EQUITY BANCSHARES INC [EQBK] Filings

10-Q 1 eqbk-20230630.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-37624

EQUITY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


Kansas		72-1532188
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7701 East Kellogg Drive, Suite 300 Wichita, KS		67207
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: 316.612.6000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Class A, Common Stock, par value $0.01 per share

Trading Symbol
EQBK

Name of each exchange on which registered
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

As of July 31, 2023, the registrant had 15,412,139 shares of Class A common stock, $0.01 par value per share, outstanding.

TABLE OF CONTENTS


Part I	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Condensed Notes to Interim Consolidated Financial Statements	13
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	49
	Overview	50
	Critical Accounting Policies	51
	Results of Operations	52
	Financial Condition	61
	Liquidity and Capital Resources	70
	Non-GAAP Financial Measures	72
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	75
Item 4.	Controls and Procedures	76
Part II	Other Information	77
Item 1.	Legal Proceedings	77
Item 1A.	Risk Factors	77
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	79

Important Notice about Information in this Quarterly Report

Unless we state otherwise or the context otherwise requires, references in this Quarterly Report to “we,” “our,” “us,” “the Company” and “Equity” refer to Equity Bancshares, Inc. and its consolidated subsidiaries, including Equity Bank, which we sometimes refer to as “Equity Bank,” “the Bank” or “our Bank.”

The information contained in this Quarterly Report is accurate only as of the date of this Quarterly Report on Form 10-Q and as of the dates specified herein.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our 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 our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution 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 we believe 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. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Item 1A - Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2023, and in Item 1A – Risk Factors of this Quarterly Report.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•

external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest rate policies of the Board of Governors of the Federal Reserve System, or the Federal Reserve, inflation or deflation, changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits which may have an adverse impact on our financial condition;

•

losses resulting from a decline in the credit quality of the assets that we hold;

•

the occurrence of various events that negatively impact the real estate market, since a significant portion of our loan portfolio is secured by real estate;

•

inaccuracies or changes in the appraised value of real estate securing the loans we originate that could lead to losses if the real estate collateral is later foreclosed upon and sold at a price lower than the appraised value;

•

the loss of our largest loan and depositor relationships;

•

limitations on our ability to lend and to mitigate the risks associated with our lending activities as a result of our size and capital position;

•

differences in our qualitative factors used in our calculation of the allowance for credit losses from actual results;

•

inadequacies in our allowance for credit losses which could require us to take a charge to earnings and thereby adversely affect our financial condition;

•

interest rate fluctuations which could have an adverse effect on our profitability;

•

the impact of the transition from London Interbank Offered Rate (“LIBOR”) and our ability to adequately manage such transition;

•

a continued economic downturn related to a pandemic, especially one affecting our core market areas;

•

potential fraud related to Small Business Administration (“SBA”) loan applications through the Paycheck Protection Program (“PPP”) as part of the U.S. Coronavirus Aid, Relief and Economic Security Act (“CARES Act”);

•

the effects of a pandemic or other widespread public health emergencies;

•

the costs of integrating the businesses we acquire, which may be greater than expected;

•

the departure of key members of our management personnel or our inability to hire qualified management personnel;

•

challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;

•

a lack of liquidity resulting from decreased loan repayment rates, lower deposit balances, or other factors;

•

inaccuracies in our assumptions about future events which could result in material differences between our financial projections and actual financial performance;

•

an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;

•

disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information technology systems;

•

unauthorized access to nonpublic personal information of our customers, which could expose us to litigation or reputational harm;

•

disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical processing functions;

•

required implementation of new accounting standards that significantly change our existing recognition practices;

•

additional regulatory requirements and restrictions on our business, which could impose additional costs on us;

•

an increase in FDIC deposit insurance assessments, which could adversely affect our earnings;

•

increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;

•

restraints on the ability of Equity Bank to pay dividends to us, which could limit our liquidity;

•

a failure in the internal controls we have implemented to address the risks inherent to the banking industry;

•

continued or increasing competition from other financial institutions, credit unions, and non-bank financial services companies, many of which are subject to different regulations than we are;

•

costs arising from the environmental risks associated with making loans secured by real estate;

•

the occurrence of adverse weather or manmade events, which could negatively affect our core markets or disrupt our operations;

•

the effects of new federal tax laws, or changes to existing federal tax laws;

•

the obligation associated with being a public company requires significant resources and management attention;

•

effect of pending and future litigation, including the results of the overdraft fee litigation against the Company that is described in this quarterly report;

•

other factors that are discussed in “Item 1A - Risk Factors.”

The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in this Quarterly Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. 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 we do 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, we cannot assess the impact of each factor on our 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 Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or verbal forward-looking statements that we or persons acting on our behalf may issue.

PART I

Item 1: Financial Statements

EQUITY BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2023, and December 31, 2022

(Dollar amounts in thousands)

See accompanying condensed notes to interim consolidated financial statements.


	(Unaudited) June 30,			December 31,
	2023			2022
ASSETS
Cash and due from banks	$	262,604		$	104,013
Federal funds sold		15,495			415
Cash and cash equivalents		278,099			104,428
Available-for-sale securities		1,094,748			1,184,390
Held-to-maturity securities, fair value of $2,236 and $1,973		2,216			1,948
Loans held for sale		2,456			349
Loans, net of allowance for credit losses of $44,544 and $45,847		3,278,126			3,265,701
Other real estate owned, net		4,362			4,409
Premises and equipment, net		106,186			101,492
Bank-owned life insurance		123,451			123,176
Federal Reserve Bank and Federal Home Loan Bank stock		21,129			21,695
Interest receivable		21,360			20,630
Goodwill		53,101			53,101
Core deposit intangibles, net		8,760			10,596
Other		100,889			89,736
Total assets	$	5,094,883		$	4,981,651
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand	$	978,968		$	1,097,899
Total non-interest-bearing deposits		978,968			1,097,899
Demand, savings and money market		2,397,524			2,329,584
Time		854,458			814,324
Total interest-bearing deposits		3,251,982			3,143,908
Total deposits		4,230,950			4,241,807
Federal funds purchased and retail repurchase agreements		44,770			46,478
Federal Home Loan Bank advances		100,000			138,864
Federal Reserve Bank borrowings		140,000			—
Subordinated debt		96,653			96,392
Contractual obligations		29,608			15,218
Interest payable and other liabilities		34,467			32,834
Total liabilities		4,676,448			4,571,593
Commitments and contingent liabilities, see Notes 11 and 12
Stockholders’ equity, see Note 7
Common stock		207			205
Additional paid-in capital		487,225			484,989
Retained earnings		160,715			140,095
Accumulated other comprehensive income (loss)		(110,225	)		(113,511	)
Treasury stock		(119,487	)		(101,720	)
Total stockholders’ equity		418,435			410,058
Total liabilities and stockholders’ equity	$	5,094,883		$	4,981,651

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months ended June 30, 2023, and 2022

(Dollar amounts in thousands, except per share data)


	(Unaudited) Three Months Ended June 30,						(Unaudited) Six Months Ended June 30,
	2023			2022			2023			2022
Interest and dividend income
Loans, including fees	$	52,748		$	36,849		$	101,129		$	73,155
Securities, taxable		5,813			5,584			11,760			10,975
Securities, nontaxable		568			678			1,237			1,333
Federal funds sold and other		2,127			513			3,253			813
Total interest and dividend income		61,256			43,624			117,379			86,276
Interest expense
Deposits		17,204			2,183			31,025			3,905
Federal funds purchased and retail repurchase agreements		192			46			387			79
Federal Home Loan Bank advances		953			176			1,971			185
Federal Reserve Bank borrowings		1,528			—			1,663			—
Subordinated debt		1,950			1,653			3,794			3,252
Total interest expense		21,827			4,058			38,840			7,421
Net interest income		39,429			39,566			78,539			78,855
Provision (reversal) for credit losses		298			824			(68	)		412
Net interest income after provision (reversal) for credit losses		39,131			38,742			78,607			78,443
Non-interest income
Service charges and fees		2,653			2,617			5,198			5,139
Debit card income		2,653			2,810			5,207			5,438
Mortgage banking		213			428			301			990
Increase in value of bank-owned life insurance		757			736			2,340			1,601
Net Gain on acquisition and branch sales		—			540			—			540
Net gain (loss) from securities transactions		(1,322	)		(32	)		(1,290	)		8
Other		1,996			2,538			3,794			4,943
Total non-interest income		6,950			9,637			15,550			18,659
Non-interest expense
Salaries and employee benefits		15,237			15,383			31,929			30,451
Net occupancy and equipment		2,940			3,007			5,819			6,177
Data processing		4,493			3,642			8,409			7,411
Professional fees		1,645			1,111			3,029			2,282
Advertising and business development		1,249			972			2,408			1,948
Telecommunications		516			442			1,001			912
FDIC insurance		515			260			875			440
Courier and postage		463			489			921			912
Free nationwide ATM cost		524			541			1,049			1,042
Amortization of core deposit intangibles		918			1,111			1,836			2,161
Loan expense		136			207			253			392
Other real estate owned		71			14			190			13
Merger expenses		—			88			—			411
Other		4,423			4,169			8,640			6,343
Total non-interest expense		33,130			31,436			66,359			60,895
Income (loss) before income tax		12,951			16,943			27,798			36,207
Provision (benefit) for income taxes		1,495			1,684			4,019			5,298
Net income (loss) and net income (loss) allocable to common stockholders	$	11,456		$	15,259		$	23,779		$	30,909
Basic earnings (loss) per share	$	0.74		$	0.95		$	1.52		$	1.88
Diluted earnings (loss) per share	$	0.74		$	0.94		$	1.51		$	1.86

See accompanying condensed notes to interim consolidated financial statements.

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Six Months ended June 30, 2023, and 2022

(Dollar amounts in thousands)


	(Unaudited) Three Months Ended June 30,				(Unaudited) Six Months Ended June 30,
	2023		2022		2023		2022
Net income	$	11,456	$	15,259	$	23,779	$	30,909
Other comprehensive income (loss):

EQUITY BANCSHARES INC [EQBK] Filings
10-Q	[2023-08-09]
10-Q	[2023-05-04]
10-K	[2023-03-09]
10-Q	[2022-11-08]
10-Q	[2022-08-08]
10-Q	[2022-05-05]
10-K	[2022-03-09]
10-Q	[2021-11-08]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-03-09]
10-Q	[2020-10-29]
10-Q	[2020-07-30]
10-Q	[2020-04-30]
10-K	[2020-03-10]
10-Q	[2019-11-12]
10-Q	[2019-08-05]
10-Q	[2019-05-16]
10-K	[2019-03-20]
10-Q	[2018-11-09]
10-Q	[2018-08-09]
10-Q	[2018-05-11]
10-K	[2018-03-16]
10-Q	[2017-11-09]
10-Q	[2017-08-09]
10-Q	[2017-05-10]
10-K	[2017-03-16]
10-Q	[2016-11-14]
10-Q	[2016-08-15]
10-Q	[2016-05-16]
10-K	[2016-03-17]
10-Q	[2015-12-23]
S-1	[2015-10-09]