Equity Bancshares, Inc. Announces Fourth Quarter Earnings of $0.64 per Diluted Common Share and Net Income of $10.0 Million

WICHITA, Kan., Jan. 23, 2020 (GLOBE NEWSWIRE) -- Equity Bancshares, Inc. (NASDAQ: EQBK), (“Equity”, “we”, “us”, “our”), the Wichita-based holding company of Equity Bank, reported its unaudited results for the fourth quarter and year ended December 31, 2019, including net income allocable to common stockholders for the year of $25.6 million, or $1.61 per diluted share, and $10.0 million, or $0.64 per diluted share, in the fourth quarter.

“Our fourth quarter 2019 results indicate the collaborative effort of our retail and deposit teams to price our offerings and meet the needs of our diverse customer base in our regions,” said Brad Elliott, Chairman and CEO of Equity. “We have remained highly competitive for our customers in all areas while continuing to deliver shareholder value.”

“During many initiatives that have improved our customer experience, responsiveness and satisfaction, we operated with the entrepreneurial spirit that is one of our core values and differentiators,” said Mr. Elliott.  “As a result, our net interest margin and our non-performing asset ratios have shown improvement.  Our focus in 2020 includes continuing to offer the relationship-based customer service that our business clients and consumers value and providing innovative products that help us grow signature deposits, including checking, operating and savings accounts.  We continue to monitor and develop relationships for further business combinations and, as always, we prioritize cultural fit in addition to stockholder value.”

On February 8, 2019, Equity completed its acquisition of two bank locations in Guymon, Oklahoma, and one bank location in Cordell, Oklahoma, from MidFirst Bank (“MidFirst”) of Oklahoma City, Oklahoma (“the MidFirst acquisition”).

Notable Items:

• Net income before taxes for the fourth quarter of 2019 was $13.1 million, or $0.84 per diluted share, compared to net income before taxes of $12.9 million, or $0.80 per diluted share, for the same time period in 2018.  Net income before taxes, adjusted to exclude merger expense was $13.8 million, or $0.86 per diluted share, for the fourth quarter of 2018.  There were no merger expenses in the fourth quarter of 2019.
• Stated diluted income per share in the fourth quarter of 2019 was $0.64.  Stated diluted income per share for the year ended December 31, 2019 was $1.61.  Merger expenses, adjusted for estimated income tax, were $694 thousand for the year ended December 31, 2019, or $0.04 per diluted share.
• On April 18, 2019, the Board of Directors of Equity Bancshares, Inc. authorized the repurchase of up to 1,100,000 shares of our Class A Voting Common Stock, par value $0.01 per share, from time to time, beginning April 29, 2019 and concluding October 30, 2020.  The repurchase program does not obligate us to acquire a specific dollar amount or number of shares and it may be extended, modified or discontinued at any time without notice.  As of December 31, 2019, a total of 421,016 shares have been repurchased under this authorization at an average price of $25.81.

Equity’s Balance Sheet Highlights:

• Total loans held for investment of $2.56 billion at December 31, 2019, as compared to total loans held for investment of $2.58 billion at December 31, 2018.  The decrease of $18.8 million includes a decrease of $25.3 million, or 1.0%, partially offset by $6.5 million of loans added in the MidFirst acquisition.
• Total deposits were $3.06 billion at December 31, 2019, as compared to $3.12 billion at December 31, 2018.  Signature deposits, including core deposits comprised of checking, savings and money market accounts, were $2.23 billion at December 31, 2019, as compared to $2.12 billion at December 31, 2018.  Signature deposits increased $114.8 million, or 5.4%, including $48.5 million assumed in the MidFirst acquisition.
• Total assets were $3.95 billion at December 31, 2019, as compared to $4.06 billion at December 31, 2018.  The MidFirst acquisition added total assets of $98.6 million.
• Book value per common share was $30.95 at December 31, 2019, as compared to $28.87 at December 31, 2018. Tangible book value per common share was $20.75 at December 31, 2019, as compared to $19.08 at December 31, 2018.

Financial Results for the Year Ended December 31, 2019

Net income allocable to common stockholders was $25.6 million for the year ended December 31, 2019, as compared to $35.8 million for the year ended December 31, 2018, a decrease of $10.2 million, principally related to the non-typical specific impairment of $14.5 million ($11.3 million adjusted for taxes) taken during the first quarter of 2019.  Results of operations of the MidFirst acquisition are included in Equity’s 2019 results of operations subsequent to the acquisition on February 8, 2019.  Equity’s financial results also reflect results of operations of our 2018 mergers subsequent to the merger dates.  Equity Bank merged with City Bank and Trust (“CBT”) in Guymon, Oklahoma, on August 23, 2018, and on May 4, 2018, Equity completed mergers with Kansas Bank Corporation (“KBC”), parent company of First National Bank of Liberal/Hugoton (“FNB”) in Liberal, Kansas and Adams Dairy Bancshares, Inc. (“Adams”), parent company of Adams Dairy Bank in Blue Springs, Missouri.

Diluted earnings per share were $1.61 for the year ended December 31, 2019, as compared to $2.28 for the comparable period of 2018.  Weighted average fully diluted shares were 15,843,211 and 15,708,386 for the year ended December 31, 2019 and 2018.

Net interest income was $125.9 million for the year ended December 31, 2019, as compared to $124.8 million for the year ended December 31, 2018, an increase of $1.1 million, or 0.8%.  The additional net interest income was primarily the result of interest-earning assets growing at a faster rate than interest-bearing liabilities due to increases in non-interest-bearing deposits and capital.

Our net interest margin was 3.48% for the year ended December 31, 2019, as compared to 3.81% for the year ended December 31, 2018.  The decrease in net interest margin was primarily due to an increase in cost of funds, a reduction in loan fees, additional callable bond premium amortization related to the adoption of ASU 2017-08 and the movement of the aforementioned large credit relationship with the non-typical specific impairment to nonaccrual during the first quarter of 2019.

The provision for loan losses was $18.4 million for the year ended December 31, 2019, as compared to $4.0 million for the year ended December 31, 2018.  In the first quarter of 2019, we recorded a $14.5 million provision for loss against a credit relationship and subsequently charged off a net of $15.2 million on this credit relationship during the year ended December 31, 2019.  Net charge-offs for the year ended December 31, 2019, were $2.4 million, exclusive of the net charge offs related to the previously mentioned credit relationship, as compared to net charge-offs of $1.0 million for the comparable period in 2018.  The increase in adjusted charge-offs year over year was primarily the result of purchased loans moving out of the portfolio.

Total non-interest income was $25.0 million for the year ended December 31, 2019, as compared to $19.7 million for the year ended December 31, 2018.  The increase is largely attributable to increases in debit card income, service charges and fees and mortgage banking income.

Total non-interest expense was $99.6 million for the year ended December 31, 2019, as compared to $94.4 million for the year ended December 31, 2018.  These results include the effect of the May 2018 addition of five locations in southwest Kansas plus one location in Blue Springs, Missouri; the August 2018 addition of one location in Guymon, Oklahoma; and the February 2019 acquisition of two additional locations in Guymon, Oklahoma, and one location in Cordell, Oklahoma.  In addition, the results reflect added lending, customer service, corporate and operations staff indirectly attributable to mergers and organic growth.  Data processing costs increased due to more accounts, higher transaction volumes and our new online banking platform.  Also, included in non-interest expense for 2019 are expenditures related to the infrastructure around our Trust and Wealth Management business line and increased professional fees associated with the previously disclosed specific credit relationship.  Merger expenses of $915 thousand ($694 thousand after tax) for the year ended December 31, 2019, as compared to $7.5 million ($5.7 million after tax) for the year ended December 31, 2018, were also included in non-interest expense.

Equity’s effective tax rate for the year ended December 31, 2019 was 22.2% as compared to 22.4% for the year ended December 31, 2018.  For both of the comparable periods, the estimated annual effective tax rate at which income tax expense was provided reflect, in addition to statutory tax rates, the levels of tax-exempt interest income, non-taxable life insurance income, non-deductible facilitative merger expense and other non-deductible expense in proportion to annual income before income taxes, as well as federal income tax credits available in each annual period.

Financial Results for the Quarter Ended December 31, 2019

Net income allocable to common stockholders was $10.0 million for the three months ended December 31, 2019, as compared to net income allocable to common stockholders of $9.9 million for the three months ended December 31, 2018, an increase of $89 thousand.

Diluted earnings per share were $0.64 for the three months ended December 31, 2019, as compared to diluted earnings per share of $0.62 for the comparable period in 2018.  Weighted average fully diluted shares were 15,684,962 and 16,095,103 for the three months ended December 31, 2019 and 2018.

Net interest income was $32.4 million for the three months ended December 31, 2019, as compared to $33.3 million for the three months ended December 31, 2018, a $931 thousand, or 2.8%, decrease.  The decrease in net interest income was primarily driven by average rates of interest-earning assets falling at a faster rate than average rates of interest-bearing liabilities.

The net interest margin was 3.61% for the three months ended December 31, 2019, as compared to 3.70% for the three months ended December 31, 2018.  The decrease in net interest margin was primarily due to a reduction in loan fees, a falling interest rate environment where the average rate of interest-earning assets fell faster than the average rate of interest-bearing liabilities as well as movement of the aforementioned large credit relationship to nonaccrual during the first quarter of 2019.

The provision for loan losses was $1.1 million for the three months ended December 31, 2019, as compared to $750 thousand for the three months ended December 31, 2018.  For the three months ended December 31, 2019, we had net charge-offs of $6.7 million, of which $5.0 million was related to the credit relationship for which we provisioned $14.5 million during the first quarter of 2019, as compared to net charge-offs of $307 thousand for the same period in 2018.  The increase in adjusted net charge-offs year-over-year was primarily the result of purchased loans moving out of the portfolio.

Total non-interest income for the quarter ended December 31, 2019 was $6.6 million, as compared to $5.4 million for the quarter ended December 31, 2018.  This increase was largely due to increases in debit card income, service charges and fees and an increase in mortgage banking.  The increases in debit card income and service charges and fees are principally attributable to the addition of accounts and higher transaction volumes.

Total non-interest expense was $24.8 million for the quarter ended December 31, 2019, as compared to $25.1 million for the quarter ended December 31, 2018.  The decrease in non-interest expense is due largely to decreases in salaries and employee benefits, merger expense and FDIC insurance expense, partially offset by increases in other expense, data processing, other real estate owned expense, professional fees and net occupancy and equipment expense.  Non-interest expense does not include any merger expenses for the three months ended December 31, 2019.  Merger expenses for the three months ended December 31, 2018, totaled $938 thousand ($712 thousand after tax).

Equity’s effective tax rate for the quarter ended December 31, 2019 was 23.8%, as compared to 23.0% for the quarter ended December 31, 2018.

Loans, Deposits and Total Assets

Loans held for investment were $2.56 billion at December 31, 2019, as compared to $2.58 billion at December 31, 2018, a decrease of $18.8 million.

As of December 31, 2019, Equity’s allowance for loan losses to total loans was 0.48%, as compared to 0.44% at December 31, 2018.  Total reserves, including purchase discounts, to total loans were approximately 0.85% as of December 31, 2019, as compared to 1.02% at December 31, 2018.  Nonperforming assets were $46.9 million as of December 31, 2019, or 1.19% of total assets.  Nonperforming assets were $39.6 million at December 31, 2018, or 0.98% of total assets.

Total deposits were $3.06 billion at December 31, 2019, as compared to $3.12 billion at December 31, 2018, a decrease of $59.9 million.  This decrease included $174.7 million of time deposits and $22.5 million of demand deposits, partially offset by an increase of $137.3 million in savings, NOW and money market deposits and $98.5 million assumed in the MidFirst acquisition.  Signature deposits were $2.23 billion at December 31, 2019, as compared to $2.12 billion at December 31, 2018.  The decrease in time deposits was primarily due to roll-off of wholesale deposits.

At December 31, 2019, Equity had consolidated total assets of $3.95 billion, as compared to $4.06 billion at December 31, 2018, a decrease of $112.1 million.

Borrowings and Capital

At December 31, 2019, borrowings totaled $383.6 million, as compared to $464.7 million at December 31, 2018.  The decrease in borrowings was principally due to a $60.5 million decrease in Federal Home Loan Bank advances, a $14.4 million decline in retail repurchase agreements and a $6.5 million reduction in bank stock loan.

At December 31, 2019, common stockholders’ equity totaled $478.1 million, $30.95 per common share, as compared to $455.9 million, $28.87 per common share, at December 31, 2018.  Tangible common equity was $320.5 million and tangible book value per common share was $20.75 at December 31, 2019.  Tangible common equity was $301.3 million and tangible book value per common share was $19.08 at December 31, 2018.  During the second and third quarters of 2019, the company repurchased a total of 421,016 shares of our Class A Voting Common Stock at a total cost of $10.9 million, or $25.81 per share.  There were no shares of our Class A Voting Common Stock repurchased during the fourth quarter of 2019.  The ratio of common equity tier 1 capital to risk-weighted assets was 11.63% and the total capital to risk-weighted assets was 12.59% at December 31, 2019.

Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. Reconciliations of non-GAAP financial measures to GAAP financial measures are provided at the end of this press release.

Conference Call and Webcast

Equity Chairman and Chief Executive Officer, Brad Elliott, and Chief Financial Officer, Greg Kossover, will hold a conference call and webcast to discuss fourth quarter and annual 2019 results on Friday, January 24, 2020 at 10 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 Friday, January 24, 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. 1766348.

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 January 31, 2020, accessible at (855) 859-2056 with conference ID no. 1766348 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.

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 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 20, 2019 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, and it is not possible for us to predict those events or how they may affect us. In addition, Equity cannot assess the impact of each factor on Equity’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this press release are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Equity or persons acting on Equity’s behalf may issue.

Investor Contact:

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

Media Contact:

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

Unaudited Financial Tables

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

TABLE 1. 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 2. YEAR-TO-DATE ANALYSIS OF CHANGES IN NET INTEREST INCOME (Unaudited)
(Dollars in thousands)

TABLE 3. QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (Unaudited)
(Dollars in thousands)

TABLE 4. CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)

TABLE 5. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)

TABLE 6. Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands, except per share data)