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Equity Bancshares, Inc. Announces Second Quarter Earnings of $0.58 Per Diluted Common Share and Net Income of $9.2 Million

Continues improvements in customer experience platforms including trust & wealth management, deposit and treasury product strategy and commercial lending

WICHITA, Kansas, July 22, 2019 (GLOBE NEWSWIRE) -- Equity Bancshares, Inc. (EQBK), (“Equity”, “we”, “us”, “our”), the Wichita-based holding company of Equity Bank, reported its unaudited results for the quarter ended June 30, 2019, including net income allocable to common stockholders of $9.2 million, or $0.58 per diluted share. Year-to-date 2019 net income allocable to common stockholders was $5.2 million and $0.32 per diluted share.

“We continue to serve as a trusted bank for entrepreneurial companies, businesses and individuals, and in the second quarter we continued our disciplined approach to lending plus additional focus on providing deposit products and services that appeal across our customer base, while innovating and streamlining our internal processes,” said Brad Elliott, Chairman and CEO of Equity. “Our Equity Trust & Wealth Management group has provided a new service for our customer base and our new Equity Bank online banking solution has proven to be a significant upgrade for business and treasury customers. We continue to prioritize product strategy and our market teams continue to focus on core deposit strategy and household growth.”

“In the first quarter, we recorded a $14.5 million provision for loss against a credit relationship. We do not believe this represents a systemic trend; rather an isolated individual relationship which is unique within our portfolio.”

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”). The acquisition added total assets of $98.6 million, which included total loans of $6.5 million. There were total deposits of $98.5 million assumed at the time of the acquisition. Results of operations of the MidFirst acquisition are included in Equity’s 2019 results of operations subsequent to the acquisition.

Notable Items:

  • Net income before taxes for the second quarter of 2019 was $11.7 million, or $0.74 per diluted share, compared to net income before taxes of $8.8 million, or $0.56 per diluted share, for the same time period in 2018. Net income before taxes, adjusted to exclude merger expense, was $12.0 million, or $0.75 per diluted share, for the second quarter of 2019, compared to net income before taxes, adjusted to exclude merger expense of $14.0 million, or $0.89 per diluted share, for the second quarter of 2018.
  • Stated diluted income per share in the second quarter of 2019 was $0.58. Merger expenses, adjusted for estimated income tax, were $207 thousand in the second quarter of 2019, or $0.01 per diluted share. Stated diluted income per share for the first six months of 2019 was $0.32. Merger expenses, adjusted for estimated income tax, were $694 thousand in the first six months of 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 June 30, 2019, a total of 277,806 shares have been repurchased under this authorization at an average price of $25.95.

Highlights of Equity’s growth include:

  • Total loans held for investment of $2.68 billion at June 30, 2019, as compared to total loans held for investment of $2.58 billion at December 31, 2018. The increase of $104.6 million includes growth of $98.1 million, or 3.8%, and $6.5 million of loans added in the MidFirst acquisition.
  • Total deposits were $3.19 billion at June 30, 2019 compared to $3.12 billion at December 31, 2018. Signature deposits, including core deposits comprised of checking accounts, savings accounts and money market accounts, were $2.19 billion at June 30, 2019, compared to $2.12 billion at December 31, 2018. Organic signature deposit growth was 1.3% for the six months ended June 30, 2019. In addition, the MidFirst acquisition added total deposits of $98.5 million.
  • Total assets of $4.18 billion at June 30, 2019, compared to $4.06 billion at December 31, 2018. The MidFirst acquisition added total assets of $98.6 million.
  • Book value per common share of $29.45 at June 30, 2019 and $28.87 at December 31, 2018. Tangible book value per common share of $19.23 at June 30, 2019 and $19.08 at December 31, 2018.

Financial Results for Six Months Ended June 30, 2019

Net income allocable to common stockholders was $5.2 million for the six months ended June 30, 2019, as compared to $15.6 million for the six months ended June 30, 2018, a decrease of $10.4 million, principally related to the non-typical specific impairment of $14.5 million 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 $0.32 for the six-month period ended June 30, 2019, as compared to $1.02 for the comparable period of 2018. Weighted average fully diluted shares were 15,992,265 and 15,294,387 for the six-month periods ended June 30, 2019 and 2018.

Net interest income was $61.9 million for the six months ended June 30, 2019, as compared to $58.7 million for the six months ended June 30, 2018, an increase of $3.2 million, or a 5.5% increase. The additional net interest income was primarily driven by an increase in yield on interest-earning assets and growth in loans and securities balances, partially offset by higher interest expense as we funded the increase in earning assets with additional deposits and an overall increase in the average cost of funds.

Our net interest margin was 3.46% for the six months ended June 30, 2019, as compared to 3.92% for the six months ended June 30, 2018. The decrease in net interest margin was partly 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 above mentioned large credit relationship to nonaccrual during the first quarter of 2019.

The provision for loan losses was $16.6 million for the six months ended June 30, 2019, as compared to $1.9 million for the six months ended June 30, 2018. Net charge-offs for the six months ended June 30, 2019 were $10.3 million, as compared to net charge-offs of $335 thousand for the comparable period in 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 total of $9.2 million on this credit relationship during the second quarter of 2019.

Total non-interest income was $11.8 million for the six months ended June 30, 2019, as compared to $8.8 million for the six months ended June 30, 2018. The increase is largely attributable to increases in debit card income, service charges and fees and an increase in swap fees. Non-interest income includes the increase in value of bank-owned life insurance of $987 thousand and $1.2 million for the six-month periods ended June 30, 2019 and 2018.

Total non-interest expense was $50.6 million for the six months ended June 30, 2019, as compared to $45.6 million for the six months ended June 30, 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. Also, data processing costs increased due to more accounts, higher transaction volumes and our new online banking platform. Trust and wealth management infrastructure and an increase in professional fees contributed as well. Non-interest expense also includes merger expenses of $915 thousand ($694 thousand after tax) for the six months ended June 30, 2019. Merger expenses for the six months ended June 30, 2018, totaled $5.8 million ($4.5 million after tax).

Equity’s effective tax rate for the six-month period ended June 30, 2019 was 20.8% as compared to 22.2% for the six-month period ended June 30, 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 anticipated annual income before income taxes, as well as federal income tax credits anticipated to be available in each annual period. Excess tax benefits associated with the exercise of stock options and the settlement in stock of restricted stock units recorded in the first six months of 2019 were $18 thousand as compared to $6 thousand in the comparable period of 2018.

Financial Results for Quarter Ended June 30, 2019

Net income allocable to common stockholders was $9.2 million for the three months ended June 30, 2019, as compared to net income allocable to common stockholders of $6.9 million for the three months ended June 30, 2018, an increase of $2.4 million.

Diluted earnings per share were $0.58 for the three months ended June 30, 2019, as compared to diluted earnings per share of $0.44 for the comparable period in 2018. Weighted average fully diluted shares were 15,918,274 and 15,690,111 for the three months ended June 30, 2019 and 2018.

Net interest income was $31.3 million for the three months ended June 30, 2019, as compared to $30.9 million for the three months ended June 30, 2018, a $368 thousand, or 1.2%, increase. The additional net interest income was primarily driven by growth in loans and securities balances and, to a lesser extent, an increase in average yield on loans, partially offset by an increase in interest expense as we funded the growth in earning assets with more deposits and borrowings and an overall increase in the average cost of funds.

The net interest margin was 3.42% for the three months ended June 30, 2019, as compared to 3.93% for the three months ended June 30, 2018. The decrease in net interest margin was partly due to a reduction in loan fees, an overall increase in our cost of funds and the movement of the above mentioned large credit relationship to nonaccrual during the first quarter of 2019. Our cost of funds has increased primarily due to increased interest rates for both retail and public fund deposits. The cost of retail deposits has increased as the general level of interest rates has risen and from an increased level of market competition for this type of deposit, which are desirable due to their lower level of interest-rate sensitivity. The cost of public fund deposits has increased due to the level of competition for these deposits, from both other financial institutions and state investment funds and due to the timing of the investment of these funds in an elevated interest rate environment.

The provision for loan losses was $974 thousand for the three months ended June 30, 2019, as compared to $750 thousand for the three months ended June 30, 2018. For the three months ended June 30, 2019, we had net charge-offs of $9.5 million, of which $9.2 million was related to the credit relationship for which we provisioned $14.5 million during the first quarter of 2019, as compared to net recoveries of $17 thousand for the same period in 2018.

Total non-interest income for the quarter ended June 30, 2019 was $6.5 million, compared to $4.6 million for the quarter ended June 30, 2018. This increase was largely due to increases in debit card income, service charges and fees and an increase in swap fees. The increases in debit card income and service charges and fees are principally attributable to the addition of accounts and higher transaction volumes. Non-interest income includes the increase in value of bank-owned life insurance of $499 thousand and $508 thousand for the three-month periods ended June 30, 2019 and 2018.

Total non-interest expense was $25.0 million for the quarter ended June 30, 2019, compared to $26.0 million for the quarter ended June 30, 2018. The decrease in non-interest expense is largely due to a decrease in merger expenses, partially offset by increases in salaries and employee benefits, other real estate owned, data processing, professional fees and FDIC insurance expenses. The results reflect added lending, customer service, corporate and operations staff indirectly attributable to mergers and organic growth plus increased data processing costs due to more accounts, higher transaction volumes along with our new online banking platform and trust and wealth management infrastructure and an increase in professional fees. Non-interest expense also includes merger expenses of $276 thousand ($207 thousand after tax) for the three months ended June 30, 2019. Merger expenses for the three months ended June 30, 2018, totaled $5.2 million ($4.0 million after tax).

Equity’s effective tax rate for the quarter ended June 30, 2019 was 21.4% as compared to 21.9% for the quarter ended June 30, 2018. Excess tax benefits associated with the exercise of stock options and the settlement in stock of restricted stock units recorded in the second quarter of 2019 were $10 thousand. No excess tax benefits associated with share-based compensation were recognized in the comparable period of 2018.

Loans, Deposits and Total Assets

Loans held for investment were $2.68 billion at June 30, 2019, as compared to $2.58 billion at December 31, 2018, an increase of $104.6 million. The increase in loans held for investment includes $6.5 million of net loans acquired in the February 2019 MidFirst acquisition plus $98.1 million of additional loan growth.

As of June 30, 2019, Equity’s allowance for loan losses to total loans was 0.66%, as compared to 0.44% at December 31, 2018. Total reserves, including purchase discounts, to total loans were approximately 1.14% as of June 30, 2019, as compared to 1.02% at December 31, 2018. Nonperforming assets of $67.4 million as of June 30, 2019, were 1.61% of total assets. Nonperforming assets at December 31, 2018, were $39.6 million or 0.97% of total assets.

Total deposits were $3.19 billion at June 30, 2019, as compared to $3.12 billion at December 31, 2018. Total deposits increased $62.4 million between December 31, 2018 and June 30, 2019. This increase included $98.5 million assumed in the MidFirst acquisition and a $57.6 million increase in organic savings, NOW and money market deposits, partially offset by a $29.1 million decrease in organic demand deposits and a $64.6 million decrease in organic time deposits. Signature deposits were $2.19 billion at June 30, 2019, as compared to $2.12 billion at December 31, 2018.

At June 30, 2019, Equity had consolidated total assets of $4.18 billion, as compared to $4.06 billion at December 31, 2018, an increase of $118.4 million. The increase in total assets includes $98.6 million of total assets acquired in the MidFirst acquisition.

Borrowings and Capital

At June 30, 2019, borrowings totaled $515.6 million, as compared to $464.7 million at December 31, 2018. The increase in borrowings was principally due to a $59.9 million increase in Federal Home Loan Bank advances, partially offset by a $9.0 million reduction in federal funds purchased and retail repurchase agreements.

At June 30, 2019, common stockholders’ equity totaled $458.4 million, $29.45 per common share, compared to $455.9 million, $28.87 per common share, at December 31, 2018. Tangible common equity was $299.3 million and tangible book value per common share was $19.23 at June 30, 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 quarter of 2019, the company repurchased a total of 277,806 shares of our Class A Voting Common Stock at a total cost of $7.2 million, or $25.95 per share. The ratio of common equity tier 1 capital to risk-weighted assets was approximately 10.47% and the total capital to risk-weighted assets was approximately 11.57% at June 30, 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 second quarter 2019 results on Tuesday, July 23, 2019 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 Tuesday, July 23, 2019, 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. 1869113.

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 30, 2019, accessible at (855) 859-2056 with conference ID no. 1869113 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
cnavratil@equitybank.com

Media Contact:

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


Unaudited Financial Tables

  • Table 1. 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)

    As of and for the three months ended  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2019     2019     2018     2018     2018  
Statement of Income Data                                        
Net interest income   $ 31,288     $ 30,639     $ 33,336     $ 32,755     $ 30,920  
Provision for loan losses     974       15,646       750       1,291       750  
Net gains (losses) from securities transactions     7       6       5       (4 )     (2 )
Other non-interest income     6,444       5,318       5,444       5,437       4,594  
Total non-interest income     6,451       5,324       5,449       5,433       4,592  
Merger expense     276       639       938       757       5,236  
Other non-interest expense     24,747       24,904       24,200       22,890       20,739  
Total non-interest expense     25,023       25,543       25,138       23,647       25,975  
Income (loss) before income taxes     11,742       (5,226 )     12,897       13,250       8,787  
Provision for income taxes (benefits)     2,510       (1,153 )     2,972       2,928       1,920  
Net income (loss)     9,232       (4,073 )     9,925       10,322       6,867  
Net income (loss) allocable to common stockholders     9,232       (4,073 )     9,925       10,322       6,867  
Basic earnings (loss) per share     0.59       (0.26 )     0.63       0.65       0.45  
Diluted earnings (loss) per share     0.58       (0.26 )     0.62       0.64       0.44  
                                         
Balance Sheet Data (at period end)                                        
Available-for-sale securities   $ 161,082     $ 166,355     $ 168,875     $ 172,388     $ 180,238  
Held-to-maturity securities     766,950       749,493       748,356       713,899       665,995  
Gross loans held for investment     2,679,985       2,618,986       2,575,408       2,598,729       2,451,772  
Allowance for loan losses     17,777       26,340       11,454       11,010       10,083  
Intangible assets, net     159,147       159,944       154,665       155,430       146,538  
Total assets     4,180,074       4,065,354       4,061,716       3,931,036       3,712,185  
Total deposits     3,185,893       3,260,870       3,123,447       2,821,246       2,635,048  
Non-time deposits     2,192,534       2,220,110       2,115,541       1,969,715       1,829,902  
Borrowings     515,582       331,221       464,676       652,755       631,501  
Total liabilities     3,721,668       3,611,891       3,605,775       3,487,799       3,278,903  
Total stockholders’ equity     458,406       453,463       455,941       443,237       433,282  
Tangible common equity*     299,259       293,519       301,276       287,807       286,744  
                                         
Selected Average Balance Sheet Data (quarterly average)                                        
Investment securities   $ 924,914     $ 918,804     $ 893,642     $ 860,940     $ 767,038  
Total gross loans receivable     2,655,256       2,560,030       2,590,610       2,516,833       2,317,071  
Interest-earnings assets     3,665,618       3,560,815       3,578,487       3,457,871       3,158,187  
Total assets     4,025,764       3,926,359       3,935,722       3,804,114       3,475,786  
Interest-bearing deposits     2,726,443       2,709,596       2,501,227       2,251,937       2,148,361  
Borrowings     347,103       269,492       480,417       642,575       495,558  
Total interest-bearing liabilities     3,073,546       2,979,088       2,981,644       2,894,512       2,643,919  
Total deposits     3,200,624       3,178,164       2,991,657       2,709,741       2,556,982  
Total liabilities     3,568,661       3,466,646       3,486,272       3,364,343       3,062,312  
Total stockholders' equity     457,103       459,713       449,450       439,771       413,474  
Tangible common equity*     297,541       302,398       294,506       289,515       279,328  
                                         
Performance ratios                                        
Return on average assets (ROAA) annualized     0.92 %     (0.42 )%     1.00 %     1.08 %     0.79 %
Return on average equity (ROAE) annualized     8.10 %     (3.59 )%     8.76 %     9.31 %     6.66 %
Return on average tangible common equity (ROATCE) annualized*     13.29 %     (4.62 )%     14.17 %     14.91 %     10.58 %
Yield on loans annualized     5.74 %     5.79 %     5.91 %     5.73 %     5.73 %
Cost of interest-bearing deposits annualized     1.64 %     1.61 %     1.45 %     1.15 %     1.00 %
Cost of total deposits annualized     1.40 %     1.37 %     1.21 %     0.95 %     0.84 %
Net interest margin annualized     3.42 %     3.49 %     3.70 %     3.76 %     3.93 %
Efficiency ratio*     65.59 %     69.26 %     62.40 %     59.93 %     58.40 %
Non-interest income / average assets     0.64 %     0.55 %     0.55 %     0.57 %     0.53 %
Non-interest expense / average assets     2.49 %     2.64 %     2.53 %     2.47 %     3.00 %
                                         
Capital Ratios                                        
Tier 1 Leverage Ratio     8.26 %     8.36 %     8.60 %     8.60 %     9.36 %
Common Equity Tier 1 Capital Ratio     10.47 %     10.46 %     10.95 %     10.49 %     11.04 %
Tier 1 Risk Based Capital Ratio     10.96 %     10.95 %     11.45 %     11.00 %     11.56 %
Total Risk Based Capital Ratio     11.57 %     11.87 %     11.86 %     11.37 %     11.94 %
Total stockholders' equity to total assets     10.97 %     11.15 %     11.23 %     11.28 %     11.67 %
Tangible common equity to tangible assets*     7.44 %     7.52 %     7.71 %     7.62 %     8.04 %
Book value per common share   $ 29.45     $ 28.66     $ 28.87     $ 28.07     $ 27.44  
Tangible book value per common share*   $ 19.23     $ 18.55     $ 19.08     $ 18.22     $ 18.16  
Tangible book value per diluted common share*   $ 18.99     $ 18.30     $ 18.73     $ 17.86     $ 17.78  

* 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)

  Year-to-date 06/30/2019     Year-to-date 06/30/2018  
  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) $ 2,607,906     $ 74,560       5.77 %   $ 2,220,559     $ 62,149       5.64 %
Total securities   921,876       12,149       2.66 %     733,234       9,739       2.68 %
Federal funds sold and other   83,723       1,257       3.03 %     68,038       1,066       3.16 %
Total interest-earning assets   3,613,505       87,966       4.91 %     3,021,831       72,954       4.87 %
Interest-bearing liabilities                                              
Total interest-bearing demand and savings   1,704,672       11,525       1.36 %     1,319,523       4,814       0.74 %
Certificates of deposit   1,013,394       10,349       2.06 %     776,839       5,242       1.36 %
Total interest-bearing deposits   2,718,066       21,874       1.62 %     2,096,362       10,056       0.97 %
FHLB advances & LOC   238,462       3,146       2.66 %     379,675       3,393       1.80 %
Other borrowings   70,049       1,019       2.94 %     62,959       798       2.56 %
Total interest-bearing liabilities   3,026,577       26,039       1.74 %     2,538,996       14,247       1.13 %
                                               
Net interest income         $ 61,927                     $ 58,707          
Interest rate spread                   3.17 %                     3.74 %
                                               
Net interest margin (2)                   3.46 %                     3.92 %
                                               
(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.  


  For the six months ended  
  June 30, 2019 vs. 2018  
  Total Increase/(Decrease)  
  Volume Variance (1)     Yield/Rate Variance (1)     Total Variance  
Interest-earning assets                      
Loans $ 11,049     $ 1,362     $ 12,411  
Total securities   2,469       (59 )     2,410  
Federal funds sold and other   237       (46 )     191  
Total interest-earning assets   13,755       1,257       15,012  
Interest-bearing liabilities                      
Total interest-bearing demand and savings   1,701       5,010       6,711  
Certificates of deposit   1,902       3,205       5,107  
Total interest-bearing deposits   3,603       8,215       11,818  
FHLB advances & LOC   (1,526 )     1,279       (247 )
Other borrowings   117       104       221  
Total interest-bearing liabilities   2,194       9,598       11,792  
                       
Net interest income $ 11,561     $ (8,341 )   $ 3,220  
                       
(1) The effect of changes in volume is determined by multiplying the change in volume by the previous year's average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the prior year's volume. The changes attributable to both volume and rate, which cannot be segregated, have been allocated to the volume variance and the rate variance in proportion to the relationship of the absolute dollar amount of the change in each.  


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

  Quarter ended 06/30/2019     Quarter ended 06/30/2018  
  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) $ 2,655,256     $ 38,027       5.74 %   $ 2,317,071     $ 33,101       5.73 %
Total securities   924,914       6,114       2.65 %     767,038       5,137       2.69 %
Federal funds sold and other   85,448       623       2.92 %     74,078       593       3.21 %
Total interest-earning assets   3,665,618       44,764       4.90 %     3,158,187       38,831       4.93 %
Interest-bearing liabilities                                              
Total interest-bearing demand and savings   1,715,991       5,857       1.37 %     1,367,544       2,591       0.76 %
Certificates of deposit   1,010,452       5,287       2.10 %     780,817       2,747       1.41 %
Total interest-bearing deposits   2,726,443       11,144       1.64 %     2,148,361       5,338       1.00 %
FHLB advances & LOC   278,864       1,841       2.65 %     426,392       2,094       1.97 %
Other borrowings   68,239       491       2.89 %     69,166       479       2.78 %
Total interest-bearing liabilities   3,073,546       13,476       1.76 %     2,643,919       7,911       1.20 %
                                               
Net interest income         $ 31,288                     $ 30,920          
Interest rate spread                   3.14 %                     3.73 %
Net interest margin (2)                   3.42 %                     3.93 %
(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.  


  For the three months ended  
  June 30, 2019 vs. 2018  
  Total Increase/(Decrease)  
  Volume Variance (1)     Yield/Rate  Variance (1)     Total Variance  
Interest-earning assets                      
Loans $ 4,842     $ 84     $ 4,926  
Total securities   1,018       (41 )     977  
Federal funds sold and other   86       (56 )     30  
Total interest-earning assets   5,946       (13 )     5,933  
Interest-bearing liabilities                      
Total interest-bearing demand and savings   781       2,485       3,266  
Certificates of deposit   957       1,583       2,540  
Total interest-bearing deposits   1,738       4,068       5,806  
FHLB advances & LOC   (850 )     597       (253 )
Other borrowings   (22 )     34       12  
Total interest-bearing liabilities   866       4,699       5,565  
                       
Net interest income $ 5,080     $ (4,712 )   $ 368  
                       
(1) The effect of changes in volume is determined by multiplying the change in volume by the previous year's average rate. Similarly, the effect of rate changes is calculated by multiplying the change in average rate by the prior year's volume. The changes attributable to both volume and rate, which cannot be segregated, have been allocated to the volume variance and the rate variance in proportion to the relationship of the absolute dollar amount of the change in each.  


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

    June 30,     December 31,  
    2019     2018  
ASSETS                
Cash and due from banks   $ 180,827     $ 192,735  
Federal funds sold     591       83  
Cash and cash equivalents     181,418       192,818  
Interest-bearing time deposits in other banks     4,742       4,991  
Available-for-sale securities     161,082       168,875  
Held-to-maturity securities, fair value of $778,051 and $739,989     766,950       748,356  
Loans held for sale     6,761       2,972  
Loans, net of allowance for loan losses of $17,777 and $11,454     2,662,208       2,563,954  
Other real estate owned, net     5,764       6,372  
Premises and equipment, net     84,942       80,442  
Bank-owned life insurance     74,092       73,105  
Federal Reserve Bank and Federal Home Loan Bank stock     33,226       29,214  
Interest receivable     16,702       17,372  
Goodwill     136,432       131,712  
Core deposit intangibles, net     21,512       21,725  
Other     24,243       19,808  
Total assets   $ 4,180,074     $ 4,061,716  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Deposits                
Demand   $ 487,430     $ 503,831  
Total non-interest-bearing deposits     487,430       503,831  
Savings, NOW and money market     1,705,104       1,611,710  
Time     993,359       1,007,906  
Total interest-bearing deposits     2,698,463       2,619,616  
Total deposits     3,185,893       3,123,447  
Federal funds purchased and retail repurchase agreements     41,047       50,068  
Federal Home Loan Bank advances     444,818       384,898  
Bank stock loan     15,308       15,450  
Subordinated debentures     14,409       14,260  
Contractual obligations     3,744       3,965  
Interest payable and other liabilities     16,449       13,687  
Total liabilities     3,721,668       3,605,775  
Commitments and contingent liabilities                
Stockholders’ equity                
Common stock     173       173  
Additional paid-in capital     381,133       379,085  
Retained earnings     105,337       101,326  
Accumulated other comprehensive loss     (1,291 )     (4,867 )
Employee stock loans     (83 )     (121 )
Treasury stock     (26,863 )     (19,655 )
Total stockholders’ equity     458,406       455,941  
     Total liabilities and stockholders’ equity   $ 4,180,074     $ 4,061,716  


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

    Three months ended June 30,     Six months ended June 30,  
    2019     2018     2019     2018  
Interest and dividend income                                
Loans, including fees   $ 38,027     $ 33,101     $ 74,560     $ 62,149  
Securities, taxable     4,969       4,112       10,051       7,835  
Securities, nontaxable     1,145       1,025       2,098       1,904  
Federal funds sold and other     623       593       1,257       1,066  
Total interest and dividend income     44,764       38,831       87,966       72,954  
Interest expense                                
Deposits     11,144       5,338       21,874       10,056  
Federal funds purchased and retail repurchase agreements     34       24       66       47  
Federal Home Loan Bank advances     1,841       2,094       3,146       3,393  
Bank stock loan     147       156       309       183  
Subordinated debentures     310       299       644       568  
Total interest expense     13,476       7,911       26,039       14,247  
                                 
Net interest income     31,288       30,920       61,927       58,707  
Provision for loan losses     974       750       16,620       1,920  
Net interest income after provision for loan losses     30,314       30,170       45,307       56,787  
Non-interest income                                
Service charges and fees     2,240       1,729       4,163       3,309  
Debit card income     2,186       1,522       3,924       2,775  
Mortgage banking     562       312       879       625  
Increase in value of bank-owned life insurance     499       508       987       1,160  
Net gains (losses) from securities transactions     7       (2 )     13       (10 )
Other     957       523       1,809       984  
Total non-interest income     6,451       4,592       11,775       8,843  
Non-interest expense                                
Salaries and employee benefits     13,067       11,629       27,165       22,520  
Net occupancy and equipment     2,188       2,011       4,155       3,813  
Data processing     2,358       1,968       4,763       3,642  
Professional fees     1,228       844       2,384       1,559  
Advertising and business development     722       665       1,368       1,284  
Telecommunications     485       432       1,070       801  
FDIC insurance     730       510       1,008       754  
Courier and postage     341       303       668       558  
Free nationwide ATM cost     420       330       781       622  
Amortization of core deposit intangibles     785       625       1,564       1,009  
Loan expense     175       145       443       491  
Other real estate owned     302       (671 )     414       (403 )
Merger expenses     276       5,236       915       5,767  
Other     1,946       1,948       3,868       3,185  
Total non-interest expense     25,023       25,975       50,566       45,602  
Income before income tax     11,742       8,787       6,516       20,028  
Provision for income taxes     2,510       1,920       1,357       4,450  
Net income and net income allocable to common stockholders   $ 9,232     $ 6,867     $ 5,159     $ 15,578  
Basic earnings per share   $ 0.59     $ 0.45     $ 0.33     $ 1.04  
Diluted earnings per share   $ 0.58     $ 0.44     $ 0.32     $ 1.02  


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

    As of and for the three months ended  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2019     2019     2018     2018     2018  
Total stockholders' equity   $ 458,406     $ 453,463     $ 455,941     $ 443,237     $ 433,282  
Less: goodwill     136,432       136,432       131,712       131,723       125,485  
Less: core deposit intangibles, net     21,512       22,296       21,725       22,466       19,800  
Less: mortgage servicing asset, net     8       10       11       13       14  
Less: naming rights, net     1,195       1,206       1,217       1,228       1,239  
Tangible common equity   $ 299,259     $ 293,519     $ 301,276     $ 287,807     $ 286,744  
Common shares issued at period end     15,563,873       15,820,303       15,793,095       15,792,695       15,780,777  
RSU shares vested           108                   6,768  
Common shares outstanding at period end     15,563,873       15,820,411       15,793,095       15,792,695       15,787,545  
Diluted common shares outstanding at period end     15,758,747       16,036,700       16,085,729       16,118,067       16,131,096  
Book value per common share   $ 29.45     $ 28.66     $ 28.87     $ 28.07     $ 27.44  
Tangible book value per common share   $ 19.23     $ 18.55     $ 19.08     $ 18.22     $ 18.16  
Tangible book value per diluted common share   $ 18.99     $ 18.30     $ 18.73     $ 17.86     $ 17.78  
                                         
Total assets   $ 4,180,074     $ 4,065,354     $ 4,061,716     $ 3,931,036     $ 3,712,185  
Less: goodwill     136,432       136,432       131,712       131,723       125,485  
Less: core deposit intangibles, net     21,512       22,296       21,725       22,466       19,800  
Less: mortgage servicing asset, net     8       10       11       13       14  
Less: naming rights, net     1,195       1,206       1,217       1,228       1,239  
Tangible assets   $ 4,020,927     $ 3,905,410     $ 3,907,051     $ 3,775,606     $ 3,565,647  
Total stockholders' equity to total assets     10.97 %     11.15 %     11.23 %     11.28 %     11.67 %
Tangible common equity to tangible assets     7.44 %     7.52 %     7.71 %     7.62 %     8.04 %
Total average stockholders' equity   $ 457,103     $ 459,713     $ 449,450     $ 439,771     $ 413,474  
Less: average intangible assets     159,562       157,315       154,944       150,256       134,146  
Average tangible common equity   $ 297,541     $ 302,398     $ 294,506     $ 289,515     $ 279,328  
Net income (loss) allocable to common stockholders   $ 9,232     $ (4,073 )   $ 9,925     $ 10,322     $ 6,867  
Amortization of intangible assets     797       791       752       707       637  
Less: tax effect of intangible assets amortization     167       166       158       148       134  
Adjusted net income (loss) allocable to common stockholders   $ 9,862     $ (3,448 )   $ 10,519     $ 10,881     $ 7,370  
Return on total average stockholders' equity (ROAE) annualized     8.10 %     (3.59 )%     8.76 %     9.31 %     6.66 %
Return on average tangible common equity (ROATCE) annualized     13.29 %     (4.62 )%     14.17 %     14.91 %     10.58 %
Non-interest expense   $ 25,023     $ 25,543     $ 25,138     $ 23,647     $ 25,975  
Less: merger expenses     276       639       938       757       5,236  
Non-interest expense, excluding merger expenses   $ 24,747     $ 24,904     $ 24,200     $ 22,890     $ 20,739  
Net interest income   $ 31,288     $ 30,639     $ 33,336     $ 32,755     $ 30,920  
Non-interest income     6,451       5,324       5,449       5,433       4,592  
Less: net gains (losses) from securities transactions     7       6       5       (4 )     (2 )
Non-interest income, excluding gains (losses) from securities transactions   $ 6,444     $ 5,318     $ 5,444     $ 5,437     $ 4,594  
Net interest income plus non-interest income, excluding net gains (losses) from securities transactions   $ 37,732     $ 35,957     $ 38,780     $ 38,192     $ 35,514  
Non-interest expense to net interest income plus non-interest income     66.31 %     71.03 %     64.81 %     61.92 %     73.14 %
Efficiency ratio     65.59 %     69.26 %     62.40 %     59.93 %     58.40 %