Bay Street News

Equity Bancshares, Inc. Fourth Quarter Results Highlighted by 6.1% Annualized Loan Growth and Strategic Balance Sheet Repositioning

WICHITA, Kan., Jan. 24, 2024 (GLOBE NEWSWIRE) — Equity Bancshares, Inc. (NYSE: EQBK), (“Equity”, “the Company”, “we,” “us,” “our”), the Wichita-based holding company of Equity Bank, reported a net loss of $28.3 million or $(1.84) earnings per diluted share for the quarter ended December 31, 2023. Excluding the impact of our previously announced bond repositioning and merger related expenses, operating income would have been $11.9 million or $0.77 earnings per diluted share.

“Our Company entered the fourth quarter positioned to take advantage of market opportunities which we expect will drive our operating growth in the future,” said Brad S. Elliott, Chairman and CEO of Equity.  “With our team’s efforts around capital creation and management, we were able to announce our newest strategic combination with the Bank of Kirksville, Missouri, as well as a repositioning of our bond portfolio.  Each of these transactions reflect our entrepreneurial spirit and, we believe, position our Company for continued success.”

“In addition to the transformative transactions, our teams continued to emphasize core customer creation and service, while maintaining strong credit quality,” Mr. Elliott said. “Our classified asset ratio continues to be historically low, while both capital and on balance sheet reserves remain high, positioning Equity to be strategic for organic and acquisitive growth opportunities.”

Notable Items:

Financial Results for the Quarter Ended December 31, 2023

Net loss allocable to common stockholders was $28.3 million, or $(1.84) per diluted share, for the three months ended December 31, 2023, as compared to $12.3 million, or $0.80 per diluted share, for the three months ended September 30, 2023. The decrease during the quarter was primarily driven by a loss on sales of available-for-sale securities of $50.6 million. Excluding the tax-effected impact of loss on sale, operating net income would have been $11.9 million, or $0.77 per diluted share.

Net Interest Income

Net interest income was $39.5 million for the three months ended December 31, 2023, as compared to $41.0 million for the three months ended September 30, 2023, a decrease of $1.5 million, or 3.77%. Net interest margin decreased to 3.49% from 3.51% as the yield on interest-earning assets increased 12 basis points to 5.69% and the cost of interest-bearing deposits increased 18 basis points to 2.83%. Continued increases in loan coupon were offset by a decline in purchase accounting and non-accrual loan costs.

Average deposits declined during the quarter and the Company continued to experience compositional shift from noninterest-bearing deposits into interest-bearing categories. At December 31, 2023, non-interest-bearing deposits declined $38.1 million from September 30, 2023, and $199.8 million from December 31, 2022.  The majority of the decline over the last 12 months is due to deposits migrating to interest-bearing deposit accounts coupled with declining excess liquidity positions of our customer base.

Provision for Credit Losses

During the three months ended December 31, 2023, there was a provision of $711 thousand compared to a provision of $1.2 million in the previous quarter.  The provision for the quarter is the result of increased loss rates within the portfolio as well as realized charge-offs; however, overall we continue to experience positive credit trends. The Company continues to estimate the allowance for credit loss with assumptions that anticipate slower prepayment rates and continued market disruption caused by elevated inflation, supply chain issues and the impact of monetary policy on consumers and businesses.  For the three months ended December 31, 2023, we had net charge-offs of $1.4 million as compared to $1.6 million for the three months ended September 30, 2023.

Non-Interest Income

Total non-interest income was $(43.4) million for the three months ended December 31, 2023, as compared to $8.7 million for the three months ended September 30, 2023, or a decrease of 597.0%, quarter-over-quarter.  The $52.1 million decrease was primarily due to an increase in losses on the sale of available-for-sale securities of $50.7 million. During the fourth quarter the Company repositioned it’s investment portfolio by selling lower yielding securities and reinvesting into higher yielding assets, resulting in the loss.

Exclusive of the investment portfolio re-positioning, non-interest income was driven down by the fair valuation of portfolio derivatives as market rates trended down in the quarter, as well as a decline in the benefits from specific credits related to the Almena State Bank transaction of $526 thousand. 

Non-Interest Expense

Total non-interest expense for the quarter ended December 31, 2023, was $35.0 million as compared to $34.2 million for the quarter ended September 30, 2023, an increase of $754 thousand. Adjusting for merger expenses, the increase quarter over quarter was $462 thousand due to increased incentive and insurance accruals within the salary and employee benefits line item.

Income Tax Expense

At December 31, 2023, the effective tax rate for the quarter was 28.6% as compared to 13.5% at September 30, 2023. The year-to-date tax rate is (223.9)% compared to 14.1% at September 30, 2023. The increase in the rate linked to the quarter represents additional benefit associated with the sale of bonds generating pre-tax losses recognized in the fourth quarter ending December 31, 2023. The year-to-date tax rate represents the anticipated tax planning benefits and credits amplified by a reduction in pre-tax book income for the year due to the pre-tax losses generated in the fourth quarter related to the sale of bonds.  The anticipated tax rate for the full year, normalized for the sale of the bonds, would have been 12.8%.  

Loans, Total Assets and Funding

Loans held for investment were $3.33 billion at December 31, 2023, increasing $50.8 million compared to the previous quarter. Total assets were $5.03 billion as of December 31, 2023, increasing $89.3 million or 1.8% from September 30, 2023.

Total deposits were $4.1 billion at December 31, 2023, increasing $63.3 million from the previous quarter end and decreasing $96.4 million from the same period end in 2022.  During the fourth quarter, there were increases in brokered deposits of $50.0 million. Excluding the impact of brokered deposits, totals deposits increased $13.3 million as compared to September 30, 2023. Of the total deposit balance, non-interest-bearing accounts comprise approximately 21.7%. Advances from the FHLB and borrowings from the Federal Reserve’s Bank Term Funding Program remained unchanged from September 30, 2023.

Asset Quality

As of December 31, 2023, Equity’s allowance for credit losses to total loans remained materially consistent at 1.3% as compared to September 30, 2023.  Nonperforming assets were $26.5 million as of December 31, 2023, or 0.5% of total assets, compared to $20.5 million at September 30, 2023, or 0.4% of total assets.  Non-accrual loans were $25.0 million at December 31, 2023, as compared to $19.4 million at September 30, 2023.  Total classified assets, including loans rated special mention or worse, other real estate owned, excluding previous branch locations, and other repossessed assets were $40.5 million, or 7.1% of regulatory capital, up from $37.6 million, or 6.3% of regulatory capital as of September 30, 2023.

Capital

Quarter over quarter, book capital increased $34.7 million to $452.9 million and tangible capital increased $35.5 million to $391.5 million.  The increase in book and tangible capital is primarily due to a decrease in the unrealized loss position in our investment portfolio of $65.0 million, partially offset by net loss for the quarter of $28.3 million, dividends declared of $1.9 million and a decrease in unrealized gains on cash-flow derivatives of $1.0 million.

The Company’s ratio of common equity tier 1 capital to risk-weighted assets was 11.7%, the total capital to risk-weighted assets was 15.5% and the total leverage ratio was 9.5% at December 31, 2023.  At September 30, 2023, the Company’s common equity tier 1 capital to risk-weighted assets ratio was 12.7%, the total capital to risk-weighted assets ratio was 16.4% and the total leverage ratio was 9.8%.

Equity Bank’s ratio of common equity tier 1 capital to risk-weighted assets was 13.9%, total capital to risk-weighted assets was 15.1% and the total leverage ratio was 10.6% at December 31, 2023.  At September 30, 2023, Equity Bank’s ratio of common equity tier 1 capital to risk-weighted assets was 14.7%, the ratio of total capital to risk-weighted assets was 15.9% and the total leverage ratio was 10.8%.

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 a common comparable metric used by banks to understand the expense structure relative to 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 and provision for loan losses 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 “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 6 in the following press release tables.

Conference Call and Webcast

Equity’s Chairman and Chief Executive Officer, Brad Elliott, and Chief Financial Officer, Chris Navratil, will hold a conference call and webcast to discuss fourth quarter results on Thursday, January 25, 2024, at 10 a.m. eastern time or 9 a.m. central time.

A live webcast of the call will be available on the Company’s website at investor.equitybank.com. To access the call by phone, please go to this registration link, and you will be provided with dial in details. Investors, news media, and other participants are encouraged to dial into the conference call ten minutes ahead of the scheduled start time.

A replay of the call and webcast will be available two hours following the close of the call until January 31, 2024, accessible 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 NYSE National, Inc. 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,” “positioned,” “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 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, 2023, 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, except as required by law. New risks and uncertainties arise from time to time 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:

Brian J. Katzfey
VP, Director of Corporate Development and Investor Relations
Equity Bank
(316) 858-3128
bkatzfey@equitybank.com     

Media Contact:

John J. Hanley
Chief Marketing Officer
Equity Bancshares, Inc.
(913) 583-8004
jhanley@equitybank.com

Unaudited Financial Tables

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

    Three months ended
December 31,
    Year ended
December 31,
 
    2023     2022     2023     2022  
Interest and dividend income                        
Loans, including fees   $ 54,932     $ 46,149     $ 211,213     $ 160,859  
Securities, taxable     6,417       5,946       23,873       22,713  
Securities, nontaxable     354       678       1,960       2,698  
Federal funds sold and other     2,591       651       9,666       1,978  
Total interest and dividend income     64,294       53,424       246,712       188,248  
Interest expense                        
Deposits     20,074       8,013       70,473       16,321  
Federal funds purchased and retail repurchase agreements     298       82       931       232  
Federal Home Loan Bank advances     1,005       1,500       3,944       2,094  
Federal Reserve Bank borrowings     1,546             4,755        
Subordinated debt     1,904       1,798       7,591       6,771  
Total interest expense     24,827       11,393       87,694       25,418  
                         
Net interest income     39,467       42,031       159,018       162,830  
Provision (reversal) for credit losses     711       (151 )     1,873       125  
Net interest income after provision (reversal) for credit losses     38,756       42,182       157,145       162,705  
Non-interest income                        
Service charges and fees     2,299       2,705       10,187       10,632  
Debit card income     2,524       2,557       10,322       10,677  
Mortgage banking     125       116       652       1,416  
Increase in value of bank-owned life insurance     925       758       4,059       3,113  
Net gain on acquisition and branch sales           422             962  
Net gains (losses) from securities transactions     (50,618 )     14       (51,909 )     5  
Other     1,331       1,757       7,560       9,152  
Total non-interest income     (43,414 )     8,329       (19,129 )     35,957  
Non-interest expense                        
Salaries and employee benefits     16,598       16,113       64,384       62,006  
Net occupancy and equipment     3,244       2,919       12,325       12,223  
Data processing     4,471       4,334       17,433       15,883  
Professional fees     1,413       1,404       5,754       4,951  
Advertising and business development     1,598       1,903       5,425       5,042  
Telecommunications     460       517       1,963       1,916  
FDIC insurance     660       360       2,195       1,140  
Courier and postage     577       533       2,046       1,881  
Free nationwide ATM cost     508       510       2,073       2,103  
Amortization of core deposit intangibles     739       924       3,374       4,042  
Loan expense     155       262       540       828  
Other real estate owned     224       388       542       589  
Merger expenses     292       68       297       594  
Other     4,059       5,014       17,250       15,182  
Total non-interest expense     34,998       35,249       135,601       128,380  
Income (loss) before income tax     (39,656 )     15,262       2,415       70,282  
Provision for income taxes     (11,357 )     3,654       (5,406 )     12,594  
Net income (loss) and net income (loss) allocable to common stockholders   $ (28,299 )   $ 11,608     $ 7,821     $ 57,688  
Basic earnings (loss) per share   $ (1.84 )   $ 0.73     $ 0.50     $ 3.56  
Diluted earnings (loss) per share   $ (1.84 )   $ 0.72     $ 0.50     $ 3.51  
Weighted average common shares     15,417,200       15,948,360       15,535,772       16,214,049  
Weighted average diluted common shares     15,417,200       16,204,185       15,648,842       16,437,906  
                                 

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

    As of and for the three months ended  
    December 31,
2023
    September 30,
2023
    June 30,
2023
    March 31,
2023
    December 31,
2022
 
Interest and dividend income                              
Loans, including fees   $ 54,932     $ 55,152     $ 52,748     $ 48,381     $ 46,149  
Securities, taxable     6,417       5,696       5,813       5,947       5,946  
Securities, nontaxable     354       369       568       669       678  
Federal funds sold and other     2,591       3,822       2,127       1,126       651  
Total interest and dividend income     64,294       65,039       61,256       56,123       53,424  
Interest expense                              
Deposits     20,074       19,374       17,204       13,821       8,013  
Federal funds purchased and retail repurchase agreements     298       246       192       195       82  
Federal Home Loan Bank advances     1,005       968       953       1,018       1,500  
Federal Reserve Bank borrowings     1,546       1,546       1,528       135        
Subordinated debt     1,904       1,893       1,950       1,844       1,798  
Total interest expense     24,827       24,027       21,827       17,013       11,393  
                               
Net interest income     39,467       41,012       39,429       39,110       42,031  
Provision (reversal) for credit losses     711       1,230       298       (366 )     (151 )
Net interest income after provision (reversal) for credit losses     38,756       39,782       39,131       39,476       42,182  
Non-interest income                              
Service charges and fees     2,299       2,690       2,653       2,545       2,705  
Debit card income     2,524       2,591       2,653       2,554       2,557  
Mortgage banking     125       226       213       88       116  
Increase in value of bank-owned life insurance     925       794       757       1,583       758  
Net gain on acquisition and branch sales                             422  
Net gains (losses) from securities transactions     (50,618 )     (1 )     (1,322 )     32       14  
Other     1,331       2,435       1,996       1,798       1,757  
Total non-interest income     (43,414 )     8,735       6,950       8,600       8,329  
Non-interest expense                              
Salaries and employee benefits     16,598       15,857       15,237       16,692       16,113  
Net occupancy and equipment     3,244       3,262       2,940       2,879       2,919  
Data processing     4,471       4,553       4,493       3,916       4,334  
Professional fees     1,413       1,312       1,645       1,384       1,404  
Advertising and business development     1,598       1,419       1,249       1,159       1,903  
Telecommunications     460       502       516       485       517  
FDIC insurance     660       660       515       360       360  
Courier and postage     577       548       463       458       533  
Free nationwide ATM cost     508       516       524       525       510  
Amortization of core deposit intangibles     739       799       918       918       924  
Loan expense     155       132       136       117       262  
Other real estate owned     224       128       71       119       388  
Merger expenses     292                         68  
Other     4,059       4,556       4,423       4,217       5,014  
Total non-interest expense     34,998       34,244       33,130       33,229       35,249  
Income (loss) before income tax     (39,656 )     14,273       12,951       14,847       15,262  
Provision for income taxes (benefit)     (11,357 )     1,932       1,495       2,524       3,654  
Net income (loss) and net income (loss) allocable to common stockholders   $ (28,299 )   $ 12,341     $ 11,456     $ 12,323     $ 11,608  
Basic earnings (loss) per share   $ (1.84 )   $ 0.80     $ 0.74     $ 0.78     $ 0.73  
Diluted earnings (loss) per share   $ (1.84 )   $ 0.80     $ 0.74     $ 0.77     $ 0.72  
Weighted average common shares     15,417,200       15,404,992       15,468,378       15,858,808       15,948,360  
Weighted average diluted common shares     15,417,200       15,507,172       15,554,255       16,028,051       16,204,185  
                                         

TABLE 3. CONSOLIDATED BALANCE SHEETS (Unaudited)

(Dollars in thousands)

    December 31,
2023
    September 30,
2023
    June 30,
2023
    March 31,
2023
    December 31,
2022
 
ASSETS                              
Cash and due from banks   $ 363,289     $ 183,404     $ 262,604     $ 249,982     $ 104,013  
Federal funds sold     15,810       15,613       15,495       384       415  
Cash and cash equivalents     379,099       199,017       278,099       250,366       104,428  
Available-for-sale securities     919,648       1,057,009       1,094,748       1,183,247       1,184,390  
Held-to-maturity securities     2,209       2,212       2,216       1,944       1,948  
Loans held for sale     476       627       2,456       648       349  
Loans, net of allowance for credit losses(1)     3,289,381       3,237,932       3,278,126       3,285,515       3,265,701  
Other real estate owned, net     1,833       3,369       4,362       4,171       4,409  
Premises and equipment, net     112,632       110,271       106,186       104,789       101,492  
Bank-owned life insurance     124,865       124,245       123,451       122,971       123,176  
Federal Reserve Bank and Federal Home Loan Bank stock     20,608       20,780       21,129       33,359       21,695  
Interest receivable     25,497       23,621       21,360       20,461       20,630  
Goodwill     53,101       53,101       53,101       53,101       53,101  
Core deposit intangibles, net     7,222       7,961       8,760       9,678       10,596  
Other     98,021       105,122       100,889       86,466       89,736  
Total assets   $ 5,034,592     $ 4,945,267     $ 5,094,883     $ 5,156,716     $ 4,981,651  
LIABILITIES AND STOCKHOLDERS’ EQUITY                              
Deposits                              
Demand   $ 898,129     $ 936,217     $ 978,968     $ 1,012,671     $ 1,097,899  
Total non-interest-bearing deposits     898,129       936,217       978,968       1,012,671       1,097,899  
Demand, savings and money market     2,483,807       2,397,003       2,397,524       2,334,463       2,329,584  
Time     763,519       748,950       854,458       939,799       814,324  
Total interest-bearing deposits     3,247,326       3,145,953       3,251,982       3,274,262       3,143,908  
Total deposits     4,145,455       4,082,170       4,230,950       4,286,933       4,241,807  
Federal funds purchased and retail repurchase agreements     43,582       39,701       44,770       45,098       46,478  
Federal Home Loan Bank advances and Federal Reserve Bank borrowings     240,000       240,000       240,000       251,222       138,864  
Subordinated debt     96,921       96,787       96,653       96,522       96,392  
Contractual obligations     19,315       29,019       29,608       19,372       15,218  
Interest payable and other liabilities     36,459       39,460       34,467       32,446       32,834  
Total liabilities     4,581,732       4,527,137       4,676,448       4,731,593       4,571,593  
Commitments and contingent liabilities                              
Stockholders’ equity                              
Common stock     207       207       207       206       205  
Additional paid-in capital     489,187       488,137       487,225       486,658       484,989  
Retained earnings     141,006       171,188       160,715       150,810       140,095  
Accumulated other comprehensive income (loss), net of tax     (57,920 )     (122,047 )     (110,225 )     (101,238 )     (113,511 )
Treasury stock     (119,620 )     (119,355 )     (119,487 )     (111,313 )     (101,720 )
Total stockholders’ equity     452,860       418,130       418,435       425,123       410,058  
Total liabilities and stockholders’ equity   $ 5,034,592     $ 4,945,267     $ 5,094,883     $ 5,156,716     $ 4,981,651  
                               
(1) Allowance for credit losses   $ 43,520     $ 44,186     $ 44,544     $ 45,103     $ 45,847  
                                         

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

    As of and for the three months ended  
    December 31,     September 30,     June 30,     March 31,     December 31,  
    2023     2023     2023     2023     2022  
Loans Held For Investment by Type                              
Commercial real estate   $ 1,759,855     $ 1,721,761     $ 1,764,460     $ 1,746,834     $ 1,721,269  
Commercial and industrial     598,327       585,129       583,664       605,576       594,862  
Residential real estate     556,328       558,188       560,389       563,791       570,550  
Agricultural real estate     196,114       205,865       202,317       202,274       199,189  
Agricultural     118,587       103,352       104,510       106,169       120,003  
Consumer     103,690       107,823       107,330       105,974       105,675  
Total loans held-for-investment     3,332,901       3,282,118       3,322,670       3,330,618       3,311,548  
Allowance for credit losses     (43,520 )     (44,186 )     (44,544 )     (45,103 )     (45,847 )
Net loans held for investment   $ 3,289,381     $ 3,237,932     $ 3,278,126     $ 3,285,515     $ 3,265,701  
                               
                               
Asset Quality Ratios                              
Allowance for credit losses on loans to total loans     1.31 %     1.35 %     1.34 %     1.35 %     1.38 %
Past due or nonaccrual loans to total loans     1.10 %     1.03 %     0.78 %     0.66 %     0.72 %
Nonperforming assets to total assets     0.53 %     0.42 %     0.31 %     0.33 %     0.37 %
Nonperforming assets to total loans plus other
    real estate owned
    0.79 %     0.63 %     0.47 %     0.51 %     0.55 %
Classified assets to bank total regulatory capital     7.09 %     6.27 %     7.94 %     10.09 %     9.98 %
                               
                               
Selected Average Balance Sheet Data (QTD Average)                              
Investment securities   $ 985,591     $ 1,085,905     $ 1,155,971     $ 1,185,482     $ 1,184,452  
Total gross loans receivable     3,293,755       3,281,483       3,337,497       3,305,681       3,275,284  
Interest-earning assets     4,480,279       4,635,384       4,678,744       4,611,019       4,538,177  
Total assets     4,892,712       5,046,179       5,064,912       4,994,417       4,930,231  
Interest-bearing deposits     3,092,637       3,206,300       3,226,965       3,235,557       3,032,902  
Borrowings     391,691       385,125       385,504       247,932       299,191  
Total interest-bearing liabilities     3,484,328       3,591,425       3,612,469       3,483,489       3,335,557  
Total deposits     4,019,362       4,177,332       4,204,334       4,279,451       4,185,904  
Total liabilities     4,469,505       4,619,919       4,640,050       4,573,917       4,531,961  
Total stockholders’ equity     423,207       426,260       424,862       420,500       398,270  
Tangible common equity*     361,451       363,625       361,409       356,053       332,820  
                               
                               
Performance ratios                              
Return on average assets (ROAA) annualized     (2.29 )%     0.97 %     0.91 %     1.00 %     0.93 %
Return on average assets before income tax and
   provision for loan losses*
    (3.16 )%     1.22 %     1.05 %     1.18 %     1.22 %
Return on average equity (ROAE) annualized     (26.53 )%     11.49 %     10.82 %     11.89 %     11.57 %
Return on average equity before income tax and
   provision for loan losses*
    (36.51 )%     14.43 %     12.51 %     13.97 %     15.05 %
Return on average tangible common equity
   (ROATCE) annualized*
    (30.39 )%     14.18 %     13.55 %     14.89 %     14.74 %
Yield on loans annualized     6.62 %     6.67 %     6.34 %     5.94 %     5.59 %
Cost of interest-bearing deposits annualized     2.58 %     2.40 %     2.14 %     1.73 %     1.05 %
Cost of total deposits annualized     1.98 %     1.84 %     1.64 %     1.31 %     0.76 %
Net interest margin annualized     3.49 %     3.51 %     3.38 %     3.44 %     3.67 %
Efficiency ratio*     74.35 %     68.83 %     69.44 %     70.00 %     70.47 %
Non-interest income / average assets     (3.52 )%     0.69 %     0.55 %     0.74 %     0.67 %
Non-interest expense / average assets     2.84 %     2.69 %     2.62 %     2.74 %     2.84 %
                               
                               
Capital Ratios                              
Tier 1 Leverage Ratio     9.46 %     9.77 %     9.54 %     9.60 %     9.61 %
Common Equity Tier 1 Capital Ratio     11.74 %     12.65 %     12.23 %     12.21 %     12.26 %
Tier 1 Risk Based Capital Ratio     12.36 %     13.28 %     12.84 %     12.83 %     12.88 %
Total Risk Based Capital Ratio     15.48 %     16.42 %     15.96 %     15.98 %     16.08 %
Total stockholders’ equity to total assets     8.99 %     8.46 %     8.21 %     8.24 %     8.23 %
Tangible common equity to tangible assets*     7.87 %     7.29 %     7.06 %     7.09 %     7.02 %
Dividend payout ratio     (6.65 )%     15.13 %     13.53 %     10.49 %     14.01 %
Book value per common share   $ 29.35     $ 27.13     $ 27.18     $ 27.03     $ 25.74  
Tangible book value per common share*   $ 25.37     $ 23.09     $ 23.08     $ 22.96     $ 21.67  
Tangible book value per diluted common share*   $ 25.05     $ 22.96     $ 22.98     $ 22.83     $ 21.35  
                               
* The value noted is considered a Non-GAAP financial measure. For a reconciliation of Non-GGAP financial measures, see Table 8. Non-GAAP Financial Measures.  
   

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

  For the year ended     For the year ended  
  December 31, 2023     December 31, 2022  
  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 $ 580,451     $ 42,901       7.39 %   $ 583,295     $ 32,258       5.53 %
Commercial real estate   1,302,568       83,441       6.41 %     1,259,257       65,122       5.17 %
Real estate construction   447,516       33,764       7.54 %     363,902       18,269       5.02 %
Residential real estate   565,711       23,799       4.21 %     597,196       22,004       3.68 %
Agricultural real estate   201,326       13,820       6.86 %     201,295       11,399       5.66 %
Agricultural   100,394       6,966       6.94 %     125,342       6,697       5.34 %
Consumer   106,542       6,522       6.12 %     102,185       5,110       5.00 %
Total loans   3,304,508       211,213       6.39 %     3,232,472       160,859       4.98 %
Securities                                  
Taxable securities   1,027,726       23,873       2.32 %     1,185,750       22,713       1.92 %
Nontaxable securities   74,917       1,960       2.62 %     106,955       2,698       2.52 %
Total securities   1,102,643       25,833       2.34 %     1,292,705       25,411       1.97 %
Federal funds sold and other   193,941       9,666       4.98 %     107,278       1,978       1.84 %
Total interest-earning assets $ 4,601,092       246,712       5.36 %   $ 4,632,455       188,248       4.06 %
Interest-bearing liabilities                                  
Demand, savings and money market deposits $ 2,362,365       46,206       1.96 %   $ 2,433,364       10,797       0.44 %
Time deposits   827,652       24,267       2.93 %     663,790       5,524       0.83 %
Total interest-bearing deposits   3,190,017       70,473       2.21 %     3,097,154       16,321       0.53 %
FHLB advances   98,380       3,944       4.01 %     79,775       2,094       2.63 %
Other borrowings   254,666       13,277       5.21 %     151,172       7,003       4.63 %
Total interest-bearing liabilities $ 3,543,063       87,694       2.48 %   $ 3,328,101       25,418       0.76 %
                                   
Net interest income       $ 159,018                 $ 162,830        
Interest rate spread               2.88 %                 3.30 %
                                   
Net interest margin (2)               3.46 %                 3.51 %
                                   
(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  
  December 31, 2023     December 31, 2022  
  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 $ 580,726     $ 11,397       7.79 %   $ 594,221     $ 9,264       6.19 %
Commercial real estate   1,309,588       21,630       6.55 %     1,327,438       19,127       5.72 %
Real estate construction   439,708       9,000       8.12 %     367,935       5,827       6.28 %
Residential real estate   561,382       5,866       4.15 %     576,357       5,667       3.90 %
Agricultural real estate   196,468       3,421       6.91 %     200,492       3,353       6.64 %
Agricultural   100,226       1,928       7.63 %     104,146       1,443       5.50 %
Consumer   105,657       1,690       6.35 %     104,695       1,468       5.57 %
Total loans   3,293,755       54,932       6.62 %     3,275,284       46,149       5.59 %
Securities                                  
Taxable securities   932,376       6,417       2.73 %     1,083,986       5,946       2.18 %
Nontaxable securities   53,215       354       2.64 %     100,466       678       2.68 %
Total securities   985,591       6,771       2.73 %     1,184,452       6,624       2.22 %
Federal funds sold and other   200,933       2,591       5.12 %     78,441       651       3.29 %
Total interest-earning assets $ 4,480,279       64,294       5.69 %   $ 4,538,177       53,424       4.67 %
Interest-bearing liabilities                                  
Demand, savings and money market deposits $ 2,351,663       13,918       2.35 %   $ 2,294,639       5,336       0.92 %
Time deposits   740,974       6,156       3.30 %     738,263       2,677       1.44 %
Total interest-bearing deposits   3,092,637       20,074       2.58 %     3,032,902       8,013       1.05 %
FHLB advances   102,432       1,005       3.89 %     155,964       1,500       3.82 %
Other borrowings   289,259       3,748       5.14 %     146,691       1,880       5.09 %
Total interest-bearing liabilities $ 3,484,328       24,827       2.83 %   $ 3,335,557       11,393       1.36 %
                                   
Net interest income       $ 39,467                 $ 42,031        
Interest rate spread               2.86 %                 3.31 %
                                   
Net interest margin (2)               3.49 %                 3.67 %
                                   
(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 7. QUARTER-OVER-QUARTER NET INTEREST INCOME ANALYSIS (Unaudited)

(Dollars in thousands)

  For the three months ended     For the three months ended  
  December 31, 2023     September 30, 2023  
  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 $ 580,726     $ 11,397       7.79 %   $ 573,039     $ 10,984       7.60 %
Commercial real estate   1,309,588       21,630       6.55 %     1,253,362       20,824       6.59 %
Real estate construction   439,708       9,000       8.12 %     480,355       9,838       8.13 %
Residential real estate   561,382       5,866       4.15 %     564,138       6,085       4.28 %
Agricultural real estate   196,468       3,421       6.91 %     203,399       3,898       7.60 %
Agricultural   100,226       1,928       7.63 %     99,773       1,856       7.38 %
Consumer   105,657       1,690       6.35 %     107,417       1,667       6.16 %
Total loans   3,293,755       54,932       6.62 %     3,281,483       55,152       6.67 %
Securities                                  
Taxable securities   932,376       6,417       2.73 %     1,027,889       5,696       2.20 %
Nontaxable securities   53,215       354       2.64 %     58,016       369       2.52 %
Total securities   985,591       6,771       2.73 %     1,085,905       6,065       2.22 %
Federal funds sold and other   200,933       2,591       5.12 %     267,996       3,822       5.66 %
Total interest-earning assets $ 4,480,279       64,294       5.69 %   $ 4,635,384       65,039       5.57 %
Interest-bearing liabilities                                  
Demand savings and money market deposits $ 2,351,663       13,918       2.35 %   $ 2,423,380       13,331       2.18 %
Time deposits   740,974       6,156       3.30 %     782,920       6,043       3.06 %
Total interest-bearing deposits   3,092,637       20,074       2.58 %     3,206,300       19,374       2.40 %
FHLB advances   102,432       1,005       3.89 %     100,000       968       3.84 %
Other borrowings   289,259       3,748       5.14 %     285,125       3,685       5.13 %
Total interest-bearing liabilities $ 3,484,328       24,827       2.83 %   $ 3,591,425       24,027       2.65 %
                                   
Net interest income       $ 39,467                 $ 41,012        
Interest rate spread               2.86 %                 2.92 %
                                   
Net interest margin (2)               3.49 %                 3.51 %
                                   
(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 8. NON-GAAP FINANCIAL MEASURES (Unaudited)
(Dollars in thousands, except per share data)

    As of and for the three months ended  
    December 31,     September 30,     June 30,     March 31,     December 31,  
    2023     2023     2023     2023     2022  
                               
Total stockholders’ equity   $ 452,860     $ 418,130     $ 418,435     $ 425,123     $ 410,058  
Less: goodwill     53,101       53,101       53,101       53,101       53,101  
Less: core deposit intangibles, net     7,222       7,961       8,760       9,678       10,596  
Less: mortgage servicing rights, net     75       100       126       151       176  
Less: naming rights, net     1,000       1,011       1,022       1,033       1,044  
Tangible common equity   $ 391,462     $ 355,957     $ 355,426     $ 361,160     $ 345,141  
Common shares outstanding at period end     15,428,251       15,413,064       15,396,739       15,730,257       15,930,112  
Diluted common shares outstanding at period end     15,629,185       15,500,749       15,468,319       15,822,536       16,163,253  
Book value per common share   $ 29.35     $ 27.13     $ 27.18     $ 27.03     $ 25.74  
Tangible book value per common share   $ 25.37     $ 23.09     $ 23.08     $ 22.96     $ 21.67  
Tangible book value per diluted common share   $ 25.05     $ 22.96     $ 22.98     $ 22.83     $ 21.35  
                               
Total assets   $ 5,034,592     $ 4,945,267     $ 5,094,883     $ 5,156,716     $ 4,981,651  
Less: goodwill     53,101       53,101       53,101       53,101       53,101  
Less: core deposit intangibles, net     7,222       7,961       8,760       9,678       10,596  
Less: mortgage servicing rights, net     75       100       126       151       176  
Less: naming rights, net     1,000       1,011       1,022       1,033       1,044  
Tangible assets   $ 4,973,194     $ 4,883,094     $ 5,031,874     $ 5,092,753     $ 4,916,734  
Total stockholders’ equity to total assets     8.99 %     8.46 %     8.21 %     8.24 %     8.23 %
Tangible common equity to tangible assets     7.87 %     7.29 %     7.06 %     7.09 %     7.02 %
                               
Total average stockholders’ equity   $ 423,207     $ 426,260     $ 424,862     $ 420,500     $ 398,270  
Less: average intangible assets     61,756       62,635       63,453       64,447       65,450  
Average tangible common equity   $ 361,451     $ 363,625     $ 361,409     $ 356,053     $ 332,820  
Net income (loss) allocable to common stockholders   $ (28,299 )   $ 12,341     $ 11,456     $ 12,323     $ 11,608  
Add: amortization of intangible assets     775       835       954       954       961  
Less: tax effect of intangible assets amortization     163       175       200       200       202  
Adjusted net income (loss) allocable to common
    stockholders
  $ (27,687 )   $ 13,001     $ 12,210     $ 13,077     $ 12,367  
Return on total average stockholders’ equity
    (ROAE) annualized
    (26.53 )%     11.49 %     10.82 %     11.89 %     11.57 %
Return on average tangible common equity
    (ROATCE) annualized
    (30.39 )%     14.18 %     13.55 %     14.89 %     14.74 %
                               
Non-interest expense   $ 34,998     $ 34,244     $ 33,130     $ 33,229     $ 35,249  
Less: merger expense     297                         68  
Adjusted non-interest expense   $ 34,701     $ 34,244     $ 33,130     $ 33,229     $ 35,181  
Net interest income   $ 39,467     $ 41,012     $ 39,429     $ 39,110     $ 42,031  
Non-interest income     (43,414 )     8,735       6,950       8,600       8,329  
Less: net gain on acquisition and branch sales                             422  
Less: net gains (losses) from securities transactions     (50,618 )     (1 )     (1,322 )     32       14  
Adjusted non-interest income   $ 7,204     $ 8,736     $ 8,272     $ 8,568     $ 7,893  
Net interest income plus adjusted non-interest income   $ 46,671     $ 49,748     $ 47,701     $ 47,678     $ 49,924  
Non-interest expense to
    net interest income plus non-interest income
    (886.70 )%     68.84 %     71.43 %     69.65 %     69.99 %
Efficiency ratio     74.35 %     68.83 %     69.45 %     69.69 %     70.47 %
Net income (loss) allocable to common stockholders   $ (28,299 )   $ 12,341     $ 11,456     $ 12,323     $ 11,608  
Add: income tax provision     (11,357 )     1,932       1,495       2,524       3,654  
Add: provision (reversal) of credit losses     711       1,230       298       (366 )     (151 )
Pre-tax, pre-provision income   $ (38,945 )   $ 15,503     $ 13,249     $ 14,481     $ 15,111  
Total average assets   $ 4,892,712     $ 5,046,179     $ 5,064,912     $ 4,994,417     $ 4,930,231  
Total average stockholders’ equity   $ 423,207     $ 426,620     $ 424,862     $ 420,500     $ 398,270  
Return on average assets (ROAA) annualized     (2.29 )%     0.97 %     0.91 %     1.00 %     0.93 %
Adjusted return on average assets     (3.16 )%     1.22 %     1.05 %     1.18 %     1.22 %
Adjusted return on average equity     (36.51 )%     14.43 %     12.51 %     13.97 %     15.05 %

 


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