Equity Bancshares, Inc. Reports Record Net Income for Second Quarter 2018, Completes Expansion in Southwest Kansas and Kansas City Metro Area, Announces Additional Expansion in Oklahoma

Wichita, Kansas, UNITED STATES


WICHITA, Kan., July 19, 2018 (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 quarter ended June 30, 2018, including net income allocable to common stockholders for the quarter of $6.9 million, or $0.44 per diluted share.  Year-to-date 2018 net income allocable to common stockholders was $15.6 million and $1.02 per diluted share.

Brad Elliott, Chairman and CEO of Equity, said, “Once again, our Equity Bank team demonstrated considerable talent and determination by providing innovative solutions that serve our customers, while executing our strategy to add vibrant, stable markets to our company footprint.  In the second quarter, our teams welcomed communities in Liberal and Hugoton, Kansas and Blue Springs, Missouri, into the Equity Bank family; as well as continuing to grow organically within our markets.  Our new team members in Liberal, Hugoton and Blue Springs have been instrumental in providing a seamless transition for customers, while partnering with our merger teams to close and complete on schedule.”

Mr. Elliott continued, “We are also pleased to welcome a strong community bank in City Bank and Trust of Guymon, Oklahoma to our footprint later this year and add to our growing Oklahoma presence.  We believe City Bank and Trust’s leadership team is a match with our credit and operating culture as well as our philosophy.  We continue to position Equity Bank for growth by reviewing merger candidates that are a cultural fit and which will add to our focus of growing organically, while not sacrificing our high credit-quality.”

Notable Items

  • Income before taxes for the second quarter of 2018 was $8.8 million, or $0.56 per diluted share, compared to $9.4 million, or $0.76 per diluted share, for the same time period in 2017.  Income before taxes, adjusted to exclude merger expense, was a record $14.0 million, or $0.89 per diluted share, for the second quarter of 2018, compared to $9.5 million, or $0.77 per diluted share, for the second quarter of 2017.
  • Stated diluted earnings per share in the second quarter of 2018 was $0.44.  Merger expenses, adjusted for estimated income tax, were $4.0 million in the second quarter of 2018, or $0.26 per diluted share.
  • Net income allocable to common stockholders, adjusted for after-tax merger expense, was a record $10.9 million, or $0.69 per diluted share in the second quarter of 2018.  Net income allocable to common stockholders, adjusted for after-tax merger expense of $84 thousand, was $6.4 million, or $0.52 per diluted share in the second quarter of 2017.

Highlights of Equity’s growth include:

  • Total loans held for investment of $2.41 billion at June 30, 2018, as compared to total loans held for investment of $2.10 billion at December 31, 2017.
  • Total deposits were $2.64 billion at June 30, 2018, and $2.38 billion at December 31, 2017.  Signature deposits, or core deposits comprised of checking accounts, savings accounts and money market accounts, were $1.83 billion at June 30, 2018, compared to $1.61 billion at December 31, 2017.
  • Total assets of $3.71 billion at June 30, 2018, compared to $3.17 billion at December 31, 2017.
  • Book value per common share of $27.44 at June 30, 2018 and $25.62 at December 31, 2017.  Tangible book value per common share of $18.16 at June 30, 2018 and $17.61 at December 31, 2017.

On June 12, 2018, Equity announced its definitive merger agreement to acquire City Bank and Trust (“CBT”) of Guymon, Oklahoma, from parent company Docking Bancshares, Inc. (“Docking”) of Arkansas City, Kansas.  After the merger, which is expected to be completed during the fourth quarter of 2018, pending customary closing conditions and regulatory approval, Equity will have completed 18 successful business combinations since 2003, and eight since the Company’s initial public offering in November 2015.  Following the merger with CBT, Equity will have 49 full-service bank locations throughout its footprint, including six in Oklahoma.

Equity also completed its 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, on May 4, 2018.  Results of operations of KBC and Adams are included in Equity’s second quarter results subsequent to their mergers.

Financial Results for Six Months Ended June 30, 2018

Net income allocable to common stockholders was $15.6 million for the six months ended June 30, 2018 as compared to $11.2 million for the six months ended June 30, 2017, an increase of $4.4 million or 38.9%.  Financial results reflect the mergers with KBC and Adams beginning on May 5, 2018.  The KBC merger added four bank locations in Liberal, Kansas and one bank location in Hugoton, Kansas with total assets of $336.1 million; the Adams merger added one bank location in Blue Springs, Missouri, with total assets of $115.8 million.  During the six months ended June 30, 2018, there was $5.8 million ($4.6 million after-tax) of merger expense principally related to the CBT, KBC and Adams mergers.

Diluted earnings per share were $1.02 for the six-month period ended June 30, 2018, as compared to $0.91 for the comparable period of 2017.  Weighted average fully diluted shares were 15,294,387 and 12,264,156 for the six months ended June 30, 2018 and 2017.  The increase in weighted average fully diluted shares reflect the issuance of 2,370,688 shares in connection with Equity’s November 2017 mergers with Eastman National Bancshares, Inc. (“Eastman”) and Cache Holdings, Inc. (“Cache”) and 1,164,912 shares in connection with Equity’s May 2018 mergers with KBC and Adams.

Net interest income was $58.7 million for the six months ended June 30, 2018 as compared to $41.1 million for the six months ended June 30, 2017, a $17.6 million or 42.9% increase.  The increase in net interest income was primarily driven by growth in loan and securities balances, partially offset by an increase in interest expense as we funded the increase in earning assets with increased deposits and borrowings.

Our net interest margin was 3.92% for the six months ended June 30, 2018 as compared to 3.93% for the six months ended June 30, 2017.

The provision for loan losses was $1.9 million for the six months ended June 30, 2018 as compared to $1.7 million for the six months ended June 30, 2017.  Net charge-offs for the six months ended June 30, 2018 were $335 thousand compared to net charge-offs of $587 thousand for the comparable period of 2017.

Total non-interest income was $8.8 million for the six months ended June 30, 2018 as compared to $7.3 million for the six months ended June 30, 2017.  Increases in service charges and fees and in debit card income are principally attributable to the addition of accounts and higher transaction volumes associated with the Eastman, Cache, KBC and Adams mergers.  Non-interest income includes the increase in value of bank owned life insurance of $1.2 million and $709 thousand for the six-month periods ended June 30, 2018 and 2017.

Total non-interest expense was $45.6 million for the six months ended June 30, 2018 as compared to $30.4 million for the six months ended June 30, 2017.  These results primarily reflect the effect of the November 2017 Eastman merger, which added four locations in Newkirk and Ponca City, Oklahoma, the November 2017 Cache merger, which added one location in Tulsa, Oklahoma, the May 2018 KBC merger, which added five locations in southwest Kansas and the May 2018 Adams merger, which added one additional location in Missouri.  In addition, the results reflect additional lending, customer service, corporate and operations staff indirectly attributable to mergers and organic growth and increased data processing costs due to increased accounts and higher transaction volumes.  Non-interest expense also includes merger expenses of $5.8 million ($4.5 million after-tax) for the six months ended June 30, 2018.  Merger expenses for the six months ended June 30, 2017, totaled $1.1 million ($660 thousand after-tax).

Equity’s effective tax rate for the six-month period ended June 30, 2018 was 22.2% as compared to 31.2% for the six-month period ended June 30, 2017.  On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Reform”) was enacted, which reduced the U.S. federal statutory income tax rate from the 35% rate applicable in 2017 to 21% in 2018.  Equity’s estimated annual effective tax rate was reduced approximately 10 percentage points in 2018 principally due to this reduction in the U.S. federal statutory rate.  In addition to the statutory tax rates applicable in each period, the estimated annual effective tax rate for both 2018 and 2017 reflect the levels of tax-exempt interest income, non-taxable life insurance income, non-deductible facilitative merger expense and other non-deductible expense included in income before income taxes as well as available federal income tax credits.  Partially offsetting the benefit of the rate reduction was a decrease in excess tax benefits associated with the exercise of stock options recorded during the six months ended June 30, 2018, as compared to the same time period of the prior year.  Excess tax benefits were $6 thousand in the first six months of 2018, down $209 thousand from the excess tax benefits recorded in the first six months of 2017.

Financial Results for Quarter Ended June 30, 2018

Net income allocable to common stockholders was $6.9 million for the three months ended June 30, 2018, as compared to $6.4 million for the three months ended June 30, 2017, an increase of $513 thousand or 8.1%.

Diluted earnings per share were $0.44 for the three months ended June 30, 2018, as compared to $0.51 for the comparable period of 2017.  Weighted average fully diluted shares were 15,690,111 and 12,444,859 for the three months ended June 30, 2018 and 2017.  The increase in weighted average fully diluted shares reflect the issuance of 2,370,688 shares in connection with Equity’s November 2017 mergers with Eastman and Cache and 1,164,912 shares in connection with Equity’s May 2018 mergers with KBC and Adams.

Net interest income was $30.9 million for the three months ended June 30, 2018, as compared to $21.2 million for the three months ended June 30, 2017, a $9.7 million or 45.9% increase.  The increase in net interest income was primarily driven by growth in loan and securities balances, partially offset by an increase in interest expense as we funded the increase in earning assets with increased deposits and borrowings.

Our net interest margin was 3.93% for the three months ended June 30, 2018, as compared to 3.91% for the three months ended June 30,  2017.  The increase in net interest margin was primarily due to an overall increase in volume and yield of interest-earning assets including an increase in accretion of purchase accounting discounts related to the Eastman and Cache mergers and to a lesser extent the KBC and Adams mergers, partially offset by an overall increase in volumes and cost of interest-bearing liabilities.

The provision for loan losses was $750 thousand for the three months ended June 30, 2018, as compared to $628 thousand for the three months ended June 30, 2017.  For the three months ended June 30, 2018 we had a net recovery of $17 thousand compared to net charge-offs of $108 thousand for the same period in 2017.

Total non-interest income rose to $4.6 million for the three months ended June 30, 2018, versus $4.0 million for the three months ended June 30, 2017.  Increases in service charges and fees and debit card income are principally attributable to the addition of accounts and higher transaction volumes associated with the Eastman and Cache mergers, and to a lesser extent, the May 2018 mergers with KBC and Adams.  Non-interest income includes the increase in value of bank owned life insurance of $508 thousand and $354 thousand for the three-month periods ended June 30, 2018 and 2017.

Total non-interest expense was $26.0 million for the quarter ended June 30, 2018, compared to $15.1 million for the quarter ended June 30, 2017.  These results reflect the effect of the November 2017 addition of five locations in northern Oklahoma, the May 2018 addition of five locations in southwest Kansas and the addition of one location in Blue Springs, Missouri.  In addition, the results reflect additional lending, customer service, corporate and operations staff indirectly attributable to mergers and organic growth and increased data processing costs due to increased accounts and higher transaction volumes.  Non-interest expense also includes merger expenses of $5.2 million ($4.0 million after-tax) for the three months ended June 30, 2018.  Merger expenses for the three months ended June 30, 2017, totaled $136 thousand ($84 thousand after-tax).

Equity’s effective tax rate for the three months ended June 30, 2018, was 21.9% as compared to 32.4% for the quarter ended June 30, 2017.  The effective tax rates for each of the comparable periods reflect the applicable statutory tax rates as well as the levels of tax-exempt interest income, non-taxable life insurance income, non-deductible facilitative merger expense and other non-deductible expense included in income before income taxes as well as available federal income tax credits.  There were no excess benefits associated with the exercise of stock options recorded in the second quarter of 2018 as compared to $8 thousand in the comparable period of 2017.

Loans, Deposits, and Total Assets

Loans held for investment were $2.41 billion at June 30, 2018, compared to $2.10 billion at December 31, 2017, an increase of $308.2 million.  The increase in loans held for investment includes $159.9 million and $82.7 million of net loans acquired in the May 2018 KBC and Adams mergers and $65.6 million of other loan growth.

As of June 30, 2018, Equity’s allowance for loan losses to total loans was 0.42%, compared to 0.40% at December 31, 2017.  Total reserves, including purchase discounts, to total loans were approximately 1.11% as of June 30, 2018, compared to 1.21% at December 31, 2017.  Nonperforming assets of $45.6 million as of June 30, 2018, were 1.23% of total assets and included nonperforming assets of $3.2 million and $1.6 million acquired in the KBC and Adams mergers.  Nonperforming assets at December 31, 2017, were $48.2 million or 1.52% of total assets.

Total deposits were $2.64 billion at June 30, 2018, as compared to $2.38 billion at December 31, 2017.  Total deposits increased $253.0 million between December 31, 2017, and June 30, 2018.  This increase included $288.4 million of deposits assumed in the KBC merger and $97.1 million of deposits assumed in the Adams merger, partially offset by a reduction of $132.4 million in deposits primarily related to a planned reduction in brokered deposits assumed in prior mergers and decreases in public funds deposits from both expenditure of the funds by the entities and from the competitive nature of public funds deposits. Signature deposits were $1.83 billion at June 30, 2018, as compared to $1.61 billion at December 31, 2017.

At June 30, 2018, Equity had consolidated total assets of $3.71 billion, compared to $3.17 billion at December 31, 2017, an increase of $541.7 million.  The increase in total assets includes $336.1 million of total assets acquired in the KBC merger and $115.8 million of total assets acquired in the Adams merger.

Capital and Borrowings

In connection with the KBC and Adams mergers, Equity issued 820,849 shares and 344,063 shares, in each case, valued at $39.11 per share, Equity’s closing price on May 4, 2018.  Net of $207 thousand of stock issuance costs, the KBC merger added $31.9 million to stockholders’ equity while the Adams merger added $13.2 million to stockholders’ equity, net of $237 thousand of stock issuance costs.

At June 30, 2018, common stockholders’ equity totaled $433.3 million, $27.44 per common share, compared to $374.1 million, $25.62 per common share, at December 31, 2017.  Tangible common equity was $286.7 million and tangible book value per common share was $18.16 at June 30, 2018.  Tangible common equity was $257.2 million and tangible book value per common share was $17.61 at December 31, 2017.  The ratio of common equity tier 1 capital to risk-weighted assets was approximately 11.13% and the total capital to risk-weighted assets was approximately 12.03% at June 30, 2018.

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 second quarter 2018 results on Friday, July 20, 2018 at 10 a.m. eastern time and 9 a.m. central time.

Investors, news media and other participants should register for the call or audio webcast at investor.equitybank.com. On Friday, July 20, 2018, 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. 2492649.

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

A replay of the call and webcast will be available two hours following the close of the call until July 27, 2018, accessible at (855) 859-2056 with conference ID no. 2492649 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, and treasury management services.  As of June 30, 2018, Equity had $3.71 billion in consolidated total assets, with 48 locations throughout Kansas, Missouri, Arkansas and Oklahoma, including its corporate headquarters in Wichita and bank locations throughout the Kansas City and Tulsa metropolitan areas.  Learn more at www.equitybank.com.

Equity seeks to provide an enhanced banking experience for customers by providing a suite of sophisticated banking products and services tailored to their needs, 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.”

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 (“SEC”) on March 16, 2018 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, Form S-3 or Form S-4.  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.

Unaudited Financial Tables

  • Table 1. Selected Financial Highlights
  • Table 2. Consolidated Balance Sheets
  • Table 3. Consolidated Statements of Income
  • Table 4. Non-GAAP Financial Measures
  
TABLE 1. SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share data)
  
 As of and for the three months ended
 June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
Statement of Income Data     
Net interest income$30,920 $27,787 $24,589 $20,321 $21,199 
Provision for loan losses 750  1,170  503  727  628 
Net gains (losses) from securities transactions (2) (8)   175  83 
Other non-interest income 4,594  4,259  4,104  3,860  3,879 
Total non-interest income 4,592  4,251  4,104  4,035  3,962 
Merger expenses 5,236  531  3,267  1,023  136 
Other non-interest expense 20,739  19,096  17,451  15,365  14,995 
Total non-interest expense 25,975  19,627  20,718  16,388  15,131 
Income before income taxes 8,787  11,241  7,472  7,241  9,402 
Provision for income taxes 1,920  2,530  3,198  2,084  3,048 
Net income 6,867  8,711  4,274  5,157  6,354 
Net income allocable to common stockholders 6,867  8,711  4,274  5,157  6,354 
Basic earnings per share 0.45  0.60  0.32  0.42  0.52 
Diluted earnings per share 0.44  0.58  0.31  0.41  0.51 
      
Balance Sheet Data (at period end)     
Securities available-for-sale$180,238 $174,717 $162,272 $81,116 $92,435 
Securities held-to-maturity 665,995  522,021  535,462  528,944  532,159 
Gross loans held for investment 2,411,471  2,125,324  2,103,279  1,540,761  1,529,396 
Allowance for loan losses 10,083  9,316  8,498  7,969  7,568 
Intangible assets, net 146,538  115,032  116,922  71,353  71,608 
Total assets 3,712,185  3,176,062  3,170,509  2,405,426  2,408,624 
Total deposits 2,635,048  2,368,297  2,382,013  1,868,493  1,819,677 
Non-time deposits 1,829,902  1,647,105  1,605,514  1,223,244  1,163,904 
Borrowings 631,501  414,415  401,652  235,098  292,302 
Total liabilities 3,278,903  2,794,575  2,796,365  2,113,591  2,122,566 
Total stockholders’ equity 433,282  381,487  374,144  291,835  286,058 
Tangible common equity* 286,744  266,455  257,222  220,482  214,450 
      
Selected Average Balance Sheet Data (quarterly average)     
Total gross loans receivable$2,317,071 $2,122,973 $1,850,045 $1,528,658 $1,519,289 
Investment securities 767,038  699,055  669,220  621,055  613,914 
Interest-earning assets 3,158,187  2,883,960  2,573,043  2,192,275  2,175,517 
Total assets 3,475,786  3,169,131  2,820,548  2,402,599  2,382,886 
Interest-bearing deposits 2,148,361  2,043,784  1,821,850  1,584,618  1,539,763 
Borrowings 495,558  389,120  330,651  266,392  309,588 
Total interest-bearing liabilities 2,643,919  2,432,904  2,152,501  1,851,010  1,849,351 
Total deposits 2,556,982  2,390,648  2,140,490  1,837,726  1,781,181 
Total liabilities 3,062,312  2,791,236  2,483,029  2,113,592  2,099,699 
Total stockholders’ equity 413,474  377,895  337,519  289,007  283,187 
Tangible common equity* 279,328  261,261  240,899  217,542  211,467 
      
Performance Ratios     
Return on average assets (ROAA) annualized 0.79% 1.11% 0.60% 0.85% 1.07%
Return on total average stockholders equity (ROAE) annualized 6.66% 9.35% 5.02% 7.08% 9.00%
Return on average tangible common equity (ROATCE) annualized* 10.58% 14.01% 7.41% 9.71% 12.36%
Yield on loans annualized 5.73% 5.55% 5.40% 5.30% 5.45%
Cost of interest-bearing deposits annualized 1.00% 0.94% 0.87% 0.82% 0.75%
Cost of total deposits annualized 0.84% 0.80% 0.74% 0.71% 0.65%
Net interest margin annualized 3.93% 3.91% 3.79% 3.68% 3.91%
Efficiency ratio* 58.40% 59.59% 60.82% 63.54% 59.79%
Non-interest income / average assets 0.53% 0.54% 0.58% 0.67% 0.67%
Non-interest expense / average assets 3.00% 2.51% 2.91% 2.71% 2.55%
      
Capital Ratios     
Tier 1 Leverage Ratio 9.36% 9.45% 10.33% 10.32% 10.15%
Common Equity Tier 1 Capital Ratio 11.13% 11.80% 11.56% 13.33% 13.07%
Tier 1 Risk Based Capital Ratio 11.65% 12.41% 12.17% 14.15% 13.89%
Total Risk Based Capital Ratio 12.03% 12.81% 12.54% 14.62% 14.34%
Total stockholders’ equity to total assets 11.67% 12.01% 11.80% 12.13% 11.88%
Tangible common equity to tangible assets* 8.04% 8.70% 8.42% 9.45% 9.18%
Book value per common share$27.44 $26.09 $25.62 $23.86 $23.44 
Tangible book value per common share*$18.16 $18.22 $17.61 $18.03 $17.57 
Tangible book value per diluted common share*$17.78 $17.85 $17.29 $17.64 $17.24 
                

* The value noted is considered a Non-GAAP financial measure.  For a reconciliation of Non-GAAP financial measures, see Table 4. Non-GAAP Financial Measures.

   
TABLE 2. CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands)
   
 June 30,
2018
December 31,
2017
ASSETS  
Cash and due from banks$46,704 $48,034 
Federal funds sold 987  4,161 
   
Cash and cash equivalents 47,691  52,195 
   
Interest-bearing time deposits in other banks 6,991  3,496 
Available-for-sale securities 180,238  162,272 
Held-to-maturity securities, fair value of $653,012 and $532,744 665,995  535,462 
Loans held for sale 43,875  16,344 
Loans, net of allowance for loan losses of $10,083 and $8,498 2,401,388  2,094,781 
Other real estate owned, net 7,623  7,907 
Premises and equipment, net 73,312  63,449 
Bank owned life insurance 72,067  68,384 
Federal Reserve Bank and Federal Home Loan Bank stock 35,681  24,373 
Interest receivable 14,343  12,371 
Goodwill 125,485  104,907 
Core deposit intangible, net 19,800  10,738 
Other 17,696  13,830 
   
Total assets$3,712,185 $3,170,509 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Deposits  
Demand$442,279 $366,530 
   
Total non-interest bearing deposits 442,279  366,530 
   
Savings, NOW, and money market 1,387,623  1,238,984 
Time 805,146  776,499 
   
Total interest-bearing deposits 2,192,769  2,015,483 
   
Total deposits 2,635,048  2,382,013 
   
Federal funds purchased and retail repurchase agreements 41,394  37,492 
Federal Home Loan Bank advances 557,619  347,692 
Bank stock loan 18,375  2,500 
Subordinated debentures 14,113  13,968 
Contractual obligations 1,734  1,967 
Interest payable and other liabilities 10,620  10,733 
Total liabilities 3,278,903  2,796,365 
   
   
Stockholders’ equity  
Common stock 173  161 
Additional paid-in capital 377,800  331,339 
Retained earnings 81,079  65,512 
Accumulated other comprehensive loss (5,994) (3,092)
Employee stock loans (121) (121)
Treasury stock (19,655) (19,655)
Total stockholders’ equity 433,282  374,144 
Total liabilities and stockholders’ equity$3,712,185 $3,170,509 
       
       


     
TABLE 3. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(Dollars in thousands, except per share data)
     
 Three Months Ended
June 30,
Six Months Ended
June 30,
 2018201720182017
Interest and dividend income    
Loans, including fees$33,101 $20,662$62,149 $40,062
Securities, taxable 4,112  3,224 7,835  5,948
Securities, nontaxable 1,025  862 1,904  1,647
Federal funds sold and other 593  334 1,066  640
     
Total interest and dividend income 38,831  25,082 72,954  48,297
     
Interest expense    
Deposits 5,338  2,894 10,056  5,470
Federal funds purchased and retail repurchase agreements 24  13 47  25
Federal Home Loan Bank advances 2,094  734 3,393  1,236
Bank stock loan 156  0 183  0
Subordinated debentures 299  242 568  474
     
Total interest expense 7,911  3,883 14,247  7,205
     
Net interest income 30,920  21,199 58,707  41,092
Provision for loan losses 750  628 1,920  1,723
     
Net interest income after provision for loan losses 30,170  20,571 56,787  39,369
Non-interest income    
Service charges and fees 1,729  1,224 3,309  2,449
Debit card income 1,522  1,205 2,775  2,210
Mortgage banking 312  540 625  1,025
Increase in value of bank owned life insurance 508  354 1,160  709
Net gains (loss) from securities transactions (2) 83 (10) 96
Other 523  556 984  812
     
Total non-interest income 4,592  3,962 8,843  7,301
     
Non-interest expense    
Salaries and employee benefits 11,629  8,236 22,520  16,042
Net occupancy and equipment 2,011  1,519 3,813  3,018
Data processing 1,968  1,191 3,642  2,352
Professional fees 844  462 1,559  978
Advertising and business development 665  624 1,284  1,142
Telecommunications 432  330 801  691
FDIC insurance 510  219 754  325
Courier and postage 303  236 558  462
Free nation-wide ATM cost 330  233 622  445
Amortization of core deposit intangible 625  235 1,009  444
Loan expense 145  282 491  459
Other real estate owned (671) 70 (403) 275
Merger expenses 5,236  136 5,767  1,062
Other 1,948  1,358 3,185  2,662
     
Total non-interest expense 25,975  15,131 45,602  30,357
     
Income before income taxes 8,787  9,402 20,028  16,313
Provision for income taxes 1,920  3,048 4,450  5,095
     
Net income$6,867 $6,354$15,578 $11,218
     
Net income allocable to common stockholders$6,867 $6,354$15,578 $11,218
     
Basic earnings per share$0.45 $0.52$1.04 $0.93
     
Diluted earnings per share$0.44 $0.51$1.02 $0.91
           
           


  
TABLE 4. Non-GAAP Financial Measures (Unaudited)
(Dollars in thousands, except per share data)
  
 As of and for the three months ended
 June 30,
2018
March 31,
2018
December 31,
2017
September 30,
2017
June 30,
2017
Total stockholders’ equity$433,282 $381,487 $374,144 $291,835 $286,058 
Less: goodwill 125,485  103,412  104,907  64,587  64,587 
Less: core deposit intangibles, net 19,800  10,355  10,738  5,476  5,719 
Less: mortgage servicing asset, net 14  16  17  19  20 
Less: naming rights, net 1,239  1,249  1,260  1,271  1,282 
      
Tangible common equity$286,744 $266,455 $257,222 $220,482 $214,450 
Common shares issued at period end 15,780,777  14,609,414  14,605,607  12,230,319  12,206,319 
RSU shares vested 6,768  11,844  0  0  0 
      
Common shares outstanding at period end 15,787,545  14,621,258  14,605,607  12,230,319  12,206,319 
      
Diluted common shares outstanding at period end 16,131,096  14,923,798  14,873,257  12,501,484  12,441,429 
      
Book value per common share$27.44 $26.09 $25.62 $23.86 $23.44 
      
Tangible book value per common share$18.16 $18.22 $17.61 $18.03 $17.57 
      
Tangible book value per diluted common share$17.78 $17.85 $17.29 $17.64 $17.24 
      
Total assets$3,712,185 $3,176,062 $3,170,509 $2,405,426 $2,408,624 
Less: goodwill 125,485  103,412  104,907  64,587  64,587 
Less: core deposit intangibles, net 19,800  10,355  10,738  5,476  5,719 
Less: mortgage servicing asset, net 14  16  17  19  20 
Less: naming rights, net 1,239  1,249  1,260  1,271  1,282 
      
Tangible assets$3,565,647 $3,061,030 $3,053,587 $2,334,073 $2,337,016 
      
Total stockholders’ equity to total assets 11.67% 12.01% 11.80% 12.13% 11.88%
      
Tangible common equity to tangible assets 8.04% 8.70% 8.42% 9.45% 9.18%
      
Total average stockholders’ equity$413,474 $377,895 $337,519 $289,007 $283,187 
Less: average intangible assets and preferred stock 134,146  116,634  96,620  71,465  71,720 
      
Average tangible common equity$279,328 $261,261 $240,899 $217,542 $211,467 
      
Net income allocable to common stockholders$6,867 $8,711 $4,274 $5,157 $6,354 
Amortization of intangible assets 637  396  349  256  247 
Less: Tax effect of intangible assets amortization 134  83  122  90  86 
      
Adjusted net income allocable to common stockholders$7,370 $9,024 $4,501 $5,323 $6,515 
      
Return on total average stockholders’ equity (ROAE)
annualized
 6.66% 9.35% 5.02% 7.08% 9.00%
      
Return on average tangible common equity (ROATCE) annualized 10.58% 14.01% 7.41% 9.71% 12.36%
      
Non-interest expense$25,975 $19,627 $20,718 $16,388 $15,131 
Less: merger expenses 5,236  531  3,267  1,023  136 
      
Non-interest expense, excluding merger expenses$20,739 $19,096 $17,451 $15,365 $14,995 
      
Net interest income$30,920 $27,787 $24,589 $20,321 $21,199 
      
Non-interest income$4,592 $4,251 $4,104 $4,035 $3,962 
Less: net gains (losses) from securities transactions (2) (8)   175  83 
      
Non-interest income, excluding net gains (losses) from securities transactions$4,594 $4,259 $4,104 $3,860 $3,879 
      
Net interest income plus non-interest income, excluding net gains (losses) from securities transactions$35,514 $32,046 $28,693 $24,181 $25,078 
Non-interest expense to net interest income plus non-interest income 73.14% 61.26% 72.21% 67.29% 60.14%
      
Efficiency ratio 58.40% 59.59% 60.82% 63.54% 59.79%
      

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jwillis@equitybank.com
investor.equitybank.com

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