Equity Bancshares, Inc. Reports Third Quarter Results

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

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

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

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

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

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

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

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

Notable Items:

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

Equity’s Balance Sheet Highlights:

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

Financial Results for the Quarter Ended September 30, 2020

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

Net Interest Income

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

Provision for Loan Losses

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

Non-Interest Income

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

Non-Interest Expense

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

Asset Quality

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

Regulatory Capital

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

Non-GAAP Financial Measures

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

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

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

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

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

Conference Call and Webcast

Equity Chairman and Chief Executive Officer, Brad Elliott, and Executive Vice President and Chief Financial Officer, Eric Newell, will hold a conference call and webcast to discuss third quarter 2020 results on Wednesday, October 21, 2020, at 10:00 a.m. eastern time, 9:00 a.m. central time.

Investors, news media and other participants should register for the call or audio webcast at. On Wednesday, October 21, 2020, participants may also dial into the call toll-free at (844) 534-7311 from anywhere in the U.S. or (574) 990-1419 internationally, using conference ID no. 4668766.

Participants are encouraged to dial into the call or access the webcast approximately 10 minutes prior to the start time. Presentation slides to pair with the call or webcast will be posted one hour prior to the call at investor.equitybank.com.

A replay of the call and webcast will be available two hours following the close of the call until October 27, 2020, accessible at (855) 859-2056 with conference ID no. 4668766 at investor.equitybank.com.

About Equity Bancshares, Inc.

Equity Bancshares, Inc. is the holding company for Equity Bank, offering a full range of financial solutions, including commercial loans, consumer banking, mortgage loans, trust and wealth management services and treasury management services, while delivering the high-quality, relationship-based customer service of a community bank. Equity’s common stock is traded on the NASDAQ Global Select Market under the symbol “EQBK.” Learn more at www.equitybank.com.

Special Note Concerning Forward-Looking Statements

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

For discussion of these and other risks that may cause actual results to differ from expectations, please refer to “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in Equity’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2020, and any updates to those risk factors set forth in Equity’s subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K. If one or more events related to these or other risks or uncertainties materialize, or if Equity’s underlying assumptions prove to be incorrect, actual results may differ materially from what Equity anticipates. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and Equity does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, such as COVID-19, and it is not possible for us to predict those events or how they may affect us. In addition, Equity cannot assess the impact of each factor on Equity’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Equity or persons acting on Equity’s behalf may issue.

Investor Contact:

Chris Navratil
SVP, Finance
Equity Bancshares, Inc.
(316) 612-6014
cnavratil@equitybank.com        

Media Contact:

John J. Hanley
SVP, Senior Director of Marketing
Equity Bancshares, Inc.
(816) 505-4063
jhanley@equitybank.com

Unaudited Financial Tables

• Table 1. Consolidated Statements of Operations
• Table 2. Quarterly Consolidated Statements of Operations
• Table 3. Consolidated Balance Sheets
• Table 4. Selected Financial Highlights
• Table 5. Year-to-Date Net Interest Income Analysis
• Table 6. Quarter-to-Date Net Interest Income Analysis
• Table 7. Quarter Over Quarter Net Interest Income Analysis
• Table 8. Non-GAAP Financial Measures

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

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

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

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

* The value noted is considered a Non-GAAP financial measure. For a reconciliation of Non-GAAP financial measures, see Table 6. Non-GAAP Financial Measures

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

TABLE 6. QUARTER-TO-DATE NET INTEREST INCOME ANALYSIS (Unaudited)
(Dollars in thousands)

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

TABLE 8. NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share data)