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

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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
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 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%


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