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A service for banking industry professionals · Thursday, November 21, 2019 · 502,801,928 Articles · 3+ Million Readers

Equity Bancshares, Inc. Announces Third Quarter Earnings of $0.66 per Diluted Common Share and Net Income of $10.4 Million

Company continues focus on product delivery, full-service banking, noninterest income growth, expense reduction and overall efficiency

/EIN News/ -- WICHITA, Kan., Oct. 21, 2019 (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 September 30, 2019, including net income allocable to common stockholders of $10.4 million, or $0.66 per diluted share.  Year-to-date 2019 net income allocable to common stockholders was $15.6 million, or $0.98 per diluted share.

“I am pleased with our core earnings results in the third quarter, and two consecutive quarters of delivering growth in earnings per share to our stockholders,” said Brad Elliott, Chairman and CEO of Equity. “Our Company’s focus in reducing expenses, streamlining operations, and effectively evaluating our processes has helped us become more efficient as a four-state, 52-location bank, with positive results to stockholders.”

“Our initiatives in building our full-service banking platform have resulted in additional signature deposit customers in our regions, including key business and treasury management relationships, resulting in noninterest income growth and expansion for our Company,” said Mr. Elliott. “Our teams throughout our regions, including operations, customer service, credit administration and quality care, will continue to prioritize innovation within our products and services, efficient and effective delivery to our markets and to maintain our focus on high credit standards.”

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 third quarter of 2019 was $13.2 million, or $0.84 per diluted share, compared to net income before taxes of $13.3 million, or $0.82 per diluted share, for the same time period in 2018.  Net income before taxes, adjusted to exclude merger expense, was $13.2 million, or $0.84 per diluted share, for the third quarter of 2019, compared to net income before taxes, adjusted to exclude merger expense of $14.0 million, or $0.87 per diluted share, for the third quarter of 2018.
  • Stated diluted income per share in the third quarter of 2019 was $0.66.  There were no merger expenses in the third quarter of 2019.  Stated diluted income per share for the first nine months of 2019 was $0.98.  Merger expenses, adjusted for estimated income tax, were $694 thousand in the first nine months of 2019, or $0.04 per diluted share.
  • During the third quarter, the reserve ratio of the Deposit Insurance Fund reached 1.40% resulting in the application of a credit to our quarterly assessments paid to the Federal Deposit Insurance Corporation.  Application of the credit reduced expense during the three and nine month periods ended September 30, 2019 by $505 thousand ($398 thousand after tax), a benefit of $0.03 per diluted share after tax.
  • 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 September 30, 2019, a total of 421,016 shares have been repurchased under this authorization at an average price of $25.81, including 143,210 shares during the third quarter at an average price of $25.55 per share.

Equity’s Balance Sheet Highlights:

  • Total loans held for investment of $2.60 billion at September 30, 2019, as compared to total loans held for investment of $2.58 billion at December 31, 2018.  The increase of $25.5 million includes growth of $19.0 million, or 0.7%, and $6.5 million of loans added in the MidFirst acquisition.
  • Total deposits were $3.11 billion at September 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 $2.18 billion at September 30, 2019, compared to $2.12 billion at December 31, 2018.  Organic signature deposit growth was 0.7% for the nine months ended September 30, 2019.  In addition, the MidFirst acquisition added total deposits of $98.5 million.
  • Total assets of $4.07 billion at September 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 $30.25 at September 30, 2019 and $28.87 at December 31, 2018. Tangible book value per common share of $19.99 at September 30, 2019 and $19.08 at December 31, 2018.

Financial Results for Nine Months Ended September 30, 2019

Net income allocable to common stockholders was $15.6 million for the nine months ended September 30, 2019, as compared to $25.9 million for the nine months ended September 30, 2018, a decrease of $10.3 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 $0.98 for the nine-month period ended September 30, 2019, as compared to $1.66 for the comparable period of 2018.  Weighted average fully diluted shares were 15,896,605 and 15,578,017 for the nine-month periods ended September 30, 2019 and 2018.

Net interest income was $93.5 million for the nine months ended September 30, 2019, as compared to $91.5 million for the nine months ended September 30, 2018, an increase of $2.0 million, or a 2.2% increase.  The additional net interest income was primarily the result of interest-earning assets growing at a faster rate than interest-bearing liabilities due to increases in non-interest bearing deposits and capital.

Our net interest margin was 3.44% for the nine months ended September 30, 2019, as compared to 3.86% for the nine months ended September 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 a large credit relationship to nonaccrual during the first quarter of 2019.

The provision for loan losses was $17.3 million for the nine months ended September 30, 2019, as compared to $3.2 million for the nine months ended September 30, 2018.  In the first quarter of 2019, we recorded a $14.5 million provision for loss against a credit relationship and subsequently charged off a net of $10.2 million on this credit relationship during the first nine months of 2019.  Net charge-offs for the nine months ended September 30, 2019, were $697 thousand, exclusive of the net charge offs related to the previously mentioned credit relationship, as compared to net charge-offs of $699 thousand for the comparable period in 2018.

Total non-interest income was $18.3 million for the nine months ended September 30, 2019, as compared to $14.3 million for the nine months ended September 30, 2018.  The variance is largely attributable to increases in debit card income, service charges and fees, mortgage banking income and an increase in swap fees.  Non-interest income includes the increase in value of bank-owned life insurance of $1.5 million and $1.7 million for the nine-month periods ended September 30, 2019 and 2018.

Total non-interest expense was $74.8 million for the nine months ended September 30, 2019, as compared to $69.2 million for the nine months ended September 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 nine months ended September 30, 2019.  Merger expenses for the nine months ended September 30, 2018, totaled $6.5 million ($5.0 million after tax).

Equity’s effective tax rate for the nine-month period ended September 30, 2019 was 21.0% as compared to 22.2% for the nine-month period ended September 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.

Financial Results for Quarter Ended September 30, 2019

Net income allocable to common stockholders was $10.4 million for the three months ended September 30, 2019, as compared to net income allocable to common stockholders of $10.3 million for the three months ended September 30, 2018, an increase of $84 thousand.

Diluted earnings per share were $0.66 for the three months ended September 30, 2019, as compared to diluted earnings per share of $0.64 for the comparable period in 2018.  Weighted average fully diluted shares were 15,708,038 and 16,136,607 for the three months ended September 30, 2019 and 2018.

Net interest income was $31.5 million for the three months ended September 30, 2019, as compared to $32.8 million for the three months ended September 30, 2018, a $1.2 million, or 3.8%, decrease.  The decrease in net interest income was primarily driven by an increase in deposit rates and an overall increase in the average cost of funds, partially offset by an increase in the average volume of loans.

The net interest margin was 3.42% for the three months ended September 30, 2019, as compared to 3.76% for the three months ended September 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 higher 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.

The provision for loan losses was $679 thousand for the three months ended September 30, 2019, as compared to $1.3 million for the three months ended September 30, 2018.  For the three months ended September 30, 2019, we had net charge-offs of $581 thousand, of which $390 thousand was related to the credit relationship for which we provisioned $14.5 million during the first quarter of 2019, as compared to net charge-offs of $364 thousand for the same period in 2018.

Total non-interest income for the quarter ended September 30, 2019 was $6.6 million, compared to $5.4 million for the quarter ended September 30, 2018.  This increase was largely due to increases in debit card income, service charges and fees and an increase in mortgage banking.  The increases in debit card income and service charges and fees are principally attributable to the addition of accounts and higher transaction volumes.  Non-interest income includes the increase in value of bank-owned life insurance of $507 thousand and $521 thousand for the three-month periods ended September 30, 2019 and 2018.

Total non-interest expense was $24.2 million for the quarter ended September 30, 2019, compared to $23.6 million for the quarter ended September 30, 2018.  The increase in non-interest expense is due largely to increases in salaries and employee benefits, professional fees and data processing, partially offset by decreases in merger expenses, FDIC insurance expense and loan expense.  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 does not include any merger expenses for the three months ended September 30, 2019.  Merger expenses for the three months ended September 30, 2018, totaled $757 thousand ($581 thousand after tax).  During the third quarter of 2019, Equity received a credit of $505 thousand that reduced the quarterly assessments paid to the Federal Deposit Insurance Corporation.

Equity’s effective tax rate for the quarter ended September 30, 2019 was 21.1% as compared to 22.1% for the quarter ended September 30, 2018.

Loans, Deposits and Total Assets

Loans held for investment were $2.60 billion at September 30, 2019, as compared to $2.58 billion at December 31, 2018, an increase of $25.5 million.  The increase in loans held for investment includes $6.5 million of net loans acquired in the February 2019 MidFirst acquisition plus $19.0 million of additional loan growth.

As of September 30, 2019, Equity’s allowance for loan losses to total loans was 0.69%, as compared to 0.44% at December 31, 2018.  Total reserves, including purchase discounts, to total loans were approximately 1.14% as of September 30, 2019, as compared to 1.02% at December 31, 2018.  Nonperforming assets of $57.1 million as of September 30, 2019, were 1.40% of total assets.  Nonperforming assets at December 31, 2018, were $39.6 million or 0.98% of total assets.

Total deposits were $3.11 billion at September 30, 2019, as compared to $3.12 billion at December 31, 2018.  Total deposits decreased $16.5 million between December 31, 2018 and September 30, 2019.  This decrease included a $128.9 million decrease in organic time deposits and a $28.3 million decrease in organic demand deposits, partially offset by $98.5 million assumed in the MidFirst acquisition and a $42.1 million increase in organic savings, NOW and money market deposits.  Signature deposits were $2.18 billion at September 30, 2019, as compared to $2.12 billion at December 31, 2018.

At September 30, 2019, Equity had consolidated total assets of $4.07 billion, as compared to $4.06 billion at December 31, 2018, an increase of $12.9 million.  The increase in total assets includes $98.6 million of total assets acquired in the MidFirst acquisition.

Borrowings and Capital

At September 30, 2019, borrowings totaled $480.0 million, as compared to $464.7 million at December 31, 2018.  The increase in borrowings was principally due to a $25.2 million increase in Federal Home Loan Bank advances, partially offset by a $9.4 million reduction in federal funds purchased and retail repurchase agreements.

At September 30, 2019, common stockholders’ equity totaled $467.1 million, $30.25 per common share, compared to $455.9 million, $28.87 per common share, at December 31, 2018.  Tangible common equity was $308.7 million and tangible book value per common share was $19.99 at September 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 and third quarters of 2019, the company repurchased a total of 421,016 shares of our Class A Voting Common Stock at a total cost of $10.9 million, or $25.81 per share.  The ratio of common equity tier 1 capital to risk-weighted assets was approximately 11.05% and the total capital to risk-weighted assets was approximately 12.19% at September 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 third quarter 2019 results on Tuesday, October 22, 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, October 22, 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. 6064137.

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 October 29, 2019, accessible at (855) 859-2056 with conference ID no. 6064137 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  
    September 30,     June 30,     March 31,     December 31,     September 30,  
    2019     2019     2019     2018     2018  
Statement of Income Data                                        
Net interest income   $ 31,526     $ 31,288     $ 30,639     $ 33,336     $ 32,755  
Provision for loan losses     679       974       15,646       750       1,291  
Net gains (losses) from securities transactions     4       7       6       5       (4 )
Other non-interest income     6,568       6,444       5,318       5,444       5,437  
Total non-interest income     6,572       6,451       5,324       5,449       5,433  
Merger expense         276       639       938       757  
Other non-interest expense     24,223       24,747       24,904       24,200       22,890  
Total non-interest expense     24,223       25,023       25,543       25,138       23,647  
Income (loss) before income taxes     13,196       11,742       (5,226 )     12,897       13,250  
Provision for income taxes (benefits)     2,790       2,510       (1,153 )     2,972       2,928  
Net income (loss)     10,406       9,232       (4,073 )     9,925       10,322  
Net income (loss) allocable to common stockholders     10,406       9,232       (4,073 )     9,925       10,322  
Basic earnings (loss) per share     0.67       0.59       (0.26 )     0.63       0.65  
Diluted earnings (loss) per share     0.66       0.58       (0.26 )     0.62       0.64  
                                         
Balance Sheet Data (at period end)                                        
Available-for-sale securities   $ 152,680     $ 161,082     $ 166,355     $ 168,875     $ 172,388  
Held-to-maturity securities     764,163       766,950       749,493       748,356       713,899  
Gross loans held for investment     2,600,924       2,679,985       2,618,986       2,575,408       2,598,729  
Allowance for loan losses     17,875       17,777       26,340       11,454       11,010  
Intangible assets, net     158,350       159,147       159,944       154,665       155,430  
Total assets     4,074,663       4,180,074       4,065,354       4,061,716       3,931,036  
Total deposits     3,106,929       3,185,893       3,260,870       3,123,447       2,821,246  
Non-time deposits     2,177,820       2,192,534       2,220,110       2,115,541       1,969,715  
Borrowings     480,000       515,582       331,221       464,676       652,755  
Total liabilities     3,607,613       3,721,668       3,611,891       3,605,775       3,487,799  
Total stockholders’ equity     467,050       458,406       453,463       455,941       443,237  
Tangible common equity*     308,700       299,259       293,519       301,276       287,807  
                                         
Selected Average Balance Sheet Data (quarterly average)                                        
Investment securities   $ 926,839     $ 924,914     $ 918,804     $ 893,642     $ 860,940  
Total gross loans receivable     2,646,454       2,655,256       2,560,030       2,590,610       2,516,833  
Interest-earnings assets     3,657,970       3,665,618       3,560,815       3,578,487       3,457,871  
Total assets     4,030,606       4,025,764       3,926,359       3,935,722       3,804,114  
Interest-bearing deposits     2,673,007       2,726,443       2,709,596       2,501,227       2,251,937  
Borrowings     390,562       347,103       269,492       480,417       642,575  
Total interest-bearing liabilities     3,063,569       3,073,546       2,979,088       2,981,644       2,894,512  
Total deposits     3,152,785       3,200,624       3,178,164       2,991,657       2,709,741  
Total liabilities     3,567,354       3,568,661       3,466,646       3,486,272       3,364,343  
Total stockholders' equity     463,252       457,103       459,713       449,450       439,771  
Tangible common equity*     304,492       297,541       302,398       294,506       289,515  
                                         
Performance ratios                                        
Return on average assets (ROAA) annualized     1.02 %     0.92 %     (0.42 )%     1.00 %     1.08 %
Return on average equity (ROAE) annualized     8.91 %     8.10 %     (3.59 )%     8.76 %     9.31 %
Return on average tangible common equity (ROATCE) annualized*     14.38 %     13.29 %     (4.62 )%     14.17 %     14.91 %
Yield on loans annualized     5.70 %     5.74 %     5.79 %     5.91 %     5.73 %
Cost of interest-bearing deposits annualized     1.56 %     1.64 %     1.61 %     1.45 %     1.15 %
Cost of total deposits annualized     1.32 %     1.40 %     1.37 %     1.21 %     0.95 %
Net interest margin annualized     3.42 %     3.42 %     3.49 %     3.70 %     3.76 %
Efficiency ratio*     63.59 %     65.59 %     69.26 %     62.40 %     59.93 %
Non-interest income / average assets     0.65 %     0.64 %     0.55 %     0.55 %     0.57 %
Non-interest expense / average assets     2.38 %     2.49 %     2.64 %     2.53 %     2.47 %
                                         
Capital Ratios                                        
Tier 1 Leverage Ratio     8.48 %     8.26 %     8.37 %     8.60 %     8.60 %
Common Equity Tier 1 Capital Ratio     11.05 %     10.46 %     10.46 %     10.95 %     10.49 %
Tier 1 Risk Based Capital Ratio     11.56 %     10.95 %     10.96 %     11.45 %     10.99 %
Total Risk Based Capital Ratio     12.19 %     11.56 %     11.87 %     11.86 %     11.37 %
Total stockholders' equity to total assets     11.46 %     10.97 %     11.15 %     11.23 %     11.28 %
Tangible common equity to tangible assets*     7.88 %     7.44 %     7.52 %     7.71 %     7.62 %
Book value per common share   $ 30.25     $ 29.45     $ 28.66     $ 28.87     $ 28.07  
Tangible book value per common share*   $ 19.99     $ 19.23     $ 18.55     $ 19.08     $ 18.22  
Tangible book value per diluted common share*   $ 19.73     $ 18.99     $ 18.30     $ 18.73     $ 17.86  

* 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)

  For the nine months ended     For the nine months ended  
  September 30, 2019     September 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) $ 2,620,897   $ 112,611   5.74 %   $ 2,320,402   $ 98,484     5.67 %
Total securities   923,548     17,867   2.59 %     776,271     15,672     2.70 %
Federal funds sold and other   84,045     2,037   3.24 %     72,102     1,820     3.38 %
Total interest-earning assets   3,628,490     132,515   4.88 %     3,168,775     115,976     4.89 %
Interest-bearing liabilities                                    
Total interest-bearing demand and savings   1,705,612     16,914   1.33 %     1,359,657     8,155     0.80 %
Certificates of deposit   997,270     15,467   2.07 %     789,133     8,411     1.43 %
Total interest-bearing deposits   2,702,882     32,381   1.60 %     2,148,790     16,566     1.03 %
FHLB advances & LOC   266,118     5,103   2.56 %     442,370     6,548     1.98 %
Other borrowings   70,044     1,578   3.01 %     67,644     1,400     2.77 %
Total interest-bearing liabilities   3,039,044     39,062   1.72 %     2,658,804     24,514     1.23 %
                                     
Net interest income       $ 93,453               $ 91,462        
Interest rate spread             3.16 %                 3.66 %
                                     
Net interest margin (2)             3.44 %                 3.86 %
                                     
(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 nine months ended  
  September 30, 2019 vs. 2018  
  Total Increase/(Decrease)  
  Volume Variance (1)   Yield/Rate Variance
(1)
  Total Variance  
Interest-earning assets                  
Loans $ 12,897   $ 1,230   $ 14,127  
Total securities   2,835     (640 )   2,195  
Federal funds sold and other   292     (75 )   217  
Total interest-earning assets   16,024     515     16,539  
Interest-bearing liabilities                  
Total interest-bearing demand and savings   2,485     6,274     8,759  
Certificates of deposit   2,589     4,467     7,056  
Total interest-bearing deposits   5,074     10,741     15,815  
FHLB advances & LOC   (3,052 )   1,607     (1,445 )
Other borrowings   43     135     178  
Total interest-bearing liabilities   2,065     12,483     14,548  
                   
Net interest income $ 13,959   $ (11,968 ) $ 1,991  
                   
(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)

  For the three months ended     For the three months ended  
  September 30, 2019     September 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) $ 2,646,454   $ 38,051   5.70 %   $ 2,516,833   $ 36,335   5.73 %
Total securities   926,839     5,718   2.45 %     860,940     5,933   2.73 %
Federal funds sold and other   84,677     780   3.66 %     80,098     754   3.74 %
Total interest-earning assets   3,657,970     44,549   4.83 %     3,457,871     43,022   4.94 %
Interest-bearing liabilities                                  
Total interest-bearing demand and savings   1,707,459     5,389   1.25 %     1,438,616     3,342   0.92 %
Certificates of deposit   965,548     5,118   2.10 %     813,321     3,168   1.55 %
Total interest-bearing deposits   2,673,007     10,507   1.56 %     2,251,937     6,510   1.15 %
FHLB advances & LOC   320,528     1,957   2.42 %     565,715     3,155   2.21 %
Other borrowings   70,034     559   3.16 %     76,860     602   3.11 %
Total interest-bearing liabilities   3,063,569     13,023   1.69 %     2,894,512     10,267   1.41 %
                                   
Net interest income       $ 31,526               $ 32,755      
Interest rate spread             3.14 %               3.53 %
                                   
Net interest margin (2)             3.42 %               3.76 %
(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  
  September 30, 2019 vs. 2018  
  Total Increase/(Decrease)  
  Volume Variance (1)   Yield/Rate Variance
(1)
  Total Variance  
Interest-earning assets                  
Loans $ 1,864   $ (148 ) $ 1,716  
Total securities   421     (636 )   (215 )
Federal funds sold and other   42     (16 )   26  
Total interest-earning assets   2,327     (800 )   1,527  
Interest-bearing liabilities                  
Total interest-bearing demand and savings   726     1,321     2,047  
Certificates of deposit   666     1,284     1,950  
Total interest-bearing deposits   1,392     2,605     3,997  
FHLB advances & LOC   (1,474 )   276     (1,198 )
Other borrowings   (73 )   30     (43 )
Total interest-bearing liabilities   (155 )   2,911     2,756  
                   
Net interest income $ 2,482   $ (3,711 ) $ (1,229 )
                   
(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)

    September 30,     December 31,  
    2019     2018  
ASSETS                
Cash and due from banks   $ 167,895     $ 192,735  
Federal funds sold     158       83  
Cash and cash equivalents     168,053       192,818  
Interest-bearing time deposits in other banks     3,497       4,991  
Available-for-sale securities     152,680       168,875  
Held-to-maturity securities, fair value of $778,966 and $739,989     764,163       748,356  
Loans held for sale     8,784       2,972  
Loans, net of allowance for loan losses of $17,875 and $11,454     2,583,049       2,563,954  
Other real estate owned, net     5,944       6,372  
Premises and equipment, net     84,481       80,442  
Bank-owned life insurance     74,599       73,105  
Federal Reserve Bank and Federal Home Loan Bank stock     31,710       29,214  
Interest receivable     16,994       17,372  
Goodwill     136,432       131,712  
Core deposit intangibles, net     20,727       21,725  
Other     23,550       19,808  
Total assets   $ 4,074,663     $ 4,061,716  
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Deposits                
Demand   $ 488,214     $ 503,831  
Total non-interest-bearing deposits     488,214       503,831  
Savings, NOW and money market     1,689,606       1,611,710  
Time     929,109       1,007,906  
Total interest-bearing deposits     2,618,715       2,619,616  
Total deposits     3,106,929       3,123,447  
Federal funds purchased and retail repurchase agreements     40,652       50,068  
Federal Home Loan Bank advances     410,093       384,898  
Bank stock loan     14,770       15,450  
Subordinated debentures     14,485       14,260  
Contractual obligations     3,744       3,965  
Interest payable and other liabilities     16,940       13,687  
Total liabilities     3,607,613       3,605,775  
Commitments and contingent liabilities                
Stockholders’ equity                
Common stock     174       173  
Additional paid-in capital     382,155       379,085  
Retained earnings     115,743       101,326  
Accumulated other comprehensive loss     (423 )     (4,867 )
Employee stock loans     (77 )     (121 )
Treasury stock     (30,522 )     (19,655 )
Total stockholders’ equity     467,050       455,941  
Total liabilities and stockholders’ equity   $ 4,074,663     $ 4,061,716  

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

    Three months ended September 30,     Nine months ended September 30,  
    2019     2018     2019     2018  
Interest and dividend income                                
Loans, including fees   $ 38,051     $ 36,335     $ 112,611     $ 98,484  
Securities, taxable     4,673       4,836       14,724       12,671  
Securities, nontaxable     1,045       1,097       3,143       3,001  
Federal funds sold and other     780       754       2,037       1,820  
Total interest and dividend income     44,549       43,022       132,515       115,976  
Interest expense                                
Deposits     10,507       6,510       32,381       16,566  
Federal funds purchased and retail repurchase agreements     50       30       116       77  
Federal Home Loan Bank advances     1,957       3,155       5,103       6,548  
Bank stock loan     198       265       507       448  
Subordinated debentures     311       307       955       875  
Total interest expense     13,023       10,267       39,062       24,514  
                                 
Net interest income     31,526       32,755       93,453       91,462  
Provision for loan losses     679       1,291       17,299       3,211  
Net interest income after provision for loan losses     30,847       31,464       76,154       88,251  
Non-interest income                                
Service charges and fees     2,268       1,912       6,431       5,221  
Debit card income     2,205       1,667       6,129       4,442  
Mortgage banking     820       392       1,699       1,017  
Increase in value of bank-owned life insurance     506       521       1,493       1,681  
Net gains (losses) from securities transactions     4       (4 )     17       (14 )
Other     769       945       2,578       1,929  
Total non-interest income     6,572       5,433       18,347       14,276  
Non-interest expense                                
Salaries and employee benefits     13,039       12,361       40,204       34,881  
Net occupancy and equipment     2,177       2,125       6,332       5,938  
Data processing     2,673       2,195       7,436       5,837  
Professional fees     991       686       3,375       2,245  
Advertising and business development     806       802       2,174       2,086  
Telecommunications     523       451       1,593       1,252  
FDIC insurance     111       457       1,119       1,211  
Courier and postage     352       321       1,020       879  
Free nationwide ATM cost     459       364       1,240       986  
Amortization of core deposit intangibles     784       694       2,348       1,703  
Loan expense     165       319       608       810  
Other real estate owned     (88 )     355       326       (48 )
Merger expenses           757       915       6,524  
Other     2,231       1,760       6,099       4,945  
Total non-interest expense     24,223       23,647       74,789       69,249  
Income before income tax     13,196       13,250       19,712       33,278  
Provision for income taxes     2,790       2,928       4,147       7,378  
Net income and net income allocable to common stockholders   $ 10,406     $ 10,322     $ 15,565     $ 25,900  
Basic earnings per share   $ 0.67     $ 0.65     $ 0.99     $ 1.70  
Diluted earnings per share   $ 0.66     $ 0.64     $ 0.98     $ 1.66  

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

    As of and for the three months ended  
    September 30,     June 30,     March 31,     December 31,     September 30,  
    2019     2019     2019     2018     2018  
Total stockholders' equity   $ 467,050     $ 458,406     $ 453,463     $ 455,941     $ 443,237  
Less: goodwill     136,432       136,432       136,432       131,712       131,723  
Less: core deposit intangibles, net     20,727       21,512       22,296       21,725       22,466  
Less: mortgage servicing asset, net     7       8       10       11       13  
Less: naming rights, net     1,184       1,195       1,206       1,217       1,228  
Tangible common equity   $ 308,700     $ 299,259     $ 293,519     $ 301,276     $ 287,807  
Common shares issued at period end     15,440,334       15,563,873       15,820,303       15,793,095       15,792,695  
RSU shares vested                 108              
Common shares outstanding at period end     15,440,334       15,563,873       15,820,411       15,793,095       15,792,695  
Diluted common shares outstanding at period end     15,647,456       15,758,747       16,036,700       16,085,729       16,118,067  
Book value per common share   $ 30.25     $ 29.45     $ 28.66     $ 28.87     $ 28.07  
Tangible book value per common share   $ 19.99     $ 19.23     $ 18.55     $ 19.08     $ 18.22  
Tangible book value per diluted common share   $ 19.73     $ 18.99     $ 18.30     $ 18.73     $ 17.86  
                                         
Total assets   $ 4,074,663     $ 4,180,074     $ 4,065,354     $ 4,061,716     $ 3,931,036  
Less: goodwill     136,432       136,432       136,432       131,712       131,723  
Less: core deposit intangibles, net     20,727       21,512       22,296       21,725       22,466  
Less: mortgage servicing asset, net     7       8       10       11       13  
Less: naming rights, net     1,184       1,195       1,206       1,217       1,228  
Tangible assets   $ 3,916,313     $ 4,020,927     $ 3,905,410     $ 3,907,051     $ 3,775,606  
Total stockholders' equity to total assets     11.46 %     10.97 %     11.15 %     11.23 %     11.28 %
Tangible common equity to tangible assets     7.88 %     7.44 %     7.52 %     7.71 %     7.62 %
Total average stockholders' equity   $ 463,252     $ 457,103     $ 459,713     $ 449,450     $ 439,771  
Less: average intangible assets     158,760       159,562       157,315       154,944       150,256  
Average tangible common equity   $ 304,492     $ 297,541     $ 302,398     $ 294,506     $ 289,515  
Net income (loss) allocable to common stockholders   $ 10,406     $ 9,232     $ (4,073 )   $ 9,925     $ 10,322  
Amortization of intangible assets     797       797       791       752       707  
Less: tax effect of intangible assets amortization     167       167       166       158       148  
Adjusted net income (loss) allocable to common stockholders   $ 11,036     $ 9,862     $ (3,448 )   $ 10,519     $ 10,881  
Return on total average stockholders' equity (ROAE) annualized     8.91 %     8.10 %     (3.59 )%     8.76 %     9.31 %
Return on average tangible common equity (ROATCE) annualized     14.38 %     13.29 %     (4.62 )%     14.17 %     14.91 %
Non-interest expense   $ 24,223     $ 25,023     $ 25,543     $ 25,138     $ 23,647  
Less: merger expenses           276       639       938       757  
Non-interest expense, excluding merger expenses   $ 24,223     $ 24,747     $ 24,904     $ 24,200     $ 22,890  
Net interest income   $ 31,526     $ 31,288     $ 30,639     $ 33,336     $ 32,755  
Non-interest income     6,572       6,451       5,324       5,449       5,433  
Less: net gains (losses) from securities transactions     4       7       6       5       (4 )
Non-interest income, excluding gains (losses) from securities transactions   $ 6,568     $ 6,444     $ 5,318     $ 5,444     $ 5,437  
Net interest income plus non-interest income, excluding net gains (losses) from securities transactions   $ 38,094     $ 37,732     $ 35,957     $ 38,780     $ 38,192  
Non-interest expense to net interest income plus non-interest income     63.58 %     66.31 %     71.03 %     64.81 %     61.92 %
Efficiency ratio     63.59 %     65.59 %     69.26 %     62.40 %     59.93 %

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