paid on interest-bearing liabilities, to 0.52% for the quarter ended June 30, 2021, from 0.58% for the quarter ended March 31, 2021. The cost of interest-bearing deposits declined by 5 basis points to 0.31% for the three months ended June 30, 2021 from 0.36% in the previous quarter primarily attributed to the reduction in the cost of time deposits, that slipped 19 basis points between the quarters.

Provision for Credit Losses

During the three months ended June 30, 2021, there was a net release of $1.7 million in the allowance for credit losses recognized through the provision for credit losses as compared to a net release of $5.8 million provision for credit losses for the three months ended March 31, 2021. For the three months ended June 30, 2021, we had net charge-offs of $567 thousand as compared to $65 thousand for the three months ended March 31, 2021. The release in the second quarter was driven primarily by improvement in assets individually evaluated for impairment as asset quality improved quarter over quarter.

Non-Interest Income

Total non-interest income was $9.1 million for the three months ended June 30, 2021, as compared to $6.7 million for the three months ended March 31, 2021, or $8.4 million excluding the $663 thousand net gain on the purchase and assumption of Almena State Bank. Other non-interest income was $2.1 million, an increase of $774 thousand, or 60.0%, from the quarter ended March 31, 2021. The increase in other non-interest income was primarily due to income of $917 thousand related to the reversal of potential repurchase obligation on acquired assets as Equity was able to improve our position on those assets during the quarter.

During the quarter, service fee revenue, including deposit services, mortgage banking, trust and wealth management, credit cards and insurance increased to $6.4 million from $5.3 million during the first quarter. The growth was driven by increasing balances, transaction activity and relationship development within our trust and wealth management business line.

Non-Interest Expense

Total non-interest expense for the quarter ended June 30, 2021, was $25.8 million as compared to $24.9 million for the quarter ended March 31, 2021. The $925 thousand change is primarily attributed to an increase of $811 thousand in data processing expense, as deposit accounts and activity have increased so too has the associated expense. The periodic increase also included $308 thousand in merger expense.

Asset Quality

As of June 30, 2021, Equity’s allowance for credit losses to total loans was 1.84%, as compared to 1.99% at March 31, 2021. Exclusive of PPP assets, the reserve to total loans was 2.04% as of June 30, 2021 as compared to 2.33% at March 31, 2021. Nonperforming assets were $66.7 million as of June 30, 2021, or 1.56% of total assets, compared to $70.1 million at March 31, 2021, or 1.67% of total assets. Total classified assets, including loans rated special mention or worse, other real estate owned and other repossessed assets were $103.1 million, or 23.11% of regulatory capital, down from $112.6 million, or 26.45% of regulatory capital as of March 31, 2021.

Regulatory Capital

The Company’s ratio of common equity tier 1 capital to risk-weighted assets was 12.4%, the total capital to risk-weighted assets was 16.7% and the total leverage ratio was 8.9% at June 30, 2021. At December 31, 2020, the Company’s common equity tier 1 capital to risk-weighted assets ratio was 12.8%, the total capital to risk-weighted assets ratio was 17.4% and the total leverage ratio was 9.3%. The Company’s subsidiary, Equity Bank, had a ratio of common equity tier 1 capital to risk-weighted assets of 14.4%, a ratio of total capital to risk-weighted assets of 15.6% and a total leverage ratio of 9.9% at June 30, 2021. At December 31, 2020, Equity Bank’s ratio of common equity tier 1 capital to risk-weighted assets was 14.5%, the ratio of total capital to risk-weighted assets was 15.7% and the total leverage ratio was 10.1%.

Non-GAAP Financial Measures

In addition to evaluating the Company’s results of operations in accordance with accounting principles generally accepted in the United States of America (“GAAP”), management periodically supplements this evaluation with an analysis of certain non-GAAP financial measures that are intended to provide the reader with additional perspectives on operating results, financial condition and performance trends, while facilitating comparisons with the performance of other financial institutions. Non-GAAP financial measures are not a substitute for GAAP measures, rather, they should be read and used in conjunction with the Company’s GAAP financial information.

The efficiency ratio is used as a common measure by banks as a comparable metric to understand the Company’s expense structure relative to its total revenue; in other words, for every dollar of total revenue recognized, how much of that dollar is expended. To improve the comparability of the ratio to our peers, non-core items are excluded. To improve transparency and acknowledging that banks are not consistent in their definition of the efficiency ratio, we include our calculation of this non-GAAP measure.

Return on average assets before income tax provision, provision for loan losses and goodwill impairment is a measure that the Company uses to understand fundamental operating performance before these expenses. Used as a ratio relative to average assets, we believe it demonstrates the “core” performance and can be viewed as an alternative measure of how efficiently the Company services its asset base. Used as a ratio relative to average equity, it can function as an alternative measure of the Company’s earnings performance in relationship to its equity.

Tangible common equity and related measures are non-GAAP financial measures that exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These financial measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally. Return on average tangible common equity is used by management and readers of our financial statements to understand how efficiently the Company is deploying its common equity. Companies that are able to demonstrate more efficient use of common equity are more likely to be viewed favorably by current and prospective investors.

The Company believes that disclosing these non-GAAP financial measures is both useful internally and is expected by our investors and analysts in order to understand the overall performance of the Company. Other companies may calculate and define their non-GAAP financial measures and supplemental data differently. A reconciliation of GAAP financial measures to non-GAAP measures and other performance ratios, as adjusted, are included in Table 8 in the following press release tables.

Conference Call and Webcast

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

Investors, news media and other participants should register for the call or audio webcast at investor.equitybank.com. On Tuesday, July 20, 2021, participants may also dial into the call toll-free at (844) 534-7311 from anywhere in the U.S. or (574) 990-1419 internationally, using conference ID no. 9999830.

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 July 27, 2021, accessible at (855) 859-2056 with conference ID no. 9999830 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.

Important Additional Information

The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities or a solicitation of any vote or approval.

In connection with the proposed transaction, Equity filed with the Securities and Exchange Commission (“SEC”) a registration statement on Form S-4 to register the shares of Equity common stock to be issued to ASBI stockholders. The registration statement included a proxy statement/prospectus, which will be sent to the stockholders of ASBI seeking their approval of the proposed transaction.

WE URGE INVESTORS AND SECURITY HOLDERS TO READ THE REGISTRATION STATEMENT ON FORM S-4, THE PROXY STATEMENT/PROSPECTUS INCLUDED WITHIN THE REGISTRATION STATEMENT ON FORM S-4 AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT EQUITY, ASB AND THE PROPOSED TRANSACTION.

The documents filed by Equity with the SEC may be obtained free of charge at Equity’s investor relations website at investor.equitybank.com or at the SEC’s website at www.sec.gov. Alternatively, these documents, when available, can be obtained free of charge from Equity upon written request to Equity Bancshares, Inc., Attn: Investor Relations, 7701 East Kellogg Drive, Suite 300, Wichita, Kansas 67207 or by calling (316) 612-6000.

Participants in the Transaction

Equity, ASBI and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from ASBI’s stockholders in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of Equity is set forth in the proxy statement for Equity’s 2021 annual meeting of stockholders filed with the SEC on Schedule 14A on March 18, 2021, and Equity’s annual report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 9, 2021. Free copies of these documents may be obtained free of charge as described in the preceding paragraph. Additional information regarding the interests of these participants and other persons who may be deemed participants in the transaction may be obtained by reading the proxy statement/prospectus regarding the proposed transaction when it becomes available.

No Offer or Solicitation

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

Special Note Concerning Forward-Looking Statements

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

For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Equity’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2021, and any updates to those risk factors set forth in Equity’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Equity’s underlying assumptions prove to be incorrect, actual results may differ materially from what Equity anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and Equity does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, such as COVID-19, and it is not possible for us to predict those events or how they may affect us. In addition, Equity cannot assess the impact of each factor on Equity’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Equity or persons acting on Equity’s behalf may issue.

Investor Contact:

Chris Navratil
SVP, Finance
Equity Bancshares, Inc.
(316) 612-6014
[email protected]

Media Contact:

John J. Hanley
SVP, Senior Director of Marketing
Equity Bancshares, Inc.
(816) 505-4063
[email protected]

Unaudited Financial Tables

  • Table 1. Consolidated Statements of Income

  • Table 2. Quarterly Consolidated Statements of Income

  • Table 3. Consolidated Balance Sheets

  • Table 4. Selected Financial Highlights

  • Table 5. Year-To-Date Net Interest Income Analysis

  • Table 6. Quarter-To-Date Net Interest Income Analysis

  • Table 7. Quarter-Over-Quarter Net Interest Income Analysis

  • Table 8. Non-GAAP Financial Measures

TABLE 1. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)

Three months ended
June 30,

Six months ended
June 30,

2021

2020

2021

2020

Interest and dividend income

Loans, including fees

$

33,810

$

32,627

$

64,811

$

67,003

Securities, taxable

3,523

4,017

7,322

8,637

Securities, nontaxable

717

880

1,441

1,846

Federal funds sold and other

268

409

556

1,004

Total interest and dividend income

38,318

37,933

74,130

78,490

Interest expense

Deposits

2,025

3,899

4,435

10,763

Federal funds purchased and retail repurchase agreements

26

24

48

55

Federal Home Loan Bank advances

80

552

145

1,727

Federal Reserve Bank discount window

6

6

Bank stock loan

306

415

Subordinated debt

1,557

255

3,113

538

Total interest expense

3,688

5,042

7,741

13,504

Net interest income

34,630

32,891

66,389

64,986

Provision (reversal) for credit losses

(1,657

)

12,500

(7,413

)

22,440

Net interest income after provision (reversal) for credit losses

36,287

20,391

73,802

42,546

Non-interest income

Service charges and fees

2,169

1,365

3,765

3,391

Debit card income

2,679

2,201

5,029

4,244

Mortgage banking

848

831

1,783

1,421

Increase in value of bank-owned life insurance

676

481

1,277

963

Net gain on acquisition

663

585

Net gains (losses) from securities transactions

4

17

12

Other

2,065

850

3,356

1,007

Total non-interest income

9,100

5,732

15,812

11,038

Non-interest expense

Salaries and employee benefits

12,769

12,695

25,491

26,199

Net occupancy and equipment

2,327

2,119

4,695

4,354

Data processing

3,474

2,763

6,137

5,426

Professional fees

999

943

2,072

2,310

Advertising and business development

799

403

1,481

1,099

Telecommunications

512

390

1,092

877

FDIC insurance

425

414

840

931

Courier and postage

327

353

696

737

Free nationwide ATM cost

513

327

985

747

Amortization of core deposit intangibles

1,030

974

2,064

1,776

Loan expense

181

287

419

521

Other real estate owned

(468

)

269

(463

)

577

Merger expenses

460

612

Other

2,458

2,000

4,566

4,141

Total non-interest expense

25,806

23,937

50,687

49,695

Income (loss) before income tax

19,581

2,186

38,927

3,889

Provision for income taxes

4,415

497

8,686

942

Net income (loss) and net income (loss) allocable to common stockholders

$

15,166

$

1,689

$

30,241

$

2,947

Basic earnings (loss) per share

$

1.06

$

0.11

$

2.10

$

0.19

Diluted earnings (loss) per share

$

1.03

$

0.11

$

2.06

$

0.19

Weighted average common shares

14,356,958

15,209,483

14,410,328

15,298,590

Weighted average diluted common shares

14,674,838

15,304,009

14,704,240

15,449,517

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

As of and for the three months ended

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

Interest and dividend income

Loans, including fees

$

33,810

$

31,001

$

35,383

$

32,278

$

32,627

Securities, taxable

3,523

3,799

3,408

3,476

4,017

Securities, nontaxable

717

724

913

923

880

Federal funds sold and other

268

288

285

405

409

Total interest and dividend income

38,318

35,812

39,989

37,082

37,933

Interest expense

Deposits

2,025

2,410

2,755

3,064

3,899

Federal funds purchased and retail repurchase agreements

26

22

25

25

24

Federal Home Loan Bank advances

80

65

94

471

552

Federal Reserve Bank discount window

6

Bank stock loan

306

Subordinated debt

1,557

1,556

1,556

1,415

255

Total interest expense

3,688

4,053

4,430

4,975

5,042

Net interest income

34,630

31,759

35,559

32,107

32,891

Provision (reversal) for credit losses

(1,657

)

(5,756

)

1,000

815

12,500

Net interest income after provision (reversal) for credit losses

36,287

37,515

34,559

31,292

20,391

Non-interest income

Service charges and fees

2,169

1,596

1,759

1,706

1,365

Debit card income

2,679

2,350

2,401

2,491

2,201

Mortgage banking

848

935

855

877

831

Increase in value of bank-owned life insurance

676

601

489

489

481

Net gain on acquisition

663

(78

)

2,145

Net gains (losses) from securities transactions

17

(1

)

4

Other

2,065

1,291

852

922

850

Total non-interest income

9,100

6,712

8,500

6,485

5,732

Non-interest expense

Salaries and employee benefits

12,769

12,722

14,053

13,877

12,695

Net occupancy and equipment

2,327

2,368

2,206

2,224

2,119

Data processing

3,474

2,663

2,748

2,817

2,763

Professional fees

999

1,073

1,095

877

943

Advertising and business development

799

682

801

598

403

Telecommunications

512

580

510

486

390

FDIC insurance

425

415

797

360

414

Courier and postage

327

369

338

366

353

Free nationwide ATM cost

513

472

423

439

327

Amortization of core deposit intangibles

1,030

1,034

1,044

1,030

974

Loan expense

181

238

161

107

287

Other real estate owned

(468

)

5

1,600

133

269

Merger expenses

460

152

299

Goodwill impairment

104,831

Other

2,458

2,108

2,385

2,690

2,000

Total non-interest expense

25,806

24,881

28,460

130,835

23,937

Income (loss) before income tax

19,581

19,346

14,599

(93,058

)

2,186

Provision for income taxes (benefit)

4,415

4,271

2,111

(2,653

)

497

Net income (loss) and net income (loss) allocable to common stockholders

$

15,166

$

15,075

$

12,488

$

(90,405

)

$

1,689

Basic earnings (loss) per share

$

1.06

$

1.04

$

0.85

$

(6.01

)

$

0.11

Diluted earnings (loss) per share

$

1.03

$

1.02

$

0.84

$

(6.01

)

$

0.11

Weighted average common shares

14,356,958

14,464,291

14,760,810

15,040,407

15,209,483

Weighted average diluted common shares

14,674,838

14,734,083

14,934,058

15,040,407

15,304,009

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

June 30,
2021

March 31,
2021

December 31,
2020

September 30,
2020

June 30,
2020

ASSETS

Cash and due from banks

$

138,869

$

136,190

$

280,150

$

65,534

$

178,045

Federal funds sold

452

498

548

305

245

Cash and cash equivalents

139,321

136,688

280,698

65,839

178,290

Interest-bearing time deposits in other banks

249

249

499

2,248

Available-for-sale securities

1,041,614

998,100

871,827

798,576

177,228

Held-to-maturity securities(1)

662,522

Loans held for sale

6,183

8,609

12,394

9,053

4,802

Loans, net of allowance for credit losses(2)

2,763,227

2,740,215

2,557,987

2,691,626

2,772,256

Other real estate owned, net

10,861

10,559

11,733

8,727

7,374

Premises and equipment, net

90,876

90,322

89,412

86,087

87,055

Bank-owned life insurance

103,321

102,645

77,044

76,555

76,066

Federal Reserve Bank and Federal Home Loan Bank stock

18,454

15,174

16,415

32,545

31,832

Interest receivable

15,064

16,655

15,831

18,110

19,598

Goodwill

31,601

31,601

31,601

31,601

136,432

Core deposit intangibles, net

13,993

15,023

16,057

17,101

18,131

Other

33,701

30,344

32,108

29,252

31,435

Total assets

$

4,268,216

$

4,196,184

$

4,013,356

$

3,865,571

$

4,205,269

LIABILITIES AND STOCKHOLDERS’ EQUITY

Deposits

Demand

$

992,565

$

972,364

$

791,639

$

693,967

$

756,613

Total non-interest-bearing deposits

992,565

972,364

791,639

693,967

756,613

Savings, NOW and money market

2,035,496

2,074,261

2,029,097

1,816,307

1,800,132

Time

659,494

587,905

626,854

623,344

690,522

Total interest-bearing deposits

2,694,990

2,662,166

2,655,951

2,439,651

2,490,654

Total deposits

3,687,555

3,634,530

3,447,590

3,133,618

3,247,267

Federal funds purchased and retail repurchase agreements

47,184

40,339

36,029

46,295

51,557

Federal Home Loan Bank advances

9,208

9,926

10,144

167,862

344,900

Subordinated debt

87,908

87,788

87,684

87,537

55,575

Contractual obligations

4,469

4,856

5,189

5,478

5,571

Interest payable and other liabilities

18,897

20,930

19,071

22,609

20,633

Total liabilities

3,855,221

3,798,369

3,605,707

3,463,399

3,725,503

Commitments and contingent liabilities

Stockholders’ equity

Common stock

176

175

174

174

174

Additional paid-in capital

389,394

387,939

386,820

386,017

384,955

Retained earnings

68,625

53,459

50,787

38,299

128,704

Accumulated other comprehensive income, net of tax

13,450

12,019

19,781

21,074

3,390

Employee stock loans

(43

)

(43

)

(43

)

Treasury stock

(58,650

)

(55,777

)

(49,870

)

(43,349

)

(37,414

)

Total stockholders’ equity

412,995

397,815

407,649

402,172

479,766

Total liabilities and stockholders’ equity

$

4,268,216

$

4,196,184

$

4,013,356

$

3,865,571

$

4,205,269

(1) Fair market value of held-to-maturity securities

$

$

$

$

$

689,206

(2) Allowance for credit losses

51,834

55,525

33,709

34,087

34,078

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

As of and for the three months ended

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Loans Held-For-Investment by Type

Commercial real estate

$

1,261,214

$

1,218,537

$

1,188,696

$

1,188,329

$

1,191,336

Commercial and industrial

732,126

820,736

734,495

857,244

883,355

Residential real estate

503,110

438,503

381,958

402,242

442,486

Agricultural real estate

129,020

134,944

133,693

127,349

129,080

Agricultural

97,912

93,764

94,322

83,084

89,040

Consumer

91,679

89,256

58,532

67,465

71,037

Total loans held-for-investment

2,815,061

2,795,740

2,591,696

2,725,713

2,806,334

Allowance for credit losses

(51,834

)

(55,525

)

(33,709

)

(34,087

)

(34,078

)

Net loans held-for-investment

$

2,763,227

$

2,740,215

$

2,557,987

$

2,691,626

$

2,772,256

Asset Quality Ratios

Allowance for credit losses on loans to total loans

1.84

%

1.99

%

1.30

%

1.25

%

1.21

%

Past due or nonaccrual loans to total loans

2.09

%

2.30

%

1.99

%

2.12

%

1.88

%

Nonperforming assets to total assets

1.56

%

1.67

%

1.36

%

1.55

%

1.37

%

Nonperforming assets to total loans plus other real estate owned

2.36

%

2.50

%

2.10

%

2.19

%

2.05

%

Classified assets to bank total regulatory capital

23.11

%

26.45

%

25.50

%

18.35

%

20.81

%

Selected Average Balance Sheet Data (QTD Average)

Investment securities

$

986,986

$

947,453

$

814,114

$

802,525

$

877,308

Total gross loans receivable

2,853,145

2,736,918

2,692,223

2,758,680

2,806,865

Interest-earning assets

3,964,633

3,891,140

3,647,730

3,679,168

3,786,629

Total assets

4,231,439

4,143,752

3,910,628

4,041,187

4,159,336

Interest-bearing deposits

2,656,052

2,690,159

2,551,219

2,430,407

2,487,187

Borrowings

171,658

139,360

172,730

377,158

384,727

Total interest-bearing liabilities

2,827,710

2,829,519

2,723,949

2,807,565

2,871,914

Total deposits

3,624,950

3,577,625

2,960,791

3,145,810

3,257,631

Total liabilities

3,827,400

3,748,114

3,501,056

3,558,099

3,675,731

Total stockholders’ equity

404,039

395,638

409,572

483,088

483,605

Tangible common equity*

356,705

347,262

355,025

329,039

327,411

Performance ratios

Return on average assets (ROAA) annualized

1.44

%

1.48

%

1.27

%

(8.90

)%

0.16

%

Return on average assets before income tax, provision for loan losses and goodwill impairment*

1.70

%

1.33

%

1.59

%

1.24

%

1.42

%

Return on average equity (ROAE) annualized

15.06

%

15.45

%

12.13

%

(74.45

)%

1.40

%

Return on average equity before income tax, provision for loan losses and goodwill impairment*

17.79

%

13.93

%

15.15

%

10.37

%

12.21

%

Return on average tangible common equity (ROATCE) annualized*

17.98

%

18.57

%

14.93

%

(108.31

)%

3.03

%

Return on average tangible common equity adjusted for goodwill impairment*

17.98

%

18.57

%

14.93

%

12.01

%

3.03

%

Yield on loans annualized

4.75

%

4.59

%

5.23

%

4.65

%

4.68

%

Cost of interest-bearing deposits annualized

0.31

%

0.36

%

0.43

%

0.50

%

0.63

%

Cost of total deposits annualized

0.22

%

0.27

%

0.37

%

0.39

%

0.48

%

Net interest margin annualized

3.50

%

3.31

%

3.88

%

3.47

%

3.49

%

Efficiency ratio*

58.85

%

64.18

%

67.19

%

67.38

%

61.98

%

Non-interest income / average assets

0.86

%

0.66

%

0.86

%

0.64

%

0.55

%

Non-interest expense / average assets

2.45

%

2.44

%

2.90

%

12.88

%

2.31

%

Capital Ratios

Tier 1 Leverage Ratio

8.88

%

8.73

%

9.30

%

8.76

%

8.52

%

Common Equity Tier 1 Capital Ratio

12.41

%

12.53

%

12.82

%

12.76

%

12.02

%

Tier 1 Risk Based Capital Ratio

12.93

%

13.08

%

13.37

%

13.32

%

12.57

%

Total Risk Based Capital Ratio

16.73

%

17.02

%

17.35

%

17.35

%

15.33

%

Total stockholders’ equity to total assets

9.68

%

9.48

%

10.16

%

10.40

%

11.41

%

Tangible common equity to tangible assets*

8.68

%

8.44

%

9.05

%

9.23

%

8.00

%

Book value per common share

$

28.76

$

27.66

$

28.04

$

27.08

$

31.53

Tangible book value per common share*

$

25.51

$

24.34

$

24.68

$

23.72

$

21.29

Tangible book value per diluted common share*

$

24.98

$

23.87

$

24.32

$

23.57

$

21.13

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

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

For the six months ended

For the six months ended

June 30, 2021

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

$

814,895

$

20,962

5.19

%

$

712,115

$

16,258

4.59

%

Commercial real estate

981,482

22,873

4.70

%

923,625

25,134

5.47

%

Real estate construction

254,807

4,531

3.59

%

260,530

6,413

4.95

%

Residential real estate

430,123

9,093

4.26

%

481,716

10,156

4.24

%

Agricultural real estate

136,366

3,384

5.00

%

134,098

4,046

6.07

%

Agricultural

94,596

2,062

4.40

%

87,892

2,576

5.89

%

Consumer

83,083

1,906

4.63

%

66,128

2,420

7.36

%

Total loans

2,795,352

64,811

4.68

%

2,666,104

67,003

5.05

%

Securities

Taxable securities

863,801

7,322

1.71

%

763,992

8,637

2.27

%

Nontaxable securities

103,529

1,441

2.81

%

128,616

1,846

2.89

%

Total securities

967,330

8,763

1.83

%

892,608

10,483

2.36

%

Federal funds sold and other

165,408

556

0.68

%

94,234

1,004

2.14

%

Total interest-earning assets

$

3,928,090

74,130

3.81

%

$

3,652,946

78,490

4.32

%

Interest-bearing liabilities

Savings, NOW and money market deposits

$

2,073,658

1,865

0.18

%

$

1,739,527

4,048

0.47

%

Time deposits

599,353

2,570

0.86

%

769,820

6,715

1.75

%

Total interest-bearing deposits

2,673,011

4,435

0.33

%

2,509,347

10,763

0.86

%

FHLB advances

23,911

145

1.22

%

283,231

1,727

1.23

%

Other borrowings

131,687

3,161

4.84

%

86,784

1,014

2.35

%

Total interest-bearing liabilities

$

2,828,609

7,741

0.55

%

$

2,879,362

13,504

0.94

%

Net interest income

$

66,389

$

64,986

Interest rate spread

3.26

%

3.38

%

Net interest margin (2)

3.41

%

3.58

%

(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

June 30, 2021

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

$

826,647

$

11,729

5.69

%

$

868,302

$

8,378

3.88

%

Commercial real estate

991,033

11,433

4.63

%

934,186

12,192

5.25

%

Real estate construction

253,947

2,352

3.71

%

253,672

2,837

4.50

%

Residential real estate

465,525

4,642

4.00

%

467,246

4,854

4.18

%

Agricultural real estate

131,906

1,687

5.13

%

130,533

1,955

6.02

%

Agricultural

94,407

1,024

4.35

%

87,830

1,266

5.80

%

Consumer

89,680

943

4.22

%

65,096

1,145

7.07

%

Total loans

2,853,145

33,810

4.75

%

2,806,865

32,627

4.68

%

Securities

Taxable securities

887,983

3,523

1.59

%

753,332

4,017

2.14

%

Nontaxable securities

99,003

717

2.90

%

123,976

880

2.86

%

Total securities

986,986

4,240

1.72

%

877,308

4,897

2.25

%

Federal funds sold and other

124,502

268

0.86

%

102,456

409

1.61

%

Total interest-earning assets

$

3,964,633

38,318

3.88

%

$

3,786,629

37,933

4.03

%

Interest-bearing liabilities

Savings, NOW and money market deposits

$

2,068,319

895

0.17

%

$

1,754,280

923

0.21

%

Time deposits

587,733

1,130

0.77

%

732,907

2,976

1.63

%

Total interest-bearing deposits

2,656,052

2,025

0.31

%

2,487,187

3,899

0.63

%

FHLB advances

37,656

80

0.86

%

270,785

552

0.82

%

Other borrowings

134,002

1,583

4.74

%

113,942

591

2.09

%

Total interest-bearing liabilities

$

2,827,710

3,688

0.52

%

$

2,871,914

5,042

0.71

%

Net interest income

$

34,630

$

32,891

Interest rate spread

3.36

%

3.32

%

Net interest margin (2)

3.50

%

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 7. QUARTER-OVER-QUARTER NET INTEREST INCOME ANALYSIS (Unaudited)
(Dollars in thousands)

For the three months ended

For the three months ended

June 30, 2021

March 31, 2021

Average Outstanding Balance

Interest Income/ Expense

Average
Yield/Rate(3)(4)

Average Outstanding Balance

Interest Income/ Expense

Average
Yield/Rate(3)(4)

Interest-earning assets

Loans (1)

Commercial and industrial

$

826,647

$

11,729

5.69

%

$

803,012

$

9,234

4.66

%

Commercial real estate

991,033

11,433

4.63

%

971,825

11,441

4.77

%

Real estate construction

253,947

2,352

3.71

%

255,677

2,178

3.45

%

Residential real estate

465,525

4,642

4.00

%

394,329

4,452

4.58

%

Agricultural real estate

131,906

1,687

5.13

%

140,875

1,696

4.88

%

Agricultural

94,407

1,024

4.35

%

94,787

1,037

4.44

%

Consumer

89,680

943

4.22

%

76,413

963

5.11

%

Total loans

2,853,145

33,810

4.75

%

2,736,918

31,001

4.59

%

Securities

Taxable securities

887,983

3,523

1.59

%

839,349

3,799

1.84

%

Nontaxable securities

99,003

717

2.90

%

108,104

724

2.72

%

Total securities

986,986

4,240

1.72

%

947,453

4,523

1.94

%

Federal funds sold and other

124,502

268

0.86

%

206,769

288

0.56

%

Total interest-earning assets

$

3,964,633

38,318

3.88

%

$

3,891,140

35,812

3.73

%

Interest-bearing liabilities

Savings, NOW and money market deposits

$

2,068,319

895

0.17

%

$

2,079,057

971

0.19

%

Time deposits

587,733

1,130

0.77

%

611,102

1,439

0.96

%

Total interest-bearing deposits

2,656,052

2,025

0.31

%

2,690,159

2,410

0.36

%

FHLB advances

37,656

80

0.86

%

10,013

65

2.63

%

Other borrowings

134,002

1,583

4.74

%

129,347

1,578

4.96

%

Total interest-bearing liabilities

$

2,827,710

3,688

0.52

%

$

2,829,519

4,053

0.58

%

Net interest income

$

34,630

$

31,759

Interest rate spread

3.36

%

3.15

%

Net interest margin (2)

3.50

%

3.31

%

(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

June 30,

March 31,

December 31,

September 30,

June 30,

2021

2021

2020

2020

2020

Income before income taxes

$

19,581

$

19,346

$

14,599

$

(93,058

)

$

2,186

Add: goodwill impairment

104,831

Less: tax effect

4,415

4,271

2,111

2,652

497

Adjusted income

$

15,166

$

15,075

$

12,488

$

9,121

$

1,689

Weighted average common shares outstanding

14,356,958

14,464,291

14,760,810

15,040,407

15,209,483

Effect of weighted average dilutive shares assuming positive net income

317,880

269,792

173,248

82,804

94,526

Weighted average diluted shares

14,674,838

14,734,083

14,934,058

15,123,211

15,304,009

Diluted earnings per share adjusted for goodwill impairment

$

1.03

$

1.02

$

0.84

$

0.60

$

0.11

Total stockholders’ equity

$

412,995

$

397,815

$

407,649

$

402,172

$

479,766

Less: goodwill

31,601

31,601

31,601

31,601

136,432

Less: core deposit intangibles, net

13,993

15,023

16,057

17,101

18,131

Less: mortgage servicing asset, net

1

2

Less: naming rights, net

1,109

1,119

1,130

1,141

1,152

Tangible common equity

$

366,292

$

350,072

$

358,861

$

352,328

$

324,049

Common shares issued at period end

14,360,172

14,383,913

14,540,556

14,853,487

15,218,301

Diluted common shares outstanding at period end

14,664,603

14,668,287

14,756,378

14,945,282

15,334,144

Book value per common share

$

28.76

$

27.66

$

28.04

$

27.08

$

31.53

Tangible book value per common share

$

25.51

$

24.34

$

24.68

$

23.72

$

21.29

Tangible book value per diluted common share

$

24.98

$

23.87

$

24.32

$

23.57

$

21.13

Total assets

$

4,268,216

$

4,196,184

$

4,013,356

$

3,865,571

$

4,205,269

Less: goodwill

31,601

31,601

31,601

31,601

136,432

Less: core deposit intangibles, net

13,993

15,023

16,057

17,101

18,131

Less: mortgage servicing asset, net

1

2

Less: naming rights, net

1,109

1,119

1,130

1,141

1,152

Tangible assets

$

4,221,513

$

4,148,441

$

3,964,568

$

3,815,727

$

4,049,552

Total stockholders’ equity to total assets

9.68

%

9.48

%

10.16

%

10.40

%

11.41

%

Tangible common equity to tangible assets

8.68

%

8.44

%

9.05

%

9.23

%

8.00

%

Total average stockholders’ equity

$

404,039

$

395,638

$

409,572

$

483,088

$

483,605

Less: average intangible assets

47,334

48,376

54,547

154,049

156,194

Average tangible common equity

$

356,705

$

347,262

$

355,025

$

329,039

$

327,411

Net income (loss) allocable to common stockholders

$

15,166

$

15,075

$

12,488

$

(90,405

)

$

1,689

Add: goodwill impairment

104,831

Less: tax effect of goodwill impairment

5,305

Adjusted net income (loss) plus goodwill impairment

15,166

15,075

12,488

9,121

1,689

Amortization of intangible assets

1,041

1,045

1,055

1,043

986

Less: tax effect of intangible assets amortization

219

219

222

234

207

Adjusted net income (loss) allocable to common stockholders

$

15,988

$

15,901

$

13,321

$

9,930

$

2,468

Return on total average stockholders’ equity (ROAE) annualized

15.06

%

15.45

%

12.13

%

(74.45

)%

1.40

%

Return on average tangible common equity (ROATCE) annualized

17.98

%

18.57

%

14.93

%

(108.31

)%

3.03

%

Adjusted return on average tangible common equity

17.98

%

18.57

%

14.93

%

12.01

%

3.03

%

Non-interest expense

$

25,806

$

24,881

$

28,460

$

130,835

$

23,937

Less: merger expense

460

152

299

Less: goodwill impairment

104,831

Non-interest expense, excluding merger expense and goodwill impairment

$

25,346

$

24,729

$

28,161

$

26,004

$

23,937

Net interest income

$

34,630

$

31,759

$

35,559

$

32,107

$

32,891

Non-interest income

9,100

6,712

8,500

6,485

5,732

Less: net gain on acquisition

663

(78

)

2,145

Less: net gains (losses) from securities transactions

17

(1

)

4

Non-interest income, excluding gains (losses) from
securities transactions

$

8,437

$

6,773

$

6,356

$

6,485

$

5,728

Net interest income plus non-interest income, excluding net gain on acquisition and net gains (losses) from securities transactions

$

43,067

$

38,532

$

41,915

$

38,592

$

38,619

Non-interest expense less goodwill impairment to net interest income plus non-interest income

59.01

%

64.67

%

64.60

%

67.38

%

61.98

%

Efficiency ratio

58.85

%

64.18

%

67.19

%

67.38

%

61.98

%

Net income (loss) allocable to common stockholders

$

15,166

$

15,075

$

12,488

$

(90,405

)

$

1,689

Add: income tax provision

4,415

4,271

2,111

(2,653

)

497

Add: provision (reversal) of credit losses

(1,657

)

(5,756

)

1,000

815

12,500

Add: goodwill impairment

104,831

Adjusted net income

$

17,924

$

13,590

$

15,599

$

12,588

$

14,686

Total average assets

$

4,231,439

$

4,143,752

$

3,910,628

$

4,041,187

$

4,159,336

Total average stockholders’ equity

$

404,039

$

395,638

$

409,572

$

483,088

$

483,605

Return on average assets (ROAA) annualized

1.44

%

1.48

%

1.27

%

(8.90

)%

0.16

%

Adjusted return on average assets

1.70

%

1.33

%

1.59

%

1.24

%

1.42

%

Adjusted return on average equity

17.79

%

13.93

%

15.15

%

10.37

%

12.21

%