2024 Annual Report
Equity Bank CEO, Rick Sems, named in the Wichita Business Journal’s 2024 Executives of the Year.
T
he Equity Bancshares mission is to empower and uplift the financial well-being of
our clients and the communities we serve, creating a great culture to grow our team
members, while providing strong return for our stockholders.
In 2024, we delivered on that mission by growing both organically and through merger
transactions. Through these transactions, we were proud add the bankers and customers
of ten banking locations in our community markets as we continue to build Equity Bank.
Throughout these pages, you’ll see how our bankers also delivered on the mission,
increasing loan and deposit balances while propelling our stock price to an all-time high.
Expansion and growth continue to be the EQBK story; thank you for your trust along the way.
Equity Bancshares Chairman & CEO, Brad Elliott, honored in the Wichita Business Journal’s Power 50 for 2024.
(Photo credit: WBJ)
Table of Contents
2
Letter to Stockholders
4
Selected Financial Highlights
8
Community Focus
10
Board of Directors & Leadership
12
Leadership
14
We Never Forget It’s Your Money
16
All Employee Meeting
17
Annual Report on Form 10-K
1
2
To My Fellow
Stockholders
As community bankers, we have the privilege of working
with and for a wide range of industries and individuals
while serving the communities we call home. In today’s
fast-paced operating environment we embrace our role
and take pride in consistently meeting the customer where
they are with products, services and friendly staff members
available when needed to solve their banking needs.
2024 was an exceptional year for our company. We realized
record levels of earnings per share, revenue and stock
price all while maintaining a balance sheet positioned
for adversity with an abundance of capital and available
liquidity. In 2015, our first year as a public company, we
realized earnings per share of $1.54. In 2024, we realized
earnings per share of $4.00 – a compounded annual growth
rate of 11.19% and a testament to the value creation potential
of a community bank operating within our footprint with a
dual-pronged organic and M&A growth strategy.
Stockholder return and
excellent outcomes for the
customers and communities
we serve are woven into
the Equity Bank story.
As we look to build value
for our investors, we start
with exceptional customer
service and a relentless
desire to be the premier
banking franchise in our
communities. We meet
customers where they
are, when they need us,
which builds value for all
stakeholders. This mentality underpinned our success in
2024 and will continue to drive us in quarters and years
to come.
Our Company completed two strategic merger transactions
during 2024 welcoming the communities, customers and
bankers of both the Bank of Kirksville and KansasLand
Bank. Each transaction was announced and closed within
75 days as our skilled team of bankers executed on our Bank’s
core competency as a premier consolidator in our region.
In addition to our acquisitive growth, we also extended our
outreach to an underserved community in our hometown
of Wichita through creation of a loan production office in
the NoMar District. The location is staffed with talented,
bilingual bankers who approach every day with the drive
to empower their community. We’re also expanding
our Spanish language product offering, including
enhancements to our banking platform and website.
Our fraud prevention page, which serves as a resource
for anyone who visits equitybank.com, is available in
five different languages to help arm our customers and
communities against fraud.
In 2024, we also celebrated internal successes. The
Company promoted Rick Sems to Chief Executive Officer
of Equity Bank, giving him
responsibility for day-to-
day oversight of the Bank.
Rick has fully integrated
himself into the Equity
Bank team, driving organic
growth initiatives on both
loans and deposits. Julie
Huber was also promoted
to Chief Operating Officer,
expanding her role to
oversee all operations and
risk at Equity Bank.
We hired Betty Bergquist
as our SVP, Managing Director of Sales and Analytics,
and promoted Jonathan Roop to SVP, Consumer Banking.
Under Rick’s guidance, both leaders are guiding retail and
commercial sales teams and refining the way we interact
and engage with our customers.
Brett Reber, our General Counsel, has been working to
resolve multiple problem credits from 2021. During the
year, the Bank received recovery payments in excess of $12
million as the efforts of Brett and his team were successful.
Our slogan ‘we never forget it’s your money’ applies to
deposits and stockholders alike. While we acknowledge
we are in an industry which takes risks, when we have a
problem loan, we will do everything we can to make sure
our stockholders receive what we bargain for in every
Chris Navratil, Brian Katzfey, Rick Sems, Brett Reber, Brad Elliott,
& Kristof Slupkowski wrap up first quarter earnings call.
While a growing company, Equity has
remained nimble to evolve and meet
our customers and communities where
we are needed most.
contract. Sometimes it takes extra effort
and time, but at Equity Bank, our team
focuses on collecting every available dollar
owed to our stockholders.
Strong operating results, a change of
administration in Washington and the trust
of stockholders brought an opportunity
to bring on offensive capital at a level that
was accretive to our tangible book value
while positioning us to take advantage of
an attractive M&A landscape. This marks
the fourth time we have raised capital since
founding the company in 2002 – each time
we have been able to find opportunities
to put that capital to work propelling us
to the $5.3 billion bank we are today, and
growing earnings per share at a double-
digit growth rate.
I can honestly say I feel as positive about
our Company right now as I have at any
point in the last 20+ years. We have great
leadership, and great people, processes,
and products to position us for continued
success.
While a growing company, Equity has
remained nimble to evolve and meet our
customers and communities where we are
needed most.
Thank you for joining us on this journey,
and for your continued support of Equity
Bancshares.
Above: Brad Elliott interviewed
for Innovation Award
submission.
Left: Brad Elliott gives a
keynote speech during the
Wichita Business Journal 2024
ICT Summit at WSU Tech in
October. (Photo credit: WBJ)
$62.6 M
net income
15.94%
return on average
tangible common
share equity*
18.07%
total risk based
capital ratio
3.98%
net interest
margin
Brad Elliott
Chairman & Chief Executive Officer
$5.3 B
assets
$4.4 B
deposits
$3.5 B
loans
3
4
NET INTEREST INCOME
& NET INTEREST MARGIN
CORE NET INCOME*
Financial Highlights & Performance
Dollars in thousands, except per share data
AS OF DECEMBER 31
2020
2021
2022
2023
2024
STATEMENT OF INCOME DATA
Interest and dividend income
$
155,561
$
157,368
$
188,248
$
246,712
$
296,843
Interest expense
22,909
14,789
25,418
87,694
110,681
Net interest income
132,652
142,579
162,830
159,018
186,162
Provision (reversal) for credit losses
24,255
(8,480)
125
1,873
2,546
Net gain on acquisition
2,145
585
962
-
2,131
Net gain/loss on securities transactions
11
406
5
(51,909)
220
Other non-interest income
23,867
31,851
34,990
32,780
36,471
Merger expense
299
9,189
594
297
4,461
Goodwill impairment
104,831
-
-
-
-
Other non-interest expense
103,860
110,276
127,786
135,304
139,696
Income (loss) before income taxes
(74,570)
64,436
70,282
2,415
78,281
Provision for income taxes
400
11,956
12,594
(5,406)
15,660
Net income (loss) allocable to common stockholders
(74,970)
52,480
57,688
7,821
62,621
Basic earnings (loss) per share
(4.97)
3.49
3.56
0.50
4.04
Diluted earnings (loss) per share
(4.97)
3.43
3.51
0.50
4.00
2024
2023
2022
2021
2020
$132,652
$142,579
$162,830
$159,018
$186,162
3.44%
3.51%
3.46%
3.46%
3.98%
3.51%
3.44%
3.63%
2024
2023
2022
2021
2020
$9,459
$62,601
$60,700
$51,843
$69,500
From December 31, 2019, to December 31, 2024 The Company
delivered a total stockholder return on the Company’s common
stock of 42.27%, outperforming the NASDAQ Bank Index, which
returned 11.03% during the same period.
TOTAL STOCKHOLDER RETURN
3.83x
NET INTEREST
INCOME ($000S)
NET INTEREST
MARGIN (%)
Outperformance of
NASDAQ Bank Index
5
AS OF DECEMBER 31
2020
2021
2022
2023
2024
BALANCE SHEET DATA
Cash and cash equivalents
$
280,698
$
259,954
$
104,428
$
379,099
$
383,747
Total securities
871,827
1,327,442
1,186,338
921,857
1,009,672
Allowance for credit losses
33,709
48,365
45,847
43,520
43,267
Gross loans held for investment
2,591,696
3,155,627
3,311,548
3,332,901
3,500,816
Goodwill and core deposit intangibles
47,658
69,344
63,697
60,323
68,070
Total assets
4,013,356
5,137,631
4,981,651
5,034,592
5,332,047
Total deposits
3,447,590
4,420,004
4,241,807
4,145,455
4,374,789
Total liabilities
3,605,707
4,637,000
4,571,593
4,581,732
4,739,129
Total stockholders' equity
407,649
500,631
410,058
452,860
592,918
Tangible common equity*
358,861
429,924
345,141
391,462
523,891
TRENDING DEPOSIT COMPOSITION
& LOAN TO DEPOSIT RATIO
NIB DDA
IB DDA, MMDA, SAV
LOAN TO DEPOSIT RATIO
TIME
AVERAGE LOANS & YIELD
2024
2023
2022
2021
2020
6.39%
7.14%
4.98%
4.77%
5.00%
$2.7B
$2.9B
$3.2B
$3.3B
$3.4B
Interest
Bearing DDA
26.8%
MMDA
27.8%
Savings
6.8%
Time Deposits
>100k
4.3%
Time
Deposits
<100k
12.5%
Non-Interest
Bearing DDA
21.8%
2024
DEPOSIT
COMPOSITION
19%
58%
23%
77.7%
15%
57%
28%
78.6%
19%
55%
26%
80.4%
18%
60%
22%
80.4%
17%
61%
22%
80.0%
2024
2023
2022
2021
2020
*Indicates non-GAAP financial measure. Please see our Annual Report on Form 10-K “Item 7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Non-GAAP Financial Measures” for reconciliation to the most directly comparable GAAP measure.
Commercial
Real Estate
52.3%
Commercial
& Industrial
18.8%
Residential
Real Estate
16.2%
Agricultural
2.5%
Consumer
2.6%
2024
DIVERSIFIED
LOAN MIX
Agricultural
Real Estate
7.6%
6
FOR THE YEAR ENDED DECEMBER 31
2020
2021
2022
2023
2024
PERFORMANCE RATIOS
Return on average assets (ROAA)
(1.87%)
1.18%
1.15%
0.16%
1.23%
Return on average equity (ROAE)
(16.14%)
11.75%
13.08%
1.85%
12.97%
Return on average tangible common equity (ROATCE)*
8.27%
14.10%
16.35%
2.94%
15.94%
Yield on loans
5.00%
4.77%
4.98%
6.39%
7.14%
Cost of interest-bearing deposits
0.66%
0.30%
0.53%
2.21%
2.80%
Net interest margin
3.63%
3.44%
3.51%
3.46%
3.98%
Efficiency ratio*
63.87%
60.58%
62.48%
68.71%
60.77%
Non-interest income/average assets
0.65%
0.74%
0.72%
(0.38%)
0.76%
Non-interest expense/average assets
5.23%
2.70%
2.56%
2.71%
2.84%
Dividend payout ratio
-
4.84%
10.26%
88.35%
13.91%
RETURN ON AVERAGE TANGIBLE
COMMON EQUITY*
TOTAL RESERVE RATIO
2024
2023
2022
2021
2020
1.98%
1.65%
1.43%
1.35%
1.29%
PURCHASE DISCOUNT
ALLOWANCE FOR CREDIT LOSSES
Financial Highlights & Performance
Dollars in thousands, except per share data
2024
2023
2022
2021
2020
8.27%
14.10%
16.35%
2.94%
15.94%
7
AS OF DECEMBER 31
2020
2021
2022
2023
2024
CAPITAL RATIOS
Tier 1 leverage ratio
9.30%
9.09%
9.61%
9.46%
11.67%
Common equity tier 1 captial ratio
12.82%
12.03%
12.26%
11.74%
14.51%
Tier 1 risk based capital ratio
13.37%
12.67%
12.88%
12.36%
15.11%
Total risk based capital ratio
17.35%
15.96%
16.08%
15.48%
18.07%
Total stockholders equity / total assets
10.16%
9.74%
8.23%
8.99%
11.12%
Tangible common equity to tangible assets (TCE/TA)*
9.05%
8.48%
7.02%
7.87%
9.95%
Tangible book value per common share (TBVPS)*
$
24.68
$
25.65
$
21.67
$
25.37
$
30.07
9.05%
9.30%
13.37%
8.48%
9.09%
12.67%
7.02%
9.61%
12.88%
7.87%
9.46%
12.36%
9.95%
11.67%
15.11%
2024
2023
2022
2021
2020
CAPITAL RATIOS
TIER 1 LEVERAGE RATIO
TCE/TA*
TIER 1 RISK-BASED
CAPITAL RATIO
TANGIBLE BOOK VALUE
Since IPO, the TBVPS* grew by $14.10 from $15.97 to
$30.07.
TBVPS EXCLUDING AOCI*
TBVPS*
8.27%
CAGR Ex. AOCI
$15.97
$16.26
$30.07
$33.24
2015
2024
*Indicates non-GAAP financial measure. Please see our Annual Report on Form 10-K “Item 7 – Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Non-GAAP Financial Measures” for reconciliation to the most directly comparable GAAP measure.
8
Community Focus
One of our core values, which shows up day in and day
out in our communities, with our people leading the
way. During 2024, Equity team members volunteered
their time and talent to help serve others in need.
6,090
volunteer
hours
935
sponsorship
causes
85
community
boards served
1
2
9
10
11
12
13
9
1) In Ponca City, the team educated students on the importance of strong financial
literacy; 2) Wichita team members volunteered at the Kansas Food Bank, putting
together boxes of food ahead of the holiday season; 3) The 2024 Emerging Leaders
class volunteered with United Way during one of their training sessions; 4) Team
members in St. Joseph dropped off snack bags to local teachers ahead of the school
year; 5) Steve Schoendaler & Levi Getz served up food from the smoker during
Grinnell’s after harvest celebration; 6) Rachel Davis & Jessica Deterts picked contest
winners to receive a donation for their elementary school; 7) Cindy Bond, Caleb
Slivinksi, and Crystal Wolfe collected gifts for Toys for Tots in Kirksville, MO;
8) Regional President, Larry Britegam, honored for his work with the Greater Salina
Community Foundation; 9) Rhonda Crosby joined Wichita team members donating
blood in our yearly Red Cross event; 10) Wichita team members participate in the
Step Up for KIDS 5K memorial walk and fundraiser; 11) Team members in
Kansas City sell Chiefs flags to raise funds for Ronald McDonald House Charities;
12) In Guymon, OK, Amada Alvidrez visited her daughter’s classroom to teach a
financial literacy lesson; 13) Paula Lawton visits a Tulsa elementary school as part of
our Read 2 Lead program.
3
4
5
6
7
8
Back row: Junetta M. Everett VP, Delta Dental of Kansas, Retired; Shawn D. Penner, Owner, Shamrock Development, LLC;
Kevin E. Cook, Partner, Forvis, Retired; Richard M. Sems, CEO, Equity Bank; Brad S. Elliott, Chairman & CEO, Equity
Bancshares, Inc.; James S. Loving, President, NCRA, Retired; Benjamen M. Hutton, CEO, Hutton Construction; Randee
Renee Koger, Attorney & Partner, Wise & Reber L.C.
Front Row: Dan R. Bowers, Attorney; James L. Berglund, President & CEO, Sunflower Bank, Retired; Jerry P. Maland,
Chairman & CEO, Community First Bancshares, Inc., Retired; Gregory H. Kossover, EVP, Capital Markets, Equity Bank;
Gregory L. Gaeddert, Managing Partner, B12 Capital Partners, LLC; Max E. Nichols, Director, American State Bancshares,
Inc., Retired; Leon H. “Lee” Borck, Chairman, American State Bancshares, Inc., Retired
Board of Directors
EQUITY BANCSHARES, INC.
All Equity Bancshares, Inc. Directors are members of the
Equity Bank Board of Directors.
10
11
EQUITY BANK SENIOR LEADERSHIP
MARKET & TEAM LEADERSHIP
Cleve Wortham
Regional President,
Ozark Mountain
Amy R. Villines
Regional Retail Operations
Manager, Ozark Mountain
& Southeast Kansas
Ernest J. Warren
SVP, Director of
Mortgage Lending
Gabriel L. Smither
Regional President,
Western Missouri
Landon Snook
Regional President,
Ozark Mountain
Shawn C. Powelson
Regional President,
Central Kansas
David A. King
Regional
President, Wichita
Jefferson A.
Keyes
Market President,
KC & Topeka
Sharon R. Holmes
Regional Retail
Operations Manager
Ryan K. Morris
Regional
President, Tulsa
Amy Jo Herrera
Director of Retail
Opperations
Jason R. Johnson
Regional Retail Sales
Manager, Wichita
Amada G.Alvidrez
SVP, Regional Retail
Manager, Southwest
J. Larry Britegam
Regional President,
North Central Kansas
Norman C. Belitz
Regional President,
Northern Missouri
Alexander M. Brown
Regional Retail Manager,
KC & Topeka
Levi D. Getz
Regional President,
Western Kansas
Alisha D. Herrera
Regional President,
Northern Oklahoma
Brittany A. Dresel
Regional Retail Manager,
Western Missouri
James B. “Brad”
Daniel
SVP, Regional CEO,
Community South
Mark C. Parman
EVP, Senior Regional
CEO, Metro Markets
Patrick J. Harbert
EVP, Chief Administrative
Officer
David E. Pass
EVP, Chief Information
Officer
Justin Harris
SVP, Regional CEO,
Community West
Ann M. Knutson
EVP, Chief Human
Resources Officer
Craig E. Dunn
SVP, Regional CEO,
Community East
Daniel P.
Duchnowski
SVP, Chief Services
Officer
Jonathan K. Roop
SVP, Consumer Banking
Michael A. Jones
SVP, Internal
Audit Director
Andrew J. Musgrave
SVP, Director of
Trust Operations
Elizabeth A.
Bergquist
SVP, Managing Director
of Sales & Analytics
Maggie E. LaNeave
Regional Retail
Manager, Kirksville
Krzysztof P.
Slupkowski
EVP, Chief Credit Officer
Richard M. Sems
CEO, Equity Bank
Julie A. Huber
EVP, Chief Operations
Officer
Chris M. Navratil
EVP, Chief Financial
Officer
Brad S. Elliott
Chairman & CEO,
Equity Bancshares, Inc.
Brett A. Reber
EVP, General Counsel
Gregory H. Kossover
EVP, Capital Markets
Equity Bancshares, Inc. founded in 2002.
- Completed five whole bank combinations.
- Opened two bank locations in Missouri.
2005
2011
Equity expands into Wichita, acquiring
two locations from Hillcrest Bank.
2002
Start-Up | 2002-2007
Growth Stage | 2008-2016
2008
- Opened new locations
in Lee’s Summit and
Overland Park, KS.
- Acquired Ellis State
Bank in Ellis and
Hays, Kansas.
Acquired four
locations in Topeka
from Citizens
Bancshares.
EQUITY BANK TIMELINE
EQUITY BANK LEADERSHIP
Operations & Administration
Steven L. Howland
SVP, Regional Credit Officer
Kristi M. Bueno
Operational Risk & Compliance Mgr.
Bart L. Drogon
Sr. SBA Division Manager
June K. Pressnell
Senior Credit Officer
Ed J. Nazar
SVP, Corporate Counsel
Nicholas B. Hoegler
SVP, Chief Compliance Officer
Levi J. Aesoph
Dir. of Payments & Deposit Ops
Bryan W. Auten
Director of Project Management
Ross A. Keesling
Director of Infrastructure
Joshua R. Kohr
Director of Data & Analytics
Jeremy K. Lachenmaier Loan Review Director
Becky L. Winter
Director of Application Services
E. Brian Yocam
Chief Information Security Off.
Deborah L. Arnold
Director of Operational Risk
Finance & Accounting
Robert E. Quaney
SVP, CAO & Accounting Policy Dir.
Tanya J. Hammond
Dir. of Regulatory Reporting
Brian J. Katzfey
Director of Investor Relations
Jenny L. Simmons
Director of Taxation
Mortgage, Healthcare & Treasury
Mark S. Janczewski
SVP, Director of Govt Banking
Ernest J. Warren
SVP, Dir. of Mortgage Lending
Glenn R. Brands
SVP, Insurance Officer
Christian P. Lett
Health Care Services
G. Ray Hill
Health Care Services
Trust & Wealth Management &
Financial Services Group
Andrew J. Musgrave
SVP, Director of Trust Operations
John M. Jones
SVP, Trust Administrator
Jill K. Warren
Registered Sales Assistant
Sandra J. Rice
Financial Advisor
J. Matthew Brewer
Wealth Solutions Officer
Kansas City & Topeka
Jefferson A. Keyes
Market President, Kansas City
Kirby L. Coale
SVP, Commercial Lender
Michael H. Doyle
SVP, Commercial Lender
Justin N. Kelly
SVP, Commercial Lender
J. Chris Ryan
SVP, Commercial Lender
Jason L. Pickerell
Market President, Topeka
Lorra C. Bagley
Bank Manager, Lee’s Summit
Alexander M. Brown
Reg. Retail Sales Mgr., KC/Topeka
Jason A. Henrie
Commercial Lender
Laura E. Bowlin
Commercial Lender
James P. Lentz
Commercial Lender
Sharon R. Holmes
Regional Retail Operations Mgr.
Chad W. Nieman
Commercial Lender
Mark W. Steinman
Commercial Lender
Brad R. Johnson
Market President, Topeka
Janet A. Thayer
Bank Manager, Topeka
Northern Missouri
Norman C. Belitz
Regional President, N. Missouri
Bryan L. Clay
Strategic Implementation Mgr.
David B. Hamlin
SVP, Commercial Lender
Maggie E. LaNeave
Regional Retail Mgr., Kirksville
Northern Oklahoma
Alisha D. Herrera
Reg. President, N. Oklahoma
D. Clint Lively
Market President, Ponca City
Nick E. Davis
Commercial Lender
Nancy A. Mills
Commercial Lender
Jaymes A.R. Penny
Commercial Lender
Ashlee L. Rascon
Reg. Retail Mgr, N. Oklahoma
Ozark Mountain
Cleve Wortham
Regional President, Ozark Mt.
Elizabeth S. Kelley
Market President, Eureka Springs
D. Craig Kesner
Market President, Berryville
Josh L. Blackman
Market President, Pea Ridge
Jay B. Ertel
SVP, Commercial Lender
Alex R. Beasley
Commercial Lender
Connie K. Featherstone Consumer & Sm. Business Lender
Amy R. Villines
Reg. Retail Manager, Ozark Mt.
Southwest Kansas
Amada G. Alvidrez
SVP, Reg.Retail Mgr., Southwest
Jimmy D. LeGrange
Market President, Guymon
Rosalva Gomez
Commercial Lender
Felix E. Vargas
AVP, Commercial Lender
Kathy K. Diehl
Bank Mgr./Loan Off., Garden City
Tulsa
Ryan K. Morris
Regional President, Tulsa
Terry D. Blain
SVP, Commercial Lender
Randall D. Goodwin
SVP, Commercial Lender
Paula D. Lawton
SVP, Commercial Lender
Eric D. Ralston
Commercial Lender
Wichita & Salina
David A. King
Regional President, Wichita
Brian L. Chamberlin
SVP, Senior Lending Officer
J. Larry Britegam
Regional President, Salina
William E. Mowery
Market President, Salina
David R. Schaefer
SVP, Commercial Lender
Andrew L. Chaney
Commercial Lender
Jason R. Johnson
Regional Retail Sales Mgr.
Colby E. May
Commercial Lender
Taylor Meder
Commercial Lender
Kolt T. Kinder
Commercial Lender
David R. Schaefer
SVP, Commercial Lender
Cynthia A. O’Hare
Bank Manager, Salina
Blake A. Yakel
Comm. Lender, Portfolio Mgmt.
Amy Jo Herrera
Dir. of Retail Opperations
Taylor R. Yardley
Retail Operations Mgr., Wichita
12
2015
2017
2016
2012
Acquired First Community
Bancshares, Inc. and ten
bank locations in Western
Missouri.
- Completed Initial Public Offering
and began trading on the Nasdaq
Global Select Market.
- Acquired First Independence
Corporation of Independence, Kan.
Acquired Prairie State
(Western KS), Patriot Bank
(Tulsa), and Eastman National
Bank (Ponca City).
- Acquired Community First Bank
of Harrison, Arkansas.
- $35.4MM private placement
capital raise.
EQUITY
UNIVERSITY
Equity University is the most advanced
career development program offered
at Equity Bank. The program
consists of a twelve-month leadership
development training designed to
actively enhance the leadership,
organizational, and performance
skills of highly motivated employees.
Congratulations to our 2024 Class.
EQUITY
UNIVERSITY
E
U
Rachel A. Davis
Bank Manager
Harrison
Dan Duchnowski
SVP, Chief Services
Officer
Wichita
Mary F. Funk
Bank Manager
Holcomb
Alisha D. Herrera
Reg. President, N.
Okla.
Ponca City
Amy Jo Herrera
Director of Retail Ops.
Wichita
Steve E. Howland
SVP, Reg. Credit Officer
Wichita
Jason R. Johnson
Reg. Retail Mgr.
Wichita
Jerome Johnson
Customer Care Ops. Mgr.
Wichita
Paula Lawton
SVP, Commercial
Lender
Tulsa
Daniel R.
Rosenberger
Credit Manager
Kansas City
Western & Central Kansas
Levi D. Getz
Regional President, W. Kansas
Shawn C. Powelson
SVP, Reg. President, Central KS
Steven L. Schoendaler
Market President, Grinnell
Allen Weber
Market President, Ellis
Dale F. Gottschalk
Market President, Hays
John M. Griffiths
Commercial Lender
Brent A. Hornbuckle
Ag/Commercial Lender
Benn L. Maddox
Consumer & Sm. Business Lender
Dodge B. Ellegood
Commercial Lender
Chad S. Churchwell
Commercial Lender
Conner D. Pfannenstiel Commercial Lender
Douglas L. Simon
SVP, Commercial Lender
Greg L. Gillespie
Commercial Lender
Jason L. Mowery
Commercial Lender
Sabree D. Larsen
Reg. Retail Sales Mgr., W. Kansas
Western Missouri
Gabriel L. Smither
Regional President, W. Missouri
Trish L. Blakely
SVP, Market President, St. Joesph
Cheryl A. Barnson
Market President, Sedalia
Corbin Cain
Market President, Windsor
W. Sue Hook
Market President, Warrensburg
Krystal D. Smith
Market President, Clinton
Gregory A. Warren
Market President, Higginsville
Brittany A. Dresel
AVP, Reg. Retail Mgr., W. Missouri
Blake C. Moreland
Senior Ag Lender
Kalie M. Reynolds
Commercial Lender
Liza R. O’Neal
Retail Operations Manager
ARKANSAS
MISSOURI
O K L A H O M A
KANSAS
OKLAHOMA
Timeline continues on next page
13
1
14
Acquired Kansas Bank
Corporation (Liberal, KS),
Adams Dairy Bank (Blue
Springs, MO), and City Bank
& Trust (Guymon, OK).
- Completed $75MM subordinated debt issuance.
2020-2021: Originated $650MM of PPP.
- Acquired Almena State Bank.
Launched Equity Trust and
Wealth Management.
- Acquired American State
Bancshares, Inc. and 15
Kansas locations.
- Acquired three St. Joseph,
MO branches from
Security Bank of KC.
Post-IPO | 2018-2024
2018
2020
2019
2021
7
8
We Never Forget
It’s Your Money
At Equity Bank, we know people bank with people,
not institutions. We value our relationships with
local businesses of all shapes and size who share
the same Entrepreneurial Spirit our company was
founded on.
Learn more about many of
the businesses featured here
in Equity Bank’s video series,
Napkin Stories. Scan the code
or visit:
equitybank.com/napkin-stories
- Launched Brilliant Bank, direct online-only bank.
- Launched Health Care Services Division.
- Equity Bank rings the bell at
the New York Stock Exchange,
signifying its common stock,
“EQBK,” is traded on the NYSE.
- Announced merger with Rockhold
BanCorp, added locations in
Northern Missouri.
15
2022
2024
2023
1) Alyssa Cook visits the staff Brandy’s Boutique & Salon in Pea Ridge, Arkansas; 2) Clovis Ribas (left) of
Shuttle Aerospace gives a tour to Equity’s Blake Yakel and Gabriela Arias; 3) Chad Nieman tours KASA Electric
with owner Mark Lamanno; 4) Laura Bowlin visits Megan Anderson, owner of Wild Flour Baking Co. in
Parkville, MO; 5) Greg Gillespie & Levi Getz check out silage choppers with Sam Schippers; 6) The Northern
Oklahoma team visits Vortex Alley Brewing; 7) Mark Steinman on-site with DRISCO in Topeka, KS; 8) Nick
Davis & Alexis Kirk meet with owner of Roots & Blooms.
- Completed acquisition of Rockhold BanCorp, adding
eight locations in Missouri.
- Acquired KansasLand Bancshares, Inc., adding two
Kansas locations.
- Opened Loan Production Offices (LPOs) in Quinter, KS
& Wichita’s NoMar District.
- Closed $92MM common stock offering.
4
3
2
5
6
16
What Makes Equity Bank Amazing
Our annual All-Employee Meeting is a highlight for
Equity Bank team members throughout our regions,
viewing a livestream with presentations from
leadership, team building videos, a motivational
keynote, and much more. On January 20, our
Equity teams celebrated continued growth and
recognized top performers. Watch selected content
at equitybank.com/AEM-2025.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-37624
EQUITY BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Kansas
72-1532188
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
7701 East Kellogg Drive, Suite 300
Wichita, KS
67207
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: 316.612.6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
Class A Common Stock, par value $0.01 per share
EQBK
New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer☐
Accelerated filer
☒
Non-accelerated filer ☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its
audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2024, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s voting and
non-voting common stock held by non-affiliates was $447.4 million.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Shares outstanding as of February 28, 2025
Class A Common Stock, par value $0.01 per share
17,508,740
Class B Non-Voting Common Stock, par value $0.01 per share
0
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s Proxy Statement relating to the 2025 Annual Meeting of Stockholders, which will be filed within 120 days after December 31,
2024, are incorporated by reference into Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
Part I
Item 1.
Business.....................................................................................................................................................................
3
Item 1A.
Risk Factors...............................................................................................................................................................
22
Item 1B.
Unresolved Staff Comments .....................................................................................................................................
51
Item 1C.
Cybersecurity ............................................................................................................................................................
51
Item 2.
Properties...................................................................................................................................................................
52
Item 3.
Legal Proceedings .....................................................................................................................................................
53
Item 4.
Mine Safety Disclosures ...........................................................................................................................................
53
Part II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities...................................................................................................................................................................
54
Item 6.
Reserved....................................................................................................................................................................
58
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations...................................
59
Item 7A.
Quantitative and Qualitative Disclosure About Market Risk ...................................................................................
87
Item 8.
Financial Statements and Supplementary Data.........................................................................................................
90
Report of Independent Registered Public Accounting Firm.....................................................................................
F-1
Consolidated Balance Sheets ....................................................................................................................................
F-4
Consolidated Statements of Income..........................................................................................................................
F-5
Consolidated Statements of Comprehensive Income................................................................................................
F-6
Consolidated Statements of Stockholders’ Equity....................................................................................................
F-7
Consolidated Statements of Cash Flows...................................................................................................................
F-8
Notes to Consolidated Financial Statements.............................................................................................................
F-10
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................................
90
Item 9A.
Controls and Procedures ...........................................................................................................................................
90
Item 9B.
Other Information......................................................................................................................................................
91
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspection .......................................................................
91
Part III
Item 10.
Directors, Executive Officers and Corporate Governance........................................................................................
92
Item 11.
Executive Compensation...........................................................................................................................................
92
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.................
92
Item 13.
Certain Relationships and Related Transactions, and Director Independence .........................................................
92
Item 14.
Principal Accounting Fees and Services...................................................................................................................
92
Part IV
Item 15.
Exhibits, Financial Statement Schedules ..................................................................................................................
93
Item 16.
Form 10-K Summary ................................................................................................................................................
96
1
Important Notice about Information in this Annual Report on Form 10-K
Unless we state otherwise or the context otherwise requires, references in this Annual Report on Form 10-K to “we,” “our,”
“us,” “the Company” and “Equity” refer to Equity Bancshares, Inc. and its consolidated subsidiaries, including Equity Bank, which
we sometimes refer to as “Equity Bank,” “the Bank” or “our Bank.”
The information contained in this Annual Report on Form 10-K is accurate only as of the date of this annual report and as of the
dates specified herein.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).” These forward-looking statements reflect our current views with respect to, among other things, future events and our financial
performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,”
“predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,”
“project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of
a future or forward-looking nature. These forward-looking statements are not historical facts and are based on current expectations,
estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by
their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements
are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although
we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may
prove to be materially different from the results expressed or implied by the forward-looking statements. When considering forward-
looking statements, you should keep in mind the risk factors and other cautionary statements described in “Item 1A – Risk Factors” of
this Annual Report on Form 10-K.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these
forward-looking statements, including, but not limited to, the following:
•
external economic and/or market factors, such as changes in monetary and fiscal policies and laws, including the interest
rate policies of the Board of Governors of the Federal Reserve System, or the Federal Reserve, inflation or deflation,
changes in the demand for loans, and fluctuations in consumer spending, borrowing and savings habits which may have an
adverse impact on our financial condition;
•
losses resulting from a decline in the credit quality of the assets that we hold;
•
the occurrence of various events that negatively impact the real estate market, since a significant portion of our loan
portfolio is secured by real estate;
•
inaccuracies or changes in the appraised value of real estate securing the loans we originate that could lead to losses if the
real estate collateral is later foreclosed upon and sold at a price lower than the appraised value;
•
the loss of our largest loan and depositor relationships;
•
limitations on our ability to lend and to mitigate the risks associated with our lending activities as a result of our size and
capital position;
•
differences in our realized losses as compared to historical loss experience adjusted for quantitative and qualitative factors
reflected in our calculation of the allowance for credit losses;
•
inadequacies in our allowance for credit losses which could require us to take a charge to earnings and thereby adversely
affect our financial condition;
•
interest rate fluctuations which could have an adverse effect on our profitability;
•
an economic downturn, especially one affecting our core market areas;
•
the effects of pandemic and widespread public health emergencies;
•
the costs of integrating the businesses we acquire, which may be greater than expected;
•
the departure of key members of our management personnel or our inability to hire qualified management personnel;
•
challenges arising from unsuccessful attempts to expand into new geographic markets, products, or services;
2
•
a lack of liquidity resulting from decreased asset repayment rates, lower deposit balances, or other factors;
•
inaccuracies in our assumptions about future events which could result in material differences between our financial
projections and actual financial performance;
•
an inability to keep pace with the rate of technological advances due to a lack of resources to invest in new technologies;
•
disruptions, security breaches, or other adverse events, failures or interruptions in, or attacks on, our information
technology systems;
•
unauthorized access to nonpublic personal information of our customers, which could expose us to litigation or
reputational harm;
•
disruptions, security breaches, or other adverse events affecting the third-party vendors who perform several of our critical
processing functions;
•
required implementation of new accounting standards that significantly change our existing recognition practices;
•
additional regulatory requirements and restrictions on our business, which could impose additional costs on us;
•
an increase in FDIC deposit insurance assessments, which could adversely affect our earnings;
•
increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital
is not available on favorable terms or at all;
•
restraints on the ability of Equity Bank to pay dividends to us, which could limit our liquidity;
•
a failure in the internal controls we have implemented to address the risks inherent to the banking industry;
•
continued or increasing competition from other financial institutions, credit unions, and non-bank financial services
companies, many of which are subject to different regulations than we are;
•
costs arising from the environmental risks associated with making loans secured by real estate;
•
the occurrence of adverse weather or man-made events, which could negatively affect our core markets or disrupt our
operations;
•
the effects of new federal tax laws, or changes to existing federal tax laws;
•
the obligations associated with being a public company;
•
effect of pending and future litigation, including the results of the overdraft fee litigation against the Company that is
described in this annual report; and
•
other factors that are discussed in “Item 1A – Risk Factors.”
The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements
that are included in this Annual Report on Form 10-K. If one or more events related to these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.
Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks
only as of the date when it is made and we do not undertake any obligation to publicly update or review any forward-looking
statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to
time and it is not possible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this Annual
Report on Form 10-K 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 we or persons acting on our behalf may
issue.
3
Part I
Item 1: Business
Our Company
We are a financial holding company headquartered in Wichita, Kansas. Our wholly-owned banking subsidiary, Equity Bank, provides
a broad range of financial services primarily to businesses and business owners as well as individuals through our network of 71
branches located in Arkansas, Kansas, Missouri and Oklahoma, as of December 31, 2024. As of December 31, 2024, we had, on a
consolidated basis, total assets of $5.33 billion, total deposits of $4.37 billion, total loans (net of allowances) of $3.46 billion and total
stockholders’ equity of $592.9 million.
Our principal objective is to increase stockholder value and generate consistent earnings growth by expanding our commercial
banking franchise both organically and through strategic acquisitions. We strive to provide an enhanced banking experience for our
customers by providing them with a comprehensive suite of sophisticated banking products and services tailored to meet their needs
while delivering the high-quality relationship-based customer service of a community bank.
Our History and Growth
We were founded in November 2002 by our Chairman and CEO, Brad S. Elliott. Mr. Elliott believed that, as a result of in-market
consolidation, there existed an opportunity to build an attractive commercial banking franchise and create long-term value for our
stockholders. Following thirteen years’ experience as a finance executive, including serving as a Regional President for a Kansas
bank with over $1.0 billion in assets, Mr. Elliott implemented his banking vision of developing a strategic consolidator of community
banks and a destination for seasoned bankers and businesspersons who share our entrepreneurial spirit. In 2003, we raised capital
from 23 local investors to finance the acquisition of National Bank of Andover in Andover, Kansas.
We believe we have a successful track record of selectively acquiring, integrating and consolidating community banks and branch
networks. Our acquisition activity includes the following transactions.
•
June 2003 – Acquired National Bank of Andover in Andover, Kansas for $3 million. At the time of our acquisition,
National Bank of Andover had $32 million in total assets.
•
February 2005 – Acquired two branches of Hillcrest Bank, N.A. in Wichita, Kansas, which increased our deposits by $66
million. In conjunction with this acquisition, we relocated our headquarters to our current principal executive offices in
Wichita.
•
June 2006 – Acquired the Mortgage Centre of Wichita and integrated it into our Bank as a department to expand our
mortgage loan platform.
•
October 2006 – Acquired a Missouri charter from First National Bank in Sarcoxie, Missouri, which allowed us to
subsequently open a full-service branch in Lee’s Summit, Missouri in 2007.
•
November 2007 – Acquired Signature Bancshares, Inc. in Spring Hill, Kansas, which provided us entry into the Overland
Park, Kansas market.
•
August 2008 – Acquired Ellis State Bank with locations in Ellis and Hays, Kansas.
•
December 2011 – Acquired four branches of Citizens Bank and Trust in Topeka, Kansas, which increased our deposits by
$110 million.
•
October 2012 – Acquired First Community Bancshares, Inc. in Overland Park, Kansas, which increased our deposits by
approximately $515 million. At the time of acquisition, First Community had total assets of approximately $595 million,
which significantly increased our total asset size and provided us with ten additional branches in Western Missouri and
five additional branches in Kansas City.
•
October 2015 – Acquired First Independence Corporation of Independence, the registered savings and loan holding
company for First Federal Savings & Loan of Independence, based in Independence, Kansas. First Independence
operated four full-service branches in Southeastern Kansas. At the time of acquisition, First Independence had
consolidated total assets of $135.0 million, total deposits of $87.1 million and total loans of $89.9 million.
•
November 2016 – Acquired Community First Bancshares, Inc. in Harrison, Arkansas, which increased our deposits by
$375.4 million. At the time of acquisition, Community First had total assets of $462.9 million and five locations in
Arkansas.
4
•
March 2017 – Acquired Prairie State Bancshares, Inc. (“Prairie”) in Hoxie, Kansas, which increased our deposits by
$125.4 million and our total assets by $153.1 million. The merger added three locations in western Kansas.
•
November 2017 – Acquired Eastman National Bancshares, Inc. (“Eastman”), which had a total of four branches in Ponca
City and Newkirk, Oklahoma. The acquisition increased our deposits by $224.1 million, our loans by $177.9 million and
our total assets by $281.5 million. In addition, at the same time, we acquired Cache Holdings, Inc. (“Cache”) in Tulsa,
Oklahoma. Cache was the holding company for Patriot Bank and had one branch in Tulsa. The acquisition of Cache
added $278.7 million in deposits, $300.7 million in loans and $343.4 in total assets.
•
May 2018 – Acquired Kansas Bank Corporation (“KBC”), which had a total of five branches in Liberal and Hugoton,
Kansas. The acquisition increased our deposits by $288.4 million, our loans by $159.4 million and our total assets by
$336.1 million. On the same day we acquired Adams Dairy Bancshares, Inc. (“Adams”), which had one branch located in
Blue Springs, Missouri. The acquisition of Adams added $97.1 million in deposits, $82.7 million in loans and $119.8
million in total assets.
•
August 2018 – Acquired City Bank and Trust Company (“City Bank”), with one branch in Guymon, Oklahoma, from
Docking Bancshares, Inc. This acquisition increased our deposits by $126.9 million, our loans by $77.1 million and our
total assets by $163.3 million.
•
February 2019 – Acquired the assets and assumed the deposits and certain other liabilities of two branch locations in
Guymon, Oklahoma and one branch location in Cordell, Oklahoma, from MidFirst Bank based in Oklahoma City,
Oklahoma. This acquisition increased our deposits by $98.5 million, our loans by $6.5 million and our total assets by
$98.6 million.
•
October 2020 – Purchased the assets and assumed the deposits of one branch location in Norton, Kansas, and one branch
location in Almena, Kansas, from Almena State Bank (“Almena”) facilitated by the Federal Deposit Insurance
Corporation (“FDIC”). This purchase increased our deposits by $62.5 million, our loans by $31.4 million and our total
assets by $66.9 million.
•
October 2021 – Acquired American State Bancshares, Inc. (“ASBI”), which had a total of seventeen branches in Kansas.
The acquisition increased our deposits by $668.8 million, our loans by $441.9 million and our total assets by $777.6
million.
•
December 2021 – Purchased the assets and assumed the deposits of three Security Bank of Kansas City (“Security”)
branch locations in St. Joseph, Missouri, from Valley View Financial Co. of Overland Park, Kansas. The purchase
increased our deposits by $75.1 million, our loans by $1.4 million and our total assets by $75.8 million.
•
February 2024 – Acquired Rockhold BanCorp ("Rockhold"), which had a total of eight branches in Missouri. The
acquisition increased our deposits by $349.8 million, our loans by $118.1 million and our total assets by $406.2 million.
•
July 2024 – Acquired KansasLand Bancshares, Inc. ("Kansasland"), with one branch in Quinter, Kansas and one branch
in Americus, Kansas. The acquisition increased our deposits by $42.4 million, our loans by $27.9 million and our total
assets by $51.9 million.
In conjunction with our strategic acquisition growth, we strive to reposition and improve the loan portfolio and deposit mix of the
banks we acquire. Following our acquisitions, we focus on identifying and disposing of problematic loans and replacing them with
higher quality loans generated organically. In addition, we focus on growth in our commercial loan portfolio through hiring and
retaining talented bankers and incentivizing them to expand their commercial banking relationships. We also seek to increase our
most attractive deposit accounts, primarily by growing deposits in our community markets and cross selling our depository products to
our loan customers.
As a result of these strategic and organic growth efforts, we have expanded our team of full-time equivalent employees from 19 to 810
and our network of branches from 2 to 71 as of December 31, 2024. We believe that we are well positioned to continue to be a
strategic consolidator of community banks while maintaining our history of attracting experienced and entrepreneurial bankers and
organically growing our loans and deposits.
Our Strategies
We believe we are a leading provider of commercial and personal banking services to businesses and business owners as well as
individuals in our targeted Midwestern markets. Our strategy is to continue consolidating community banks within such markets and
maintaining our organic growth, while preserving our asset quality through disciplined lending practices.
5
•
Strategic Consolidation of Community Banks. We believe our strategy of selectively acquiring and integrating
community banks has provided us with economies of scale and improved our overall franchise efficiency. We expect to
continue to pursue strategic acquisitions and believe our targeted market areas present us with many and varied
acquisition opportunities. The following table presents the number of banks by asset size within our operating footprint
and potential markets of expansion.
State
< $300M
$300M - $1B
$1B - $2B
Kansas
132
48
8
Missouri
113
60
18
Arkansas
30
28
9
Oklahoma
97
55
14
Nebraska
83
44
13
Iowa
137
70
16
Total
592
305
78
We believe many of these banks will continue to be burdened by new and more complex banking regulations, resource
constraints, competitive limitations, rising technological and other business costs, management succession issues and
liquidity concerns.
Despite the significant number of opportunities, we intend to continue to employ a disciplined approach to our acquisition
strategy and only seek to identify and partner with financial institutions that possess attractive market share, low-cost
deposit funding or compelling non-interest income-generating businesses. We believe consolidation will lead to organic
growth opportunities for us following the integration of businesses we acquire. We also expect to continue to manage our
branch network in order to ensure effective coverage for customers while minimizing any geographic overlap and driving
corporate efficiency.
•
Enhance the Performance of the Banks We Acquire. We strive to successfully integrate the banks we acquire into our
existing operational platform and enhance stockholder value through the creation of efficiencies within the combined
operations. As a result of our acquisition history, we believe we have developed an experienced approach to integration
that seeks to identify and execute on such synergies, particularly in the areas of technology, data processing, compliance
and human resources, while generating earnings growth. We believe that our experience and reputation as a successful
integrator and acquirer will allow us to continue to capitalize on additional opportunities within our markets in the future.
•
Focus on Lending Growth in Our Metropolitan Markets While Increasing Deposits in Our Community Markets. We
are focused on continuing to grow organically and believe the markets in which we operate currently provide meaningful
opportunities to expand our commercial customer base and increase our current market share. We believe our branch
network is strategically split between growing metropolitan markets, such as Kansas City, Wichita and Tulsa, and stable
community markets within Southeastern Kansas, Southwestern Kansas, Central Kansas, North Central Kansas, Western
Kansas, Topeka, Western Missouri, North Central Missouri, Northern Arkansas, Northern Oklahoma and Western
Oklahoma. We believe this diverse geographic footprint provides us with access to low cost, stable core deposits in
community markets that we can use to fund commercial loan growth in our metropolitan markets. The following table
shows our total deposits and loans in our community markets and our metropolitan markets as of December 31, 2024,
which we believe illustrates our execution of this strategy.
Deposits
Loans
Amount(1)
Overall %
Amount(1)
Overall %
Metropolitan markets(2)
$ 1,596,394
36%
$ 2,366,878
68%
Community markets(3)
$ 2,778,395
64%
$ 1,133,938
32%
100%
100%
(1)
Amounts in thousands.
(2)
Represents 14 locations in the Wichita, Kansas City and Tulsa metropolitan statistical areas (“MSAs”).
(3)
Represents 57 locations outside of the Wichita, Kansas City and Tulsa MSAs.
Our team of seasoned bankers represents an important driver of our organic growth by expanding banking relationships
with current and potential customers. We expect to continue to make opportunistic hires of talented and entrepreneurial
bankers, particularly in our metropolitan markets, to further augment our growth. Our bankers are incentivized to
increase the size of their loan and deposit portfolios and generate fee income while maintaining strong credit quality. We
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also seek to cross-sell our various banking products, including our deposit and treasury wealth management products, to
our commercial loan customers, which we believe provides a basis for expanding our banking relationships as well as a
stable, low-cost deposit base. We have built a scalable platform that will support this continued organic growth.
•
Preserve Our Asset Quality Through Disciplined Lending Practices. Our approach to credit management uses well-
defined policies and procedures, disciplined underwriting criteria and ongoing risk management. We are a competitive
and effective commercial and industrial lender, supplementing ongoing and active loan servicing with early-stage credit
review provided by our bankers. This approach has allowed us to maintain loan growth with a diversified portfolio of
high-quality assets. We believe our credit culture supports accountable bankers who maintain an ability to expand our
customer base as well as make sound decisions for our Company.
Our Competitive Strengths
We believe the following competitive strengths will allow us to continue to achieve our principal objective of increasing stockholder
value and generating consistent earnings growth through the organic and strategic expansion of our commercial banking franchise.
•
Experienced Leadership and Management Team. Our seasoned and experienced executive management team, senior
leaders and board of directors have exhibited the ability to deliver stockholder value by consistently growing profitably
while expanding our commercial banking franchise through acquisition and integration. Our executive management team
has, on average, more than twenty years of experience working for and with large financial institutions in our markets
during various economic cycles along with significant merger and acquisition experience in the financial services
industry. Our team has instilled a transparent and entrepreneurial culture that rewards leadership, innovation and problem
solving.
•
Focus on Commercial Banking. We are primarily a commercial bank. As measured by outstanding balances at
December 31, 2024, commercial loans composed over 71.1% of our loan portfolio and within our commercial loan
portfolio, 73.5% of such loans were commercial real estate loans and 26.5% were commercial and industrial loans. We
have developed strong commercial relationships in our markets across a diversified range of sectors including key areas
supporting regional and local economic activity and growth, such as manufacturing, freight/transportation, consumer
services, franchising and commercial real estate. We have also been successful in attracting customers from larger
competitors because of our flexible and responsive approach in providing banking solutions tailored to meet our
customers’ needs while maintaining disciplined underwriting standards. Our relationship-based approach seeks to grow
lending relationships with our customers through cross-selling our banking products, such as our deposit and treasury
management tools, as they expand their businesses. We have a growing presence in attractive commercial banking
markets, such as Wichita, Kansas City and Tulsa, which we believe present significant opportunities to continue to
increase our business banking activities.
•
Our Ability to Consolidate. Our branches are strategically located within metropolitan markets as well as stable
community markets that present opportunities to expand our market share. Our executive management team has
identified significant acquisition and consolidation opportunities ranging from small to large community banking
institutions. We believe our track record of strategic acquisitions and effective integrations, combined with our expertise
in our markets and scalable platform, will allow us to capitalize on these growth opportunities.
•
Disciplined Acquisition Approach. Our disciplined approach to acquisitions, consolidations and integrations includes the
following: (i) selectively acquiring community banking franchises only at appropriate valuations, after taking into account
risks that we perceive with respect to the targeted bank; (ii) completing comprehensive due diligence and developing an
appropriate plan to address any legacy credit problems of the targeted institution; (iii) identifying an achievable cost
savings estimate and holding our management accountable for achieving such estimates; (iv) executing definitive
acquisition agreements that we believe provide adequate protections to us; (v) installing our credit procedures, audit and
risk management policies and procedures and compliance standards upon consummation of the acquisition; (vi)
collaborating with the target’s management team to execute on synergies and cost saving opportunities related to the
acquisition; and (vii) involving a broader management team across multiple departments in order to help ensure the
successful integration of all business functions. We believe our approach allows us to realize the benefits of the
acquisition and create stockholder value while appropriately managing risk.
•
Efficient and Scalable Platform with Capacity to Support Our Growth. Through significant investments in technology
and staff, our management team has built an efficient and scalable corporate infrastructure within our commercial banking
franchise, including in the areas of banking processes, technology, data processing, underwriting, risk management and
internal audit, which we believe will support our continued growth. While expanding our infrastructure, several
departmental functions have been outsourced to gain the experience of outside professionals while at the same time
achieving more favorable economics and cost-effective solutions. Such outsourced areas include specific internal audit
7
functions and select loan review. This outsourcing strategy has proven to control costs while adding enhanced controls
and/or service levels. We believe that this scalable infrastructure will continue to allow us to efficiently and effectively
manage our anticipated growth.
•
Culture Committed to Talent Development, Transparency and Accountability. We have invested in professional talent
since our inception by building a team of “businesspersons first and bankers second” and economically aligned them with
our stockholders, through our share-based incentive compensation and stock purchase opportunities. In our efforts to
become a destination for seasoned bankers with an entrepreneurial spirit, we have developed numerous leadership
development programs. For example, “Equity University” is a year-long program we designed for our promising
company-wide leaders. We believe our well-trained and motivated professionals work most effectively in a corporate
environment that emphasizes transparency, respect, innovation and accountability. Our culture provides our professionals
with the empowerment to better serve our clients and our communities.
•
Sophisticated and Customized Banking Products with High-Quality Customer Service. We strive to offer our customers
the sophisticated commercial banking products of large financial institutions with the personalized service of a community
bank. Our management team’s significant banking and lending experience in our markets has provided us with an
understanding of the commercial banking needs of our customers that allows us to tailor our products and services to meet
our customers’ needs. In addition to offering a diverse array of banking products and services, we offer our customers the
high-touch, relationship-based customer service experience of a community bank. For example, we utilize Equity
Connect, a customized customer relationship management system, to assign relationship officers to enhance relationships
with our customers and identify and meet their particular needs.
•
Strong Risk Management Practices. We place significant emphasis on risk management as an integral component of our
organizational culture without sacrificing growth. We believe our comprehensive risk management system is designed to
make sure that we have sound policies, procedures and practices for the management of key risks under our risk
framework (which includes market, operational, liquidity, interest rate sensitivity, credit, insurance, regulatory, legal and
reputational risk) and that any exceptions are reported by senior management to our board of directors or audit committee.
Our risk management practices are overseen by the Chairmen of our audit and risk committees, who have many years of
combined banking experience, and our Chief Risk Officer, who has more than 30 years of banking and financial services
experience. We believe that our enterprise risk management philosophy has been important in gaining and maintaining
the confidence of our various constituencies and growing our business and footprint within our markets. We also believe
our strong risk management practices are manifested in our asset quality statistics.
Our Banking Services
A general description of the range of commercial banking products and other services we offer follows.
Lending Activities
At December 31, 2024, we had total loans of $3.46 billion (net of allowances), representing 64.8% of our total assets. For additional
information concerning our loan portfolio, see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results
of Operations – Financial Condition – Loan Portfolio.”
Concentrations of Credit Risk. Most of our lending activity is conducted with businesses and individuals in metropolitan Kansas City,
Tulsa and Wichita. Our loan portfolio consists primarily of commercial real estate loans, which were $1.83 billion and constituted
52.3% of our total loans as of December 31, 2024, commercial and industrial loans, which were $658.9 million and constituted 18.8%
of our total loans as of December 31, 2024, and residential real estate loans, which were $566.8 million and constituted 16.2% of our
total loans as of December 31, 2024. Our commercial real estate loans are generally secured by first liens on real property. The
remaining commercial and industrial loans are typically secured by general business assets, accounts receivable, inventory and/or the
corporate guaranty of the borrower and/or personal guaranty of its principals. Residential real estate loans consists primarily of loans
secured by 1-4 family residential properties, including home equity lines of credit. The geographic concentration subjects the loan
portfolio to the general economic conditions within Arkansas, Kansas, Missouri and Oklahoma. The risks created by such
concentrations have been considered by management in the determination of the adequacy of the allowance for credit losses.
Management believes the allowance for credit losses is adequate to cover expected losses in our loan portfolio as of December 31,
2024.
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Sound risk management practices and appropriate levels of capital are essential elements of a sound commercial real estate lending
program. Concentrations of commercial real estate exposures add a dimension of risk that compounds the risk inherent in individual
loans. Interagency guidance on commercial real estate concentrations describe sound risk management practices which include board
and management oversight, portfolio management, management information systems, market analysis, portfolio stress testing and
sensitivity analysis, credit underwriting standards and credit risk review functions. Management believes these practices allow us to
appropriately monitor concentrations in commercial real estate in our loan portfolio.
Large Credit Relationships. As of December 31, 2024, the aggregate amount of loans to our ten largest borrowers (including related
entities) amounted to approximately $314.6 million, or 9.0% of total loans. See “Item 1A – Risk Factors – Risks Related to Our
Business – Our largest loan relationships currently make up a material percentage of our total loan portfolio.”
Loan Underwriting and Approval. Historically, we believe we have made sound, high quality loans while recognizing that lending
money involves a degree of business risk. We have loan policies designed to assist us in managing this business risk. These policies
provide a general framework for our loan origination, monitoring and funding activities, while recognizing that not all risks can be
anticipated. Our board of directors delegates loan authority up to board-approved hold limits collectively to our Directors’ credit
committee, which is comprised of members of our board of directors. Our board of directors also delegates limited lending authority
to our internal loan committee, which is comprised of members of our executive management team. In addition, our board of directors
also delegates more limited lending authority to our Chief Executive Officer, President, Chief Credit Officer, credit risk personnel and,
on a further limited basis, to selected lending managers in each of our target markets. Lending officers and relationship managers,
including our bankers, have further limited individual loan authority. When the total relationship exceeds an individual’s loan
authority, a higher authority or credit committee approval is required. The objective of our approval process is to provide a
disciplined, collaborative approach to larger credits while maintaining responsiveness to client needs.
Loan decisions are documented as to the borrower’s business, purpose of the loan, evaluation of the repayment source and associated
risks, evaluation of collateral, covenants and monitoring requirements and the risk rating rationale. Our strategy for approving or
disapproving loans is to follow conservative loan policies and consistent underwriting practices which include:
•
maintaining close relationships among our customers and their designated banker to ensure ongoing credit monitoring and
loan servicing;
•
granting credit on a sound basis with full knowledge of the purpose and source of repayment for such credit;
•
ensuring that primary and secondary sources of repayment are adequate in relation to the amount of the loan;
•
developing and maintaining targeted levels of diversification for our loan portfolio as a whole and for loans within each
category; and
•
ensuring that each loan is properly documented and that any insurance coverage requirements are satisfied.
Managing credit risk is a Company-wide process. Our strategy for credit risk management includes well-defined, centralized credit
policies, uniform underwriting criteria and ongoing risk monitoring and review processes for all credit exposures. Our processes
emphasize early-stage review of loans, regular credit evaluations and management reviews of loans, which supplement the ongoing
and proactive credit monitoring and loan servicing provided by our bankers. Our Chief Credit Officer provides Company-wide credit
oversight to ensure that the risk identification processes are functioning properly and that our credit standards are followed. In
addition, a third-party loan review is performed to assist in the identification of problem assets and to confirm our internal risk rating
of loans. We attempt to identify potential problem loans early in an effort to seek aggressive resolution of these situations before the
loans become a loss, record any necessary charge-offs promptly and maintain adequate allowance levels for probable credit losses
incurred in the loan portfolio.
Our loan policies generally include other underwriting guidelines for loans collateralized by real estate. These underwriting standards
are designed to determine the maximum loan amount that a borrower has the capacity to repay based upon the type of collateral
securing the loan and the borrower’s income. Such loan policies include maximum amortization schedules and loan terms for each
category of loans collateralized by liens on real estate.
In addition, our loan policies provide guidelines for personal guarantees; an environmental review; loans to employees, executive
officers and directors; problem loan identification; maintenance of an adequate allowance for credit losses and other matters relating to
lending practices.
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Lending Limits. Our lending activities are subject to a variety of lending limits imposed by federal and state law. In general, the Bank
is subject to a legal lending limit on loans to a single borrower based on the Bank’s capital level. The dollar amounts of the Bank’s
lending limit increases or decreases as the Bank’s capital increases or decreases. The Bank is able to sell participations in its larger
loans to other financial institutions, which allows it to manage the risk involved in these loans and to meet the lending needs of its
customers requiring extensions of credit in excess of these limits.
The Bank’s legal lending limit as of December 31, 2024, on loans to a single borrower was $151.9 million. However, we typically
maintain an in-house limit of $25.0 million for loans to a single borrower. We have strict policies and procedures in place for the
establishment of hold limits with respect to specific products and businesses and evaluating exceptions to the hold limits for individual
relationships.
Our loan policies provide general guidelines for loan-to-value ratios that restrict the size of loans to a maximum percentage of the
value of the collateral securing the loans, which percentage varies by the type of collateral. Our internal loan-to-value limitations
follow limits established by applicable law.
Loan Types. We provide a variety of loans to meet our customers’ needs. The section below discusses our general loan categories.
Commercial and Industrial Loans. We make commercial and industrial loans, including commercial lines of credit, working capital
loans, term loans, equipment financing, aircraft financing, acquisition, expansion and development loans, borrowing base loans,
government guaranteed loans, letters of credit and other loan products, primarily in our target markets that are underwritten on the
basis of the borrower’s ability to service the debt from income. We take as collateral a lien on general business assets including,
among other things, available real estate, accounts receivable, inventory and equipment and generally obtain a personal guaranty of
the borrower or principal. Our commercial and industrial loans generally have variable interest rates and terms that typically range
from one to five years depending on factors such as the type and size of the loan, the financial strength of the borrower/guarantor and
the age, type and value of the collateral. Fixed rate commercial and industrial loan maturities are generally short-term, with three to
five-year maturities, or include periodic interest rate resets. Terms greater than five years may be appropriate in some circumstances
based upon the useful life of the underlying asset being financed or if some form of credit enhancement, such as a government
guarantee is obtained.
In general, commercial and industrial loans may involve increased credit risk and, therefore, typically yield a higher return. The
increased risk in commercial and industrial loans derives from the expectation that such loans generally are serviced principally from
the operations of the business and those operations may not be successful. Any interruption or discontinuance of operating cash flows
from the business, which may be influenced by events not under the control of the borrower such as economic events and changes in
governmental regulations, could materially affect the ability of the borrower to repay the loan. In addition, the collateral securing
commercial and industrial loans generally includes movable property such as equipment and inventory, which may decline in value
more rapidly than we anticipate exposing us to increased credit risk. As a result of these additional complexities, variables and risks,
commercial and industrial loans require extensive underwriting and servicing.
Commercial Real Estate Loans. We make commercial mortgage loans collateralized by real estate, which may be owner occupied or
non-owner-occupied. Commercial real estate lending typically involves higher loan principal amounts and the repayment is
dependent, in large part, on sufficient income from the properties securing the loans to cover operating expenses and debt service. We
require our commercial real estate loans to be secured by well-managed property with adequate margins and generally obtain a
guarantee from responsible parties. Our commercial mortgage loans generally are collateralized by first liens on real estate, have
variable or fixed interest rates and amortize over a 10 to 20-year period with balloon payments or rate adjustments due at the end of
three to seven years. Periodically, we will utilize an interest rate swap to hedge against long-term fixed rate exposures. Commercial
mortgage loans considered for interest rate swap hedging typically have terms of greater than five years.
Repayment of these loans may be subject to adverse conditions in the real estate market or the economy to a greater extent than other
types of loans. In underwriting commercial real estate loans, we seek to minimize these risks in a variety of ways, including giving
careful consideration to the property’s age, condition, operating history, future operating projections, current and projected market
rental rates, vacancy rates, location and physical condition. The underwriting analysis also may include credit verification, reviews of
appraisals, environmental hazards or reports, the borrower’s liquidity and leverage, management experience of the owners or
principals, economic condition and industry trends.
We also make loans to finance the construction of residential and non-residential properties. Construction loans generally are
collateralized by first liens on real estate and have floating interest rates. We conduct periodic inspections, either directly or through
an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described above are also used in
our construction lending activities. Our construction loans have terms that typically range from six months to two years depending on
factors such as the type and size of the development and the financial strength of the borrower/guarantor. Loans are typically
10
structured with an interest only construction period. Loans are underwritten to either mature at the completion of construction, or
transition to a traditional amortizing commercial real estate facility at the completion of construction, in line with other commercial
real estate loans held at the bank.
Construction loans generally involve additional risks attributable to the fact that loan funds are advanced upon the security of a project
under construction, and the project is of uncertain value prior to its completion. Because of uncertainties inherent in estimating
construction costs, the market value of the completed project and the effects of governmental regulation on real property, it can be
difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. As a result of these
uncertainties, construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the
success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If we are forced to foreclose on a
project prior to completion, there is no assurance that we will be able to recover the entire unpaid portion of the loan. In addition, we
may be required to fund additional amounts to complete a project and it may be necessary to hold the property for an indeterminate
period of time subject to the regulatory limitations imposed by local, state or federal laws.
1 – 4 Family Residential Mortgages. We make residential real estate loans collateralized by owner-occupied properties located in our
market areas. We offer a variety of mortgage loan products with amortization periods up to 30 years including traditional 30-year
fixed loans and various adjustable rate mortgages. Typically, loans with a fixed interest rate of greater than 10 years are held for sale
and sold on the secondary market and adjustable rate mortgages are held for investment. Loans collateralized by one-to-four family
residential real estate generally are originated in amounts of no more than 80% of appraised value. Home equity loans and HELOCs
are generally limited to a combined loan-to-value ratio of 80%, including the subordinate lien. We retain a valid lien on real estate,
obtain a title insurance policy that ensures that the property is free from encumbrances and require hazard insurance.
From time to time we have purchased pools of residential mortgages originated by other financial institutions to hold for investment
with the intent to diversify our residential mortgage loan portfolio and increase our yield. We have a defined set of credit guidelines
that we use when evaluating these credits. Although these loans were originated and underwritten by another institution, our mortgage
and credit departments do their own independent review. These loans typically are secured by collateral outside of our branch
footprint.
Agricultural Loans. We offer both fixed-rate and adjustable-rate agricultural real estate loans to our customers. We also make loans
to finance the purchase of machinery, equipment and breeding stock, seasonal crop operating loans used to fund the borrower’s crop
production operating expenses, livestock operating, and revolving loans used to purchase livestock for resale and related livestock
production expense.
Generally, our agricultural real estate loans amortize over periods not in excess of 20 years and have a loan-to-value ratio under 80%.
We also originate agricultural real estate loans directly and through programs sponsored by the Farm Service Agency (“FSA”), an
agency of the United States Department of Agriculture, which provides a partial guarantee on loans underwritten to FSA standards.
Agricultural real estate loans generally carry higher interest rates and have shorter terms than 1-4 family residential real estate loans.
Agricultural real estate loans, however, entail additional credit risks compared to one-to-four-family residential real estate loans, as
they typically involve larger loan balances concentrated with single borrowers or groups of related borrowers. We generally require
farmers to obtain multi-peril crop insurance coverage through a program partially subsidized by the Federal government to help
mitigate the risk of crop failures.
Agricultural operating loans may be originated at an adjustable or fixed rate of interest and generally for a term of up to 7 years. In
the case of agricultural operating loans secured by breeding livestock and/or farm equipment, such loans are originated at fixed rates
of interest for a term of up to 5 years. We typically originate agricultural operating loans based on the borrower’s ability to make
repayment from the cash flow of the borrower’s agricultural business. As a result, the availability of funds for the repayment of
agricultural operating loans may be substantially dependent on the success of the business itself and the general economic
environment. A significant number of agricultural borrowers with these types of loans may qualify for relief under a chapter of the
U.S. Bankruptcy Code that is designed specifically for the reorganization of financial obligations of family farmers and which
provides certain preferential procedures to agricultural borrowers compared to traditional bankruptcy proceedings pursuant to other
chapters of the U.S. Bankruptcy Code.
Consumer Loans. We make a variety of loans to individuals for personal and household purposes, including secured and unsecured
term loans and home improvement loans. Consumer loans are underwritten based on the individual borrower’s income, current debt
level, past credit history and the value of any available collateral. The terms of consumer loans vary considerably based upon the loan
type, nature of collateral and size of the loan. Consumer loans entail greater risk than residential real estate loans because they may be
unsecured or, if secured, the value of the collateral, such as an automobile or boat, may be more difficult to assess and more likely to
decrease in value than real estate. In such cases, any repossessed collateral for a defaulted consumer loan may not provide an
adequate source of repayment for the outstanding loan balance. The remaining deficiency often will not warrant further substantial
collection efforts against the borrower beyond obtaining a deficiency judgment. In addition, consumer loan collections are dependent
on the borrower’s continuing financial stability, and thus are more likely to be adversely affected by job loss, divorce, illness or
11
personal bankruptcy. Furthermore, the application of various federal and state laws may limit the amount which can be recovered on
such loans.
Deposit Products
Our lending and investing activities are primarily funded by deposits. We offer a variety of deposit accounts with a wide range of
interest rates and terms including demand, savings, money market and time deposits with the goal of attracting a wide variety of
customers, including small to medium-sized businesses. We employ customer acquisition strategies to generate new account and
deposit growth, such as customer referral incentives, search engine optimization, targeted direct mail and email campaigns, in addition
to conventional marketing initiatives and advertising. Our goal is to emphasize our core deposits and cross-sell our deposit products
to our loan customers.
We design our consumer deposit products specifically for the lifestyles of clients in the communities we serve. Some accounts
emphasize and reward debit card usage, while others appeal to higher deposit customers. We also utilize Equity Connect, which is our
customer relationship management system, to assist our personnel in deepening and expanding current relationships by providing
timely identification of potential needs. It also serves as a methodical tool to track customer onboarding and retention actions by
account officers. We do participate in the Certificate of Deposit Registry Services (“CDARS”) as well as the Insured Cash Sweep
("ICS") both provided via IntraFi Network as options for our customers to place funds and occasionally as a funding source.
We also bid for, and accept deposits from public entities in our markets.
Other Products and Services
We offer banking products and services that are competitively priced with a focus on convenience and accessibility. We offer a full
suite of online banking solutions including access to account balances, online transfers, online bill payment and electronic delivery of
customer statements, mobile banking solutions for iPhone and Android phones, including remote check deposit with mobile bill pay.
We offer extended drive-through hours, ITMs, ATMs and banking by telephone, mail and personal appointment. We offer debit cards
with no ATM surcharges or foreign ATM fees for checking customers, plus night depository, direct deposit, cashier’s and travelers
checks and letters of credit, as well as treasury management services, wire transfer services and automated clearing house (“ACH”)
services. We offer both consumer and commercial credit cards, as well as Health Savings Account solutions.
We offer a full array of commercial treasury management services designed to be competitive with banks of all sizes. Treasury
management services include balance reporting (including current day and previous day activity), transfers between accounts, wire
transfer initiation, ACH origination and stop payments. Cash management deposit products consist of lockbox, remote deposit
capture, positive pay, reverse positive pay, account reconciliation services, zero balance accounts and sweep accounts, including loan
sweep.
We offer a full comprehensive suite of products and offerings for trust and wealth management customers. Trust and wealth
management services include private banking, investment management, trust services and estate and financial planning.
We offer insurance brokerage services primarily focused on crop coverage for agricultural customers throughout our footprint.
Our Markets
As of December 31, 2024, we conducted banking operations through our 71 bank locations in Arkansas, Kansas, Missouri and
Oklahoma. We believe that an important factor contributing to our historical performance and our ability to execute our strategy is the
attractiveness and specific characteristics of our existing and target markets. In particular, we believe our markets provide us with
access to low cost, stable core deposits in community markets that we can use to fund commercial loan growth in metropolitan areas.
We believe our existing and target markets are among some of the most attractive in the Midwestern United States. Our markets are
home to thousands of manufacturing and trade jobs, and have experienced recent growth in the healthcare, consumer services and
technology sectors. We believe the central geographic footprint of our markets provides numerous industrial plants, facilities and
manufacturing businesses with a central shipping location from which they can distribute their products. Our markets also serve as the
corporate headquarters for Koch Industries Inc., Hallmark Cards, Inc., H&R Block, Inc., American Century Investments, Garmin
International, Inc., Cessna Aircraft Company, Seaboard Corporation, Cargill Meat Solutions, Spirit AeroSystems, Dairy Farmers of
America, Quik Trip, ONEOK, Salina Vortex and Williams Companies and host a major presence for companies across a variety of
industries, including Bombardier Learjet, Collective Brands, Inc., FedEx, Flexsteel, Hills Pet Nutrition, Inc., Textron Aviation
Services, Phillips 66, Rib Crib, Honeywell, T-Mobile, Oracle, and Bayer Corporation. We understand the community banking needs
12
of the businesses and individuals within our markets and have focused on developing a commercial and personal banking platform to
service such needs.
Information Technology Systems
We continue to make significant investments in our information technology systems and staff for our banking and lending operations
and treasury management activities. We believe this investment will support our continued growth, permit us to enhance our
capabilities to offer new products and overall customer experience and enable us to provide scale for future growth and acquisitions.
We use nationally recognized software vendors and their support allows us to operate our data processing and core systems in-house.
Our internal network is maintained in-house. We house our back-up site at a decentralized location. This back-up site is intended to
provide for redundancy and disaster recovery capabilities in the event of a significant equipment failure or disaster.
The majority of our other systems, including our e-mail, electronic funds transfer, transaction processing and online banking services
are hosted by third-party service providers. The scalability of this infrastructure will support our growth strategy. In addition, the
tested capability of these vendors to automatically switch over to standby systems should allow us to recover our systems and provide
business continuity quickly in case of a disaster.
For a discussion of our cybersecurity risk management and strategy and governance, please see “Item 1C – Cybersecurity"
Competition
The financial services industry is highly competitive. We compete for loans, deposits, and financial services in all of our principal
markets. We compete directly with other bank and nonbank institutions located within our markets, Internet-based banks, out-of-
market banks, and bank holding companies that advertise in or otherwise serve our markets, along with money market and mutual
funds, brokerage houses, mortgage companies, and insurance companies or other commercial entities that offer financial services
products. Competition involves efforts to retain current customers, obtain new loans and deposits, increase the scope and type of
services offered and offer competitive interest rates paid on deposits and charged on loans. Many of our competitors enjoy
competitive advantages, including greater financial resources, a wider geographic presence, more accessible branch office locations,
the ability to offer additional services, more favorable pricing alternatives and lower origination and operating costs. Some of our
competitors have been in business for a long time and have an established customer base and name recognition. We believe that our
competitive pricing, personalized service and community involvement enable us to effectively compete in the communities in which
we operate.
Human Capital
The Company’s success depends on its ability to attract and retain highly qualified senior and middle management and other skilled
employees. Competition for qualified employees can be intense and it may be difficult to locate personnel with the necessary
combination of skills, attributes and business relationships.
The Company believes that its employees are the primary key to the Company’s success as a financial institution. The Company is
committed to attracting, retaining and promoting top quality talent regardless of sex, sexual orientation, gender identity, race, color,
national origin, age, religion and physical ability. The Company strives to identify and select the best candidates for all open positions
based on qualifying factors for each job. The Company is dedicated to providing a workplace for its employees that is inclusive,
supportive and free of any form of discrimination or harassment; rewarding and recognizing its employees based on their individual
results and performance; and recognizing and respecting all of the characteristics and differences that make each of the Company’s
employees unique.
Additionally, the Company is committed to employee development through a combination of in-house and external training programs.
Further, the Company has two staff development programs with formal in-house training programs for junior bankers including
guidance from senior banking team members.
As of December 31, 2024, the Company employed 810 full-time equivalent employees. None of our employees are represented by
any collective bargaining unit or is a party to a collective bargaining agreement.
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Available Information
The Company files reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company makes available, free of charge, on its website at
http://investor.equitybank.com its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably
practicable after the Company electronically files, or furnishes, such materials to the SEC. The SEC also maintains a website at
http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file
electronically with the SEC. The information contained on or accessible from our website does not constitute a part of this Annual
Report on Form 10-K and is not incorporated by reference herein.
Supervision and Regulation
Banking is a complex, highly regulated industry. Consequently, our growth and earnings performance can be affected, not only by
management decisions and general and local economic conditions, but also by the statutes administered by and the regulations and
policies of, various governmental regulatory authorities. These authorities include, but are not limited to, the Federal Reserve, the
FDIC, the Kansas Office of State Bank Commissioner (“OSBC”), the Consumer Financial Protection Bureau (“CFPB”), the Internal
Revenue Service (“IRS”) and state taxing authorities. The effect of these statutes, regulations and policies and any changes to any of
them can be significant and cannot be predicted.
The primary goals of the bank regulatory scheme are to maintain a safe and sound banking system and to facilitate the conduct of
sound monetary policy. In furtherance of those goals, the U.S. Congress and the individual states have created several regulatory
agencies and enacted numerous laws, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”), that govern banks and the banking industry. The system of supervision and regulation applicable to us establishes a
comprehensive framework for our operations and is intended primarily for the protection of the FDIC’s deposit insurance funds, our
depositors and the public, rather than the stockholders and creditors.
New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations and
competitive relationships of financial institutions operating in the United States. We cannot predict whether or in what form any
proposed regulation or statute will be adopted or the extent to which our businesses may be affected by any new regulation or statute.
The following is an attempt to summarize some of the relevant laws, rules and regulations governing banks and bank holding
companies, but does not purport to be a complete summary of all applicable laws, rules and regulations governing banks. The
descriptions are qualified in their entirety by reference to the specific statutes and regulations discussed.
The laws, rules and regulations add significantly to the cost of operating the Company and Equity Bank and thus have a negative
impact on profitability. In recent years, financial service providers that are not subject to the same regulations as the Company and
Equity Bank have expanded significantly. Less regulation may give these institutions a competitive advantage over the Company and
Equity Bank. Such institutions may continue to draw large amounts of funds away from banking institutions, with a continuing
adverse effect on the banking industry in general.
Bank Holding Company Regulation
We are a financial holding company registered under the Bank Holding Company Act of 1956 (“BHC Act”), as amended, and are
subject to supervision and regulation by the Federal Reserve. Federal laws subject bank holding companies to particular restrictions
on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory
enforcement actions, for violation of laws and policies.
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Activities Closely Related to Banking
The BHC Act prohibits a bank holding company, with certain limited exceptions, from acquiring direct or indirect ownership or
control of more than five percent of the voting shares of any company that is not a bank or from engaging in any activities other than
those of banking, managing or controlling banks and certain other subsidiaries or furnishing services to or performing services for its
subsidiaries. Bank holding companies also may engage in or acquire interests in companies that engage in a limited set of activities
that are so closely related to banking as to be a proper incident thereto. If a bank holding company has become a financial holding
company (“FHC”), it may engage in a broader set of activities, including insurance underwriting and broker-dealer services as well as
activities that are jointly determined by the Federal Reserve and the U.S. Treasury to be financial in nature or incidental to such
financial activity. FHCs may also engage in activities that are determined by the Federal Reserve to be complementary to financial
activities. To maintain FHC status, the bank holding company and all subsidiary depository institutions must be “well managed” and
“well capitalized.” Additionally, all subsidiary depository institutions must have received at least a “Satisfactory” rating on its most
recent Community Reinvestment Act (“CRA”) examination. Failure to meet these requirements may result in limitations on activities
and acquisitions. During the fourth quarter of 2022, we elected to become a FHC.
Safe and Sound Banking Practices
Bank holding companies are not permitted to engage in unsafe and unsound banking practices. The Federal Reserve may order a bank
holding company to terminate an activity or control of a non-bank subsidiary if such activity or control constitutes a significant risk to
the financial safety, soundness or stability of a subsidiary bank and is inconsistent with sound banking principles. Regulation Y also
requires a holding company to give the Federal Reserve prior notice of any redemption or repurchase of its own equity securities if the
consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding year, is equal to
10% or more of the company’s consolidated net worth.
Consistent with the Dodd-Frank Act codification of the Federal Reserve’s policy that bank holding companies must serve as a source
of financial strength for their subsidiary banks, the Federal Reserve has stated that, as a matter of prudence, a bank holding company
generally should not maintain a rate of distributions to stockholders unless its available net income has been sufficient to fully fund the
distributions and the prospective rate of earnings retention appears consistent with a bank holding company’s capital needs, asset
quality and overall financial condition.
In addition, the Federal Reserve Supervisory Letter SR 09-4 provides guidance on the declaration and payment of dividends, capital
redemptions and capital repurchases by a bank holding company. Supervisory Letter SR 09-4 provides that, as a general matter, a
bank holding company should eliminate, defer or significantly reduce its dividends if: (i) the bank holding company’s net income
available to stockholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund
the dividends, (ii) the bank holding company’s prospective rate of earnings retention is not consistent with the bank holding
company’s capital needs and overall current and prospective financial condition or (iii) the bank holding company will not meet, or is
in danger of not meeting, its minimum regulatory capital adequacy ratios. Failure to do so could result in a supervisory finding that
the bank holding company is operating in an unsafe and unsound manner.
Limitations on Equity Bank’s ability to pay dividends could, in turn, affect our ability to pay dividends to our stockholders. For more
information concerning Equity Bank’s ability to pay dividends, see “Bank Regulation” below.
The Federal Reserve has broad authority to prohibit activities of bank holding companies and their non-banking subsidiaries which
represent unsafe and unsound banking practices, or which constitute violations of laws or regulations. Notably, the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”), provides that the Federal Reserve can assess civil money
penalties for such practices or violations which can be as high as $1 million per day. FIRREA contains expansive provisions
regarding the scope of individuals and entities against which such penalties may be assessed.
Annual Reporting and Examinations
We are required to file annual and quarterly reports with the Federal Reserve and such additional information as the Federal Reserve
may require pursuant to the BHC Act. The Federal Reserve may examine a bank holding company or any of its subsidiaries and
charge the company for the cost of such an examination. We are also subject to reporting and disclosure requirements under state and
federal securities laws.
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Rules on Regulatory Capital
Regulatory capital rules pursuant to the Basel III requirements (“Basel III rules”), require banks and bank holding companies to
maintain a minimum common equity Tier 1 (“CET1”) risk-based capital ratio of 4.5%, a Tier 1 risk-based capital ratio of 6%, a total
risk-based capital ratio of 8% and a leverage ratio of 4%. Under the Basel III rules, banks and bank holding companies must maintain
a CET1 risk-based capital ratio of 6.5%, a Tier 1 risk-based capital ratio of 8%, a total risk-based capital ratio of 10% and a leverage
ratio of 5% to be deemed “well capitalized” for purposes of certain rules and requirements. Banks and bank holding companies are
also required to maintain a “capital conservation buffer” in excess of the minimum risk-based capital ratios. The buffer is intended to
help ensure that banking organizations conserve capital when it is most needed, allowing them to better weather periods of economic
stress. The minimum 2.5% buffer is composed solely of CET1 capital. If an institution’s capital conservation buffer is less than or
equal to 2.5%, then the institution is subject to limitations on certain activities, including payment of dividends, share repurchases and
discretionary bonuses to executive officers.
The federal bank regulatory agencies may also set higher capital requirements for banks and bank holding companies whose
circumstances warrant it. For example, holding companies experiencing internal growth or making acquisitions are expected to
maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets.
At this time, the bank regulatory agencies are more inclined to impose higher capital requirements to meet well capitalized standards
and future regulatory change could impose higher capital standards as a routine matter. Our regulatory capital ratios and those of
Equity Bank are in excess of the levels established for well capitalized institutions under the Basel III rules.
The Basel III rules also set forth certain changes in the methods of calculating certain risk-weighted assets, which in turn affect the
calculation of risk-based capital ratios. Under the Basel III rules, higher or more sensitive risk weights are assigned to various
categories of assets, including certain credit facilities that finance the acquisition, development or construction of real property, certain
exposures or credits that are 90 days past due or on non-accrual, foreign exposures and certain corporate exposures. In addition, the
Basel III rules include (i) alternative standards of credit worthiness consistent with the Dodd-Frank Act, (ii) greater recognition of
collateral and guarantees and (iii) revised capital treatment for derivatives and repo-style transactions.
In addition, the Basel III rules include certain exemptions to address concerns about the regulatory burden on community banks. For
example, banking organizations with less than $15 billion in consolidated assets as of December 31, 2009, are permitted to include in
Tier 1 capital trust preferred securities and cumulative perpetual preferred stock issued and included in Tier 1 capital prior to May 19,
2010, on a permanent basis without phase out. Community banks were also permitted to make a one-time election in their March 31,
2015, quarterly filings to opt-out of the requirement to include most accumulated other comprehensive income (“AOCI”) components
in the calculation of CET1 capital and, in effect, retain the AOCI treatment under the prior capital rules. Under the Basel III rules, we
made the one-time, permanent election to continue to exclude AOCI from capital.
In accordance with the Economic Growth, Regulatory Relief and Consumer Protection Act, depository institutions and depository
institution holding companies that have less than $10 billion in total consolidated assets and meet other qualifying criteria, including a
leverage ratio of greater than 9%, off-balance-sheet exposures of 25% or less of total consolidated assets and trading assets plus
trading liabilities of 5% or less of total consolidated assets, are deemed “qualifying community banking organizations” and are eligible
to opt into the community bank leverage ratio framework. A qualifying community banking organization that elects to use the
community bank leverage ratio framework and that maintains a leverage ratio of greater than 9% is considered to have satisfied the
generally applicable risk-based and leverage capital requirements under the Basel III rules and, if applicable, is considered to have met
the “well capitalized” ratio requirements for purposes of its primary federal regulator’s prompt corrective action rules, discussed
below. The final rules include a two-quarter grace period during which a qualifying community banking organization that temporarily
fails to meet any of the qualifying criteria, including the greater-than 9% leverage ratio requirement, is generally still deemed “well
capitalized” so long as the banking organization maintains a leverage ratio greater than 8%. A banking organization that fails to
maintain a leverage ratio greater than 8% is not permitted to use the grace period and must comply with the generally applicable
requirements under the Basel III Capital rules and file the appropriate regulatory reports. The Company and Equity Bank have not
made an election to use the community bank leverage ratio framework but may make such an election in the future if eligible and
doing so is advantageous.
Imposition of Liability for Undercapitalized Subsidiaries
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) required each federal banking agency to revise its
risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk and
the risks of nontraditional activities, as well as reflect the actual performance and expected risk of loss on multifamily mortgages.
Pursuant to FDICIA, each federal banking agency has specified, by regulation, the levels at which an insured institution would be
considered well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized. As
of December 31, 2024, Equity Bank exceeded the capital levels required to be deemed well capitalized.
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Additionally, FDICIA requires bank regulators to take prompt corrective action to resolve problems associated with insured
depository institutions. Under these prompt corrective action provisions of FDICIA, if a controlled bank is undercapitalized, then the
regulators could require the bank to submit a capital restoration plan. If an institution becomes significantly undercapitalized or
critically undercapitalized, additional and significant limitations are placed on the institution. The capital restoration plan of an
undercapitalized institution will not be accepted by the regulators unless each company having control of the undercapitalized
institution guarantees the subsidiary’s compliance with the capital restoration plan, until it becomes adequately capitalized. We have
control of Equity Bank for the purpose of this statute.
Further, by statute and regulation, a bank holding company must serve as a source of financial and managerial strength to each bank
that it controls and, under appropriate circumstances, may be required to commit resources to support each such controlled bank. This
support may be required at times when the bank holding company may not have the resources to provide the support. In addition, if
the Federal Reserve believes that a bank holding company’s activities, assets or affiliates represent a significant risk to the financial
safety, soundness or stability of a controlled bank, then the Federal Reserve could require the bank holding company to terminate the
activities, liquidate the assets or divest the affiliates. The regulators may require these and other actions in support of controlled banks
even if such actions are not in the best interests of the bank holding company or its stockholders.
Acquisitions by Bank Holding Companies
The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve before it may acquire all or
substantially all of the assets of any bank or ownership or control of any voting shares of any bank if after such acquisition it would
own or control, directly or indirectly, more than 5% of the voting shares of such bank. In approving bank acquisitions by bank
holding companies, the Federal Reserve is required to consider the financial and managerial resources and future prospects of the bank
holding company and banks concerned, the convenience and needs of the communities to be served, the effect on competition as well
as the financial stability of the United States. The Attorney General of the United States may, within 30 days after approval of an
acquisition by the Federal Reserve, bring an action challenging such acquisition under the federal antitrust laws, in which case the
effectiveness of such approval is stayed pending a final ruling by the courts. Under certain circumstances, the 30-day period may be
shortened to 15 days.
Control Acquisitions
The Change in Bank Control Act (“CBCA”) prohibits a person or group of persons from acquiring “control” of a bank holding
company unless the Federal Reserve has been notified and has not objected to the transaction. Under a rebuttable presumption
established by the Federal Reserve, the acquisition of 10% or more of a class of voting stock of a bank holding company with a class
of securities registered under Section 12 of the Exchange Act, such as ourselves, would, under the circumstances set forth in the
presumption, constitute acquisition of control of us.
In addition, the BHC Act prohibits any entity from acquiring 25% or more (the BHC Act has a lower limit for acquirers that are
existing bank holding companies) of a bank holding company’s or bank’s voting securities, or otherwise obtaining control or the
power to exercise a “controlling influence” over a bank holding company or bank, without the prior approval of the Federal Reserve.
On January 30, 2020, the Board of Governors of the Federal Reserve System adopted a final rule revising the Federal Reserve’s
regulations related to determinations of whether a company has the ability to exercise a controlling influence over another company,
including a bank holding company or a bank, for purposes of the BHC Act. The final rule establishes a comprehensive framework
that employs several factors to determine if a company has control over another company, including the first company’s total voting
and non-voting equity investment in the second company; director, officer and employee overlaps between the first company and the
second company; and the scope of business relationships between the first company and the second company. The final rule went into
effect on April 1, 2020.
Interstate Branching
The Dodd-Frank Act permits a national or state bank, with the approval of its regulator, to open a branch in any state if the law of the
state in which the branch is located would permit the establishment of the branch if the bank were a bank chartered in that state.
Anti-Tying Restrictions
Bank holding companies and their affiliates are prohibited from tying the provision of certain services, such as extensions of credit, to
other services offered by a holding company or its affiliates.
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Bank Regulation
Equity Bank operates under a Kansas state bank charter and is subject to regulation by the OSBC and the Federal Reserve. The OSBC
and the Federal Reserve regulate or monitor all areas of Equity Bank’s operations, including capital requirements, issuance of stock,
declaration of dividends, interest rates, deposits, loans, investments, borrowings, record keeping, establishment of branches,
acquisitions, mergers, information technology and employee responsibility and conduct. The OSBC places limitations on activities of
Equity Bank, including the issuance of capital notes or debentures and the holding of real estate and personal property and requires
Equity Bank to maintain a certain ratio of reserves against deposits. The OSBC requires Equity Bank to file a report annually, in
addition to any periodic report requested.
The Federal Reserve and the OSBC regularly examine Equity Bank and its records. The FDIC may also periodically examine and
evaluate insured banks.
Standards for Safety and Soundness
As part of FDICIA’s efforts to promote the safety and soundness of depository institutions and their holding companies, appropriate
federal banking regulators are required to have in place regulations specifying operational and management standards (addressing
internal controls, loan documentation, credit underwriting and interest rate risk), asset quality and earnings. As discussed above, the
Federal Reserve and the FDIC have extensive authority to police unsafe or unsound practices and violations of applicable laws and
regulations by depository institutions and their holding companies. For example, the FDIC may terminate the deposit insurance of any
institution that it determines has engaged in an unsafe or unsound practice. The agencies can also assess civil money penalties of up to
$1 million per day, issue cease-and-desist or removal orders, seek injunctions and publicly disclose such actions.
The ability of Equity Bank, as a Kansas state bank, to pay dividends is restricted under the Kansas Banking Code. Pursuant to the
Kansas Banking Code, a Kansas state bank may declare and pay a dividend out of undivided profits after deducting losses to the
holders of record of the stock outstanding on the date the dividend is declared. However, prior to the declaration of any dividend, a
Kansas state bank must transfer 25% of its net profits since the last preceding dividend to its surplus fund until the surplus fund is
equal to its total capital stock. In addition, no dividend may be declared without the approval of the OSBC, if such dividend would
reduce the surplus fund to an amount less than 30% of the resulting total capital of the bank.
Equity Bank is also subject to certain restrictions on the payment of dividends as a result of the requirement that it maintain an
adequate level of capital in accordance with guidelines promulgated from time to time by the federal regulators.
The present and future dividend policy of Equity Bank is subject to the discretion of its boards of directors. In determining whether to
pay dividends to us and, if paid, the amount of the dividends, the board of directors of Equity Bank considers many of the same factors
discussed above. Equity Bank cannot guarantee that it will have the financial ability to pay dividends to us, or if dividends are paid,
that they will be sufficient for us to make distributions to our stockholders. Equity Bank is not obligated to pay dividends.
Insider Transactions
A bank is subject to certain restrictions on extensions of credit to insiders of the bank or of any affiliate. Insiders include executive
officers, directors, certain principal stockholders and their related interests. Extensions of credit include derivative transactions,
repurchase and reverse repurchase agreements and securities borrowing and lending transactions to the extent that such transactions
cause a bank to have credit exposure to an insider. Any extension of credit to an insider must:
•
be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for
comparable transactions with third parties; and
•
involve no more than the normal risk of repayment or present other unfavorable features.
For loans above certain threshold amounts, board approval is required, and the interested insider may not be involved. In addition, a
bank may purchase an asset from or sell an asset to an insider only if the transaction is on market terms and if representing more than
10% of capital, is approved in advance by the majority of disinterested directors.
Additional and more stringent limits apply to a bank’s transactions with its own executive officers and certain directors. These limits
do not apply to transactions with all directors or to insiders of the bank’s affiliates.
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Restrictions on Transactions with Affiliates
Section 23A of the Federal Reserve Act imposes quantitative and qualitative limits on transactions between a bank and any affiliate
and requires certain levels of collateral for any such loans. It also limits the amount of advances to third parties which are
collateralized by the securities or obligations of a holding company. Section 23B of the Federal Reserve Act requires that certain
transactions between Equity Bank and its affiliates must be on terms substantially the same, or at least as favorable, as those prevailing
at the time for comparable transactions with or involving other nonaffiliated companies. In the absence of such comparable
transactions, any transaction between Equity Bank and its affiliates must be on terms and under circumstances, including credit
standards, which in good faith would be offered to or would apply to nonaffiliated companies.
Capital Adequacy
In addition to the capital rules applicable to both banks and bank holding companies discussed above, under the prompt corrective
action regulations, the federal bank regulators are required and authorized to take supervisory actions against undercapitalized banks.
For this purpose, a bank is placed in one of the following five categories based on the bank’s capital:
•
well capitalized (at least 5% leverage ratio, 6.5% CET1 risk-based capital ratio, 8% Tier 1 risk-based capital ratio and
10% total risk-based capital ratio);
•
adequately capitalized (at least 4% leverage ratio, 4.5% CET1 risk-based capital ratio, 6% Tier 1 risk-based capital ratio
and 8% total risk-based capital ratio);
•
undercapitalized (less than 4% leverage ratio, 4.5% CET1 risk-based capital ratio, 6% Tier 1 risk-based capital ratio or 8%
total risk-based capital ratio);
•
significantly undercapitalized (less than 3% leverage ratio, 3% CET1 risk-based capital ratio, 4% Tier 1 risk-based capital
ratio or 6% total risk-based capital ratio); and
•
critically undercapitalized (less than 2% tangible capital to total assets).
Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary
actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital
category in which the institution is placed. The regulators have the discretion to downgrade a bank from one category to a lower
category. Generally, subject to a narrow exception, banking regulators must appoint a receiver or conservator for an institution that is
“critically undercapitalized.” An institution that is categorized as “undercapitalized,” “significantly undercapitalized,” or “critically
undercapitalized” is required to submit an acceptable capital restoration plan to its appropriate federal banking agency.
Failure to meet capital guidelines could subject Equity Bank to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits and other restrictions on our
business.
As of December 31, 2024, Equity Bank exceeded the capital levels required to be deemed well capitalized.
Deposit Insurance
The FDIC insures the deposits of federally insured banks up to prescribed statutory limits for each depositor, through the Deposit
Insurance Fund (“DIF”) and safeguards the safety and soundness of the banking and thrift industries. The Dodd-Frank Act
permanently raised the standard maximum deposit insurance amount to $250,000. The amount of FDIC assessments paid by each
insured depository institution is based on its relative risk of default as measured by financial ratios and supervisory factors derived
from a statistical model that estimates a bank’s probability of failure within three years.
We are generally unable to control the amount of premiums that we are required to pay for FDIC insurance. At least semi-annually,
the FDIC will update its loss and income projections for the DIF and, if needed, will increase or decrease assessment rates, following
notice-and-comment rulemaking, if required. If there are additional bank or financial institution failures or if the FDIC otherwise
determines to increase assessment rates, Equity Bank may be required to pay higher FDIC insurance premiums. Any future increases
in FDIC insurance premiums may have a material and adverse effect on our earnings.
Consumer Financial Protection Bureau
The Dodd-Frank Act created the CFPB which is granted broad rulemaking, supervisory and enforcement powers under various federal
consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement
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Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy provisions of the Gramm-
Leach-Bliley Act and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository
institutions with $10 billion or more in assets. Depository institutions with less than $10 billion in assets, such as Equity Bank, are
subject to rules promulgated by the CFPB, which may increase their compliance risk and the costs associated with their compliance
efforts, but such banks will continue to be examined and supervised by federal banking regulators for consumer compliance purposes.
The CFPB has authority to prevent unfair, deceptive or abusive practices in connection with the offering of consumer financial
products.
The Dodd-Frank Act authorizes the CFPB to establish certain minimum standards for the origination of residential mortgages,
including a determination of the borrower’s ability to repay. In addition, the Dodd-Frank Act allows borrowers to raise certain
defenses to foreclosure if they receive any loan other than a “qualified mortgage” as defined by the CFPB.
The CFPB has issued a number of regulations related to the origination of mortgages, foreclosure and overdrafts as well as many other
consumer issues. Additionally, the CFPB has proposed, or will be proposing, additional regulations on issues that directly relate to
our business. Although it is difficult to predict at this time the extent to which the CFPB’s final rules impact the operations and
financial condition of Equity Bank, such rules may have a material impact on Equity Bank’s compliance costs, compliance risk and
fee income.
Privacy
Under the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of financial records, financial institutions are required to disclose
their policies for collecting and protecting confidential information. Customers generally may prevent financial institutions from
sharing personal financial information with nonaffiliated third parties except for third parties that market the institutions’ own
products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated
third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to consumers.
Recent cyber-attacks against banks and other institutions that resulted in unauthorized access to confidential customer information
have prompted the federal banking agencies to issue extensive guidance on cybersecurity. The regulatory agencies may devote more
resources to this part of their safety and soundness examination than they may have in the past.
Like other lending institutions, our subsidiary bank uses credit bureau data in its underwriting activities. Use of that data is regulated
under the Federal Credit Reporting Act on a uniform, nationwide basis. The act and its implementing regulation, Regulation V, cover
credit reporting, prescreening, sharing of information between affiliates and the use of credit data. The Fair and Accurate Credit
Transactions Act of 2003 allows states to enact identity theft laws that are not inconsistent with the conduct required by the provisions
of the act.
The Patriot Act, International Money Laundering Abatement and Financial Anti-Terrorism Act and Bank Secrecy Act
A major focus of governmental policy on financial institutions has been aimed at combating money laundering and terrorist financing.
The Patriot Act and the International Money Laundering and Financial Anti-Terrorism Act of 2001 substantially broadened the scope
of U.S. anti-money laundering laws and penalties, specifically related to the Bank Secrecy Act and expanded the extra-territorial
jurisdiction of the United States. The U.S. Treasury has issued a number of implementing regulations that apply various requirements
of the Patriot Act to financial institutions, such as Equity Bank. These regulations impose obligations on financial institutions to
maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to
verify the identity of their customers.
Failure of a financial institution and its holding company to maintain and implement adequate programs to combat money laundering
and terrorist financing, or to comply with relevant laws and regulations, could have serious legal, reputational and financial
consequences for the institution. Because of the significance of regulatory emphasis on these requirements, Equity Bank will continue
to expend significant staffing, technology and financial resources to maintain programs designed to ensure compliance with applicable
laws and regulations and an effective audit function for testing of Equity Bank’s compliance with the Bank Secrecy Act, on an
ongoing basis.
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The Community Reinvestment Act
The Community Reinvestment Act (“CRA”) and related regulations are intended to encourage banks to help meet the credit needs of
their service areas, including low- and moderate-income neighborhoods, consistent with safe and sound operations. The bank
regulators examine and assign each bank a public CRA rating. The CRA requires bank regulators to take into account the bank’s
record in meeting the needs of its service area when considering an application by a bank to establish or relocate a branch or to
conduct certain mergers or acquisitions. The Federal Reserve is required to consider the CRA records of a bank holding company’s
controlled banks when considering an application by the bank holding company to acquire a banking organization or to merge with
another bank holding company. When we or the Bank apply for regulatory approval to engage in certain transactions, the regulators
will consider the CRA record of target institutions and our depository institution subsidiaries. An unsatisfactory CRA record could
substantially delay approval or result in a withdrawal or denial of an application. The regulatory agency’s assessment of the
institution’s record is made available to the public. The Bank received an overall CRA rating of “satisfactory” on its most recent CRA
examination.
In October 2023, the FDIC, the Federal Reserve and the Office of the Comptroller of the Currency (“OCC”) jointly adopted a final
rule that amends their regulations implementing the CRA. The final rule adopts key changes to existing CRA regulations, including:
1.
Changes to the asset threshold of the different bank categories covered under the regulations.
2.
Changes to activities that qualify for CRA credit.
3.
New types of assessment areas that allow for increased flexibility in obtaining CRA credit.
4.
New data collection and reporting obligations.
The final rule's effective date is April 1, 2024; however, most of the rule's new requirements will be applicable beginning January 1,
2026. The new data reporting requirements will be applicable on January 1, 2027.
Cybersecurity
Federal bank regulatory agencies have adopted guidelines for establishing information security standards and cybersecurity programs
for implementing safeguards. These guidelines, along with related regulatory materials, increasingly focus on risk management and
processes related to information technology and the use of third parties in the provision of financial services. State regulators have also
been increasingly active in implementing privacy and cybersecurity standards and regulations. Many states have also recently
implemented or modified their data breach notification, information security and data privacy requirements. We expect this trend of
state-level activity in those areas to continue and are continually monitoring developments in the states in which our customers are
located.
The federal banking regulators regularly issue new guidance and standards, and update existing guidance and standards, regarding
cybersecurity intended to enhance cyber risk management among financial institutions. Financial institutions are expected to comply
with such guidance and standards and to accordingly develop appropriate security controls and risk management processes. If we fail
to observe such regulatory guidance or standards, we could be subject to various regulatory sanctions, including financial penalties.
Federal banking regulators have imposed a cybersecurity-related notification rules that requires banking organizations to notify their
primary federal regulator as soon as possible and within 36 hours of incidents that, among other things, have materially disrupted or
degraded, or are reasonably likely to materially disrupt or degrade, the banking organization’s ability to deliver services to a material
portion of its customer base, jeopardize the viability of key operations of the banking organization or impact the stability of the
financial sector. The rule also imposes requirements on bank service providers to notify their affected banking organization customers
of certain computer-security incidents.
Further, In July 2023, the SEC adopted rules requiring public companies to disclose material cybersecurity incidents they experience
and to disclose on an annual basis material information regarding their cybersecurity risk management, processes, strategy, and
governance. The rules also generally require public companies to disclose on Form 8-K any cybersecurity incident it determines to be
material within four business days of such determination and to describe the material aspects of the incident's nature, scope, and
timing, as well as its material impact or reasonably likely material impact on the company. See Item 1C. Cybersecurity for a
discussion of the Company’s cybersecurity risk management, strategy and governance.
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Other Regulations
Interest and other charges that Equity Bank collects or contracts for are subject to state usury laws and federal laws concerning interest
rates. Equity Bank’s loan operations are also subject to federal laws applicable to credit transactions, such as:
•
the Federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
•
the Fair Housing Act;
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the Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public
officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the
community it serves;
•
the Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in
extending credit;
•
the Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;
•
the Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and
•
the rules and regulations of the various governmental agencies charged with the responsibility of implementing these
federal laws.
In addition, Equity Bank’s deposit operations are subject to the Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve to implement such act, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and
liabilities arising from the use of automated teller machines and other electronic banking services.
Violations of consumer protection laws and other regulations can result in significant potential liability, including actual damages,
restitution and injunctive relief from litigation brought by customers, state attorney generals, the Department of Justice and other
plaintiffs, as well as enforcement actions by banking regulators and reputational harm.
Concentrated Commercial Real Estate Lending Regulations
The Federal Reserve and other federal banking regulatory agencies have promulgated guidance governing financial institutions with
concentrations in commercial real estate lending. The guidance provides that a bank may be exposed to heightened commercial real
estate lending concentration risk and subject to further supervisory analysis if (i) total reported loans for construction, land
development and other land represent 100% or more of total capital or (ii) total reported loans secured by multifamily residential
properties, non-farm non-residential properties and loans for construction, land development and other land, together with loans to
finance commercial real estate, construction and land development activities that are not secured by real estate, represent 300% or
more of total capital and the bank’s commercial real estate loan portfolio has increased 50% or more during the prior 36 months. If a
concentration is present, management is expected to employ heightened risk management practices including board and management
oversight and strategic planning, development of underwriting standards, risk assessment and monitoring through market analysis and
stress testing and increasing capital requirements.
Effect of Governmental Monetary Policies
The commercial banking business is affected not only by general economic conditions but also by both U.S. fiscal policy and the
monetary policies of the Federal Reserve. Some of the instruments of fiscal and monetary policy available to the Federal Reserve
include changes in the discount rate on member bank borrowings, the fluctuating availability of borrowings at the “discount window,”
open market operations, the imposition of and changes in reserve requirements against member banks’ deposits and assets of foreign
branches, the imposition of and changes in reserve requirements against certain borrowings by banks and their affiliates and the
placing of limits on interest rates that member banks may pay on time and savings deposits. Such policies influence, to a significant
extent, the overall growth of bank loans, investments and deposits and the interest rates charged on loans or paid on time and savings
deposits. We cannot predict the nature of future fiscal and monetary policies and the effect of such policies on the future business and
our earnings.
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Item 1A: Risk Factors
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control. The
material risks and uncertainties that management believes affect the Company are described below. Additional risks and uncertainties
that management is not aware of, or that management currently deems immaterial, may also impair the Company’s business
operations. This report is qualified in its entirety by these risk factors. If any of the following risks actually occur, our business,
financial condition and results of operations could be materially and adversely affected. If this were to happen, the value of our
securities could decline significantly, and you could lose all or part of your investment. Some statements in the following risk factors
constitute forward-looking statements. Please refer to “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this
Annual Report on Form 10-K.
Summary of Risk Factors
Our risk factors can be broadly summarized by the following categories:
•
Economic Risks
•
Credit and Interest Rate Risks
•
Strategic Risks
•
Risks Relating to the Regulation of Our Industry
•
Risks Relating to the Company’s Common Stock
•
General Risks
While not an exhaustive list, the principal risks that we believe could adversely affect our business, financial condition or results of
operations include:
•
a change in economic conditions or a return to recessionary conditions could result in increases in our level of nonperforming loans and/or
reduced demand for our products and services;
•
the value of real estate collateral may fluctuate significantly resulting in an under-collateralized loan portfolio;
•
unstable global economic conditions may have serious adverse consequences on our business, financial condition, and operations;
•
external economic factors, such as changes in monetary policy and inflation and deflation as well as the possibility of U.S. tariffs and
retaliatory tariffs, may have an adverse effect on our business, financial condition and results of operations;
•
inability to effectively manage or adequately measure credit risk;
•
we could suffer losses from a decline in the credit quality of the assets that we hold;
•
a significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market could negatively
impact our business;
•
a large portion of our loan portfolio is comprised of commercial loans that are secured by accounts receivable, inventory, equipment or
other asset-based collateral, and deterioration in the value of such collateral could increase our exposure to future probable losses;
•
our largest lending relationships currently make up a material percentage of our total loan portfolio;
•
our profitability is vulnerable to interest rate fluctuations;
•
market interest rates for loans, investments and deposits are highly sensitive to many factors beyond our control;
•
our financial instruments expose us to certain market risks and may increase the volatility of earnings and AOCI;
•
the outbreak of an epidemic, pandemic or highly contagious disease occurring in the United States or in the geographies in which we
conduct operations;
•
our financial performance will be negatively impacted if we are unable to execute our growth strategy;
•
our strategy of pursuing acquisitions exposes us to financial, execution, compliance and operational risks;
•
acquisitions may disrupt our business, dilute stockholder value and be costly to integrate;
•
we rely heavily on our management team and could be adversely affected by the unexpected loss of key officers;
•
our business is concentrated in, and largely dependent upon, the continued growth and welfare of the general geographic markets in which
we operate;
•
our ability to grow our loan portfolio may be limited;
•
we may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices;
•
our future profitability levels are dependent on our ability to grow and maintain deposits at competitive costs;
•
our ability to retain bankers and recruit additional successful bankers is critical to the success of our business strategy;
•
a lack of liquidity could adversely affect our financial condition and results of operations;
•
our financial projections are based upon numerous assumptions about future events and our actual financial performance may differ
materially from our projections if our assumptions are inaccurate;
•
we continually encounter technological change and may have fewer resources than our competitors;
•
our information systems may experience a failure or interruption;
•
we use information technology in our operations and offer online banking services to our customers, and unauthorized access to our or our
customers’ confidential or proprietary information as a result of a cyber-attack or otherwise;
•
we are dependent upon outside third parties for the processing and handling of our records and data;
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•
the development and use of AI presents risks and challenges that may adversely impact the Company's business;
•
if our enterprise risk management framework is not effective at mitigating risk and loss to us;
•
changes in accounting standards could materially impact our financial statements;
•
if the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could require charges to
earnings, which would adversely affect our business, financial condition and results of operations;
•
we may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could harm liquidity,
results of operations and financial condition;
•
increasing scrutiny and evolving expectations from customers, regulators, investors and other stakeholders with respect to our
environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks;
•
we are subject to extensive regulations in the conduct of our business, which imposes additional costs on us;
•
changes in laws, government regulation and monetary policy may have a material effect on our results of operations;
•
significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions that could, in
turn, adversely impact our business, results of operations and financial conditions;
•
the company faces risks related to the adoption of future legislation and potential changes in federal regulatory agency leadership, policies,
and priorities;
•
the CFPB has reshaped the consumer financial laws through rulemaking and enforcement of the prohibitions against unfair, deceptive and
abusive business practices. Compliance with such initiatives may impact the business operations of depository institutions offering
consumer financial products or services, including the Company;
•
a protracted government shutdown may result in reduced loan originations and related gains on sales could negatively affect our financial
condition and results of operations;
•
our banking subsidiary may be required to pay higher FDIC insurance premiums or special assessments;
•
we are subject to certain capital requirements by regulators;
•
we are subject to stringent capital requirements, which may adversely impact our return on equity or constrain us from paying dividends or
repurchasing shares;
•
we may need to raise additional capital in the future and the capital may not be available when it is needed or may be dilutive to
stockholders;
•
we are subject to the Bank Secrecy Act and other anti-money laundering statutes and regulations, and any deemed deficiency by us with
respect to these laws could result in significant liability;
•
the laws that regulate our operations are designed for the protection of depositors and the public, not our stockholders;
•
as a bank holding company, the sources of funds available to us are limited;
•
recent negative developments affecting the banking industry, and resulting media coverage, may have eroded customer confidence in the
banking system;
•
any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry could increase
the Company's expenses and affect the Company's operation;
•
climate change related legislative and regulatory initiatives, have the potential to disrupt our business and adversely impact the operations
and creditworthiness of our customers
•
the market price of our Class A common stock may be subject to substantial fluctuations which may make it difficult for you to sell your
shares at the volumes, prices and times desired;
•
the obligations associated with being a public company requires significant resources and management attention;
•
there is no guarantee that we will declare or pay cash dividends on our common stock;
•
securities analysts may not initiate or continue coverage on our Class A common stock, which could adversely affect the market for our
Class A common stock;
•
use of our common stock for future acquisitions or to raise capital may be dilutive to existing stockholders;
•
a future issuance of stock could dilute the value of our Class A common stock;
•
we have significant institutional investors whose interests may differ from yours;
•
our directors and executive officers beneficially own a significant portion of our Class A common stock and have substantial influence over
us;
•
shares of our Class A common stock are not insured deposits and may lose value;
•
we have the ability to incur debt and pledge our assets, including our stock in Equity Bank, to secure that debt, and holders of any such debt
obligations will generally have priority over holders of our Class A common stock with respect to certain payment obligations;
•
if we fail to maintain an effective system of disclosure controls and procedures and internal control over financial reporting, we may not be
able to accurately report our financial results or prevent fraud;
•
our board of directors may issue shares of preferred stock that would adversely affect the rights of our Class A common stockholders;
•
the return on your investment in our Class A common stock is uncertain;
•
we operate in a highly competitive industry and face significant competition from other banking organizations;
•
as a community bank, our ability to maintain our reputation is critical to the success of our business, and the failure to do so may materially
adversely affect our performance;
•
we are subject to environmental risk in our lending activities;
•
we are subject to claims and litigation pertaining to intellectual property;
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•
we have pledged all of the stock of Equity Bank as collateral for a loan, and if the lender forecloses, you could lose your investment; and
•
we have outstanding subordinated debt obligations, and if the Company defaults on those obligations, the debt holders could lose their
investment.
The foregoing factors should not be construed as exhaustive. This summary of risk factors should be read in conjunction with the
more detailed risk factors below.
Economic Risks
Recessionary conditions could result in increases in our level of nonperforming loans and/or reduced demand for our
products and services, which could have an adverse effect on our results of operations.
Economic recession or other economic problems, including those affecting our markets and regions, but also those affecting the
U.S. or world economies, could have a material adverse impact on the demand for our products and services. If economic conditions
deteriorate, or if there are negative developments affecting the domestic and international credit markets, the value of our loans and
investments may be harmed, which in turn would have an adverse effect on our financial performance and our financial condition may
be adversely affected. In addition, although deteriorating market conditions could adversely affect our financial condition, results of
operations and cash flows, we may not benefit from any market growth or favorable economic conditions, either in our primary
market areas or nationally, even if they do occur.
Changes in economic conditions could cause an increase in delinquencies and nonperforming assets, including loan charge-
offs, which could depress our net income and growth.
Our loan portfolio includes many real estate secured loans, demand for which may decrease during economic downturns as a
result of, among other things, an increase in unemployment, a decrease in real estate values and a slowdown in housing. If we see
negative economic conditions develop in the United States as a whole or in our Arkansas, Kansas, Missouri and Oklahoma markets,
we could experience higher delinquencies and loan charge-offs, which would reduce our net income and adversely affect our financial
condition. Furthermore, to the extent that real estate collateral is obtained through foreclosure, the costs of holding and marketing the
real estate collateral, as well as the ultimate values obtained from disposition, could reduce our earnings and adversely affect our
financial condition.
Unstable global economic conditions may have serious adverse consequences on our business, financial condition, and
operations.
The global credit and financial markets have from time-to-time experienced extreme volatility and disruptions, including
severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in
unemployment rates, high rates of inflation, and uncertainty about economic stability. Changes in trade policies by the United States
or other countries, such as tariffs or retaliatory tariffs, may cause inflation which could impact the prices of products sold by our
borrowers and have the potential to reduce demand for their products impacting their profitability and making it difficult for our
borrowers to repay their loans. The financial markets and the global economy may also be adversely affected by the current or
anticipated impact of military conflict, including the conflict between Russia and Ukraine, and the conflict in the Middle East. These
events have increased and are expected to continue to increase volatility in commodity and energy prices, including oil, and
continuing hostilities raise the possibility of supply disruptions. Rising tensions and global instability have the potential to affect
consumer confidence in the U.S. and abroad, therefore having a broader effect on financial markets. Changes in trade policies or
sanctions imposed by the United States and other countries in response to such conflict could further adversely impact the financial
markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and
economic instability. Our general business strategy may be adversely affected by any such economic downturn, volatile business
environment, hostile third-party action or continued unpredictable and unstable market conditions.
The value of real estate collateral may fluctuate significantly resulting in an under-collateralized loan portfolio.
The market value of real estate, particularly real estate held for investment, can fluctuate significantly in a short period of time
as a result of market conditions in the geographic area in which the real estate is located. If the value of the real estate serving as
collateral for our loan portfolio were to decline materially, a significant part of our loan portfolio could become under-collateralized.
If the loans that are collateralized by real estate become troubled during a time when market conditions are declining or have declined,
then, in the event of foreclosure, we may not be able to realize the amount of collateral that we anticipated at the time of originating
the loan. This could have a material adverse effect on our provision for credit losses and our operating results and financial condition.
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External economic factors, such as changes in monetary policy and inflation and deflation, may have an adverse effect on
our business, financial condition and results of operations.
Our financial condition and results of operations are affected by credit policies of monetary authorities, particularly the Federal
Reserve. Actions by monetary and fiscal authorities, including the Federal Reserve, could lead to inflation, deflation or other
economic phenomena that could adversely affect our financial performance. The primary impact of inflation on our operations most
likely will be reflected in increased operating costs. Conversely, deflation generally will tend to erode collateral values and diminish
loan quality. Virtually all of our assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact
on our performance than general levels of inflation or deflation. Interest rates do not necessarily move in the same direction or by the
same magnitude as the prices of goods and services.
Volatility in commodity prices may adversely affect our financial condition and results of operations.
In addition to the geographic concentration of our markets, certain industry-specific economic factors also affect us. For
example, while we do not have a concentration in energy lending, the industry is cyclical and recently has experienced a significant
volatility in crude oil and natural gas prices. In addition, we make loans to customers involved in the agricultural industry, many of
whom are also impacted by fluctuations in commodity prices. Volatility in commodity prices could adversely impact the ability of
borrowers in these industries to perform under the terms of their borrowing arrangements with us and, as a result, a severe and
prolonged decline in commodity prices may adversely affect our financial condition and results of operations. It is also difficult to
project future commodity prices as they are dependent upon many different factors beyond our control.
Credit and Interest Rate Risks
Inability to effectively manage credit risk.
As a lender, we are exposed to the risk that our loan customers may not repay their loans according to the terms of these loans
and the collateral securing the payment of these loans may be insufficient to fully compensate us for the outstanding balance of the
loan plus the costs to dispose of the collateral. We may experience significant credit losses, which could have a material adverse
effect on our operating results and financial condition. Management makes various assumptions and judgments about the
collectability of our loan portfolio, including the diversification by industry of our commercial loan portfolio, the amount of
nonperforming loans and related collateral, the volume, growth and composition of our loan portfolio, the effects on the loan portfolio
of current economic indicators and their probable impact on borrowers and the evaluation of our loan portfolio through our internal
loan review process and other relevant factors.
We maintain an allowance for credit losses, which is an allowance established through a provision for credit losses charged to
expense that represents management’s best estimate of credit losses in our loan portfolio. Additional credit losses will likely occur in
the future and may occur at a rate greater than we have experienced to date. In determining the amount of the allowance, we rely on
an analysis of our loan portfolio, our experience and our evaluation of general economic conditions. If our assumptions, prove to be
incorrect, our current allowance may not be sufficient and adjustments may be necessary to allow for different economic conditions or
adverse developments in our loan portfolio. In addition, as an acquirer of other banks, our allowance for credit losses may not be
sufficient when coupled with purchase discounts on acquired portfolios. Material additions to the allowance could materially decrease
our net income.
In addition, banking regulators periodically review our allowance for credit losses and may require us to increase our provision
for credit losses or recognize further charge-offs, based on judgments different than those of our management. Any increase in our
allowance for credit losses or charge-offs as required by these regulatory agencies could have a material negative effect on our
operating results, financial condition and liquidity.
We could suffer losses from a decline in the credit quality of the assets that we hold.
We could sustain losses if borrowers, guarantors, and related parties fail to perform in accordance with the terms of their loans.
We have adopted underwriting and credit monitoring procedures and policies that we believe are appropriate to minimize this risk,
including the establishment and review of the allowance for credit losses, periodic assessment of the likelihood of nonperformance,
tracking loan performance and diversifying our credit portfolio. These policies and procedures, however, may not prevent unexpected
losses that could have a material adverse effect on our financial condition and results of operations. In particular, we face credit
quality risks presented by past, current and potential economic and real estate market conditions.
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A significant portion of our loan portfolio is secured by real estate, and events that negatively impact the real estate market
could negatively impact our business.
There are significant risks associated with real estate-based lending. Real estate collateral may deteriorate in value during the
time that credit is extended, in which case we might not be able to sell such collateral for an amount necessary to satisfy a defaulting
borrower’s obligation to us. In that event, there could be a material adverse effect on our financial condition and results of operations.
Additionally, commercial real estate loans are subject to unique risks. These types of loans are often viewed as having more risks than
residential real estate or other consumer loans, primarily because relatively large amounts are loans to a relatively small number of
borrowers. Thus, the deterioration of even a small number of these loans could cause a significant increase in the allowance for credit
losses or loan charge-offs, which in turn could have a material adverse effect on our financial condition and results of operations.
Furthermore, commercial real estate loans depend on cash flows from the property securing the debt. Cash flows may be affected
significantly by general economic conditions and a downturn in a local economy in one of our markets or in occupancy rates where a
property is located could increase the likelihood of default.
The foregoing risks are enhanced as a result of the limited geographic scope of our principal markets. Most of the real estate
securing our loans is located in our Arkansas, Kansas, Missouri and Oklahoma markets. Because the value of this collateral depends
upon local real estate market conditions and is affected by, among other things, neighborhood characteristics, real estate tax rates, the
cost of operating the properties and local governmental regulation, adverse changes in any of these factors in our markets could cause
a decline in the value of the collateral securing a significant portion of our loan portfolio. Further, the concentration of real estate
collateral in these four markets limits our ability to diversify the risk of such occurrences.
A large portion of our loan portfolio is comprised of commercial loans that are secured by accounts receivable, inventory,
equipment or other asset-based collateral, and deterioration in the value of such collateral could increase our exposure to future
probable losses.
These commercial loans are typically larger in amount than loans to individuals and therefore, have the potential for larger
losses on a single loan basis. Additionally, asset-based borrowers are often highly leveraged and have inconsistent historical earnings
and cash flows. Historically, losses in our commercial credits have been higher than losses in other classes of our loan portfolio.
Significant adverse changes in our borrowers’ industries and businesses could cause rapid declines in values of, and collectability
associated with, those business assets, which could result in inadequate collateral coverage for our commercial loans and expose us to
future losses. An increase in specific reserves and charge-offs related to our commercial loan portfolio could have a material adverse
effect on our business, financial condition, results of operations and future prospects.
Our use of appraisals in deciding whether to make a loan secured by real property does not ensure the value of the real
property collateral.
In considering whether to make a loan secured by real property, we generally require an appraisal. However, an appraisal is
only an estimate of the value of the property at the time the appraisal is made. If the appraisal does not reflect the amount that may be
obtained upon any sale or foreclosure of the property, we may not realize an amount equal to the indebtedness secured by the property.
A portion of our loan portfolio is comprised of participation and syndicated transaction interests, which could have an
adverse effect on our ability to monitor the lending relationships and lead to an increased risk of loss.
We participate in loans originated by other institutions and in syndicated transactions (including shared national credits) in
which other lenders serve as the agent bank. Our reduced control over the monitoring and management of these relationships,
particularly participations in large bank groups, could lead to increased risk of loss, which could have a material adverse effect on our
business, financial condition, results of operations and future prospects.
Our largest loan relationships currently make up a material percentage of our total loan portfolio.
As of December 31, 2024, our ten largest loan relationships totaled over $314.6 million in loan exposure, or 9.0% of the total
loan portfolio. The concentration risk associated with having a small number of large loan relationships is that, if one or more of these
relationships were to become delinquent or suffer default, we could be at serious risk of material losses. The allowance for credit
losses may not be adequate to cover losses associated with any of these relationships and any loss or increase in the allowance would
negatively affect our earnings and capital. Even if the loans are collateralized, the large increase in classified assets could harm our
reputation with our regulators, investors and potential investors and inhibit our ability to execute our business plan.
27
We may not be able to adequately measure and limit the credit risk associated with our loan portfolio, which could adversely
affect our profitability.
As a part of the products and services that we offer, we make commercial and commercial real estate loans. The principal
economic risk associated with each class of loans is the creditworthiness of the borrower, which is affected by the strength of the
relevant business market segment, local market conditions and general economic conditions. Additional factors related to the credit
quality of commercial loans include the quality of the management of the business and the borrower’s ability both to properly evaluate
changes in the supply and demand characteristics affecting our market for products and services and to effectively respond to those
changes. Additional factors related to the credit quality of commercial real estate loans include tenant vacancy rates and the quality of
management of the property. A failure to effectively measure and limit the credit risk associated with our loan portfolio could have an
adverse effect on our business, financial condition and results of operations.
We could be adversely affected by the soundness of other financial institutions.
Financial services institutions are interrelated as a result of trading, clearing, counterparty or other relationships. We have
exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial
services industry, including commercial banks, brokers and dealers, investment banks and other institutional clients. Many of these
transactions expose us to credit risk in the event of a default by a counterparty or client. In addition, our credit risk may be
exacerbated when our collateral cannot be foreclosed upon or is liquidated at prices not sufficient to recover the full amount of the
credit or derivative exposure due. Any such losses could adversely affect our business, financial condition and results of operations.
Our profitability is vulnerable to interest rate fluctuations.
Our profitability depends substantially upon our net interest income. Net interest income is the difference between the interest
earned on assets (such as loans and securities held in our investment portfolio) and the interest paid for liabilities (such as interest paid
on savings and money market accounts and time deposits). Income associated with interest-earning assets and costs associated with
interest-bearing liabilities may not be affected uniformly by fluctuations in interest rates. The magnitude and duration of changes in
interest rates are events over which we have no control and such changes may have an adverse effect on our net interest income.
Prepayment and early withdrawal levels, which are also impacted by changes in interest rates, can significantly affect our assets and
liabilities. For example, an increase in interest rates could, among other things, reduce the demand for loans and decrease loan
repayment rates. Such an increase could also adversely affect the ability of our floating-rate borrowers to meet their higher payment
obligations, which could in turn lead to an increase in nonperforming assets and net charge-offs. Conversely, a decrease in the general
level of interest rates could affect us by, among other things, leading to greater competition for deposits and incentivizing borrowers to
prepay or refinance their loans more quickly or frequently than they otherwise would. The primary tool that management uses to
measure interest rate risk is a simulation model that evaluates the impact of varying levels of prevailing interest rates and the impact
on net interest income and the economic value of equity. Generally, the interest rates on our interest-earning assets and interest-
bearing liabilities do not change at the same rate, to the same extent or on the same basis. Even assets and liabilities with similar
maturities or re-pricing periods may react in different degrees to changes in market interest rates. Interest rates on certain types of
assets and liabilities may fluctuate in advance of changes in general market interest rates, while interest rates on other types of assets
and liabilities may lag behind changes in general market rates. Certain assets, such as fixed and adjustable rate mortgage loans, have
features that limit changes in interest rates on a short-term basis and over the life of the asset. Changes in interest rates could
materially and adversely affect our financial condition and results of operations. See “Item 7A – Quantitative and Qualitative
Disclosure About Market Risk” for a discussion of interest rate risk modeling and the inherent risks in modeling assumptions.
Market interest rates for loans, investments and deposits are highly sensitive to many factors beyond our control.
Generally, interest rate spreads (the difference between interest rates earned on assets and interest rates paid on liabilities) have
narrowed in recent years as a result of changing market conditions, policies of various government and regulatory authorities and
competitive pricing pressures and we cannot predict whether these rate spreads will narrow even further. This narrowing of interest
rate spreads could adversely affect our financial condition and results of operations. In addition, we cannot predict whether interest
rates will continue to remain at present levels. Changes in interest rates may cause significant changes, up or down, in our net interest
income.
We attempt to minimize the adverse effects of changes in interest rates by structuring our asset-liability composition in order to
obtain the maximum spread between interest income and interest expense. However, there can be no assurance that we will be
successful in minimizing the adverse effects of changes in interest rates. Depending on our portfolio of loans and investments, our
financial condition and results of operations may be adversely affected by changes in interest rates.
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Our financial instruments expose us to certain market risks and may increase the volatility of earnings and AOCI.
We hold certain financial instruments measured at fair value. For those financial instruments measured at fair value, we are
required to recognize the changes in the fair value of such instruments in earnings or accumulated other comprehensive income
(“AOCI”) each quarter. Therefore, any increases or decreases in the fair value of these financial instruments have a corresponding
impact on reported earnings or AOCI. Fair value can be affected by a variety of factors, many of which are beyond our control,
including our credit position, interest rate volatility, capital markets volatility, and other economic factors. Accordingly, we are subject
to mark-to-market risk and the application of fair value accounting may cause our earnings and AOCI to be more volatile than would
be suggested by our underlying performance.
Strategic Risks
Global health pandemics or outbreaks of highly contagious diseases occurring in the United States or in the geographies in
which we conduct operations, could adversely affect the Company’s business operations, asset valuations, financial condition and
results of operations.
The Company’s business is dependent upon the willingness and ability of our customers to conduct banking and other financial
transactions. Outbreaks of highly contagious or infectious diseases could negatively impact the ability of our employees and customers
to conduct such transactions and disrupt the business activities and operations of our customers in the geographic areas in which we
operate. The COVID-19 pandemic caused changes in the behavior of customers, businesses, and their employees, including illness,
quarantines, social distancing practices, cancellation of events and travel, business and school shutdowns, reduction in commercial
activity and financial transactions, supply chain interruptions, increased unemployment, and overall economic and financial market
instability. Similar impacts could be experienced in the future if such an outbreak or pandemic were to occur again. Notwithstanding
our contingency plans and other safeguards against pandemics or another contagious disease, the spread of contagion could negatively
impact the availability of Equity Bank staff who are necessary to conduct our business operations, as well as potentially impact the
business and operations third party service providers who perform critical services for us. If the response to contain a similar highly
infectious or contagious disease, is unsuccessful, the Company could experience a material adverse effect on our business operations,
asset valuations, financial condition, and results of operations. Material adverse impacts may include all or a combination of valuation
impairments on the Company’s intangible assets, investments, loans, loan servicing rights, deferred tax assets, or counter-party risk
derivatives.
Our financial performance will be negatively impacted if we are unable to execute our growth strategy.
Our current growth strategy is to grow organically and supplement that growth with select acquisitions. Our ability to grow
organically depends primarily on generating loans and deposits of acceptable risk and expense and we may not be successful in
continuing this organic growth. Our ability to identify appropriate markets for expansion, recruit and retain qualified personnel and
fund growth at a reasonable cost depends upon prevailing economic conditions, maintenance of sufficient capital, competitive factors,
and changes in banking laws, among other factors. Conversely, if we grow too quickly and are unable to control costs and maintain
asset quality, such growth, whether organic or through select acquisitions, could materially and adversely affect our financial
condition and results of operations.
We may not be able to identify and acquire other financial institutions, which could hinder our ability to continue to grow.
A substantial part of our historical growth has been a result of acquisitions of other financial institutions. We intend to continue
our strategy of evaluating and selectively acquiring other financial institutions that serve customers or markets we find desirable.
However, the market for acquisitions remains highly competitive and we may be unable to find satisfactory acquisition candidates in
the future that fit our acquisition strategy. To the extent that we are unable to find suitable acquisition candidates, an important
component of our strategy may be lost. If we are able to identify attractive acquisition opportunities, we must generally satisfy a
number of conditions prior to completing any such transaction, including certain bank regulatory approval, which has become
substantially more difficult, time-consuming and unpredictable as a result of the recent financial crisis. Additionally, any future
acquisitions may not produce the revenue, earnings or synergies that we anticipated.
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Our strategy of pursuing acquisitions exposes us to financial, execution, compliance and operational risks that could have a
material adverse effect on our business, financial condition, results of operations and growth prospects.
We intend to continue pursuing a strategy that includes acquisitions. An acquisition strategy involves significant risks,
including the following:
•
finding suitable candidates for acquisition;
•
attracting funding to support additional growth within acceptable risk tolerances;
•
maintaining asset quality;
•
retaining customers and key personnel, including bankers;
•
obtaining necessary regulatory approvals, which we may have difficulty obtaining or be unable to obtain;
•
conducting adequate due diligence and managing known and unknown risks and uncertainties;
•
integrating acquired businesses; and
•
maintaining adequate regulatory capital.
The market for acquisition targets is highly competitive, which may adversely affect our ability to find acquisition candidates
that fit our strategy and standards. We face significant competition in pursuing acquisition targets from other banks and financial
institutions, many of which possess greater financial, human, technical and other resources than we do. Our ability to compete in
acquiring target institutions will depend on our available financial resources to fund the acquisitions, including the amount of cash and
cash equivalents we have and the liquidity and market price of our Class A common stock. In addition, increased competition may
also drive up the acquisition consideration that we will be required to pay in order to successfully capitalize on attractive acquisition
opportunities. To the extent that we are unable to find suitable acquisition targets, an important component of our growth strategy
may not be realized.
Acquisitions of financial institutions and branches also involve operational risks and uncertainties, such as unknown or
contingent liabilities with no available manner of recourse, exposure to unexpected problems such as asset quality, the retention of key
employees and customers and other issues that could negatively affect our business. We may not be able to complete future
acquisitions or, if completed, we may not be able to successfully integrate the operations, technology platforms, management,
products and services of the entities that we acquire or to realize our attempts to eliminate redundancies. The integration process may
also require significant time and attention from our management that would otherwise be directed toward servicing existing business
and developing new business. Failure to successfully integrate the entities we acquire into our existing operations in a timely manner
may increase our operating costs significantly and adversely affect our business, financial condition and results of operations. Further,
acquisitions typically involve the payment of a premium over book and market values and therefore, some dilution of our tangible
book value and net income per common share may occur in connection with any future acquisition and the carrying amount of any
goodwill that we currently maintain or may acquire may be subject to impairment in future periods.
If we continue to grow, we will face risks arising from our increased size. If we do not manage such growth effectively, we may
be unable to realize the benefit from the investments in technology, infrastructure and personnel that we have made to support our
expansion. In addition, we may incur higher costs and realize less revenue growth than we expect, which would reduce our earnings
and diminish our future prospects and we may not be able to continue to implement our business strategy and successfully conduct our
operations. Risks associated with failing to maintain effective financial and operational controls as we grow, such as maintaining
appropriate loan underwriting procedures, information technology systems, determining adequate allowances for credit losses and
complying with regulatory accounting requirements, including increased credit losses, reduced earnings and potential regulatory
penalties and restrictions on growth, all could have a negative effect on our business, financial condition and results of operations.
Acquisitions may disrupt our business and dilute stockholder value and integrating acquired companies may be more
difficult, costly or time-consuming than we expect.
Our pursuit of acquisitions may disrupt our business and any equity that we issue as merger consideration may have the effect of
diluting the value of common stockholders. In addition, we may fail to realize some or all of the anticipated benefits of completed
acquisitions. We anticipate that the integration of businesses that we may acquire in the future will be a time-consuming and
expensive process, even if the integration process is effectively planned and implemented.
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In addition, our acquisition activities could be material to our business and involve a number of significant risks, including the
following:
•
incurring time and expense associated with identifying and evaluating potential acquisitions and negotiating potential
transactions, resulting in our attention being diverted from the operation of our existing business;
•
using inaccurate estimates and judgments to evaluate credit, operations, management and market risks with respect to the
target company or the assets and liabilities that we seek to acquire;
•
exposure to potential asset quality issues of the target company;
•
intense competition from other banking organizations and other potential acquirers, many of which have substantially
greater resources than we do;
•
potential exposure to unknown or contingent liabilities of banks and businesses we acquire, including, without limitation,
liabilities for regulatory and compliance issues;
•
inability to realize the expected revenue increases, cost savings, increases in geographic or product presence and other
projected benefits of the acquisition;
•
incurring time and expense required to integrate the operations and personnel of the combined businesses;
•
inconsistencies in standards, procedures and policies that would adversely affect our ability to maintain relationships with
customers and employees;
•
experiencing higher operating expenses relative to operating income from the new operations;
•
creating an adverse short-term effect on our results of operations;
•
losing key employees and customers;
•
significant problems relating to the conversion of the financial and customer data of the entity;
•
integration of acquired customers into our financial and customer product systems;
•
potential changes in banking or tax laws or regulations that may affect the target company; or
•
risks of impairment to goodwill.
If difficulties arise with respect to the integration process, the economic benefits expected to result from acquisitions might not
occur. As with any merger of financial institutions, there also may be business disruptions that cause us to lose customers or cause
customers to move their business to other financial institutions. Failure to successfully integrate businesses that we acquire could have
an adverse effect on our profitability, return on equity, return on assets or our ability to implement our strategy, any of which in turn
could have a material adverse effect on our business, financial condition and results of operations.
Operational Risks
We rely heavily on our management team and could be adversely affected by the unexpected loss of key officers.
We are led by an experienced management team with substantial experience in the markets that we serve and the financial
products that we offer. Our operating strategy focuses on providing products and services through long-term relationship managers.
Accordingly, our success depends in large part on the performance of our key personnel, as well as on our ability to attract, motivate
and retain highly qualified senior and middle management. Competition for employees is intense and the process of locating key
personnel with the combination of skills and attributes required to execute our business plan may be lengthy. We may not be
successful in retaining our key employees and the unexpected loss of services of one or more of our key personnel could have a
material adverse effect on our business because of their skills, knowledge of our market and financial products, years of industry
experience, long-term customer relationships and the difficulty of promptly finding qualified replacement personnel. If the services of
any of our key personnel should become unavailable for any reason, we may not be able to identify and hire qualified persons on
terms acceptable to us, which could have an adverse effect on our business, financial condition and results of operations.
Our business is concentrated in, and largely dependent upon, the continued growth and welfare of the general geographic
markets in which we operate.
Our banking operations are concentrated in Arkansas, Kansas, Missouri and Oklahoma. As a result, our financial condition and
results of operations and cash flows are affected by changes in the economic conditions of our markets. Our success depends to a
significant extent upon the business activity, population, income levels, deposits and real estate activity in these markets. Although
our customers’ business and financial interests may extend well beyond these market areas, adverse conditions that affect these market
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areas could reduce our growth rate, affect the ability of our customers to repay their loans, affect the value of collateral underlying
loans, impact our ability to attract deposits and generally affect our financial conditions and results of operations. Because of our
geographic concentration, we may be less able than other regional or national financial institutions to diversify our credit risks across
multiple markets.
Difficult conditions in the market for financial products and services may materially and adversely affect our business and
results of operations.
Recessionary periods historically have brought about increased foreclosures and unemployment which have resulted in
significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and
investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other
derivative securities, have historically caused many financial institutions to seek additional capital, to merge with larger and stronger
institutions and, in some cases, to fail. This market turmoil and tightening of credit have led to an increased level of commercial and
consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity
generally. Although conditions have improved, a return of these trends could have a material adverse effect on our business and
operations. Negative market developments may affect consumer confidence levels and may cause adverse changes in payment
patterns, causing increases in delinquencies and default rates, which may impact our charge-offs and provisions for loan and credit
losses. Economic deterioration that affects household and/or corporate incomes could also result in reduced demand for credit or fee-
based products and services. These conditions would have adverse effects on us and others in the financial services industry.
Our ability to grow our loan portfolio may be limited by, among other things, economic conditions, competition within our
market areas, the timing of loan repayments and seasonality.
Our ability to continue to improve our operating results is dependent upon, among other things, growing our loan portfolio.
While we believe that our strategy to grow our loan portfolio is sound and our growth targets are achievable over an extended period
of time, competition within our market areas is significant, particularly for high credit quality borrowers. We compete with both large
regional and national financial institutions, who are sometimes able to offer more attractive interest rates and other financial terms
than we choose to offer, as well as other community-based banks who seek to offer a similar level of service to that which we offer.
This competition can make loan growth challenging, particularly if we are unwilling to price loans at levels that would cause
unacceptable levels of compression of our net interest margin or if we are unwilling to structure a loan in a manner that we believe
results in a level of risk to us that we are not willing to accept. Moreover, loan growth throughout the year can fluctuate due in part to
seasonality of the businesses of our borrowers and potential borrowers and the timing on loan repayments, particularly those of our
borrowers with significant relationships with us, resulting from, among other things, excess levels of liquidity. To the extent that we
are unable to increase loans, we may be unable to successfully implement our growth strategy, which could materially and adversely
affect us.
We may suffer losses in our loan portfolio due to inadequate or faulty underwriting and loan collection practices.
There are risks inherent in any loan portfolio, which we attempt to address by adhering to specific underwriting and loan
collection practices. Underwriting practices often include analysis of a borrower's prior credit history; financial statements; tax returns;
cash flow projections; valuation of collateral; personal guarantees of loans to businesses; and verification of liquid assets. If the
underwriting process fails to capture accurate information or proves to be inadequate, we may incur losses on loans that appeared to
meet our underwriting criteria, and those losses may exceed the amounts set aside as reserves in the allowance for credit losses. Loan
collection resources may be expanded to meet increases in nonperforming loans resulting from economic downturns or to service any
loans acquired, resulting in higher loan administration costs. We are also exposed to the risk of improper documentation of foreclosure
proceedings that would also increase the cost of collection.
Several of our large depositors have relationships with each other, which creates a higher risk that one customer’s
withdrawal of its deposit could lead to a loss of other deposits from customers within the relationship, which, in turn, could force
us to fund our business through more expensive and less stable sources.
As of December 31, 2024, our ten largest non-brokered depositors accounted for $438.7 million in deposits, or approximately
10.0% of our total deposits. Further, our non-brokered deposit account balance was $4.2 billion, or approximately 97.1% of our total
deposits, as of December 31, 2024. Several of our large depositors have business, family or other relationships with each other, which
creates a risk that any one customer’s withdrawal of its deposit could lead to a loss of other deposits from customers within the
relationship.
Withdrawals of deposits by any one of our largest depositors or by one of our related customer groups could force us to rely
more heavily on borrowings and other sources of funding for our business and withdrawal demands, adversely affecting our net
interest margin and results of operations. We may also be forced, as a result of any withdrawal of deposits, to rely more heavily on
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other, potentially more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a
material adverse effect on our business, results of operations, financial condition and future prospects.
Our future profitability levels are dependent on our ability to grow and maintain deposits at competitive costs.
Our ability to fund our lending and investing activities at a reasonable cost depends on our ability to maintain adequate deposit
levels at an economically competitive cost structure. The following risks could impact the cost structures of deposits:
•
Increased competition over transactional and time deposit accounts could increase the costs of these deposits by
increasing the rate of change and velocity of change in deposit rates, as overall market rates change;
•
Migration of transactional deposit accounts to time deposit accounts could increase the overall costs of deposits; and
•
Changes in the mix of retail and public funds deposit customers could increase the costs of deposits. Public funds
deposits are more rate sensitive than retail deposits and if we are forced to rely more heavily on those types of deposits
overall funding cost could increase.
Our ability to retain bankers and recruit additional successful bankers is critical to the success of our business strategy and
any failure to do so could adversely affect our business, financial condition, results of operations and growth prospects.
Our ability to retain and grow our loans, deposits and fee income depends upon the business generation capabilities, reputation
and relationship management skills of our bankers. If we were to lose the services of any of our bankers, including successful bankers
employed by banks that we may acquire, to a new or existing competitor or otherwise, we may not be able to retain valuable
relationships and some of our customers could choose to use the services of a competitor instead of our services.
Our growth strategy also relies on our ability to attract and retain additional profitable bankers. We may face difficulties in
recruiting and retaining bankers of our desired caliber, including as a result of competition from other financial institutions. In
particular, many of our competitors are significantly larger with greater financial resources and may be able to offer more attractive
compensation packages and broader career opportunities. Additionally, we may incur significant expenses and expend significant
time and resources on training, integration and business development before we are able to determine whether a new banker will be
profitable or effective. If we are unable to attract and retain successful bankers, or if our bankers fail to meet our expectations in terms
of customer relationships and profitability, we may be unable to execute our business strategy and our business, financial condition,
results of operations and growth prospects may be adversely affected.
Any expansion into new markets or new lines of business might not be successful.
As part of our ongoing strategic plan, we may consider expansion into new geographic markets. Such expansion might take the
form of the establishment of de novo branches or the acquisition of existing banks or bank branches. There are considerable costs
associated with opening new branches and new branches generally do not generate sufficient revenues to offset costs until they have
been in operation for some time. Additionally, we may consider expansion into new lines of business through the acquisition of third
parties or organic growth and development. There are substantial risks associated with such efforts, including risks that (i) revenues
from such activities might not be sufficient to offset the development, compliance and other implementation costs, (ii) competing
products and services and shifting market preferences might affect the profitability of such activities and (iii) our internal controls
might be inadequate to manage the risks associated with new activities. Furthermore, it is possible that our unfamiliarity with new
markets or lines of business might adversely affect the success of such actions. If any such expansions into new geographic or product
markets are not successful, there could be an adverse effect on our financial condition and results of operations.
Our small to medium-sized business and entrepreneurial customers may have fewer financial resources than larger entities
to weather a downturn in the economy that might impair a borrower’s ability to repay a loan and could adversely affect our
financial condition and results of operations.
We focus our business development and marketing strategy primarily to serve the banking and financial services needs of small
to medium-sized businesses and entrepreneurs. These small to medium-sized businesses and entrepreneurs may have fewer financial
resources in terms of capital or borrowing capacity than larger entities. If economic conditions negatively impact our markets
generally, and small to medium-sized businesses are adversely affected, our financial condition and results of operations may be
negatively affected.
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A lack of liquidity could adversely affect our financial condition and results of operations.
Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and
maturity schedules of our loans to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through
deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on our liquidity. Our most important
source of funds is deposits. Deposit balances can decrease when customers perceive alternative investments as providing a better
risk/return tradeoff. If customers move money out of bank deposits and into other investments such as money market funds, we would
lose a relatively low-cost source of funds, increasing our funding costs and reducing our net interest income and net income.
Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities and proceeds
from the issuance and sale of our equity securities to investors. Additional liquidity is provided by the ability to borrow from the
Federal Home Loan Bank of Topeka. We also may borrow funds from third-party lenders, such as other financial institutions. Our
access to funding sources in amounts adequate to finance or capitalize our activities, or on terms that are acceptable to us, could be
impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial
markets or negative views and expectations about the prospects for the financial services industry. Our access to funding sources
could also be affected by a decrease in the level of our business activity as a result of a downturn in our markets or by one or more
adverse regulatory actions against us.
Any decline in available funding could adversely impact our ability to originate loans, invest in securities, meet our expenses or
to fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could have a material
adverse impact on our liquidity, business, financial condition and results of operations.
Our financial flexibility would be severely constrained if we were unable to maintain our access to funding or if adequate
financing were not available at acceptable interest rates. Further, if we were required to rely more heavily on more expensive funding
sources to support liquidity, our revenues may not increase proportionately to cover our increased costs. In this case, our operating
margins and profitability would be adversely affected, If alternative funding sources were no longer available to us, we may need to
sell a portion of our investment and/or loan portfolio to raise funds, which, depending upon market conditions, could result in us
realizing a loss on the sale of such assets. At December 31, 2024, we had a net unrealized loss of $56.8 million, net of tax, on our
available for-sale investment securities portfolio.
As a community banking institution, we have lower lending limits and different lending risks than certain of our larger,
more diversified competitors.
We are a community banking institution that provides banking services to the local communities in the market areas in which
we operate. Our ability to diversify our economic risks is limited by our own local markets and economies. We lend primarily to
individuals and small to medium-sized businesses, which may expose us to greater lending risks than those of banks that lend to
larger, better-capitalized businesses with longer operating histories. In addition, our legally mandated lending limits are lower than
those of certain of our competitors that have more capital than we do. These lower lending limits may discourage borrowers with
lending needs that exceed our limits from doing business with us. We may try to serve such borrowers by selling loan participations
to other financial institutions; however, this strategy may not succeed.
Our financial projections are based upon numerous assumptions about future events and our actual financial performance
may differ materially from our projections if our assumptions are inaccurate.
If the communities in which we operate do not grow, or if the prevailing economic conditions locally or nationally are less
favorable than we have assumed, then our ability to reduce our nonperforming loans and other real estate owned portfolios and to
implement our business strategies may be adversely affected and our actual financial performance may be materially different from
our projections.
Moreover, we cannot give any assurance that we will benefit from any market growth or favorable economic conditions in our
market areas even if they do occur. If our senior management team is unable to provide the effective leadership necessary to
implement our strategic plan our actual financial performance may be materially adversely different from our projections.
Additionally, to the extent that any component of our strategic plan requires regulatory approval, if we are unable to obtain necessary
approval, we will be unable to completely implement our strategy, which may adversely affect our actual financial results. Our
inability to successfully implement our strategic plan could adversely affect the price of our Class A common stock.
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We depend on the accuracy and completeness of information about customers and counterparties.
In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely on
information furnished to us by or on behalf of customers and counterparties, including financial statements and other financial
information. We also may rely on representations of customers and counterparties as to the accuracy and completeness of that
information and, with respect to financial statements, on reports of independent auditors. In deciding whether to extend credit, we may
rely upon our customers’ representations that their financial statements conform to GAAP and present fairly, in all material respects,
the financial condition, results of operations and cash flows of the customer. We also may rely on customer representations and
certifications or other audit or accountants’ reports, with respect to the business and financial condition of our clients. Our financial
condition, results of operations, financial reporting and reputation could be negatively affected if we rely on materially misleading,
false, inaccurate or fraudulent information.
We are subject to possible claims and litigation pertaining to fiduciary responsibility.
From time to time, customers could make claims and take legal action pertaining to our performance of our fiduciary
responsibilities. Whether customer claims and legal action related to our performance of our fiduciary responsibilities are founded or
unfounded, if such claims and legal actions are not resolved in a manner favorable to us, they may result in significant financial
liability and/or adversely affect our market perception of our products and services as well as impact customer demand for those
products and services. Any financial liability or reputation damage could have a material adverse effect on our business, which, in
turn, could have a material adverse effect on our financial condition and results of operations.
We may be the subject of litigation, which would result in legal liability and damage to its business and reputation.
From time to time, we may be subject to claims or legal action from customers, employees or others. Financial institutions like
the Company are facing a growing number of significant class actions, including those based on the manner of calculation of interest
on loans and the assessment of overdraft fees. Future litigation could include claims for substantial compensatory and/or punitive
damages or claims for indeterminate amounts of damages. The Company is also involved from time to time in other reviews,
investigations and proceedings (both formal and informal) by governmental and other agencies regarding its businesses. These matters
also could result in adverse judgments, settlements, fines, penalties, injunctions or other relief. Like other financial institutions, we are
also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of
confidential information. Substantial legal liability or significant regulatory action against us could materially adversely affect its
business, financial condition or results of operations and/or cause significant reputational harm to its business.
We continually encounter technological change and may have fewer resources than our competitors to continue to invest in
technological improvements.
The banking and financial services industries are undergoing rapid technological changes with frequent introductions of new
technology-driven products and services. In addition to enhancing the level of service provided to customers, the effective use of
technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend, in part, upon our
ability to address the needs of our customers by using technology to provide products and services that enhance customer convenience
and create additional efficiencies in operations. Many of our competitors have greater resources to invest in technological
improvements and we may not be able to effectively implement new technology-driven products and services, which could reduce our
ability to effectively compete.
Our information systems may experience a failure or interruption.
We rely heavily on communications and information systems to conduct our business. Any failure or interruption in the
operation of these systems could impair or prevent the effective operation of our customer relationship management, general ledger,
deposit, lending or other functions. While we have policies and procedures designed to prevent or limit the effect of a failure or
interruption in the operation of our information systems, there can be no assurance that any such failures or interruptions will not
occur or, if they do occur, that they will be adequately addressed. The occurrence of any failures or interruptions impacting our
information systems could damage our reputation, result in a loss of customer business and expose us to additional regulatory scrutiny,
civil litigation and possible financial liability, any of which could have a material adverse effect on our financial condition and results
of operations.
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We use information technology in our operations and offer online banking services to our customers, and unauthorized
access to our or our customers’ confidential or proprietary information as a result of a cyber-attack or otherwise could expose us
to reputational harm and litigation and adversely affect our ability to attract and retain customers.
Information security risks for financial institutions have generally increased in recent years, in part because of the proliferation
of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions and the increased
sophistication and activities of organized crime, hackers, terrorists, activists and other external parties. The financial services industry
has seen increases in electronic fraudulent activity, hacking, security breaches, sophisticated social engineering and cyber-attacks,
including in the commercial banking sector, as cyber criminals have been targeting commercial bank accounts on an increasing basis.
We are under continuous threat of loss due to fraudulent activity, hacking and cyber-attacks, especially as we continue to expand
customer capabilities to utilize internet and other remote channels to transact business.
Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from
cyber criminals and hackers, our plans to continue to provide internet banking and mobile banking channels and our plans to develop
additional remote connectivity solutions to serve our customers. Therefore, the secure processing, transmission and storage of
information in connection with our online banking services are critical elements of our operations. However, our network is
vulnerable to unauthorized access, computer viruses and other malware, phishing schemes or other security failures. In addition, our
customers may use personal smartphones, tablet PCs or other mobile devices that are beyond our control systems in order to access
our products and services. Our technologies, systems and networks and our customers’ devices, may become the target of cyber-
attacks, electronic fraud or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse,
loss or destruction of our or our customers’ confidential, proprietary and other information, or otherwise disrupt our or our customers’
or other third parties’ business operations. As cyber threats continue to evolve, we may be required to spend significant capital and
other resources to protect against these threats or to alleviate or investigate problems caused by such threats. Our business relies on
the secure processing, storage, transmission and retrieval of confidential customer information in our computer and data management
systems and networks, and in the computer and data management systems and networks of third parties, and any breaches or
unauthorized access to such information could present significant regulatory costs and expose us to litigation and other possible
liabilities. Any inability to prevent these types of security threats could also cause existing customers to lose confidence in our
systems and could adversely affect our reputation and ability to generate deposits. The occurrence of any cyber-attack or information
security breach could result in financial losses or increased costs to us or our clients, disclosure or misuse of confidential information
belonging to us or personal or confidential information belonging to our clients, misappropriation of assets, reputational damage,
damage to our competitive position and the disruption of our operations, all of which could adversely affect our financial condition or
results of operations.
In recent periods, several governmental agencies and large corporations, including financial service organizations and retail
companies, have suffered major data breaches, in some cases exposing not only their confidential and proprietary corporate
information, but also sensitive financial and other personal information of their clients or clients and their employees or other third
parties and subjecting those agencies and corporations to potential fraudulent activity and their clients, clients and other third parties to
identity theft and fraudulent activity in their credit card and banking accounts. Therefore, security breaches and cyber-attacks can
cause significant increases in operating costs, including the costs and capital expenditures required to correct the deficiencies and
strengthen the security of data processing and storage systems.
Unfortunately, it is not always possible to anticipate, detect, or recognize these threats to our systems, or to implement effective
preventative measures against all breaches, whether those breaches are malicious or accidental. Cybersecurity risks for banking
organizations have significantly increased in recent years and have been difficult to detect before they occur because, among other
reasons:
•
the proliferation of new technologies and the use of the internet and telecommunications technologies to conduct financial
transactions;
•
these threats arise from numerous sources, not all of which are in our control, including among others, human error, fraud or
malice on the part of employees or third parties, accidental technological failure, electrical or telecommunication outages,
failures of computer servers or other damage to our property or assets, natural disasters or severe weather conditions, health
emergencies or pandemics, or outbreaks of hostilities or terrorist acts;
•
the techniques used in cyber-attacks change frequently and may not be recognized until launched or until well after the breach
has occurred;
•
the increased sophistication and activities of organized crime groups, hackers, terrorist organizations, hostile foreign
governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate
espionage;
36
•
the vulnerability of systems to third parties seeking to gain access to such systems either directly or using equipment or security
passwords belonging to employees, customers, third-party service providers or other users of our systems; and
•
our frequent transmission of sensitive information to, and storage of such information by, third parties, including our vendors
and regulators, and possible weaknesses that go undetected in our data systems notwithstanding the testing we conduct of those
systems.
While we invest in systems and processes that are designed to detect and prevent security breaches and cyber-attacks and we
conduct periodic tests of our security systems and processes, we may not succeed in anticipating or adequately protecting against or
preventing all security breaches and cyber-attacks from occurring. Even the most advanced internal control environment may be
vulnerable to compromise. Targeted social engineering attacks are becoming more sophisticated and are extremely difficult to
prevent. Additionally, the existence of cyber-attacks or security breaches at third parties with access to our data, such as vendors, may
not be disclosed to us in a timely manner. Further, we may not be able to insure against losses related to cyber threats. As cyber
threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our
protective measures or to investigate and remediate any information security vulnerabilities or incidents.
As is the case with non-electronic fraudulent activity, cyber-attacks or other information or security breaches, whether directed at
us or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack
on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third
parties with whom we do business. A successful penetration or circumvention of system security could cause us negative
consequences, including loss of customers and business opportunities, disruption to our operations and business, misappropriation or
destruction of our confidential information and/or that of our customers, or damage to our customers’ and/or third parties’ computers
or systems, and could expose us to additional regulatory scrutiny and result in a violation of applicable privacy laws and other laws,
litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage,
reimbursement or other compensatory costs, additional compliance costs, and could adversely impact our results of operations,
liquidity and financial condition.
The development and use of AI presents risks and challenges that may adversely impact the Company's business.
The Company or its third-party (or fourth party) vendors, clients or counterparties may develop or incorporate AI technology in
certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the
Company’s business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and
internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy,
consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require
changes in the Company’s implementation of AI technology and increase the Company’s compliance costs and risk of non-
compliance. AI models, particularly generative AI models, may produce output or take actions that is incorrect, that reflects biases
included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that
infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models
makes it difficult to understand why they are generating particular opinions. This limited transparency increases the challenges
associated with assessing the proper operation of AI models, understanding, monitoring the capabilities of the AI models, reducing
erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which
decisions are made. Further, the Company may rely on AI models developed by third parties, and, to that extent, would be dependent
in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any
unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the
risks associated with the output of their models, matters over which the Company may have limited visibility. Any of these risks could
expose the Company to liability or adverse legal or regulatory consequences and harm the Company’s reputation and the public
perception of its business or the effectiveness of its security measures.
We are dependent upon outside third parties for the processing and handling of our records and data.
We rely on software developed by third-party vendors to process various transactions. In some cases, we have contracted with
third parties to run their proprietary software on our behalf. These systems include, but are not limited to, general ledger, payroll,
employee benefits, loan and deposit processing and securities portfolio accounting. While we perform a review of controls instituted
by the applicable vendors over these programs in accordance with industry standards and perform our own testing of user controls, we
must rely on the continued maintenance of controls by these third-party vendors, including safeguards over the security of customer
data. In addition, we maintain, or contract with third parties to maintain, daily backups of key processing outputs in the event of a
failure on the part of any of these systems. Nonetheless, we may incur a temporary disruption in our ability to conduct business or
process transactions, or incur damage to our reputation, if the third-party vendor fails to adequately maintain internal controls or
institute necessary changes to systems. Such a disruption or breach of security may have a material adverse effect on our business.
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We are subject to losses due to the errors or fraudulent behavior of employees or third parties.
We are exposed to many types of operational risk, including the risk of fraud by employees and outsiders, clerical record-
keeping errors and transactional errors. Our business is dependent on our employees as well as third-party service providers to
process a large number of increasingly complex transactions. We could be materially adversely affected if someone causes a
significant operational breakdown or failure, either as a result of human error or where an individual purposefully sabotages or
fraudulently manipulates our operations or systems. When we originate loans, we rely upon information supplied by loan applicants
and third parties, including the information contained in the loan application, property appraisal and title information, if applicable,
and employment and income documentation provided by third parties. If any of this information is misrepresented and such
misrepresentation is not detected prior to loan funding, we generally bear the risk of loss associated with the misrepresentation. Any
of these occurrences could result in a diminished ability of us to operate our business, potential liability to customers, reputational
damage and regulatory intervention, which could negatively impact our business, financial condition and results of operations.
If our enterprise risk management framework is not effective at mitigating risk and loss to us, we could suffer unexpected
losses and our results of operations could be materially adversely affected.
Our enterprise risk management framework seeks to achieve an appropriate balance between risk and return, which is critical to
optimizing stockholder value. We have established processes and procedures intended to identify, measure, monitor, report and
analyze the types of risk to which we are subject, including credit, liquidity, operational, regulatory compliance and reputational.
However, as with any risk management framework, there are inherent limitations to our risk management strategies as there may exist,
or develop in the future, risks that we have not appropriately anticipated or identified. For example, the recent financial and credit
crisis and resulting regulatory reform highlighted both the importance and some of the limitations of managing unanticipated risks. If
our risk management framework proves ineffective, we could suffer unexpected losses and our business and results of operations
could be materially adversely affected.
Changes in accounting standards could materially impact our financial statements.
From time to time, the Financial Accounting Standards Board or the SEC may change the financial accounting and reporting
standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing
accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators, outside
auditors or management) may change their interpretations or positions on how these standards should be applied. These changes may
be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results
of operations. In some cases, we could be required to apply a new or revised standard retrospectively or apply an existing standard
differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.
If the goodwill that we have recorded or may record in connection with a business acquisition becomes impaired, it could
require charges to earnings, which would adversely affect our business, financial condition and results of operations.
Goodwill represents the amount by which the cost of an acquisition exceeded the fair value of net assets we acquired in
connection with the purchase of another financial institution. We review goodwill for impairment at least annually, or more
frequently if a triggering event occurs which indicates that the carrying value of the asset might be impaired. There can be no
assurance that our future evaluations of our existing goodwill or goodwill we may acquire in the future will not result in findings of
impairment and related write-downs, which could adversely affect our business, financial condition and results of operations. For
additional information about the Company’s impairment assessment process and results see “NOTE 7 – GOODWILL AND CORE
DEPOSIT INTANGIBLES” in Notes to Consolidated Financial Statements.
We may be required to repurchase mortgage loans or indemnify buyers against losses in some circumstances, which could
harm liquidity, results of operations and financial condition.
When mortgage loans are sold, whether as whole loans or pursuant to a securitization, we are required to make customary
representations and warranties to purchasers, guarantors and insurers, including government-sponsored enterprises, about the
mortgage loans and the manner in which they were originated. We may be required to repurchase or substitute mortgage loans, or
indemnify buyers against losses, in the event we breach these representations or warranties. In addition, we may be required to
repurchase mortgage loans as a result of early payment default of the borrower on a mortgage loan. With respect to loans that are
originated through Equity Bank or correspondent channels, the remedies available against the originating broker or correspondent, if
any, may not be as broad as the remedies available to purchasers, guarantors and insurers of mortgage loans against us. We face
further risk that the originating broker or correspondent, if any, may not have financial capacity to perform remedies that otherwise
may be available. Therefore, if a purchaser, guarantor or insurer enforces its remedies against us, we may not be able to recover losses
from the originating broker or correspondent. If repurchase and indemnity demands increase and such demands are valid claims and
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are in excess of our provision for potential losses, our liquidity, results of operations and financial condition may be adversely
affected.
Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to
our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their
environmental, social and governance (“ESG”) practices and disclosure. Investor advocacy groups, investment funds and influential
investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity,
labor conditions and human rights. Increased ESG related compliance costs could result in increases to our overall operational costs.
Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively
impact our reputation, ability to do business with certain partners, and our stock price. New government regulations could also result
in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.
Risks Relating to the Regulation of Our Industry
We are subject to extensive regulation in the conduct of our business, which imposes additional costs on us and adversely
affects our profitability.
As a bank holding company, we are subject to federal regulation under the BHC Act, and the examination and reporting
requirements of the Federal Reserve. Federal regulation of the banking industry, along with tax and accounting laws, regulations, rules
and standards, may limit our operations significantly and control the methods by which we conduct business, as they limit those of
other banking organizations. Banking regulations are primarily intended to protect depositors, deposit insurance funds and the
banking system as a whole and not stockholders or other creditors. These regulations affect lending practices, capital structure,
investment practices, dividend policy and overall growth, among other things. For example, federal and state consumer protection
laws and regulations limit the manner in which we may offer and extend credit. In addition, the laws governing bankruptcy generally
favor debtors, making it more expensive and more difficult to collect from customers who become subject to bankruptcy proceedings.
We also may be required to invest significant management attention and resources to evaluate and make any changes necessary
to comply with applicable laws and regulations, particularly as a result of regulations adopted under the Dodd-Frank Act. This
allocation of resources, as well as any failure to comply with applicable requirements, may negatively impact our financial condition
and results of operations.
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Changes in laws, government regulation and monetary policy may have a material effect on our results of operations.
Financial institutions have been the subject of significant legislative and regulatory changes and may be the subject of further
significant legislation or regulation in the future, none of which is within our control. New proposals for legislation continue to be
introduced in the United States Congress that could further substantially increase regulation of the bank and non-bank financial
services industries, impose restrictions on the operations and general ability of firms within the industry to conduct business consistent
with historical practices, including in the areas of compensation, interest rates, financial product offerings and disclosures and have an
effect on bankruptcy proceedings with respect to consumer residential real estate mortgages, among other things. Federal and state
regulatory agencies also frequently adopt changes to their regulations or change the manner in which existing regulations are applied.
Changes to statutes, regulations or regulatory policies, including changes in their interpretation or implementation by regulators, could
affect us in substantial and unpredictable ways. Such changes could, among other things, subject us to additional costs and lower
revenues, limit the types of financial services and products that we may offer, ease restrictions on non-banks and thereby enhance their
ability to offer competing financial services and products, increase compliance costs and require a significant amount of
management’s time and attention. Failure to comply with statutes, regulations or policies could result in sanctions by regulatory
agencies, civil monetary penalties or reputational damage, each of which could have a material adverse effect on our business,
financial condition and results of operations.
Significant changes to the size, structure, powers and operations of the federal government may cause economic disruptions
that could, in turn, adversely impact our business, results of operations and financial conditions.
The Trump Administration has commenced efforts to implement significant changes to the size and scope of the federal
government and reform its operations to achieve stated goals that include reducing the federal budget deficit and national debt,
improving the efficiency of government operations, and promoting innovation and economic growth. To date, these efforts have been
carried out through a mix of executive actions aimed at eliminating or modifying federal agency and federal program funding,
reducing the size of the federal workforce, reducing or altering the scope of activities conducted by, and possibly eliminating, various
federal agencies and bureaus, and encouraging the use of AI and other advanced technologies within the public and private sectors.
These changes, if implemented and taken as a whole, may have varied effects on the economy that are difficult to predict. For
instance, the delivery of government services and the distribution of federal program funds and benefits may be disrupted or, in some
cases, eliminated as a result of funding cuts or recasting of federal agency mandates. Further, a substantial reduction of the federal
workforce could adversely affect regional and local economies, both directly and indirectly, in geographies with significant
concentrations of federal employees and contractors. It is possible that such comprehensive changes to the federal government may be
materially adverse to the regional and local economies where we conduct business and to our customers, which, in turn, could be
materially adverse to our business, financial condition and results of operations.
The Company faces risks related to the adoption of future legislation and potential changes in federal regulatory agency
leadership, policies and priorities.
As a result of the 2024 Presidential and Congressional elections, Republicans are currently able to set the policy agenda both
legislatively and in the regulatory agencies that have rulemaking and supervisory authority over the financial services industry
generally and the Bank specifically. However, the Republican Party holds slim majorities in each of the Senate and the House of
Representatives. Accordingly, the prospects for the enactment of major banking reform legislation under the new Congress are unclear
at this time. The recent turnover of the Presidential Administration will result in certain changes in the leadership and senior staffs of
the OCC, the FDIC, the CFPB, the SEC and the Treasury Department. These changes are expected to impact the rulemaking,
supervision, examination and enforcement priorities and policies of the agencies, including the possible reversal of a number of final
and proposed rules and policy statements promulgated under the Biden Administration. The potential impact of any changes in agency
personnel, policies and priorities on the financial services sector, including the Bank, cannot be predicted at this time.
The CFPB has reshaped the consumer financial laws through rulemaking and enforcement of the prohibitions against
unfair, deceptive and abusive business practices. Compliance with such initiatives may impact the business operations of
depository institutions offering consumer financial products or services, including the Company.
The CFPB has broad rulemaking authority to administer and carry out the provisions of the Dodd-Frank Act with respect to
financial institutions that offer covered financial products and services to consumers. As an independent bureau within the Federal
Reserve System, the CFPB may impose requirements more severe than the previous bank regulatory agencies. The CFPB has also
been directed to write rules identifying practices or acts that are unfair, deceptive or abusive in connection with any transaction with a
consumer for a consumer financial product or service, or the offering of a consumer financial product or service. The CFPB has
initiated enforcement actions against a variety of bank and non-bank market participants with respect to a number of consumer
financial products and services that have resulted in those participants expending significant time, money and resources to adjust to the
initiatives being pursued by the CFPB.
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The CFPB pursued a more aggressive enforcement policy with respect to a range of regulatory compliance matters under the
Biden Administration, specifically including fair lending, credit reporting, loan servicing, financial institution sales and marketing
practices, and financial institution consumer fee and account management practices. CFPB enforcement actions may serve as
precedent for how the CFPB interprets and enforces consumer protection laws, including practices or acts that are deemed to be unfair,
deceptive or abusive, with respect to all supervised institutions, which may result in the imposition of higher standards of compliance
with such laws. In addition, with the recent change in Administration, there have been, and likely will continue to be, corresponding
changes in the leadership and senior staff of the CFPB. This turnover could lead to changes in agency policies, tactics and
interpretations. In addition, the new Administration and Congress may seek to limit the scope and reach of the CFPB’s authority. The
extent and timing of any such changes and any resulting impact on our business and financial results cannot be predicted at this time.
A protracted government shutdown may result in reduced loan originations and related gains on sales and could negatively
affect our financial condition and results of operations.
During any protracted federal government shutdown, we may not be able to close certain loans and we may not be able to
recognize non-interest income on the sale of loans. Some of the loans we originate are sold directly to government agencies, and some
of these sales may be unable to be consummated during a shutdown. In addition, we believe that some borrowers may decide not to
proceed with their home purchase and not close on their loans, which would result in a permanent loss of the related non-interest
income. A federal government shutdown could also result in reduced income for government employees or employees of companies
that engage in business with the federal government, which could result in greater loan delinquencies, increased in our non-
performing, criticized, and classified assets, and a decline in demand for our products and services.
Banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and
our failure to comply with any supervisory actions to which we become subject as a result of such examinations could materially
and adversely affect us.
We are subject to supervision and regulation by federal and state banking agencies that periodically conduct examinations of our
business, including compliance with laws and regulations – specifically, our subsidiary, Equity Bank, is subject to examination by the
Federal Reserve and the OSBC and we are subject to examination by the Federal Reserve. Accommodating such examinations may
require management to reallocate resources, which would otherwise be used in the day-to-day operation of other aspects of our
business. If, as a result of an examination, any such banking agency was to determine that the financial condition, capital resources,
allowance for credit losses, asset quality, earnings prospects, management, liquidity or other aspects of our operations had become
unsatisfactory, or that we or our management were in violation of any law or regulation, such banking agency may take a number of
different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require
affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be
judicially enforced, to direct an increase in our capital, to restrict our growth, to assess civil monetary penalties against us, our officers,
or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent
risk of loss to depositors, to terminate our deposit insurance. If we become subject to such a regulatory action, it could have a material
adverse effect on our business, financial condition and results of operations.
Our banking subsidiary may be required to pay higher FDIC insurance premiums or special assessments which may
adversely affect our earnings.
As a member institution of the FDIC, our banking subsidiary, Equity Bank, is assessed a quarterly deposit insurance premium.
We are generally unable to control the amount of premiums or special assessments that Equity Bank is required to pay, future bank
failures may stress the Deposit Insurance Fund and prompt the FDIC to increase its premiums or to issue special assessments. Any
future changes in the calculation or assessment of FDIC insurance premiums may have a material adverse effect on our results of
operations, financial condition and our ability to continue to pay dividends on our common stock at the current rate or at all.
We are subject to certain capital requirements by regulators.
Applicable regulations require us to maintain specific capital standards in relation to the respective credit risks of our assets and
off-balance sheet exposures. Various components of these requirements are subject to qualitative judgments by regulators. We
maintain a “well capitalized” status under the current regulatory framework. Our failure to maintain a “well capitalized” status could
affect our customers’ confidence in us, which could adversely affect our ability to do business. In addition, failure to maintain such
status could also result in restrictions imposed by our regulators on our growth and other activities. Any such effect on customers or
restrictions by our regulators could have a material adverse effect on our financial condition and results of operations.
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We are subject to stringent capital requirements, which may adversely impact our return on equity or constrain us from
paying dividends or repurchasing shares.
Banking institutions are required to hold more capital as a percentage of assets than most industries. Holding high amounts of
capital compresses our earnings and constrains growth. In addition, the failure to meet applicable regulatory capital requirements
could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or
restricting the commencement of new activities, and could affect client and investor confidence, our costs of funds and FDIC
insurance costs and our ability to make acquisitions and result in a material adverse effect on our business, financial condition, results
of operations and growth prospects.
We may need to raise additional capital in the future, including as a result of potential increased minimum capital thresholds
established by regulators, but that capital may not be available when it is needed or may be dilutive to stockholders.
We are required by federal and state regulatory authorities to maintain adequate capital levels to support our operations. New
regulations implementing minimum capital standards could require financial institutions to maintain higher minimum capital ratios
and may place a greater emphasis on common equity as a component of “Tier 1 capital,” which consists generally of stockholders’
equity and qualifying preferred stock, less certain goodwill items and other intangible assets. In order to support our operations and
comply with regulatory standards, we may need to raise capital in the future. Our ability to raise additional capital will depend on
conditions in the capital markets at that time, which are outside of our control, and on our financial performance. Accordingly, we
cannot assure you of our ability to raise additional capital, if needed, on favorable terms. The capital and credit markets have
experienced significant volatility in recent years. In some cases, the markets have produced downward pressure on stock prices and
credit availability for certain issuers without regard to those issuers’ underlying financial strength. If we cannot raise additional
capital when needed, our financial condition and results of operations may be adversely affected and our banking regulators may
subject us to regulatory enforcement action, including receivership. Furthermore, our issuance of additional shares of our Class A
common stock could dilute the economic ownership interest of our Class A stockholders.
Stockholders may be deemed to be acting in concert or otherwise in control of us and our bank subsidiary, which could
impose prior approval requirements and result in adverse regulatory consequences for such holders.
We are a financial holding company regulated by the Federal Reserve. Any entity (including a “group” composed of natural
persons) owning 25% or more of a class of our outstanding shares of voting stock, or a lesser percentage if such holder or group
otherwise exercises a “controlling influence” over us, may be subject to regulation as a “bank holding company” in accordance with
the Bank Holding Company Act of 1956, as amended. In addition, (i) any bank holding company or foreign bank with a U.S.
presence is required to obtain the approval of the Federal Reserve under the Bank Holding Company Act to acquire or retain 5% or
more of a class of our outstanding shares of voting stock, and (ii) any person other than a bank holding company may be required to
obtain prior regulatory approval under the Change in Bank Control Act to acquire or retain 10% or more of our outstanding shares of
voting stock. Any stockholder that is deemed to “control” the Company for bank regulatory purposes would become subject to prior
approval requirements and ongoing regulation and supervision. Such a holder may be required to divest amounts equal to or
exceeding 5% of the voting shares of investments that may be deemed incompatible with bank holding company status, such as an
investment in a company engaged in non-financial activities. Regulatory determination of “control” of a depository institution or
holding company is based on all of the relevant facts and circumstances. Potential investors are advised to consult with their legal
counsel regarding the applicable regulations and requirements.
Shares of our common stock owned by holders determined by a bank regulatory agency to be acting in concert would be
aggregated for purposes of determining whether those holders have control of a bank or bank holding company. Each stockholder
obtaining control that is a “company” would be required to register as a bank holding company. “Acting in concert” generally means
knowing participation in a joint activity or parallel action towards the common goal of acquiring control of a bank or a parent
company, whether or not pursuant to an express agreement. The manner in which this definition is applied in individual
circumstances can vary and cannot always be predicted with certainty. Many factors can lead to a finding of acting in concert,
including where: (i) the stockholders are commonly controlled or managed; (ii) the stockholders are parties to an oral or written
agreement or understanding regarding the acquisition, voting or transfer of control of voting securities of a bank or bank holding
company; (iii) the stockholders are immediate family members; or (iv) both a stockholder and a controlling stockholder, partner,
trustee or management official of such stockholder own equity in the bank or bank holding company.
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We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair
lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The Community Reinvestment Act, or CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws
and regulations impose nondiscriminatory lending requirements on financial institutions. The U.S. Department of Justice and other
federal agencies are responsible for enforcing these laws and regulations. A successful regulatory challenge to an institution’s
performance under the CRA or fair lending laws and regulations could result in a wide variety of sanctions, including damages and
civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion and restrictions on
entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws
in private class action litigation. Such actions could have a material adverse effect on our business, financial condition, results of
operations and future prospects.
We are subject to the Bank Secrecy Act and other anti-money laundering statutes and regulations, and any deemed
deficiency by us with respect to these laws could result in significant liability.
The Bank Secrecy Act, the USA PATRIOT Act of 2001, or the Patriot Act, and other laws and regulations require financial
institutions, among other duties, to institute and maintain an effective anti-money laundering program and file suspicious activity and
currency transaction reports, when appropriate. In addition to other bank regulatory agencies, the federal Financial Crimes
Enforcement Network of the U.S. Treasury, is authorized to impose significant civil money penalties for violations of those
requirements and has recently engaged in coordinated enforcement efforts with the state and federal banking regulators, as well as the
U.S. Department of Justice, Consumer Financial Protection Bureau, Drug Enforcement Administration and Internal Revenue Service,
or the IRS. We are also subject to increased scrutiny of compliance with the rules enforced by the Office of Foreign Assets Control of
the U.S. Treasury regarding, among other things, the prohibition of transacting business with and the need to freeze assets of, certain
persons and organizations identified as a threat to the national security, foreign policy or economy of the United States. If our
policies, procedures and systems are deemed deficient, we would be subject to liability, including fines and regulatory actions, which
may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed with certain
aspects of our business plan, including our acquisition plans. Failure to maintain and implement adequate programs to combat money
laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could have a material
adverse effect on our business, financial condition, results of operations and future prospects.
Many of our new activities and expansion plans require regulatory approvals and failure to obtain them may restrict our
growth.
We intend to complement and expand our business by pursuing strategic acquisitions of financial institutions and other
complementary businesses. Generally, we must receive state and federal regulatory approval before we can acquire an FDIC-insured
depository institution or related business. In determining whether to approve a proposed acquisition, federal banking regulators will
consider, among other factors, the effect of the acquisition on competition, our financial condition, our future prospects and the impact
of the proposal on U.S. financial stability. The regulators also review current and projected capital ratios and levels, the competence,
experience and integrity of management and its record of compliance with laws and regulations, the convenience and needs of the
communities to be served (including the acquiring institution’s record of compliance under the CRA) and the effectiveness of the
acquiring institution in combating money laundering activities. Such regulatory approvals may not be granted on terms that are
acceptable to us, or at all. We may also be required to sell branches as a condition to receiving regulatory approval, which may not be
acceptable to us or, if acceptable to us, may reduce the benefit of any acquisition.
The Federal Reserve may require us to commit capital resources to support our subsidiary, Equity Bank.
The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to its subsidiary
banks and to commit resources to support its subsidiary banks. Under the “source of strength” doctrine, the Federal Reserve may
require a bank holding company to make capital injections into a troubled subsidiary bank at times when the bank holding company
may not be inclined to do so and may charge the bank holding company with engaging in unsafe and unsound practices for failure to
commit resources to such a subsidiary bank. Accordingly, we could be required to provide financial assistance to our subsidiary,
Equity Bank, if it experiences financial distress.
Such a capital injection may be required at a time when our resources are limited, and we may be required to borrow the funds
to make the required capital injection. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any
commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover,
bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the
holding company’s general unsecured creditors, including the holders of any note obligations.
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The laws that regulate our operations are designed for the protection of depositors and the public, not our stockholders.
The federal and state laws and regulations applicable to our operations give regulatory authorities extensive discretion in
connection with their supervisory and enforcement responsibilities and generally have been promulgated to protect depositors and the
FDIC’s DIF and not for the purpose of protecting stockholders. These laws and regulations can materially affect our future business.
Laws and regulations now affecting us may be changed at any time and the interpretation of such laws and regulations by bank
regulatory authorities is also subject to change.
As a bank holding company, the sources of funds available to us are limited.
Any future constraints on liquidity at the holding company level could impair our ability to declare and pay dividends on our
Class A common stock. In some instances, notice to, or approval from, the Federal Reserve may be required prior to our declaration
or payment of dividends. Further, our operations are primarily conducted by our subsidiary, Equity Bank, which is subject to
significant regulation. Federal and state banking laws restrict the payment of dividends by banks to their holding companies and
Equity Bank will be subject to these restrictions in paying dividends to us. Because our ability to receive dividends or loans from
Equity Bank is restricted, our ability to pay dividends to our stockholders is also restricted.
Additionally, the right of a bank holding company to participate in the assets of its subsidiary bank in the event of a bank-level
liquidation or reorganization is subject to the claims of the bank’s creditors, including depositors, which take priority, except to the
extent that the holding company may be a creditor with a recognized claim.
Negative developments affecting the banking industry, and resulting media coverage in 2023 eroded customer confidence in
the banking system.
The high-profile bank failures in 2023 involving Silicon Valley Bank, Signature Bank and First Republic Bank have generated
significant market volatility among publicly traded bank holding companies and, in particular, regional banks like Equity Bank. These
market developments negatively impacted customer confidence in the safety and soundness of regional banks. As a result, customers
may choose to maintain deposits with larger financial institutions or invest in higher yielding short-term fixed income securities, all of
which could materially adversely impact Equity Bank's liquidity, loan funding capacity, net interest margin, capital and results of
operations. While the Department of the Treasury, the Federal Reserve, and the FDIC made statements ensuring that depositors of
these failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions
will be successful in restoring customer confidence in regional banks and the banking system more broadly.
Any regulatory examination scrutiny or new regulatory requirements arising from the recent events in the banking industry
could increase the Company’s expenses and affect the Company’s operations.
The Company and Equity Bank anticipate increased regulatory scrutiny and new regulations directed towards banks of similar
size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase the
Company’s costs of doing business and reduce its profitability. Among other things, there may be an increased focus by both
regulators and investors on deposit composition and the level of uninsured deposits. As a result, the Bank could face increased
scrutiny or be viewed as higher risk by regulators and the investor community. Equity Bank's level of uninsured deposits as a
percentage of non-brokered deposits was 46.3% at December 31, 2024, and 35.2% at December 31, 2023. Of these uninsured
balances at December 31, 2024, $809.2 million or 41.1 % and at December 31, 2023, $528.2 million or 38.0%, are fully collateralized
by either investments held by the Company or letters of credit from the FHLB.
Climate change related legislative and regulatory initiatives, have the potential to disrupt our business and adversely impact
the operations and creditworthiness of our customers.
Political and social attention to the issue of climate change has increased. The federal and state legislatures and regulatory
agencies have proposed legislative and regulatory initiatives seeking to mitigate the effects of climate change. These agreements and
measures may result in the imposition of taxes and fees, the required purchase of emission credits, and the implementation of
significant operational changes. In addition, the federal banking agencies may address climate-related issues in their agendas in
various ways, including by increasing supervisory expectations with respect to banks' risk management practices, accounting for the
effects of climate change in stress testing scenarios and systemic risk assessments, revising expectations for credit portfolio
concentrations based on climate-related initiatives and lending to communities disproportionately impacted by the effects of climate
change. We may incur compliance, operating, maintenance and remediation costs.
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Risks Relating to the Company’s Common Stock
The market price of our Class A common stock may be subject to substantial fluctuations which may make it difficult for you
to sell your shares at the volumes, prices and times desired.
The trading price of our Class A common stock may be volatile, which may make it difficult for you to resell your shares at the
volume, prices and times desired. There are many factors that may impact the market price and trading volume of our Class A
common stock, including:
•
actual or anticipated fluctuations in our operating results, financial condition or asset quality;
•
market conditions in the broader stock market in general or in our industry in particular;
•
publication of research reports about us, our competitors or the bank and non-bank financial services industries generally,
or changes in, or failure to meet, securities analysts’ estimates of our financial and operating performance, or lack of
research reports by industry analysts or ceasing of coverage;
•
future issuances of our Class A common stock or other securities;
•
significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or
involving our competitors or us;
•
additions or departures of key personnel;
•
trades of large blocks of our Class A common stock;
•
economic and political conditions or events;
•
regulatory developments; and
•
other news, announcements or disclosures (whether by us or others) related to us, our competitors, our core markets or the
bank and non-bank financial services industries.
The stock market and, in particular, the market for financial institution stocks, have experienced substantial fluctuations in
recent years, which in many cases have been unrelated to the operating performance and prospects of particular companies. In
addition, significant fluctuations in the trading volume in our Class A common stock may cause significant price variations to occur.
Increased market volatility may materially and adversely affect the market price of our Class A common stock, which could make it
difficult to sell your shares at the volume, prices and times desired.
In the past, following periods of volatility in the market price of our common stock, securities class action litigation has been
instituted. Pending or future securities class action suits against us could result in significant liabilities and, regardless of the outcome,
could result in substantial costs and the diversion of our management’s attention and resources.
The obligations associated with being a public company require significant resources and management attention.
As a public company, we face increased legal, accounting, administrative and other costs and expenses that are not incurred by
private companies. We subject to the reporting requirements of the Exchange Act, which requires that we file annual, quarterly and
current reports with respect to our business and financial condition and proxy and other information statements, and the rules and
regulations implemented by the SEC, the Sarbanes-Oxley Act, the Dodd-Frank Act, the PCAOB and the New York Stock Exchange,
each of which imposes additional reporting and other obligations on public companies. As a public company, we are required to:
•
prepare and distribute periodic reports, proxy statements and other stockholder communications in compliance with the
federal securities laws and rules;
•
expand the roles and duties of our board of directors and committees thereof;
•
maintain an enhanced internal audit function;
•
institute more comprehensive financial reporting and disclosure compliance procedures;
•
involve and retain to a greater degree outside counsel and accountants in the activities listed above;
•
enhance our investor relations function;
•
establish internal policies, including those relating to trading in our securities and disclosure controls and procedures;
•
retain additional personnel;
45
•
comply with the New York Stock Exchange listing standards; and
•
comply with the Sarbanes-Oxley Act.
We expect these rules and regulations and changes in laws, regulations and standards relating to corporate governance and
public disclosure, which have created uncertainty for public companies, to increase legal and financial compliance costs and make
some activities more time consuming and costly. These laws, regulations and standards are subject to varying interpretations, in many
cases due to their lack of specificity and, as a result, their application in practice may evolve over time as new guidance is provided by
regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices. Our investment in compliance with existing and evolving
regulatory requirements will result in increased administrative expenses and a diversion of management’s time and attention from
revenue-generating activities to compliance activities, which could have a material adverse effect on our business, financial condition
and results of operations. These increased costs may require us to divert a significant amount of money that we could otherwise use to
expand our business and achieve our strategic objectives.
There is no guarantee that we will declare or pay cash dividends on our common stock.
The holders of our common stock will receive dividends if and when declared by our board of directors out of legally available
funds. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will
depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory
restrictions and other factors that our board of directors may deem relevant.
Our principal business operations are conducted through our subsidiary, Equity Bank. Cash available to pay dividends to our
stockholders is derived primarily, if not entirely, from dividends paid by Equity Bank to us. The ability of Equity Bank to pay
dividends to us, as well as our ability to pay dividends to our stockholders, will continue to be subject to and limited by, certain legal
and regulatory restrictions. Further, any lenders making loans to us may impose financial covenants that may be more restrictive with
respect to dividend payments than the regulatory requirements.
If a substantial number of shares become available for sale and are sold in a short period of time, the market price of our
Class A common stock could decline.
If our existing stockholders sell substantial amounts of our Class A common stock in the public market, the market price of our
Class A common stock could decrease significantly. The perception in the public market that our existing stockholders might sell
shares of Class A common stock could also depress our market price. A decline in the price of shares of our Class A common stock
might impede our ability to raise capital through the issuance of additional shares of our Class A common stock or other equity
securities and could result in a decline in the value of the shares of our Class A common stock.
Securities analysts may not initiate or continue coverage on our Class A common stock, which could adversely affect the
market for our Class A common stock.
The trading market for our Class A common stock may depend in part on the research and reports that securities analysts
publish about us and our business. We do not have any control over these securities analysts, and they may not cover our Class A
common stock. If securities analysts do not cover our Class A common stock, the lack of research coverage may adversely affect our
market price. If we are covered by securities analysts and our Class A common stock is the subject of an unfavorable report, the price
of our Class A common stock may decline. If one or more of these analysts cease to cover us or fail to publish regular reports on us,
we could lose visibility in the financial markets, which could cause the price or trading volume of our Class A common stock to
decline.
The trading volume in our common stock is less than other larger financial institutions.
Although our Class A common stock is listed for trading on the New York Stock Exchange, the trading volume in our common
stock is less than that of other, larger financial services companies. A public trading market having the desired characteristics of
depth, liquidity and orderliness depends on the presence in the marketplace of willing buyers and sellers of our Class A common stock
at any given time. This presence depends on the individual decisions of investors and general economic and market conditions over
which we have no control. Given the lower trading volume of our Class A common stock, significant sales of our Class A common
stock or the expectation of these sales, could cause the price of our Class A common stock to decline.
46
Use of our common stock for future acquisitions or to raise capital may be dilutive to existing stockholders.
When we determine that appropriate strategic opportunities exist, we may acquire other financial institutions and related
businesses, subject to applicable regulatory requirements. We may use our common stock for such acquisitions. We may also seek to
raise capital for such acquisitions through selling additional common stock. It is possible that the issuance of additional common
stock in such acquisitions or capital transactions may be dilutive to the interests of our existing stockholders.
A future issuance of stock could dilute the value of our Class A common stock.
We may sell additional shares of Class A common stock, or securities convertible into or exchangeable for such shares, in
subsequent public or private offerings. Future issuance of any new shares could cause further dilution in the value of our outstanding
shares of Class A common stock. We cannot predict the size of future issuances of our Class A common stock, or securities
convertible into or exchangeable for such shares, or the effect, if any, that future issuances and sales of shares of our Class A common
stock will have on the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock
(including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect
prevailing market prices of our Class A common stock.
We have significant institutional investors whose interests may differ from yours.
A significant portion of our outstanding equity is currently held by various investment funds. These funds could have a
significant level of influence because of their level of ownership, including a greater ability than you and our other stockholders to
influence the election of directors and the potential outcome of other matters submitted to a vote of our stockholders, such as mergers,
the sale of substantially all of our assets and other extraordinary corporate matters and affect the votes of our board of directors. The
interests of these funds could conflict with the interests of our other stockholders, including you, and any future transfer by these funds
of their shares of Class A common stock to other investors who have different business objectives could have a material adverse effect
on our business, financial condition, results of operations and future prospects, and the market value of our Class A common stock.
Our directors and executive officers beneficially own a significant portion of our Class A common stock and have substantial
influence over us.
Our directors and executive officers, as a group, beneficially own a significant portion of our Class A common stock. As a
result of this beneficial ownership, our directors and executive officers have the ability, by taking coordinated action, to exercise
significant influence over our affairs and policies. The interests of our directors and executive officers may not be consistent with
your interests as a stockholder. This influence may also have the effect of delaying or preventing changes of control, or changes in
management or limiting the ability of our other stockholders to approve transactions that they may deem to be in the best interests of
our Company.
Shares of our Class A common stock are not insured deposits and may lose value.
Shares of our Class A common stock are not savings or deposit accounts and are not insured by the FDIC’s DIF or any other
agency or private entity. Such shares are subject to investment risk, including the possible loss of some or all of the value of your
investment.
We have the ability to incur debt and pledge our assets, including our stock in Equity Bank, to secure that debt, and holders
of any such debt obligations will generally have priority over holders of our Class A common stock with respect to certain payment
obligations.
We have the ability to incur debt and pledge our assets to secure that debt. Absent special and unusual circumstances, a holder
of indebtedness for borrowed money has rights that are superior to those of holders of Class A common stock. For example, interest
must be paid to the lender before dividends can be paid to stockholders and loans must be paid off before any assets can be distributed
to stockholders if we were to liquidate. Furthermore, we would have to make principal and interest payments on our indebtedness,
which could reduce our profitability or result in net losses on a consolidated basis.
If we fail to maintain an effective system of disclosure controls and procedures and internal control over financial reporting,
we may not be able to accurately report our financial results or prevent fraud.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for
evaluating and reporting on that system of internal control. Our internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
47
purposes in accordance with generally accepted accounting principles. Ensuring that we have adequate disclosure controls and
procedures in place, including internal control over financial reporting, so that we can produce accurate financial statements on a
timely basis is costly and time-consuming and needs to be reevaluated frequently. As a public company, we are required to comply
with the Sarbanes-Oxley Act and other rules that govern public companies. Our management is required to certify our compliance
with Section 404 of the Sarbanes-Oxley Act and to make annual assessments of the effectiveness of our internal control over financial
reporting. In addition, our independent registered public accounting firm is required to report on the effectiveness of our internal
control over financial reporting.
Our management may conclude that our internal control over financial reporting is not effective due to our failure to cure any
identified material weakness or otherwise. Moreover, even if our management concludes that our internal control over financial
reporting is effective, our independent registered public accounting firm may not conclude that our internal control over financial
reporting is effective. In the future, our independent registered public accounting firm may not be satisfied with our internal control
over financial reporting or the level at which our controls are documented, designed, operated or reviewed, or it may interpret the
relevant requirements differently from us. In addition, during the course of the evaluation, documentation and testing of our internal
control over financial reporting, we may identify deficiencies in our internal control over financial reporting or disclosure controls.
Any such deficiencies may also subject us to adverse regulatory consequences. If we fail to achieve and maintain the adequacy of our
internal control over financial reporting or disclosure controls, as these standards are modified, supplemented or amended from time to
time, we may be unable to report our financial information on a timely basis, we may not be able to conclude on an ongoing basis that
we have effective internal control over financial reporting or disclosure controls and we may suffer adverse regulatory consequences
or violations of listing standards. There could also be a negative reaction in the financial markets due to a loss of investor confidence
in the reliability of our financial statements.
Our corporate governance documents and certain corporate and banking laws applicable to us could make a takeover more
difficult.
Certain provisions of our Articles of Incorporation and our Bylaws and applicable corporate and federal banking laws, could
make it more difficult for a third party to acquire control of us or conduct a proxy contest, even if those events were perceived by
many of our stockholders as beneficial to their interests. These provisions and the corporate and banking laws and regulations
applicable to us, among others:
•
empower our board of directors, without stockholder approval, to issue preferred stock, the terms of which, including
voting power, are set by our board of directors;
•
only permit stockholder action to be taken at an annual or special meeting of stockholders and not by written consent in
lieu of such a meeting;
•
provide for a classified board of directors, so that only approximately one-third of our directors are elected each year;
•
prohibit us from engaging in certain business combinations with “interested stockholders” (generally defined as a holder
of 15% or more of the corporation’s outstanding voting stock);
•
require at least 120 days’ advance notice of nominations for the election of directors and the presentation of stockholder
proposals at meetings of stockholders; and
•
require prior regulatory application and approval of any transaction involving control of our organization.
These provisions may discourage potential acquisition proposals and could delay or prevent a change in control, including under
circumstances in which our stockholders might otherwise receive a premium over the market price of our shares.
Our board of directors may issue shares of preferred stock that would adversely affect the rights of our Class A common
stockholders.
Our authorized capital stock includes 10,000,000 shares of preferred stock of which none were issued and outstanding as of
March 7, 2025. Our board of directors, in its sole discretion, may designate and issue one or more series of preferred stock from the
authorized and unissued shares of preferred stock. Subject to limitations imposed by law or our Articles of Incorporation, our board of
directors is empowered to determine:
•
the designation of, and the number of, shares constituting each series of preferred stock;
•
the dividend rate for each series;
•
the terms and conditions of any voting, conversion and exchange rights for each series;
•
the amounts payable on each series on redemption or our liquidation, dissolution or winding-up;
•
the provisions of any sinking fund for the redemption or purchase of shares of any series; and
48
•
the preferences and the relative rights among the series of preferred stock.
We could issue preferred stock with voting and conversion rights that could adversely affect the voting power of the shares of
our Class A common stock and with preferences over our Class A common stock with respect to dividends and in liquidation.
The return on your investment in our Class A common stock is uncertain.
We cannot provide any assurance that an investor in our Class A common stock will realize a substantial return on his or her
investment, or any return at all. Further, as a result of the uncertainty and risks associated with our operations, many of which are
described in this “Item 1A—Risk Factors” section, it is possible that an investor could lose his or her entire investment.
General Risks
We operate in a highly competitive industry and face significant competition from other financial institutions and financial
services providers that could decrease our growth or profits.
Consumer and commercial banking are highly competitive industries. Our market areas contain not only a large number of
community and regional banks, but also a significant presence of the country’s largest commercial banks. We compete with other
state and national financial institutions, as well as savings and loan associations, savings banks and credit unions, for deposits and
loans. In addition, we compete with financial intermediaries, such as consumer finance companies, commercial finance companies,
mortgage banking companies, insurance companies, securities firms, mutual funds and several government agencies, as well as major
retailers, all actively engaged in providing various types of loans and other financial services. Some of these competitors may have a
long history of successful operations in our market areas and greater ties to local businesses and more expansive banking relationships,
as well as more established depositor bases, fewer regulatory constraints and lower cost structures than we do. Competitors with
greater resources may possess an advantage through their ability to maintain numerous banking locations in more convenient sites, to
conduct more extensive promotional and advertising campaigns or to operate a more developed technology platform. Due to their
size, many competitors may offer a broader range of products and services, as well as better pricing for certain products and services
than we can offer. For example, in a low interest rate environment, competitors with lower costs of capital may solicit our customers
to refinance their loans with a lower interest rate. Further, increased competition among financial services companies due to the recent
consolidation of certain competing financial institutions may adversely affect our ability to market our products and services.
Technology has lowered barriers to entry and made it possible for banks to compete in our market areas without a retail footprint by
offering competitive rates and for non-banks to offer products and services traditionally provided by banks.
The financial services industry could become even more competitive as a result of legislative, regulatory and technological
changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial
holding company, which can offer virtually any type of financial service, including banking, securities underwriting, insurance (both
agency and underwriting) and merchant banking.
Our ability to compete successfully depends on a number of factors, including:
•
our ability to develop, maintain and build upon long-term customer relationships based on quality service and high ethical
standards;
•
our ability to attract and retain qualified employees to operate our business effectively;
•
our ability to expand our market position;
•
the scope, relevance and pricing of products and services that we offer to meet customer needs and demands;
•
the rate at which we introduce new products and services relative to our competitors;
•
customer satisfaction with our level of service; and
•
industry and general economic trends.
Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our
growth and profitability, which, in turn, could harm our business, financial condition and results of operations.
49
As a community bank, our ability to maintain our reputation is critical to the success of our business, and the failure to do so
may materially adversely affect our performance.
We are a community bank and our reputation is one of the most valuable components of our business. As such, we strive to
conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees
who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and
caring about our customers and associates. If our reputation is negatively affected by the actions of our employees or otherwise, our
business and therefore, our operating results may be materially adversely affected. Further, negative public opinion can expose us to
litigation and regulatory action as we seek to implement our growth strategy.
We are subject to environmental risks in our lending activities.
Because a significant portion of our loan portfolio is secured by real property, we may foreclose upon and take title to such
property in the ordinary course of business. If hazardous substances are found on such property, we could be liable for remediation
costs, as well as for personal injury and property damage. Environmental laws might require us to incur substantial expenses,
materially reduce the property’s value or limit our ability to use or sell the property. Although management has policies requiring
environmental reviews before loans secured by real property are made and before foreclosure is commenced, it is still possible that
environmental risks might not be detected and that the associated costs might have a material adverse effect on our financial condition
and results of operations.
Adverse weather or man-made events could negatively affect our markets or disrupt our operations, which could have an
adverse effect upon our business and results of operations.
A significant portion of our business is generated in our Arkansas, Kansas, Missouri and Oklahoma markets, which have been,
and may continue to be, susceptible to natural disasters, such as tornadoes, droughts, floods and other severe weather events. These
natural disasters could negatively impact regional economic conditions, cause a decline in the value or destruction of mortgaged
properties and increase the risk of delinquencies, foreclosures or loss on loans originated by us, damage our banking facilities and
offices and negatively impact our growth strategy. Such weather events could disrupt operations, result in damage to properties and
negatively affect the local economies in the markets where we operate. We cannot predict whether, or to what extent, damage that
may be caused by future weather or man-made events will affect our operations or the economies in our current or future market areas,
but such events could negatively impact economic conditions in these regions and result in a decline in local loan demand and loan
originations, a decline in the value or destruction of properties securing our loans and an increase in delinquencies, foreclosures or
credit losses. Our business or results of operations may be adversely affected by these and other negative effects of natural or man-
made disasters. Further, severe weather, natural disasters, acts of war or terrorism and other external events could adversely affect us
in a number of ways, including an increase in delinquencies, bankruptcies or defaults that could result in a higher level of
nonperforming assets, net charge-offs and provision for credit losses. Such risks could also impair the value of collateral securing
loans and hurt our deposit base.
We are or may become involved from time to time in suits, legal proceedings, information-gathering requests, investigations
and proceedings by governmental and self-regulatory agencies that may lead to adverse consequences.
Many aspects of our business involve substantial risk of legal liability. We have been named or threatened to be named as
defendants in various lawsuits arising from our business activities (and in some cases from the activities of companies that we have
acquired) including, but not limited to, consumer residential real estate mortgages. In addition, from time to time, we are, or may
become, the subject of governmental and self-regulatory agency information-gathering requests, reviews, investigations and
proceedings and other forms of regulatory inquiry, including by bank regulatory agencies, the Consumer Financial Protection Bureau,
the SEC and law enforcement authorities. The results of such proceedings could lead to significant civil or criminal penalties,
including monetary penalties, damages, adverse judgments, settlements, fines, injunctions, restrictions on the way in which we
conduct our business or reputational harm.
We are subject to claims and litigation pertaining to intellectual property.
We rely on technology companies to provide information technology products and services necessary to support our day-to-day
operations. Technology companies frequently enter into litigation based on allegations of patent infringement or other violations of
intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise
obtained. Competitors of our vendors, or other individuals or companies, have from time to time claimed to hold intellectual property
sold to us by its vendors. Such claims may increase in the future as the financial services sector becomes more reliant on information
technology vendors. The plaintiffs in these actions frequently seek injunctions and substantial damages.
50
Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential
or actual litigants, we may have to engage in litigation that could be expensive, time-consuming, disruptive to our operations and
distracting to management. If we are found to infringe one or more patents or other intellectual property rights, we may be required to
pay substantial damages or royalties to a third-party. In certain cases, we may consider entering into licensing agreements for disputed
intellectual property, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will
not occur. These licenses may also significantly increase our operating expenses. If legal matters related to intellectual property
claims were resolved against us or settled, we could be required to make payments in amounts that could have a material adverse
effect on our business, financial condition and results of operations.
We have pledged all of the stock of Equity Bank as collateral for a loan, and if the lender forecloses, you could lose your
investment.
We have pledged all of the stock of Equity Bank as collateral for a third-party loan, which had no balance as of December 31,
2024. This loan has a maximum lending commitment of $25.0 million. This loan was renewed and amended on February 10, 2025
and has a maturity date of February 10, 2026. If we were to default on this indebtedness, the lender of such loan could foreclose on
Equity Bank’s stock and we would lose our principal asset. In that event, if the value of Equity Bank’s stock is less than the amount
of the indebtedness, you would lose the entire amount of your investment.
We have outstanding subordinated debt obligations, and if the Company defaults on those obligations, the debt holders could
lose their investment.
In the event of default, the Company’s senior debt holders will be entitled to receive payment in full prior to payment of
subordinated debt holders. If the company’s distributable assets in the event of default can only repay the senior debt holders the
subordinated debt holders could lose their investment.
51
Item 1B: Unresolved Staff Comments
None
Item 1C: Cybersecurity
The Company’s Board of Directors (the “Board”) recognizes the importance of maintaining the trust and confidence of our
customers, clients, business partners and employees. The Board is actively involved in oversight of the Company’s risk management
program, and cybersecurity represents an important component of the Company’s overall approach to enterprise risk management
(“ERM”). The Company’s cybersecurity policies, standards, processes and practices are integrated into the Company’s ERM program
In general, the Company seeks to address cybersecurity risks through a comprehensive, cross-functional approach that is focused on
preserving the confidentiality, security and availability of its systems and the information that the Company collects and stores by
identifying, preventing and mitigating cybersecurity threats and effectively responding to cybersecurity incidents when they occur.
Due to our heavy reliance on the strength and capability of our technology systems, which we use both to interface with our
customers and to manage our internal financial reporting and other systems, we utilize a layered cybersecurity model designed to
protect Company systems and sensitive data. This defense model is composed of a variety of different components including
administrative, technical controls and safeguards. These various components are centrally managed and monitored creating a multi-
layered, interlocking, cybersecurity defense system. We believe this defense system is dynamic and designed to adjust to protect
against the latest cyber threats and attack vectors.
Risk Management and Strategy
As one of the critical elements of the Company’s overall ERM approach, the Company’s cybersecurity risk management
program and strategy is focused on the following key areas:
•
Governance: As discussed in more detail under the heading “Governance,” The Board’s oversight of cybersecurity risk
management is supported by the Risk Management Committee of the Board (the “Risk Management Committee”), which
regularly interacts with the Company’s ERM function, the Company’s Chief Information Security Officer (“CISO”), the
Company’s Chief Information Officer (“CIO”), other members of management.
•
Incident Response and Recovery Planning: The Company has implemented a comprehensive, cross-functional approach
to identifying, preventing and mitigating cybersecurity threats and incidents, while also implementing controls and
procedures that provide for the prompt escalation of certain cybersecurity incidents so that decisions regarding the public
disclosure and reporting of such incidents can be made by management in a timely manner.
•
Technical Safeguards: The Company deploys technical safeguards that are designed to protect the Company’s information
systems from cybersecurity threats, including firewalls, intrusion prevention and detection systems, anti-malware
functionality and access controls, which are evaluated and improved through vulnerability assessments and cybersecurity
threat intelligence.
•
Incident Response and Recovery Planning: The Company has established and maintains comprehensive incident response
and recovery plans that establish a structured approach for the Company’s response to a cybersecurity incident, and such
plans are tested and evaluated on a regular basis.
•
Outside Experts. The Company routinely works with outside experts, consultants, auditors and other third parties in
connection with managing its cybersecurity risks and for advice regarding best practices and technical expertise.
•
Education and Awareness: The Company provides regular, mandatory training for personnel regarding cybersecurity
threats to equip the Company’s personnel with effective tools to address cybersecurity threats, and to communicate the
Company’s evolving information security policies, standards, processes and practices.
The Company engages in the periodic assessment and testing of the Company’s policies, standards, processes and practices that
are designed to address cybersecurity threats and incidents. These efforts include a wide range of activities, including audits,
assessments, tabletop exercises, threat modeling, vulnerability testing and other exercises focused on evaluating the effectiveness of
our cybersecurity measures and planning. The Company regularly engages third parties to perform assessments on our cybersecurity
measures, including information security maturity assessments, audits and independent reviews of our information security control
environment and operating effectiveness. The results of such assessments, audits and reviews are reviewed by the Cybersecurity team
and the Company adjusts its cybersecurity policies, standards, processes and practices as necessary based on the information provided
by these assessments, audits and reviews.
52
Governance
Board Oversight of Risks from Cybersecurity Threats
The Board, in coordination with the Risk Management Committee, oversees the Company’s ERM process, including the
management of risks arising from cybersecurity threats. The Board and the Risk Management Committee each receive regular
presentations and reports on cybersecurity risks, which address a wide range of topics including recent developments, evolving
standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and
information security considerations arising with respect to the Company’s peers and third parties. The Board and the Risk
Management Committee also receive prompt and timely information regarding any cybersecurity incident that meets established
reporting thresholds, as well as ongoing updates regarding any such incident until it has been addressed. On an annual basis, the Board
and the Risk Management Committee discuss the Company’s approach to cybersecurity risk management with the Company’s CISO
and CIO.
During the fiscal year of this Report, the Company has not identified risks from cybersecurity threats, including as a result of
prior cybersecurity incidents, that individually or in the aggregate have materially affected or are reasonably anticipated to materially
affect the organization. Nevertheless, the Company recognizes cybersecurity threats are ongoing and evolving, and we continue to
remain vigilant. For more information on the Company's cybersecurity-related risks, see "Item 1A - Risk Factors - We use information
technology in our operations and offer online banking services to our customers, and unauthorized access to our or our customers'
confidential or proprietary information as a result of a cyber-attack or otherwise could expose us to reputational harm and litigation
and adversely affect our ability to attract and retain customers."
Management’s Role in Assessing and Managing Risks from Cybersecurity Threats
The CISO, in coordination with our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Information
Officer (“CIO”) and Chief Legal Officer (“CLO”), works collaboratively across the Company to implement a program designed to
protect the Company’s information systems from cybersecurity threats and to promptly respond to any cybersecurity incidents in
accordance with the Company’s incident response and recovery plans. To facilitate the success of the Company’s cybersecurity risk
management program, multidisciplinary teams throughout the Company are deployed to address cybersecurity threats and to respond
to cybersecurity incidents. Through ongoing communications with these teams, the CISO and CIO monitor the prevention, detection,
mitigation and remediation of cybersecurity threats and incidents in real time, and report such threats and incidents to the Risk
Management Committee when appropriate.
The CISO has served in various roles in information technology and information security for over 15 years, including serving as
the Chief Information Security Officer of two large public companies. The CISO holds an undergraduate degree in Information
Networking and Telecommunications, a graduate degree in Cybersecurity, and has attained the professional certification of Certified
Information Systems Security Professional. The CIO holds an undergraduate degree in Business Finance and has served in various
roles in information technology for over 30 years, including serving as either the Chief Information Security Officer or Chief
Information Officer of two public companies.
Item 2: Properties
Our principal executive offices are located at 7701 East Kellogg Drive, Wichita, Kansas 67207. Including our principal
executive offices, as of December 31, 2024, we operated a total of 71 branches, consisting of seven branches in the Wichita, Kansas
metropolitan area, six branches in the Kansas City metropolitan area, two branches in Topeka, Kansas, eleven branches in Western
Missouri, eight branches in North Central Missouri, seven branches in Western Kansas, four branches in Southeast Kansas, seven
branches in Southwest Kansas, five branches in Central Kansas, two branches in North Central Kansas, five branches in Northern
Arkansas, one branch in the Tulsa, Oklahoma metropolitan area, four branches in Northern Oklahoma and two branches in Western
Oklahoma. Most of Equity Bank’s branches are equipped with automated teller machines and drive-through facilities. We believe all
of our facilities are suitable for our operational needs. The following table summarizes pertinent details of our principal executive
offices and branches, as of December 31, 2024.
53
Address
Owned/Leased
Principal Executive Office and Wichita Branch:
7701 East Kellogg Drive
Wichita, Kansas 67207
Owned
Branches as of December 31, 2024
Owned
63
Leased(1)
8
(1) Included in this category is one branch in which the building is owned but the land is on a long-term lease expiring in January 2030.
Item 3: Legal Proceedings
From time to time we are party to various litigation matters incidental to the conduct of our business. See “NOTE 21 – LEGAL
MATTERS” of the Notes to Consolidated Financial Statements under Item 8 to this Annual Report on Form 10-K for a complete
discussion of litigation matters.
Item 4: Mine Safety Disclosures
Not applicable.
54
Part II
Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Common Equity Holders
Our common stock is listed on the New York Stock Exchange under the symbol “EQBK”. At February 28, 2025, there were
17,508,740 shares of our Class A common stock, outstanding and 216 stockholders of record for the Company’s Class A common
stock. At February 28, 2025, no shares of our Class B common stock were outstanding.
Dividend Policy
Our future determination to pay dividends on our common stock will be made by our board of directors and will depend on a
number of factors, including:
•
our historical and projected financial condition, liquidity and results of operations;
•
our capital levels and requirements;
•
statutory and regulatory prohibitions and other limitations;
•
any contractual restriction on our ability to pay cash dividends, including pursuant to the terms of any of our credit
agreements or other borrowing arrangements; the Company expects to pay dividends at similar levels in the future;
•
our business strategy;
•
tax considerations;
•
any acquisitions or potential acquisitions that we may examine;
•
general economic conditions; and
•
other factors deemed relevant by our board of directors.
We are not obligated to pay dividends on our common stock.
As a Kansas corporation, we are subject to certain restrictions on dividends under the Kansas General Corporation Code.
Generally, a Kansas corporation may pay dividends to its stockholders out of its surplus or, if there is no surplus, out of its net profits
for the fiscal year in which the dividend is declared or the preceding fiscal year, or both. In addition, if the capital of a Kansas
corporation is diminished by depreciation in the value of its property, or by losses or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets,
the directors of such corporation cannot declare and pay out of such net profits any dividends upon any shares of any classes of its
capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets is repaired. We are also subject to certain restrictions on the payment of cash dividends as a
result of banking laws, regulations and policies. For more information, see “Item 1 – Supervision and Regulation – Banking
Regulation – Standards for Safety and Soundness.”
Since we are a financial holding company and do not engage directly in business activities of a material nature, our ability to
pay dividends to our stockholders depends, in large part, upon our receipt of dividends from Equity Bank, which is also subject to
numerous limitations on the payment of dividends under federal and state banking laws, regulations and policies. The present and
future dividend policy of Equity Bank is subject to the discretion of its board of directors. Equity Bank is not obligated to pay
dividends.
If Equity Bank is “significantly undercapitalized” under the applicable federal bank capital standards, or if Equity Bank is
“undercapitalized” and has failed to submit an acceptable capital restoration plan or has materially failed to implement such a plan, the
FDIC may choose to require Equity Bank to receive prior approval from the Federal Reserve for any capital distribution. In addition,
Equity Bank generally is prohibited from making a capital distribution if such distribution would cause Equity Bank to be
“undercapitalized” under applicable federal bank capital standards. For more information, see “Item 7 – Supervision and Regulation –
Banking Regulation – Standards for Safety and Soundness.”
Securities Authorized for Issuance Under Equity Compensation Plans
The following table presents shares of our common stock that may be issued with respect to compensation plans at December
31, 2024.
55
Plan Category
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(a)
Weighted average
exercise price
of outstanding
options, warrants
and rights
(b)
Number of
securities remaining
available for future
issuance under
equity compensation
plans (excluding
securities reflected
in column a)
(c)
Equity compensation plans - stock options
495,180
$
30.07
*
Equity compensation plans - restricted stock awards and restricted stock
units
285,331
*
Equity compensation plans - available
780,511
1,050,525
Equity compensation plans - employee stock purchase plan
—
—
322,181
Equity compensation plans
780,511
1,372,706
Equity compensation plans not approved by
security holders
—
—
—
Total
780,511
$
—
1,372,706
* All securities remaining available for future issuance were available under our 2022 Omnibus Equity Plan as of December 31, 2024.
On April 26, 2022, the Company's shareholders approved the Company’s 2022 Omnibus Equity Plan (the Plan) to reserve 760,000
shares for the grant of non-qualified stock options, restricted stock units, restricted stock and unrestricted stock to its employees and
directors. The Plan replaced the Amended and Restated 2013 Stock Incentive Plan (2013 Plan). There were pour over shares
available in the new plan from the previous plan due to forfeiture, cancellation, and expiration after the effective date. For the year
ended December 31, 2024, there were pour over shares of 22,731 from our Amended and Restated 2013 Stock Incentive Plan, which
are included in the available RSU balance at December 31, 2024.
On January 27, 2019, the Company’s Board of Directors adopted the Equity Bancshares, Inc. 2019 Employee Stock Purchase Plan
(“ESPP”) and reserved 500,000 shares of common stock for issuance. The ESPP was approved by the Company’s stockholders on
April 24, 2019. The ESPP enables eligible employees to purchase the Company’s common stock at a price per share equal to 85% of
the lower of the fair market value of the common stock at the beginning or end of each offering period. At December 31, 2024, there
were 322,181 shares available under the employee stock purchase plan for future issuance.
56
Performance Graph
The following performance graph compares total stockholders’ return on the Company’s common stock for the period beginning
at the close of trading December 31, 2019, to December 31, 2024, with the cumulative total return of the S&P 500 Index, NASDAQ
Composite Index and the NASDAQ Bank Index for the same period. Cumulative total return is computed by dividing the difference
between the Company’s share price at the end and the beginning of the measurement period by the share price at the beginning of the
measurement period, including reinvestment of dividends. The performance graph assumes $100 is invested on December 31, 2019,
in the Company’s common stock, the NASDAQ Bank Index and the S&P 500 Index. Historical stock price performance is not
necessarily indicative of future stock price performance.
Recent Sales of Unregistered Equity Securities
None
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Repurchase of Common Stock
On October 7, 2024, the Federal Reserve Bank of Kansas City advised the Company that it had no objection to the Company’s
authorization of its repurchase of up to an additional 1,000,000 shares of the Company’s Class A Voting common stock, par value
$0.01 per share, from time to time, beginning October 1, 2024, and concluding September 30, 2025.
57
The following table presents shares that were repurchased under the repurchase program during the fourth quarter of 2024.
Plan beginning October 1, 2024, to September 30, 2025
Period
Total Number
of Shares
Purchased
Average Price
Paid per
Share
Total Number
of Shares
Purchased as
Part of
Repurchase
Plan
Maximum
Number of
Shares That
May Yet Be
Purchased
Under the
Plan(1)
October 1, 2024 through October 31, 2024
—
$
—
—
1,000,000
November 1, 2024 through November 30, 2024
—
—
—
1,000,000
December 1, 2024 through December 31, 2024
—
—
—
1,000,000
Total
—
$
—
—
1,000,000
(1)Represents shares that may be repurchased under the 2024 repurchase plan
58
Item 6: Reserved
59
Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with
our audited consolidated financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.
The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected
performance. We caution that assumptions, expectations, projections, intentions or beliefs about future events may, and often do, vary
from actual results and the differences can be material. See “Cautionary Statement Regarding Forward-Looking Statements.” Also,
see the risk factors and other cautionary statements described under the heading “Item 1A – Risk Factors” included in Item 1A of this
Annual Report on Form 10-K. We do not undertake any obligation to publicly update any forward-looking statements except as
otherwise required by applicable law.
This discussion and analysis of our financial condition and results of operation includes the following sections:
•
Table containing selected financial data and ratios for the periods;
•
Overview;
•
Critical Accounting Policies – a discussion of accounting policies that require critical estimates and assumptions;
•
Results of Operations – an analysis of our operating results, including disclosures about the sustainability of our earnings;
•
Financial Condition – an analysis of our financial position;
•
Liquidity and Capital Resources – an analysis of our cash flows and capital position; and
•
Non-GAAP Financial Measures – reconciliation of non-GAAP measures.
60
Years Ended December 31,
(Dollars in thousands, except per share data)
2024
2023
2022
2021
2020
Statement of Income Data
Interest and dividend income
$
296,843
$
246,712
$
188,248
$
157,368
$
155,561
Interest expense
110,681
87,694
25,418
14,789
22,909
Net interest income
186,162
159,018
162,830
142,579
132,652
Provision (reversal) for credit losses
2,546
1,873
125
(8,480)
24,255
Net gain on acquisition
2,131
—
962
585
2,145
Net gain (loss) from securities transactions
220
(51,909)
5
406
11
Other non-interest income
36,471
32,780
34,990
31,851
23,867
Merger expense
4,461
297
594
9,189
299
Goodwill impairment
—
—
—
—
104,831
Loss on extinguishment of debt
—
—
—
372
—
Other non-interest expense
139,696
135,304
127,786
109,904
103,860
Income (loss) before income taxes
78,281
2,415
70,282
64,436
(74,570)
Provision for income taxes
15,660
(5,406)
12,594
11,956
400
Net income (loss)
62,621
7,821
57,688
52,480
(74,970)
Net income (loss) allocable to common stockholders
62,621
7,821
57,688
52,480
(74,970)
Basic earnings (loss) per share
4.04
0.50
3.56
3.49
(4.97)
Diluted earnings (loss) per share
4.00
0.50
3.51
3.43
(4.97)
Balance Sheet Data (at period end)
Cash and cash equivalents
$
383,747
$
379,099
$
104,428
$
259,954
$
280,698
Securities available-for-sale
1,004,455
919,648
1,184,390
1,327,442
871,827
Securities held-to-maturity
5,217
2,209
1,948
—
—
Loans held for sale
513
476
349
4,214
12,394
Gross loans held for investment
3,500,816
3,332,901
3,311,548
3,155,627
2,591,696
Allowance for credit losses
43,267
43,520
45,847
48,365
33,709
Loans held for investment, net of allowance for credit losses
3,457,549
3,289,381
3,265,701
3,107,262
2,557,987
Goodwill and core deposit intangibles, net
68,070
60,323
63,697
69,344
47,658
Mortgage servicing asset, net
—
75
176
276
—
Naming rights, net
957
1,000
1,044
1,087
1,130
Total assets
5,332,047
5,034,592
4,981,651
5,137,631
4,013,356
Total deposits
4,374,789
4,145,455
4,241,807
4,420,004
3,447,590
Borrowings
312,796
380,503
281,734
151,891
133,857
Total liabilities
4,739,129
4,581,732
4,571,593
4,637,000
3,605,707
Total stockholders’ equity
592,918
452,860
410,058
500,631
407,649
Tangible common equity*
523,891
391,462
345,141
429,924
358,861
Performance ratios
Return on average assets (ROAA)
1.23 %
0.16 %
1.15 %
1.18 %
(1.87)%
Return on average equity (ROAE)
12.97 %
1.85 %
13.08 %
11.75 %
(16.14)%
Return on average tangible common equity (ROATCE)*
15.94 %
2.94 %
16.35 %
14.10 %
8.27 %
Yield on loans
7.14%
6.39%
4.98%
4.77%
5.00%
Cost of interest-bearing deposits
2.80%
2.21%
0.53%
0.30%
0.66%
Net interest margin
3.98%
3.46%
3.51%
3.44%
3.63%
Efficiency ratio*
60.77%
68.71%
62.48%
60.58%
63.87%
Non-interest expense to net interest income plus non-interest
income*
64.07%
96.93%
64.58%
68.10%
65.64%
Non-interest income / average assets
0.76%
(0.38)%
0.72%
0.74%
0.65%
Non-interest expense / average assets
2.84%
2.71%
2.56%
2.70%
5.23%
Dividend payout ratio
13.91%
88.35%
10.26%
4.84%
0.00%
Performance ratios - Core
Core earnings per diluted share*
$
4.43
$
3.31
$
3.69
$
4.09
$
0.62
Core return on average assets*
1.37 %
1.03 %
1.21 %
1.41 %
0.23 %
Core return on average equity*
14.29 %
11.63 %
13.72 %
13.85 %
1.87 %
Core non-interest expense / average assets*
2.67 %
2.64 %
2.46%
2.38%
2.50%
Capital Ratios
Tier 1 Leverage Ratio
11.67%
9.46%
9.61%
9.09%
9.30%
Common Equity Tier 1 Capital Ratio
14.51%
11.74%
12.26%
12.03%
12.82%
Tier 1 Risk Based Capital Ratio
15.11%
12.36%
12.88%
12.67%
13.37%
Total Risk Based Capital Ratio
18.07%
15.48%
16.08%
15.96%
17.35%
Total Stockholders equity / Total Assets
11.12%
8.99%
8.23%
9.74%
10.16%
Tangible common equity to tangible assets*
9.95%
7.87%
7.02%
8.48%
9.05%
61
Book value per share
$
34.04
$
29.35
$
25.74
$
29.87
$
28.04
Tangible book value per common share*
$
30.07
$
25.37
$
21.67
$
25.65
$
24.68
Tangible book value per diluted common share*
$
29.70
$
25.05
$
21.35
$
25.22
$
24.68
* Indicates non-GAAP financial measure. Please see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Non-GAAP Financial Measures” for reconciliation to the most directly comparable GAAP measure.
62
Overview
We are a financial holding company headquartered in Wichita, Kansas. Our wholly-owned banking subsidiary, Equity Bank,
provides a broad range of financial services primarily to businesses and business owners as well as individuals through our network of
71 full-service branches located in Arkansas, Kansas, Missouri and Oklahoma. As of December 31, 2024, we had, on a consolidated
basis, total assets of $5.33 billion, total deposits of $4.37 billion, total loans held for investment, net of allowances, of $3.46 billion
and total stockholders’ equity of $592.9 million. Net income for the year ended December 31, 2024, was $62.6 million, compared to
net income of $7.8 million for the year ended December 31, 2023.
History and Background
From 2003 through 2024, we completed a series of 22 acquisitions, two charter consolidations and two branch dispositions. We
seek to integrate the banks we acquire into our existing operational platform and enhance stockholder value through the creation of
efficiencies within the combined operations. In conjunction with our strategic acquisition growth, we strive to reposition and improve
the loan portfolio and deposit mix of the banks we acquire. Following our acquisitions, we focus on identifying and disposing of
problematic loans and replacing them with higher quality loans generated organically. In addition, we concentrate on growth in our
commercial loan portfolio, which we believe generally offers higher return opportunities than our consumer loan portfolio, primarily
by hiring additional talented bankers, particularly in our metropolitan markets, and incentivizing our bankers to expand their
commercial banking relationships. We also seek to increase our most attractive deposit accounts primarily by growing deposits in our
community markets and cross selling our depository products to our loan customers.
Our principal objective is to continually increase stockholder value and generate consistent earnings growth by expanding our
commercial banking franchise both organically and through strategic acquisitions. We believe our strategy of selectively acquiring
and integrating community banks has provided us with economies of scale and improved our overall franchise efficiency. We expect
to continue to pursue strategic acquisitions and believe our targeted market areas present us with many and varied acquisition
opportunities. We are also focused on continuing to grow organically and believe the markets in which we operate currently provide
meaningful opportunities to expand our commercial customer base and increase our current market share. We believe our geographic
footprint, which is strategically split between growing metropolitan markets, such as Kansas City, Tulsa and Wichita, and stable
community markets within Southeastern Kansas, Southwestern Kansas, Central Kansas, North Central Kansas, Western Kansas,
Topeka, Western Missouri, North Central Missouri, Northern Arkansas, Northern Oklahoma and Western Oklahoma, provides us with
access to low cost stable core deposits in community markets that we can use to fund commercial loan growth in our metropolitan
markets. We strive to provide an enhanced banking experience for our customers by providing them with a comprehensive suite of
sophisticated banking products and services tailored to meet their needs, while delivering the high-quality relationship-based customer
service of a community bank.
Highlights for the Year Ended December 31, 2024
•
Net income of $62.6 million, or $4.00 diluted earnings per share, for the year ended December 31, 2024.
•
Dividends declared of $8.7 million, or $0.54 per share, for the year ended December 31, 2024, compared to $6.9 million,
or $0.44 per share, for the year ended December 31, 2023, an increase of 26.0%
•
Total loans held for investment increased to $3.50 billion at December 31, 2024, compared to $3.33 billion at December
31, 2023, an increase of 5.0%.
•
Completed two mergers during the year ended December 31, 2024. The first, Rockhold BanCorp, adding $349.8 million
in deposits, eight banking locations and new territory to the Equity Bank footprint. The second, Kanasland Bancshares,
Inc., adding $42.4 million in deposits and two banking locations.
•
The Company completed a common stock capital raise, issuing 2,067,240 shares at a public offering price of $44.50 per
share. After expense capital impact totaled $86.9 million.
Critical Accounting Policies
The preparation of our financial statements in accordance with GAAP requires management to make a number of judgments and
assumptions that affect our reported results and disclosures. Several of our accounting policies are inherently subject to valuation
assumptions and other subjective assessments and are more critical than others in terms of their importance to results. Changes in any
of the estimates and assumptions underlying critical accounting policies could have a material effect on our financial statements. Our
accounting policies are described in “NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES” in the Notes to Consolidated Financial Statements.
63
The accounting policies that management believes are the most critical to an understanding of our financial condition and results
of operations and require complex management judgment are described below.
Allowance for Credit Losses: The allowance for credit losses for loans represents management’s estimate of all expected credit
losses over the expected contractual life of our loan portfolio. This assessment includes procedures to estimate the allowance and test
the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management’s evaluation of
historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the
portfolio, adverse situations that may affect the borrower’s ability to repay a loan (including the timing of future payments), the
estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and
other pertinent factors, including regulatory recommendations. The level of the allowance for credit losses maintained by
management is believed adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet date; however,
determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that
are inherently uncertain. The actual realized facts and circumstances may be different than those currently estimated by management
and may result in significant changes in the allowance for credit losses in future periods. The allowance for credit losses for loans, as
reported in our consolidated balance sheets, is adjusted by provision for credit losses, which is recognized in earnings and is reduced
by the charge-off amounts, net of recoveries.
The Company utilizes primarily two methods for estimating the allowance for credit losses and the method used depends on the
status of the underlying loans. Non-performing loans primarily utilize a collateral specific fair value impairment method and
performing loans primarily utilize a historical loss method. The performing loan method utilizes a probability of default (PD) and loss
given default (LGD) modeling approach for historical loss coupled with a macroeconomic factor analysis derived from a statistical
regression of loss experience correlated to changes in economic factors for all commercial banks operating within our geographical
footprint. The macroeconomic regression is based on a multivariate approach and includes key indicators that provide the highest
cumulative adjusted R-square figure. Economic factors include, but are not limited to, national unemployment, gross domestic
product, market interest rates and property pricing indices. To arrive at the most predictive calculation, a lag factor was applied to
these inputs, resulting in current and historic economic inputs driving the projection of loss over our reasonable and supportable
forecast period, which management has defined as 12 months for all portfolio segments. Following the reasonable and supportable
forecast period, loss experience immediately reverts to the current historical loss experience of the Company. The estimated loan
losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses. The
qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively selected by
management but measured by objective measurements period over period. The current period measurements are evaluated and
assigned a factor commensurate with the current level of risk relative to past measurements over time. The resulting qualitative
adjustments are applied to the relevant collectively evaluated loan portfolios. These adjustments are based upon quarterly trend
assessments in projected economic sentiment, portfolio concentrations, policy exceptions, personnel retention, independent loan
review results, collateral considerations, risk ratings and competition. The qualitative allowance allocation, as determined by the
processes noted above, is increased or decreased for each loan segment based on the assessment of these various qualitative factors.
The resultant loss rates are applied to the estimated future exposure at default (EAD), as determined based on contractual amortization
terms through an average default month and estimated prepayment experience in arriving at the quantitative reserve within our
allowance for credit losses.
The allowance represents management’s best estimate, but significant changes in circumstances relating to loan quality and
economic conditions could result in significantly different results than what is reflected in the consolidated balance sheet as of
December 31, 2024. Likewise, an improvement in loan quality or economic conditions may allow for a further reduction in the
required allowance. Changing credit conditions would be expected to impact realized losses driving variability in specifically
assessed allowances, as well as calculated quantitative and more subjectively analyzed qualitative factors. Depending on the volatility
in these conditions, material impacts could be realized within the Company’s operations. Likewise, changing economic conditions,
both positive and negative, to the extent significant could result in unexpected realization of provision or reversal of allowance for
credit losses due to its impact on the quantitative and qualitative inputs to the Company’s calculation. Under the CECL methodology,
the impact of these conditions has the potential to further exacerbate periodic differences due to its life of loan perspective. The life of
loans calculated under the methodology is based in contractual duration and modified for prepayment expectations, making significant
variation in periodic results possible due to changing contractual or adjusted duration of the assets within the calculation.
Goodwill: Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of
acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment and any
such impairment is recognized and expensed in the period identified. Goodwill will be assessed more frequently if a triggering event
occurs which indicates that the carrying value of the asset might be impaired. We have selected December 31 as the date to perform
our annual goodwill impairment test. Goodwill is the only intangible asset with an indefinite useful life. For the year ended December
31, 2024, management performed a qualitative analysis and has determined that there was not evidence of a triggering event during
the period then ended. Our qualitative analysis process consists of using recent bank merger transactions, for companies that are
64
similar to the Company based on financial performance, to calculate the average change in control premium from the merger data.
The average change in control premium, number of shares and our current trading price is used to estimate the market value of our
equity, which is compared to our book value of equity. In addition to estimating equity market value, we evaluate the qualitative
considerations contained in current accounting guidance to identify any evidence of goodwill impairment. Based on this qualitative
analysis and conclusion, it was determined that a more robust quantitative assessment was not necessary at our measurement date.
For additional information see “NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES” and “NOTE 7 – GOODWILL AND CORE DEPOSIT INTANGIBLES” in the Notes to Consolidated
Financial Statements.
Results of Operations
We generate most of our revenue from interest income and fees on loans, interest and dividends on investment securities and
non-interest income, such as service charges and fees, debit card income and mortgage banking income. We incur interest expense on
deposits and other borrowed funds and non-interest expense, such as salaries and employee benefits and occupancy expenses.
Changes in interest rates earned on interest-earning assets or incurred on interest-bearing liabilities, as well as the volume and
types of interest-earning assets, interest-bearing and non-interest-bearing liabilities and stockholders’ equity, are usually the largest
drivers of periodic change in net interest income. Fluctuations in interest rates are driven by many factors, including governmental
monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and
international circumstances and domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan
portfolio are affected by, among other factors, economic and competitive conditions in Arkansas, Kansas, Missouri and Oklahoma, as
well as developments affecting the consumer, commercial and real estate sectors within these markets.
For information comparing our results of operations for the year ended December 31, 2023, to year ended December 31, 2022,
see “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on
Form 10-K filed with the SEC on March 7, 2024.
Net Income
Year ended December 31, 2024, compared with year ended December 31, 2023
For the year ended December 31, 2024, there was net income allocable to common stockholders of $62.6 million, compared to
net income allocable to common stockholders of $7.8 million for the year ended December 31, 2023, an increase of $54.8 million.
This change was primarily driven by a $27.1 increase in net interest income, a $58.0 million increase in non interest income offset by
a $8.6 million increase in non interest expense and an increase in provision for taxes of $21.1 million. The changes in the components
of net income are discussed in more detail below in the following sections of “Results of Operations.”
Net Interest Income and Net Interest Margin Analysis
Net interest income is the difference between interest income on interest-earning assets, including loans and securities, and
interest expense incurred on interest-bearing liabilities, including deposits and other borrowed funds. To evaluate net interest income,
management measures and monitors (1) yields on loans and other interest-earning assets, (2) the costs of deposits and other funding
sources, (3) the net interest spread and (4) net interest margin. Net interest spread is the difference between rates earned on interest-
earning assets and rates paid on interest-bearing liabilities. Net interest margin is calculated as net interest income divided by average
interest-earning assets. Because non-interest-bearing sources of funds, such as non-interest-bearing deposits and stockholders’ equity
also fund interest-earning assets, net interest margin includes the benefit of these non-interest-bearing sources of funds. Net interest
income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, referred to as “volume
change,” and it is also affected by changes in yields earned on interest-earning assets and rates paid on interest-bearing deposits and
other borrowed funds, referred to as “yield/rate change.”
The following table shows the average balance of each principal category of assets, liabilities, and stockholders’ equity and the
average yields on interest-earning assets and average rates on interest-bearing liabilities for the years ended December 31, 2024, 2023,
65
and 2022. The yields and rates are calculated by dividing income or expense by the average daily balances of the associated assets or
liabilities.
Average Balance Sheets and Net Interest Analysis
December 31, 2024
December 31, 2023
December 31, 2022
(Dollars in thousands)
Average
Outstanding
Balance
Interest
Income/
Expense
Average
Yield/
Rate(3)(4)
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)
Commercial and industrial
$
635,881
$ 51,188
8.05% $
580,451
$ 42,901
7.39% $
583,295
$ 32,258
5.53%
Commercial real estate
1,400,661
99,316
7.09%
1,302,568
83,441
6.41%
1,259,257
65,122
5.17%
Real estate construction
416,296
36,004
8.65%
447,516
33,764
7.54%
363,902
18,269
5.02%
Residential real estate
563,176
26,505
4.71%
565,711
23,799
4.21%
597,196
22,004
3.68%
Agricultural real estate
227,341
16,848
7.41%
201,326
13,820
6.86%
201,295
11,399
5.66%
Agricultural
96,877
9,103
9.40%
100,394
6,966
6.94%
125,342
6,697
5.34%
Consumer
100,995
6,851
6.78%
106,542
6,522
6.12%
102,185
5,110
5.00%
Total loans
3,441,227
245,815
7.14%
3,304,508
211,213
6.39%
3,232,472
160,859
4.98%
Taxable securities
979,926
39,091
3.99%
1,027,726
23,873
2.32%
1,185,750
22,713
1.92%
Nontaxable securities
59,597
1,579
2.65%
74,917
1,960
2.62%
106,955
2,698
2.52%
Federal funds sold and other
195,378
10,358
5.30%
193,941
9,666
4.98%
107,298
1,978
1.84%
Total interest-earning assets
4,676,128
296,843
6.35%
4,601,092
246,712
5.36%
4,632,475
188,248
4.06%
Non-interest-earning assets
Other real estate owned, net
2,332
3,991
10,144
Premises and equipment, net
115,892
107,297
102,165
Bank-owned life insurance
129,232
123,665
121,741
Goodwill and other intangibles, net
68,190
63,064
67,747
Other non-interest-earning assets
84,165
100,296
88,840
Total assets
$
5,075,939
$
4,999,405
$
5,023,112
Interest-bearing liabilities
Interest-bearing demand deposits
$
1,028,114
27,587
2.68% $
1,002,543
22,681
2.26% $
1,124,828
7,248
0.64%
Savings and money market
1,425,025
33,931
2.38%
1,359,822
23,525
1.73%
1,308,536
3,549
0.27%
Demand savings and money market
2,453,139
61,518
2.51%
2,362,365
46,206
1.96%
2,433,364
10,797
0.44%
Certificates of deposit
770,772
28,891
3.75%
827,652
24,267
2.93%
663,790
5,524
0.83%
Total interest-bearing deposits
3,223,911
90,409
2.80%
3,190,017
70,473
2.21%
3,097,154
16,321
0.53%
FHLB term and line of credit advances
216,012
10,180
4.71%
98,380
3,944
4.01%
79,775
2,094
2.63%
Federal Reserve Bank discount window
30,986
1,361
4.39%
108,551
4,755
4.38%
3
—
0.25%
Subordinated borrowings
97,194
7,580
7.80%
96,651
7,591
7.85%
96,133
6,771
7.04%
Other borrowings
47,336
1,151
2.43%
49,464
931
1.88%
55,036
232
0.42%
Total interest-bearing liabilities
3,615,439
110,681
3.06%
3,543,063
87,694
2.48%
3,328,101
25,418
0.76%
Non-interest-bearing liabilities and
stockholders’ equity
Non-interest-bearing checking accounts
931,860
979,410
1,203,167
Non-interest-bearing liabilities
45,666
53,210
50,962
Stockholders’ equity
482,974
423,722
440,882
Total liabilities and stockholders’ equity
$
5,075,939
$
4,999,405
$
5,023,112
Net interest income
$186,162
$159,018
$162,830
Interest rate spread
3.29%
2.88%
3.30%
Net interest margin(2)
3.98%
3.46%
3.51%
Total cost of deposits, including
non-interest bearing deposits
$
4,155,771
$ 90,409
2.18% $
4,169,427
$ 70,473
1.69% $
4,300,321
$ 16,321
0.38%
Average interest-earning assets to
interest-bearing liabilities
129.34%
129.86%
139.19%
(1)Average loan balances include non-accrual loans, hedge fair value adjustments and merger fair value adjustments.
(2)Net interest margin is calculated by dividing 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 un-rounded 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.
66
The following table analyzes the change in volume variances and yield/rate variances for the year ended December 31, 2024, as
compared to the year ended December 31, 2023, and the year ended December 31, 2023, as compared to the year ended December 31,
2022.
Analysis of Changes in Net Interest Income
2024 vs. 2023
2023 vs. 2022
Increase (Decrease) Due to:
Increase (Decrease) Due to:
(Dollars in thousands)
Volume(1)
Yield/Rate(1)
Total
Volume(1)
Yield/Rate(1)
Total
Interest-earning assets
Loans
Commercial and industrial
$
4,286
$
4,001
$
8,287
$
(158) $
10,801
$
10,643
Commercial real estate
6,561
9,314
15,875
2,307
16,012
18,319
Real estate construction
(2,467)
4,707
2,240
4,860
10,635
15,495
Residential real estate
(107)
2,813
2,706
(1,205)
3,000
1,795
Agricultural real estate
1,874
1,154
3,028
2
2,419
2,421
Agricultural
(252)
2,389
2,137
(1,492)
1,761
269
Consumer
(352)
681
329
226
1,186
1,412
Total loans
9,543
25,059
34,602
4,540
45,814
50,354
Taxable securities
(1,159)
16,377
15,218
(3,275)
4,435
1,160
Nontaxable securities
(406)
25
(381)
(835)
97
(738)
Federal funds sold and other
72
620
692
2,473
5,215
7,688
Total interest-earning assets
$
8,050
$
42,081
$
50,131
$
2,903
$
55,561
$
58,464
Interest-bearing liabilities
Demand savings and money market
$
1,766
$
13,546
$
15,312
$
(726) $
36,135
$
35,409
Certificates of deposit
(1,759)
6,383
4,624
1,670
17,073
18,743
Total interest-bearing deposits
7
19,929
19,936
944
53,208
54,152
FHLB term and line of credit advances
5,438
798
6,236
567
1,283
1,850
Federal Reserve Bank discount window
(3,407)
13
(3,394)
4,753
2
4,755
Subordinated borrowings
43
(54)
(11)
37
783
820
Other borrowings
(42)
262
220
(26)
725
699
Total interest-bearing liabilities
2,039
20,948
22,987
6,275
56,001
62,276
Net Interest Income
$
6,011
$
21,133
$
27,144
$
(3,372) $
(440) $
(3,812)
(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.
Year ended December 31, 2024, compared with year ended December 31, 2023
The increase in net interest income is primarily due to a 99 basis point increase in yields on interest-earning assets offset by a 58
basis point increase in the average cost of interest bearing liabilities. The change in yields and costs were driven, primarily, by a
continued higher rate environment within the marketplace creating continued lag re-pricing of both the asset and liability portfolios
throughout 2024. The asset yield was also positively impacted by the re-positioning of a portion of our investment portfolio in
December of 2023. In the final four months of 2024, the FOMC reduced short-term interest rates by 100 basis points across three
meetings. Due to their timing, the cuts did not have a material impact on operating results for 2024.
Net interest spread increased from 2.88% at December 31, 2023 to 3.29% at December 31, 2024 primarily due to the increase in
both the volume and yield of interest-earning assets out-pacing the increase in the cost and change in volume in interest-bearing
liabilities. The increase in net interest margin was driven by the additive yield from re-positioning of the investment portfolio,
production of new earning assets and the acquisition of earning assets in the current environment outpacing the continued, lagged re-
pricing of liabilities used in funding.
Provision for Credit Losses
We maintain an allowance for credit losses for estimated losses in our loan portfolio. The allowance for credit losses is
increased by a provision for credit losses, which is a charge to earnings, and subsequent recoveries of amounts previously charged-off,
but is decreased by charge-offs when the collectability of a loan balance is unlikely. Management estimates the allowance balance
67
required using past loan loss experience within the Company’s portfolio. This historical loss calculation is then modified to reflect
quantitative economic circumstances based on evidenced economic conditions and regression formulas which incorporate lag factors
in identifying a sufficiently predictive adjusted-R square as well as qualitative factors not inherently reflected in our historical loss or
quantitative economic inputs. Included in our qualitative assessment is the consideration of prospective economic conditions over the
next 12 months, considered the Company’s reasonable and supportable forecast period. As these factors change, the amount of the
credit loss provision changes.
Year ended December 31, 2024, compared with year ended December 31, 2023
There was a $2.5 million provision for credit losses for the year ended December 31, 2024, compared to a provision for credit
losses of $1.9 million for the year ended December 31, 2023. The provision for credit losses recorded during the period ended
December 31, 2024, is the result of an increase in the loan portfolio, slower prepayment rates, and net charge-offs during the period
which were offset by decreases in projected future loss rates and specific reserves on loans individually evaluated for credit loss.
For additional detail see “Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Allowance for Credit Losses.” Net charge-offs for the year ended December 31, 2024, were $3.8 million as compared to net charge-
offs of $4.2 million for the year ended December 31, 2023. For the year ended December 31, 2024, gross charge-offs were $4.6
million offset by gross recoveries of $817 thousand. In comparison, gross charge-offs were $5.0 million for the year ended December
31, 2023, offset by gross recoveries of $754 thousand.
Non-Interest Income
The following table provides a comparison of the major components of non-interest income for the years ended December 31,
2024, 2023, and 2022.
Non-Interest Income
For the Years Ended December 31,
2024 vs. 2023
2023 vs. 2022
(Dollars in thousands)
2024
2023
2022
Change
%
Change
%
Service charges and fees
$
9,830
$
10,187
$
10,632
$
(357)
(3.5)% $
(445)
(4.2)%
Debit card income
10,246
10,322
10,677
(76)
(0.7)%
(355)
(3.3)%
Mortgage banking
861
652
1,416
209
32.1%
(764)
(54.0)%
Increase in value of bank-owned life
insurance
4,966
4,059
3,113
907
22.3%
946
30.4%
Other
Investment referral income
500
424
539
76
17.9%
(115)
(21.3)%
Trust income
1,624
1,123
1,036
501
44.6%
87
8.4%
Insurance sales commissions
555
582
566
(27)
(4.6)%
16
2.8%
Recovery on zero-basis
purchased loans
4,380
517
249
3,863
747.2%
268
107.6%
Income (loss) from equity method
investments
(87)
(222)
(222)
135
(60.8)%
—
—%
Other non-interest income
3,596
5,136
6,984
(1,540)
(30.0)%
(1,848)
(26.5)%
Total other
10,568
7,560
9,152
3,008
39.8%
(1,592)
(17.4)%
Subtotal
36,471
32,780
34,990
3,691
11.3%
(2,210)
(6.3)%
Gain on acquisition
2,131
—
962
2,131
100.0%
(962)
(100.0)%
Net gain (loss) from securities
transactions
220
(51,909)
5
52,129
(100.0)%
(51,914)
(100.0)%
Total non-interest income
$
38,822
$ (19,129) $
35,957
$
57,951
(302.9)% $ (55,086)
(153.2)%
Year ended December 31, 2024, compared with year ended December 31, 2023
Non-interest income, before gain on acquisition and gain or loss on sale of securities, increased 11.3%. The increase was driven
by recovery on zero-basis purchased loans and yield on bank-owned life insurance, partially offset by the decrease in Other non-
interest income. 'Other non-interest income' declined primarily due to a $1.1 million reduction in realized reversals of loan repurchase
obligations in 2024.
68
During 2024 the Company completed two mergers resulting in a bargain purchase gain of $2.1 million. The increase in net gains
from securities transactions is primarily due to securities sold in 2023 at losses to restructure the portfolio into higher yielding
investments and other assets which did not recur in 2024.
Non-Interest Expense
The following table provides a comparison of the major components of non-interest expense for the years ended December 31,
2024, 2023, and 2022.
Non-Interest Expense
For the Year Ended December 31,
2024 vs. 2023
2023 vs. 2022
(Dollars in thousands)
2024
2023
2022
Change
%
Change
%
Salaries and employee benefits
$
72,786
$
64,384
$
62,006
$
8,402
13.0%
$
2,378
3.8%
Net occupancy and equipment
14,371
12,325
12,223
2,046
16.6%
102
0.8%
Data processing
20,004
17,433
15,883
2,571
14.7%
1,550
9.8%
Professional fees
6,503
5,754
4,951
749
13.0%
803
16.2%
Advertising and business development
5,366
5,425
5,042
(59)
(1.1)%
383
7.6%
Telecommunications
2,501
1,963
1,916
538
27.4%
47
2.5%
FDIC insurance
2,483
2,195
1,140
288
13.1%
1,055
92.5%
Courier and postage
2,599
2,046
1,881
553
27.0%
165
8.8%
Free nationwide ATM expense
2,127
2,073
2,103
54
2.6%
(30)
(1.4)%
Amortization of core deposit
intangibles
4,289
3,374
4,042
915
27.1%
(668)
(16.5)%
Loan expense
601
540
828
61
11.3%
(288)
(34.8)%
Other real estate owned and
repossessed assets, net
(7,525)
617
247
(8,142)
(1319.6)%
370
149.8%
Other
13,591
17,175
15,524
(3,584)
(20.9)%
1,651
10.6%
Subtotal
139,696
135,304
127,786
4,392
3.2%
7,518
5.9%
Merger expenses
4,461
297
594
4,164
1402.0%
(297)
(50.0)%
Total non-interest expense
$ 144,157
$ 135,601
$ 128,380
$
8,556
6.3%
$
7,221
5.6%
Year ended December 31, 2024, compared with year ended December 31, 2023
The increase in non-interest expense was primarily due to increases in salaries and employee benefits of $8.4 million, data
processing expense of $2.6 million, net occupancy and equipment expense of $2.0 million, offset by a decrease in Other real estate
owned of $8.1 million and Other expenses of $3.6 million. These items and other changes in the various components of non-interest
expense are discussed in more detail below.
Salaries and employee benefits: There was a $8.4 million increase in salaries and benefits for the year ended December 31,
2024, as compared to the year ended December 31, 2023. Salaries and wages increased by $5.3 million which includes a $2.1 million
related to additional staff from merger activity for the year ended December 31, 2024, as compared to the year ended December 31,
2023. Additionally, for the year ended December 31, 2024, there was an increase in incentives compensation of $2.2 million.
Included in salaries and employee benefits is share-based compensation expense of $3.5 million for the year ended December 31,
2024, and $2.5 million for the year ended December 31, 2023.
Data processing: The $2.6 million increase was principally due to increased software license expenses of $2.7 million.
Net occupancy and equipment: The $2.0 million increase was primarily due to the additional expense of $840 thousand related
to properties acquired through merger activity.
Professional fees: The increase of $749 thousand was principally due to an increase in attorney fees of $432 thousand and a
increase in accounting fees of $385 thousand.
69
Other real-estate owned: During the year, the Company realized a gain on disposition of repossessed assets of $8.5 million
which drives the annual change. Excluding this gain, other real estate expense would have been $975 thousand, an increase of $358
thousand.
Other: Other non-interest expenses consists of subscriptions, memberships and dues, employee expenses including travel,
meals, entertainment and education, supplies, printing, insurance, account related losses, correspondent bank fees, customer program
expenses, losses net of gains on the sale of fixed assets, losses net of gains on the sale of repossessed assets other than real estate, other
operating expenses, such as settlement of claims, limited partnership tax credits and provision for unfunded commitments. There was
a $3.6 million decrease in other non-interest expense for the year ended December 31, 2024, as compared to the year ended December
31, 2023. This decrease was primarily due to a reduction of $3.6 million in write-offs of tax credit investments.
Merger expenses: Merger expenses of $4.5 million include legal, advisory and accounting fees associated with services to
facilitate the acquisition of two banks in 2024. Merger expenses also include data processing conversion costs and costs associated
with the integration of personnel, processes, facilities and employee bonuses. During 2023, the Company incurred merger expenses of
$297 thousand related to the Rockhold BanCorp acquisition.
Efficiency Ratio
The efficiency ratio is a supplemental financial measure utilized in the internal evaluation of our performance and is not defined
under GAAP. Our efficiency ratio is computed by dividing non-interest expense, excluding goodwill impairment, merger expenses
and loss on debt extinguishment, by the sum of net interest income and non-interest income, excluding net gains on sales of and
settlement of securities and gain on acquisition. Generally, an increase in the efficiency ratio indicates that more resources are being
utilized to generate the same volume of income, while a decrease would indicate a more efficient allocation of resources. The ratio
defined under GAAP that is most comparable to the efficiency ratio is non-interest expense to net interest income plus non-interest
income which is discussed in “Results of Operations – Non-GAAP Financial Measures.”
The Company’s efficiency ratio improved in 2024 as compared to 2023 due to the increase in net interest income excluding the
net gain on securities transactions and gain on acquisition outpacing the change in non-interest expense, excluding goodwill
impairment and merger expenses, as discussed in “Results of Operations – Net Interest Income and Net Interest Margin Analysis” and
“Results of Operations – Non-Interest Income.”
Income Taxes
The amount of income tax expense is influenced by the amount of pre-tax income, the amount of tax-exempt income, the
amount of non-deductible expenses and available tax credits.
Year ended December 31, 2024, compared with year ended December 31, 2023
The effective income tax rate for the year ended December 31, 2024, was 20.0% as compared to the U.S. statutory rate of
21.0%. The effective income tax rate for the year ended December 31, 2023, was (223.9)% as compared to the U.S. statutory rate of
21.0% as a result of tax planning benefits and credits amplified by a reduction in pre-tax book income for the year due to the pre-tax
losses related to the sale of bonds. As detailed in “NOTE 13 – INCOME TAXES” in the Notes to Consolidated Financial Statements,
the income tax rates differed from the U.S. statutory rates primarily due to non-taxable income, non-deductible expenses, and tax
credits. The Company made investments in solar tax credits during the years ended December 31, 2024 and December 31, 2023 which
had a material impact on the effective income tax rate for each period. Additionally, the Company recognized tax gains and related
penalties on the surrender of Bank Owned Life Insurance (“BOLI”) for the year ended December 31, 2024.
Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and
liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying
amounts and tax bases of assets and liabilities and are computed using enacted tax rates. A valuation allowance, if needed, reduces
deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely than not”
that the tax position will be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is
the largest amount of tax benefit that is more likely than not to be realized on examination. The Company recognizes interest and/or
penalties related to income tax matters in income tax expense. There were no material amounts to report for interest or penalties
incurred in 2024, 2023, or 2022.
70
Impact of Inflation
Our consolidated financial statements and related notes included elsewhere in this annual report have been prepared in
accordance with GAAP. These require the measurement of financial position and operating results in terms of historical dollars,
without considering changes in the relative value of money over time due to inflation or recession.
Unlike many industrial companies, substantially all our assets and liabilities are monetary in nature. As a result, interest rates
have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily
move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses do
reflect general levels of inflation.
Financial Condition
Overview
Our total assets increased $297.5 million, or 5.91%, from $5.03 billion at December 31, 2023, to $5.33 billion at December 31,
2024. The increase in total assets was primarily from increases in loans, net of allowance for credit losses of $168.2 million, available
for sale securities of $84.8 million and cash and due from banks of $20.2 million, partially offset by a decrease in federal funds sold of
$15.6 million. Our total liabilities increased $157.4 million, or 3.44%, from $4.58 billion at December 31, 2023, to $4.74 billion at
December 31, 2024. The increase in total liabilities was from an increase in total deposits of $229.3 million, an increase in FHLB
advances of $78.1 million, partially offset by a decrease in Federal Reserve Bank borrowings of $140.0 million. Our total
stockholders’ equity increased $140.1 million, or 30.9%, from $452.9 million at December 31, 2023 to $592.9 million at December
31, 2024. The increase in stockholders equity was primarily driven by the increase in common stock of $86.9 million from the private
placement stock offering, as well as net income of $62.6 million, partially offset by treasury stock repurchase of $11.9 million and
dividends paid of $7.9 million for the year ended December 31, 2024.
Loan Portfolio
Our loan portfolio consists of various types of loans, most of which are made to borrowers located in the Wichita, Kansas City
and Tulsa MSAs, as well as various community markets throughout Arkansas, Kansas, Missouri and Oklahoma. Although the
portfolio is diversified and generally secured by various types of collateral, the majority of our loan portfolio consists of commercial
and industrial and commercial real estate loans and a substantial portion of our borrowers’ ability to honor their obligations is
dependent on local economic conditions in Arkansas, Kansas, Missouri and Oklahoma.
At December 31, 2024, gross total loans were 80.0% of deposits and 65.7% of total assets. At December 31, 2023, gross total
loans were 80.4% of deposits and 66.2% of total assets.
The organic, or non-acquired, growth in our loan portfolio is attributable to our ability to attract new customers from other
financial institutions and overall growth in our markets. Our lending staff has been successful in building banking relationships with
new customers. New lenders have been hired in our markets and these employees have been successful in transitioning their former
clients and attracting new clients. Lending activities originate from the efforts of our lenders with an emphasis on lending to
individuals, professionals, small to medium-sized businesses and commercial companies located in the Wichita, Kansas City and
Tulsa MSAs, as well as community markets in Arkansas, Kansas, Missouri and Oklahoma.
71
The following table summarizes our loan portfolio by type of loan as of the dates indicated.
Composition of Loan Portfolio
December 31,
2024
2023
2022
Amount
Percent
Amount
Percent
Amount
Percent
(Dollars in thousands)
Commercial and industrial
$ 658,865
18.8%$ 598,327
17.9% $ 594,863
18.0%
Real estate loans:
Commercial real estate
1,830,514
52.3% 1,759,855
52.8%
1,721,268
52.0%
Residential real estate
566,766
16.2%
556,328
16.7%
570,550
17.2%
Agricultural real estate
267,248
7.6%
196,114
5.9%
199,189
6.0%
Total real estate loans
2,664,528
76.1% 2,512,297
75.4%
2,491,007
75.2%
Agricultural
87,339
2.5%
118,587
3.6%
120,003
3.6%
Consumer
90,084
2.6%
103,690
3.1%
105,675
3.2%
Total loans held for investment
$3,500,816
100.0%$3,332,901
100.0% $3,311,548
100.0%
Total loans held for sale
$
513
100.0%$
476
100.0% $
349
100.0%
Total loans held for investment
(net of allowances)
$3,457,549
100.0%$3,289,381
100.0% $3,265,701
100.0%
Commercial and industrial: Commercial and industrial loans include loans used to purchase fixed assets, to provide working
capital or meet other financing needs of the business.
Commercial real estate: Commercial real estate loans include all loans secured by nonfarm, nonresidential properties and
multifamily residential properties, as well as 1-4 family investment-purpose real estate loans.
Residential real estate: Residential real estate loans include loans secured by primary or secondary personal residences.
Agricultural real estate, Agricultural, Consumer and other: Agricultural real estate loans are loans related to farmland.
Agricultural loans are primarily operating lines subject to annual farming revenues including productivity/yield of the agricultural
commodities produced. Consumer loans are generally secured by consumer assets but may be unsecured.
The contractual maturity ranges of loans in our loan portfolio and the amount of such loans with predetermined interest rates and
floating rates in each maturity range as of December 31, 2024, and December 31, 2023, are summarized in the following tables.
Loan Maturity and Sensitivity to Changes in Interest Rates
As of December 31, 2024
One year
or less
After one year
through five
years
After five
years
through
fifteen years
After fifteen
years
Total
(Dollars in thousands)
Commercial and industrial
$
253,375
$
309,996
$
92,880
$
2,614
$
658,865
Real Estate:
Commercial real estate
484,450
1,019,023
231,122
95,919
1,830,514
Residential real estate
2,375
11,344
124,983
428,064
566,766
Agricultural real estate
100,169
93,430
34,720
38,929
267,248
Total real estate
586,994
1,123,797
390,825
562,912
2,664,528
Agricultural
59,213
21,373
3,270
3,483
87,339
Consumer
32,498
45,352
10,234
2,000
90,084
Total
$
932,080
$ 1,500,518
$ 497,209
$ 571,009
$
3,500,816
Loans with a predetermined fixed interest rate
$
405,335
$
544,767
$ 115,887
$ 261,080
$
1,327,069
Loans with an adjustable/floating interest rate
526,745
955,751
381,322
309,929
2,173,747
Total
$
932,080
$ 1,500,518
$ 497,209
$ 571,009
$
3,500,816
72
As of December 31, 2023
One year
or less
After one year
through five
years
After five
years
through
fifteen years
After fifteen
years
Total
(Dollars in thousands)
Commercial and industrial
$
171,879
$
345,693
$
77,886
$
2,869
$
598,327
Real Estate:
Commercial real estate
369,311
1,063,226
247,300
80,018
1,759,855
Residential real estate
1,447
10,091
128,077
416,713
556,328
Agricultural real estate
73,882
84,802
27,559
9,871
196,114
Total real estate
444,640
1,158,119
402,936
506,602
2,512,297
Agricultural
80,659
30,948
2,851
4,129
118,587
Consumer
31,832
50,779
19,077
2,002
103,690
Total
$
729,010
$ 1,585,539
$ 502,750
$ 515,602
$
3,332,901
Loans with a predetermined fixed interest rate
$
289,816
$
685,903
$ 127,602
$ 273,488
$
1,376,809
Loans with an adjustable/floating interest rate
439,194
899,636
375,148
242,114
1,956,092
Total
$
729,010
$ 1,585,539
$ 502,750
$ 515,602
$
3,332,901
Nonperforming Assets
The following table presents information regarding nonperforming assets at the dates indicated.
Nonperforming Assets
As of December 31,
2024
2023
2022
(Dollars in thousands)
Non-accrual loans
$
27,050
$
25,026
$
17,601
Accruing loans 90 or more days past due
181
279
—
OREO acquired through foreclosure, net
2,632
772
600
Other repossessed assets
4,812
380
47
Total nonperforming assets
$
34,675
$
26,457
$
18,248
Ratios:
Nonperforming assets to total assets
0.65%
0.53%
0.37%
Nonperforming assets to total loans plus OREO
0.99%
0.79%
0.55%
Nonperforming assets (“NPAs”) include loans on non-accrual status, accruing loans 90 or more days past due, restructured
loans, other real estate acquired through foreclosure and other repossessed assets. Included in other repossessed assets is the gross
collateral of a Main Street Lending loan valued at $4.7 million which the Company owns five percent of the collateral. The change in
NPAs is due to the Main Street Lending of specific circumstances on specific borrower relationships and not considered indicative of
broad declining credit quality as of the reporting date. NPAs and classified assets continue to be at historically low levels for the
Company.
The nonperforming loans at December 31, 2024, consisted of 323 separate credits and 270 separate borrowers. We had four
nonperforming loan relationships each with outstanding balances exceeding $1.0 million as of December 31, 2024. There are several
procedures in place to assist us in maintaining the overall quality of our loan portfolio. We have established underwriting guidelines
to be followed by lenders and we also monitor delinquency levels for any negative or adverse trends. There can be no assurance,
however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit due to general
economic conditions.
Regulatory Loan Classification
We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such
as: current financial information, historical payment experience, credit documentation, public information and current economic
trends, among other factors. Loans are analyzed individually and classified based on credit risk. Consumer loans are considered pass
73
credits unless downgraded due to payment status or reviewed as part of a larger credit relationship. We use the following definitions
for risk ratings:
Pass: Loans classified as pass include all loans that do not fall under one of the three following categories. These loans are
considered unclassified.
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If
left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of our credit
position at some future date. These loans are considered classified.
Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the
deficiencies are not corrected. These loans are considered classified.
Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions and values,
highly questionable and improbable. These loans are considered classified.
Potential problem loans consist of loans that are performing in accordance with contractual terms, but for which management
has concerns about the borrower’s ability to comply with repayment terms because of the borrower’s potential financial difficulties.
Potential problem loans are assigned a grade of special mention or substandard. At December 31, 2024, the Company had $35.4
million in potential problem loans which were not included in either non-accrual or 90 days past due categories, compared to $11.1
million at December 31, 2023.
For additional information about the risk category by class of loans see “NOTE 4 – LOANS AND ALLOWANCE FOR
CREDIT LOSSES” in the Notes to Consolidated Financial Statements. At December 31, 2024, loans considered unclassified were
98.1% of total loans compared to 98.8% of total loans at December 31, 2023.
Risk Category of Loans by Class
As of December 31, 2024
Unclassified
Classified
Total
(Dollars in thousands)
Commercial and industrial
$
626,519
$
32,346
$
658,865
Real estate:
Commercial real estate
1,813,778
16,736
1,830,514
Residential real estate
561,198
5,568
566,766
Agricultural real estate
258,353
8,895
267,248
Total real estate
2,633,329
31,199
2,664,528
Agricultural
86,201
1,138
87,339
Consumer
89,300
784
90,084
Total
$
3,435,349
$
65,467
$
3,500,816
As of December 31, 2023
Unclassified
Classified
Total
(Dollars in thousands)
Commercial and industrial
$
586,629
$
11,698
$
598,327
Real estate:
Commercial real estate
1,748,878
10,977
1,759,855
Residential real estate
549,014
7,314
556,328
Agricultural real estate
190,659
5,455
196,114
Total real estate
2,488,551
23,746
2,512,297
Agricultural
115,284
3,303
118,587
Consumer
103,066
624
103,690
Total
$
3,293,530
$
39,371
$
3,332,901
For additional information see “NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES” in the Notes to
Consolidated Financial Statements.
74
In accordance with applicable regulation, appraisals or evaluations are required to independently value real estate and, as an
important element, to consider when underwriting loans secured in part or in whole by real estate. The value of real estate collateral
provides additional support to the borrower’s credit capacity.
With respect to potential problem loans, all monitored and under-performing loans are individually reviewed. If we
determine that a loan has individually assessed credit loss, then we evaluate the borrower’s overall financial condition to determine the
need, if any, for non-performing classification, possible write downs or appropriate additions to the allowance for credit losses based
on the unlikelihood of full repayment of principal and interest in accordance with the contractual terms or the net realizable value of
the pledged collateral.
Allowance for Credit Losses
Please see “Critical Accounting Policies – Allowance for Credit Losses” for additional discussion of our allowance policy.
In connection with our review of the loan portfolio, risk elements attributable to particular loan types or categories are
considered when assessing the quality of individual loans. For additional information see “NOTE 1 – NATURE OF OPERATIONS
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” in the Notes to Consolidated Financial Statements.
Analysis of allowance for credit losses: At December 31, 2024, the allowance for credit losses totaled $43.3 million, or 1.24%
of total loans. At December 31, 2023, the allowance for credit losses totaled $43.5 million, or 1.31% of total loans.
The $253 thousand decrease in the allowance for credit losses was the result of net charge-offs of $3.8 million, a reduction in
reserves on loans individually evaluated and the continued decline of realized loss rates relative to the full analysis cycle partially
offset by an increase in loan balances, purchase accounting for two completed mergers in 2024 and an expansion in quantitative and
qualitative reserve on the loan balances collectively evaluated. The allowance for credit losses calculation on loans collectively
evaluated at December 31, 2024, totaled $38.4 million, or 1.1%, of the $3.5 billion in loans collectively evaluated, compared to an
allowance for credit losses of $38.8 million, or 1.2%, of the $3.3 billion in loans collectively evaluated at December 31, 2023.
Net losses as a percentage of average loans was 0.11% for the twelve months ended December 31, 2024, as compared to 0.13%
for the twelve months ended December 31, 2023, and 0.08% for the twelve months ended December 31, 2022.
75
The following table presents, as of and for the periods indicated, an analysis of the allowance for credit losses and other related
data.
Allowance for Credit Losses
(Dollars in thousands)
December 31, 2024
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real Estate
Agricultural
Real Estate
Agricultural
Consumer
Total
Allowance for credit losses
$
14,948
$
14,005
$
8,553
$
3,504
$
439
$
1,818
$
43,267
Total loans outstanding (1)
1,830,514
658,865
566,766
267,248
87,339
90,084
3,500,816
Net charge-offs
53
2,787
139
8
3
809
3,799
Average loan balance (1)
1,816,957
635,881
561,914
227,341
96,877
100,993
3,439,963
Non-accrual loan balance
7,458
7,798
4,670
5,751
592
781
27,050
Loans to total loans outstanding
52.3%
18.8%
16.2%
7.6%
2.5%
2.6%
100.0%
ACL to total loans
0.8%
2.1%
1.5%
1.3%
0.5%
2.0%
1.2%
Net charge-offs to average loans
—%
0.4%
—%
—%
—%
0.8%
0.1%
Non-accrual loans to total loans
0.4%
1.2%
0.8%
2.2%
0.7%
0.9%
0.8%
ACL to non-accrual loans
200.4%
179.6%
183.1%
60.9%
74.2%
232.8%
160.0%
December 31, 2023
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real Estate
Agricultural
Real Estate
Agricultural
Consumer
Total
Allowance for credit losses
$
13,476
$
17,954
$
7,784
$
1,718
$
995
$
1,593
$
43,520
Total loans outstanding (1)
1,759,855
598,327
556,328
196,114
118,587
103,690
3,332,901
Net charge-offs
(75)
3,700
18
46
(47)
558
4,200
Average loan balance (1)
1,750,084
580,451
564,728
201,326
100,394
106,542
3,303,525
Non-accrual loan balance
5,447
5,041
7,251
4,214
2,470
603
25,026
Loans to total loans outstanding
52.8%
18.0%
16.7%
5.9%
3.6%
3.1%
100.0%
ACL to total loans
0.8%
3.0%
1.4%
0.9%
0.8%
1.5%
1.3%
Net charge-offs to average loans
—%
0.6%
—%
—%
—%
0.5%
0.1%
Non-accrual loans to total loans
0.3%
0.8%
1.3%
2.1%
2.1%
0.6%
0.8%
ACL to non-accrual loans
247.4%
356.2%
107.4%
40.8%
40.3%
264.2%
173.9%
December 31, 2022
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real Estate
Agricultural
Real Estate
Agricultural
Consumer
Total
Allowance for loan losses
$
16,731
$
14,951
$
8,608
$
819
$
2,457
$
2,281
$
45,847
Total loans outstanding (1)
1,721,268
594,863
570,550
199,189
120,003
105,675
3,311,548
Net charge-offs
1,193
590
56
27
35
742
2,643
Average loan balance (1)
1,623,159
583,295
595,494
201,295
125,342
102,186
3,230,771
Non-accrual loan balance
2,689
5,838
3,206
2,052
3,468
348
17,601
Loans to total loans outstanding
52.0%
18.0%
17.2%
6.0%
3.6%
3.2%
100.0%
ACL to total loans
1.0%
2.5%
1.5%
0.4%
2.0%
2.2%
1.4%
Net charge-offs to average loans
0.1%
0.1%
—%
—%
—%
0.7%
0.1%
Non-accrual loans to total loans
0.2%
1.0%
0.6%
1.0%
2.9%
0.3%
0.5%
ACL to non-accrual loans
622.2%
256.1%
268.5%
39.9%
70.8%
655.5%
260.5%
(1) Excluding loans held for sale.
Management believes that the allowance for credit losses at December 31, 2024, is adequate to cover current expected losses in
the loan portfolio as of such date. There can be no assurance, however, that we will not sustain losses in future periods that could be
substantial in relation to the size of the allowance at December 31, 2024.
Securities
We use our securities portfolio to provide a source of liquidity, to provide an appropriate return on funds invested, to manage
interest rate risk, to meet pledging requirements and to meet regulatory capital requirements. At December 31, 2024, securities
represented 18.9% of total assets compared with 18.3% at December 31, 2023.
At the date of purchase, debt securities are classified into one of two categories, held-to-maturity or available-for-sale. We do
not purchase securities for trading purposes. At each reporting date, the appropriateness of the classification is reassessed.
Investments in debt securities are classified as held-to-maturity and carried at cost, adjusted for the amortization of premiums and the
accretion of discounts, in the financial statements only if management has the positive intent and ability to hold those securities to
maturity. Debt securities not classified as held-to-maturity are classified as available-for-sale and measured at fair value in the
76
financial statements with unrealized gains and losses reported, net of deferred income tax, as accumulated comprehensive income or
loss until realized. Interest earned on securities is included in total interest and dividend income. Also included in total interest and
dividend income are dividends received on stock investments in the Federal Reserve Bank of Kansas City and the FHLB of Topeka.
These stock investments are stated at cost.
The following table summarizes the amortized cost and fair value by classification of available-for-sale securities as of the dates
shown.
Available-For-Sale Securities
December 31,
2024
2023
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(Dollars in thousands)
U.S. Government-sponsored entities
$
71,173
$
65,094
$
39,103
$
33,087
U.S. Treasury securities
86,523
86,563
89,999
89,256
Mortgage-backed securities
Government-sponsored residential
mortgage-backed securities
624,228
589,172
560,674
529,143
Private label residential mortgage-backed
securities
144,971
124,664
161,174
137,841
Corporate
61,947
58,652
56,722
49,683
Small Business Administration loan pools
6,542
6,266
8,066
7,727
State and local subdivisions
83,868
74,044
81,458
72,911
Total available-for-sale securities
$
1,079,252
$
1,004,455
$
997,196
$
919,648
The following table summarizes the amortized cost and fair value by classification of held-to-maturity securities as of the dates
shown.
Held-To-Maturity Securities
December 31,
2024
2023
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
(Dollars in thousands)
Mortgage-backed securities
Government-sponsored residential
mortgage-backed securities
$
3,932
$
3,909
$
1,094
$
1,097
State and local subdivisions
1,285
1,305
1,115
1,153
Total held-to-maturity securities
$
5,217
$
5,214
$
2,209
$
2,250
77
The following tables summarize the contractual maturity of debt securities and their weighted average yields as of December 31,
2024, and December 31, 2023. Expected maturities will differ from contractual maturities because issuers may have the right to call
or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-
backed securities, are shown separately. Available-for-sale securities are shown at fair value and held-to-maturity securities are
shown at cost, adjusted for the amortization of premiums and the accretion of discounts.
December 31, 2024
Due in one year
or less
Due after one
year through
five years
Due after five
years through
ten years
Due after 10 years
Total
Carrying
Value
Yield
Carrying
Value
Yield
Carrying
Value
Yield
Carrying
Value
Yield
Carrying
Value
Yield
(Dollars in thousands)
Available-for-sale securities:
U.S. Government-sponsored entities
$
7,797
4.68%
$
22,911
4.45%
$
32,623
1.85%
$
1,763
2.02%
$
65,094
3.11%
U.S. Treasury securities
78,400
3.67%
8,163
4.66%
—
— %
—
— %
86,563
3.76%
Mortgage-backed securities
Government-sponsored residential
mortgage-backed securities
—
— %
71,025
4.57%
124,899
2.57%
393,248
4.45%
589,172
4.06%
Private label residential
mortgage-backed securities
—
— %
—
— %
—
— %
124,664
2.35%
124,664
2.35%
Corporate
600
4.25%
11,213
6.81%
46,839
4.75%
—
— %
58,652
5.14%
Small Business Administration loan pools
—
— %
—
— %
4,387
5.28%
1,879
2.19%
6,266
2.35%
State and political subdivisions(1)
2,593
2.37%
10,446
2.38%
33,256
2.11%
27,749
2.49%
74,044
2.31%
Total available-for-sale securities
89,390
3.72%
123,758
4.57%
242,004
2.88%
549,303
3.86%
1,004,455
3.70%
Held-to-maturity securities:
Mortgage-backed securities
Government-sponsored residential
mortgage-backed securities
—
— %
—
— %
3,053
5.02%
879
4.96%
3,932
5.00%
State and political subdivisions(1)
—
— %
—
— %
172
3.02%
1,113
4.62%
1,285
4.40%
Total held-to-maturity securities
—
— %
—
— %
3,225
4.91%
1,992
4.77%
5,217
4.86%
Total debt securities
$
89,390
3.72%
$
123,758
4.57%
$
245,229
2.91%
$ 551,295
3.86%
$
1,009,672
3.70%
(1)
The calculated yield is not calculated on a tax equivalent basis.
December 31, 2023
Due in one year
or less
Due after one
year through
five years
Due after five
years through
ten years
Due after 10 years
Total
Carrying
Value
Yield
Carrying
Value
Yield
Carrying
Value
Yield
Carrying
Value
Yield
Carrying
Value
Yield
(Dollars in thousands)
Available-for-sale securities:
U.S. Government-sponsored entities
$
—
— % $
—
— % $
31,337
1.65%
$
1,750
2.02%
$
33,087
1.67%
U.S. Treasury securities
69,843
5.39%
19,413
1.18%
—
— %
—
— %
89,256
4.47%
Mortgage-backed securities
Government-sponsored residential
mortgage-backed securities
—
— %
40,978
3.78%
137,929
2.62%
350,236
4.26%
529,143
3.80%
Private label residential
mortgage-backed securities
—
— %
—
— %
—
— %
137,841
2.27%
137,841
2.27%
Corporate
—
— %
8,001
7.49%
41,682
4.63%
—
— %
49,683
5.09%
Small Business Administration loan pools
—
— %
—
— %
5,587
5.44%
2,140
2.08%
7,727
4.51%
State and political subdivisions(1)
3,963
2.09%
6,138
2.34%
30,789
2.00%
32,021
2.38%
72,911
2.20%
Total available-for-sale securities
73,806
5.21%
74,530
3.38%
247,324
2.82%
523,988
3.60%
919,648
3.51%
Held-to-maturity securities:
Mortgage-backed securities
Government-sponsored residential
mortgage-backed securities
—
— %
—
— %
—
— %
1,094
4.93%
1,094
4.93%
State and political subdivisions(1)
—
— %
—
— %
—
— %
1,115
4.62%
1,115
4.62%
Total held-to-maturity securities
—
— %
—
— %
—
— %
2,209
4.77%
2,209
4.77%
Total debt securities
$ 73,806
5.21%
$ 74,530
3.38%
$ 247,324
2.82%
$ 526,197
3.61%
$ 921,857
3.51%
(1)
The calculated yield is not calculated on a tax equivalent basis.
Mortgage-backed securities are securities that have been developed by pooling a number of real estate mortgages and which are
principally issued by federal agencies such as Ginnie Mae, Fannie Mae, Freddie Mac and non-agency private label providers. Unlike
U.S. Treasury and U.S. Government agency securities, which have a lump sum payment at maturity, mortgage-backed securities
provide cash flows from regular principal and interest payments and principal prepayments throughout the lives of the securities.
Premiums and discounts on mortgage-backed securities are amortized and accreted over the expected life of the security and may be
impacted by prepayments. As such, mortgage-backed securities purchased at a premium will generally produce decreasing net yields
as interest rates drop because homeowners tend to refinance their mortgages resulting in prepayments and an acceleration of premium
amortization. Securities purchased at a discount will reflect higher net yields in a decreasing interest rate environment as prepayments
result in an acceleration of discount accretion.
78
The contractual maturity of mortgage-backed securities is not a reliable indicator of their expected lives because borrowers have
the right to prepay their obligations at any time. Monthly pay downs on mortgage-backed securities cause the average lives of these
securities to be much different than their stated lives. At December 31, 2024, and 2023, 72.3% and 73.2% of the mortgage-backed
securities held by us had contractual final maturities of more than ten years with a weighted average life of 5.1 years and 5.3 years and
a modified duration of 4.2 years and 4.4 years.
Deposits
Our lending and investing activities are primarily funded by deposits. A variety of deposit accounts are offered with a wide
range of interest rates and terms including demand, savings, money market and time deposits. We rely primarily on competitive
pricing policies, convenient locations, comprehensive marketing strategy and personalized service to attract and retain these deposits.
Overall, deposits have increased $229.3 million from December 31, 2023 to December 31, 2024 and deposits excluding brokered
deposits have increased $104.2 million for the same time period. During 2024 there has been significant competition for deposits and
continued pricing pressure which has caused deposit migration to higher earning deposit account types. In addition to competition, the
overall increase in deposits is due to merger activity, offset by a general decrease in excess liquidity in the market due to the impacts
of elevated inflation and the effects of monetary policy, in the form of higher interest rates, on both consumer and business customers.
The following table shows our composition of deposits at December 31, 2024, 2023, and 2022.
Composition of Deposits
December 31,
2024
2023
2022
2024 vs. 2023
2023 vs. 2022
Amount
Percent of
Total
Amount
Percent of
Total
Amount
Percent of
Total
Change
%
Change
%
(Dollars in thousands)
Non-interest-bearing demand
$
954,065
21.8%
$
898,129
21.7%
$
1,097,899
25.9%
$
55,936
6.2%
$ (199,770)
(18.2)%
Interest-bearing demand
1,172,577
26.8%
998,822
24.1%
1,061,264
25.0%
173,755
17.4%
(62,442)
(5.9)%
Savings and money market
1,511,620
34.6%
1,484,985
35.8%
1,268,320
29.9%
26,635
1.8%
216,665
17.1%
Time
736,527
16.8%
763,519
18.4%
814,324
19.2%
(26,992)
(3.5)%
(50,805)
(6.2)%
Total deposits
$
4,374,789
100.0%
$
4,145,455
100.0%
$
4,241,807
100.0%
$ 229,334
5.5%
$
(96,352)
(2.3)%
The following tables show deposits acquired in 2024, as of the time of each acquisition.
Rockhold Acquisition
Amount
Percent of
Total
(Dollars in thousands)
Non-interest-bearing demand
$
97,593
27.9%
Interest-bearing demand
124,760
35.7%
Savings and money market
94,731
27.1%
Time
32,693
9.3%
Total deposits
$
349,777
100.0%
Kansasland Acquisition
Amount
Percent of
Total
(Dollars in thousands)
Non-interest-bearing demand
$
6,439
15.2%
Interest-bearing demand
5,011
11.8%
Savings and money market
14,314
33.7%
Time
16,654
39.3%
Total deposits
$
42,418
100.0%
79
The following tables show deposits sold in 2022 branch dispositions, as of the time of such dispositions.
United Bank and Trust Branch
Sale
Amount
Percent of
Total
(Dollars in
thousands)
Non-interest-bearing demand
$
15,817
30.0%
Interest-bearing demand
9,039
17.2%
Savings and money market
19,576
37.1%
Time
8,282
15.7%
Total deposits
$
52,714
100.0%
High Plains Bank Branch Sale
Amount
Percent of
Total
(Dollars in thousands)
Non-interest-bearing demand
$
1,925
10.1%
Interest-bearing demand
3,664
19.2%
Savings and money market
7,300
38.3%
Time
6,168
32.4%
Total deposits
$
19,057
100.0%
The following table shows the average deposit balance and average rate paid on deposits for the year ended December 31, 2024,
2023, and 2022.
Average Deposit Balances and Average Rate Paid
December 31,
2024
2023
2022
Average
Balance
Average
Rate
Paid
Average
Balance
Average
Rate
Paid
Average
Balance
Average
Rate
Paid
(Dollars in thousands)
Non-interest-bearing demand
$
931,860
— % $
979,410
— % $
1,203,167
— %
Interest-bearing demand
1,028,114
2.68%
1,002,543
2.26%
1,124,828
0.64%
Savings and money market
1,425,025
2.38%
1,359,822
1.73%
1,308,536
0.27%
Time
770,772
3.75%
827,652
2.93%
663,790
0.83%
Total deposits
$ 4,155,771
$
4,169,427
$
4,300,321
80
Included in interest-bearing demand deposits are Insured Cash Sweep (“ICS”) reciprocal demand deposit balances of $469.5
million at December 31, 2024, and $382.6 million at December 31, 2023, and $282.7 million at December 31, 2022. Also included in
savings and money market deposits at December 31, 2024, 2023, and 2022, are ICS reciprocal money-market deposit balances of
$100.6 million, $230.8 million, and $17.7 million. These balances represent customer funds placed in ICS that allow Equity Bank to
break large demand and money-market deposits into smaller amounts and place them in a network of other ICS banks to ensure FDIC
insurance coverage on the entire deposit. These deposits are placed in ICS but are Equity Bank’s customer relationships that
management views as core funding.
Included in time deposits are Certificate of Deposit Account Registry Service (“CDARS”) program balances of $35.4 million,
$21.8 million, and $11.8 million at December 31, 2024, 2023, and 2022. CDARS allows Equity Bank to break large deposits into
smaller amounts and place them in a network of other CDARS banks to ensure FDIC insurance coverage on the entire deposit.
Reciprocal deposits are not considered brokered deposits as long as the aggregate balance is less than the lesser of 20% of total
liabilities or $5.0 billion and Equity Bank is well capitalized and well rated. All non-reciprocal deposits and reciprocal deposits in
excess of regulatory limits are considered brokered deposits.
Included in interest-bearing demand deposit are brokered deposit balances totaling $75.1 million, $1 thousand, $1 thousand at
December 31, 2024, 2023 and 2022. Also included in time deposits are brokered deposit balances totaling $50.0 million, $200.0
million and $251.8 million at December 31, 2024, 2023, and 2022.
The following table provides information on the maturity distribution of time deposits of $250,000 or more as of December 31,
2024, and December 31, 2023.
December 31,
2024
2023
(Dollars in thousands)
3 months or less
$
69,637
$
65,449
Over 3 through 6 months
200,049
94,459
Over 6 through 12 months
13,799
18,082
Over 12 months
52,080
18,777
Total Time Deposits
$
335,565
$
196,767
Other Borrowed Funds
We utilize borrowings to supplement deposits to fund our lending and investing activities. Short-term borrowing and long-term
borrowing consist of funds from the FHLB, Federal Reserve Bank, federal funds purchased and retail repurchase agreements, a bank
stock loan and subordinated debt. The Company continually has short-term borrowings which are disclosed in “NOTE 10 –
BORROWINGS” and “NOTE 11 – SUBORDINATED DEBT.”
Federal funds purchased and retail repurchase agreements: We have available federal funds lines of credit with our
correspondent banks. Retail repurchase agreements outstanding represent the purchase of interests in securities by banking customers.
Retail repurchase agreements are stated at the amount of cash received in connection with the transaction. We do not account for any
of our retail repurchase agreements as sales for accounting purposes in our financial statements. Retail repurchase agreements with
banking customers are settled on the following business day. See “NOTE 10 – BORROWINGS” in the Notes to Consolidated
Financial Statements for additional information.
FHLB advances: FHLB advances include both draws against our line of credit and fixed rate term advances. Each term
advance is payable in full at its maturity date and contains a provision for prepayment penalties. Our FHLB borrowings are used for
operational liquidity needs for originating and purchasing loans, purchasing investments and general operating cash requirements. See
“NOTE 10 – BORROWINGS” in the Notes to Consolidated Financial Statements for additional information.
Federal Reserve Bank: Federal Reserve Bank Term Funding Program borrowings are fixed rate term loans, secured by loans
and qualifying pledged securities. Our Federal Reserve Bank borrowings are used for operational liquidity needs for originating and
purchasing loans, purchasing investments and general operating cash requirements. see “NOTE 10 – BORROWINGS” in the Notes to
Consolidated Financial Statements.
Bank stock loan: The Company maintains a borrowing facility through an unaffiliated financial institution. The terms of the
loan require us and Equity Bank to maintain minimum capital ratios and other covenants. The loan and accrued interest may be
prepaid at any time without penalty. In the event of default, the lender has the option to declare all outstanding balances as
immediately due. For detailed information, see “NOTE 10 – BORROWINGS” in the Notes to Consolidated Financial Statements.
81
Subordinated debentures: In conjunction with the 2012 acquisition of First Community, we assumed certain subordinated
debentures owed to special purpose unconsolidated subsidiaries that are controlled by us, FCB Capital Trust II and FCB Capital Trust
III, (“CTII” and “CTIII,” respectively). In conjunction with the 2016 acquisition of Community First Bancshares, Inc., we assumed
certain subordinated debentures owed to a special purpose unconsolidated subsidiary that is controlled by us, Community First (AR)
Statutory Trust I, (“CFSTI”). In conjunction with the 2021 acquisition of ASBI, we assumed certain subordinated debentures owed to
a special purpose unconsolidated subsidiary that is controlled by us, American State Bank Statutory Trust I, (“ASBSTI”). For
additional information, see “NOTE 11 – SUBORDINATED DEBT” in the Notes to Consolidated Financial Statements.
Subordinated notes: In 2020, the Company entered into Subordinated Note Purchase Agreements with certain qualified
institutional buyers and institutional accredited investors pursuant to which the Company issued and sold a total of $75.0 million in
aggregate principal amounts of its 7.00% Fixed-to-Floating Rate Subordinated Notes due in 2030. For additional information, see
“NOTE 11 – SUBORDINATED DEBT” in the Notes to Consolidated Financial Statements.
Liquidity and Capital Resources
Liquidity
Market and public confidence in our financial strength and financial institutions, in general, will largely determine access to
appropriate levels of liquidity. This confidence is significantly dependent on our ability to maintain sound asset quality and
appropriate levels of capital reserves.
Liquidity is defined as the ability to meet anticipated customer demands for future funds under credit commitments and deposit
withdrawals at a reasonable cost and on a timely basis. We measure our liquidity position by giving consideration to both on- and off-
balance sheet sources of and demands for funds on a daily, weekly and monthly basis.
Liquidity risk involves the risk of being unable to fund assets with the appropriate duration and rate-based liabilities, as well as
the risk of not being able to meet unexpected cash needs. Liquidity planning and management are necessary to ensure the ability to
fund operations in a cost-effective manner and to meet current and future potential obligations such as loan commitments, lease
obligations and unexpected deposit outflows. In this process, we focus on both assets and liabilities and on the manner in which they
combine to provide adequate liquidity to meet our needs.
During the years ended December 31, 2024, 2023, and 2022, our liquidity needs have primarily been met by core deposits,
securities and loan maturities, as well as amortizing payment from investment securities and loans. Other funding sources include
federal funds purchased, retail repurchase agreements, brokered certificates of deposit, subordinated notes, borrowings from the FHLB
and from the Federal Reserve Bank.
Our largest sources of funds are deposits, fed funds sold, retail repurchase agreements and subordinated debt, and our largest
uses of funds are the origination of loans or purchases of loans or investment securities. Average loans were $3.44 billion for the year
ended December 31, 2024, an increase of 4.2% over average loans of $3.30 billion for the year ended December 31, 2023. Excess
deposits are primarily invested in our interest-bearing deposit account with the Federal Reserve Bank of Kansas City, investment
securities, federal funds sold or other short-term liquid investments until the funds are needed to fund loan growth. Our investment
securities portfolio has a weighted average life of 4.8 years and a modified duration of 4.0 years at December 31, 2024. We believe
that our daily funding needs can be met through cash provided by operating activities, payments and maturities on loans and
investment securities, our core deposit base, FHLB advances, Federal Reserve Bank and other borrowing relationships. For additional
information, see "NOTE 10 - BORROWINGS" in the Notes to Consolidated Financial Statements.
Cash Flow Overview
During 2024, investing activities provided $123.7 million and operating activities provided $73.8 million of liquidity, which
were offset by financing activities use of $192.9 million, ultimately increasing total cash and cash equivalents by $4.6 million. The
cash provided by investing activities was primarily driven by the sale and maturity of securities of $288.6 million which was partially
offset by the purchase of securities of $187.1 million, the assets acquired net of cash received from mergers of $62.2 million, the gain
on the sale of real estate owned and other repossessed assets of $10.3 million, the other uses of cash from investing activity included
$49.1 million from the purchase of loans, the net change in bank owned life insurance of $3.2 million and the purchase of premises
and equipment of $8.5 million and the $5.9 million net redemption of FHLB and Federal Reserve Bank stock. The cash provided by
financing activities was driven mostly by increases in proceeds from the issuance of common stock of $87.0 million and net change in
FHLB term and overnight borrowings of $72.0 million. The cash usage from financing activity was driven by a decreases in deposits
of $163.0 million excluding the additions from mergers, the net principle repayment of the Federal Reserve Bank borrowings of
82
$140.0 million, the change in contractual obligations of $15.7 million, purchases of treasury stock of $11.9 million and dividends paid
of $7.9 million.
During 2023, investing activities provided $232.2 million and operating activities provided $76.5 million of liquidity, which
were offset by financing activities use of $34.0 million, ultimately increasing total cash and cash equivalents by $274.7 million. The
cash provided by investing activities was driven by the sale and maturity of securities of $789.4 million and primarily offset by the
purchase of securities of $510.5 million, the net change in loans of $23.7 million, the purchase of premises and equipment of $15.6
million and the purchase of correspondent and miscellaneous stock of $11.9 million. The cash usage in financing activities was driven
primarily by decreases in deposits of $96.4 million, FHLB term and LOC advances of $38.9 million, the purchases of treasury stock of
$17.9 million, change in contractual obligations of $12.3 million and dividends paid of $6.6 million offset by an increase in Federal
Reserve Bank borrowings of $140.0 million.
For information related to cash flow during 2022, see “Item 7 – Management’s Discussion and Analysis of Financial Condition
and Results of Operations” in our Annual Report on Form 10-K filed with the SEC on March 9, 2023.
Off-Balance Sheet Items
In the normal course of business, we enter into various transactions, which, in accordance with GAAP, are not included in our
consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions
include commitments to extend credit and standby and commercial letters of credit, which involve, to varying degrees, elements of
credit risk and interest rate risk in excess of the amounts recognized in the consolidated balance sheets. Our exposure to credit loss is
represented by the contractual amounts of these commitments. The same credit policies and procedures are used in making these
commitments as for on-balance sheet instruments.
Standby and Performance Letters of Credit: For additional information see “NOTE 20 – COMMITMENTS AND CREDIT
RISK” in the Notes to Consolidated Financial Statements.
Commitments to Extend Credit: For additional information see “NOTE 20 – COMMITMENTS AND CREDIT RISK” in the
Notes to Consolidated Financial Statements.
Future Debt Repayments
In the normal course of business, we enter into short-term and long-term debt obligations resulting in commitments to make
future payments. For additional information see “NOTE 10 – BORROWINGS” and “NOTE 11 – SUBORDINATED DEBT.”
Capital Resources
Capital management consists of providing equity to support our current and future operations. The bank regulators view capital
levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and
their holding companies are required to maintain minimum capital relative to the amount and types of assets that they hold. As a bank
holding company and a state-chartered Fed member bank, the Company and Equity Bank are subject to regulatory capital
requirements.
Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities and
certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject
to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Management believes, as of
December 31, 2024, and December 31, 2023, the Company and Equity Bank meet all capital adequacy requirements to which they are
subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial
condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital
distributions are limited, as are asset growth and acquisitions, and capital restoration plans are required.
Failure to meet capital guidelines could subject the institution to a variety of enforcement remedies by federal bank regulatory
agencies, including termination of deposit insurance by the FDIC, restrictions on certain business activities and appointment of the
FDIC as conservator or receiver. As of December 31, 2024, the most recent notifications from the federal regulatory agencies
categorized Equity Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as well
capitalized, Equity Bank must maintain minimum total capital, Tier 1 capital, Common Equity Tier 1 capital and Tier 1 leverage
ratios. There are no conditions or events since that notification that management believes have changed Equity Bank’s category.
83
The total increase in stockholders’ equity of $140.1 million was principally attributable to increases in additional paid-in-capital
of $95.2 million and retained earnings of $53.9 million, partially offset by a increase in treasury stock of $11.9 million. For additional
information about the Company’s capital see "NOTE 12 – STOCKHOLDERS' EQUITY", “NOTE 14 – REGULATORY MATTERS”
and "NOTE 17 – SHARE-BASED PAYMENTS" in Notes to Consolidated Financial Statements.
Non-GAAP Financial Measures
We identify certain financial measures discussed in this Annual Report on Form 10-K as being “non-GAAP financial
measures.” In accordance with the SEC’s rules, we classify a financial measure as being a non-GAAP financial measure if that
financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts,
that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance
with generally accepted accounting principles as in effect from time to time in the United States in our statements of income, balance
sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or
statistical measures calculated using exclusively either financial measures calculated in accordance with GAAP, operating measures or
other measures that are not non-GAAP financial measures or both.
The non-GAAP financial measures that we discuss in this Annual Report on Form 10-K should not be considered in isolation or
as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the
manner in which we calculate the non-GAAP financial measures that we discuss in this Annual Report on Form 10-K may differ from
that of other companies reporting measures with similar names. You should understand how such other banking organizations
calculate their financial measures similar or with names similar to the non-GAAP financial measures that we have discussed in this
Annual Report on Form 10-K when comparing such non-GAAP financial measures.
Tangible Book Value per Common Share and Tangible Book Value Per Diluted Common Share: Tangible book value is a non-
GAAP measure generally used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a)
tangible common equity as total stockholders’ equity less preferred stock, goodwill, core deposit intangibles, net of accumulated
amortization, mortgage servicing asset, net of accumulated amortization, and naming rights, net of accumulated amortization; (b)
tangible book value per common share as tangible common equity (as described in clause (a)) divided by shares of common stock
outstanding; and (c) tangible book value per diluted common share as tangible common equity (as described in clause (a)) divided by
shares of common stock outstanding plus the period-end dilutive effects of vested restricted stock units, the assumed exercise of stock
options, redemption of non-vested restricted stock units, and pending employee stock purchase plan shares at period end. For tangible
book value, the most directly comparable financial measure calculated in accordance with GAAP is book value.
Management believes that these measures are important to many investors who are interested in changes from period to period
in book value per common share exclusive of changes in intangible assets. Goodwill and other intangible assets have the effect of
increasing total book value while not increasing our tangible book value.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity, tangible
book value per common share and tangible book value per diluted common share and compares these values with book value per
common share.
December 31,
2024
2023
2022
2021
2020
(Dollars in thousands, except share data)
Total stockholders’ equity
$
592,918
$
452,860
$
410,058
$
500,631
$
407,649
Goodwill
(53,101)
(53,101)
(53,101)
(54,465)
(31,601)
Core deposit intangibles, net
(14,969)
(7,222)
(10,596)
(14,879)
(16,057)
Mortgage servicing asset, net
—
(75)
(176)
(276)
—
Naming rights, net
(957)
(1,000)
(1,044)
(1,087)
(1,130)
Tangible common equity
$
523,891
$
391,462
$
345,141
$
429,924
$
358,861
Common shares outstanding at period end
17,419,858
15,428,251
15,930,112
16,760,115
14,540,556
Diluted common shares outstanding at
period end
17,636,843
15,629,185
16,163,253
17,050,115
14,540,556
Book value per common share
$
34.04
$
29.35
$
25.74
$
29.87
$
28.04
Tangible book value per common
share
$
30.07
$
25.37
$
21.67
$
25.65
$
24.68
Tangible book value per diluted
common share
$
29.70
$
25.05
$
21.35
$
25.22
$
24.68
84
Tangible Common Equity to Tangible Assets: Tangible common equity to tangible assets is a non-GAAP measure generally
used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) tangible common equity as total
stockholders’ equity less preferred stock, goodwill, core deposit intangibles, net of accumulated amortization, mortgage servicing
asset, net of accumulated amortization and naming rights, net of accumulated amortization; (b) tangible assets as total assets less
goodwill, core deposit intangibles, net of accumulated amortization, mortgage servicing asset, net of accumulated amortization and
naming rights, net of accumulated amortization; and (c) tangible common equity to tangible assets as tangible common equity (as
described in clause (a)) divided by tangible assets (as described in clause (b)). For common equity to tangible assets, the most directly
comparable financial measure calculated in accordance with GAAP is total stockholders’ equity to total assets.
Management believes that this measure is important to many investors in the marketplace who are interested in the relative
changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. Goodwill and other
intangible assets have the effect of increasing both total stockholders’ equity and total assets while not increasing tangible common
equity or tangible assets.
The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible common equity and total
assets to tangible assets.
December 31,
2024
2023
2022
2021
2020
(Dollars in thousands)
Total stockholders’ equity
$
592,918
$
452,860
$
410,058
$
500,631
$
407,649
Goodwill
(53,101)
(53,101)
(53,101)
(54,465)
(31,601)
Core deposit intangibles, net
(14,969)
(7,222)
(10,596)
(14,879)
(16,057)
Mortgage servicing asset, net
—
(75)
(176)
(276)
—
Naming rights, net
(957)
(1,000)
(1,044)
(1,087)
(1,130)
Tangible common equity
$
523,891
$
391,462
$
345,141
$
429,924
$
358,861
Total assets
$
5,332,047
$
5,034,592
$
4,981,651
$ 5,137,631
$
4,013,356
Goodwill
(53,101)
(53,101)
(53,101)
(54,465)
(31,601)
Core deposit intangibles, net
(14,969)
(7,222)
(10,596)
(14,879)
(16,057)
Mortgage servicing asset, net
—
(75)
(176)
(276)
—
Naming rights, net
(957)
(1,000)
(1,044)
(1,087)
(1,130)
Tangible assets
$
5,263,020
$
4,973,194
$
4,916,734
$ 5,066,924
$
3,964,568
Equity / assets
11.12%
8.99%
8.23%
9.74%
10.16%
Tangible common equity to tangible
assets
9.95%
7.87%
7.02%
8.48%
9.05%
Core Return on Average Equity: Core return on average equity is a non-GAAP measure generally used by financial analysts
and investment bankers to evaluate financial institutions. We calculate: (a) average tangible common equity as total average
stockholders’ equity less average intangible assets and preferred stock; (b) core net income allocable to common stockholders as net
income allocable to common stockholders less net gain on acquisition, less gain(loss) on securities transactions, plus loss on debt
extinguishment, plus merger expenses, plus BOLI tax expense, plus goodwill impairment, net of actual tax effect, plus amortization of
intangible assets less estimated tax effect on adjustments (tax rates used in this calculation were 21% for 2024, 2023, 2022, 2021 and
2020) (c) core return on average equity as core net income allocable to common stockholders (as described in clause (b)) divided by a
simple average of net income and core net income plus average stockholders' equity. For return on average equity, the most directly
comparable financial measure calculated in accordance with GAAP is return on average equity.
Return on Average Tangible Common Equity: Return on average tangible common equity is a non-GAAP measure generally
used by financial analysts and investment bankers to evaluate financial institutions. We calculate: (a) average tangible common equity
as total average stockholders’ equity less average intangible assets and preferred stock; (b) core net income allocable to common
stockholders as net income allocable to common stockholders plus goodwill impairment, net of actual tax effect, plus amortization of
intangible assets less estimated tax effect on amortization of intangible assets (tax rates used in this calculation were 21% for 2024,
2023, 2022, 2021 and 2020) (c) return on average tangible common equity as core net income allocable to common stockholders (as
described in clause (b)) divided by average tangible common equity (as described in clause (a)). For return on average tangible
common equity, the most directly comparable financial measure calculated in accordance with GAAP is return on average equity.
Management believes that this measure is important to many investors in the marketplace because it measures the return on
equity, exclusive of the effects of intangible assets on earnings and capital. Goodwill and other intangible assets have the effect of
85
increasing average stockholders’ equity and, through amortization, decreasing net income allocable to common stockholders while not
increasing average tangible common equity or decreasing core net income allocable to common stockholders.
The following table reconciles, as of the dates set forth below, total average stockholders’ equity to average equity and net
income allocable to common stockholders to core net income allocable to common stockholders.
December 31,
2024
2023
2022
2021
2020
(Dollars in thousands)
Total average stockholders’ equity
$ 482,974
$ 423,722
$ 440,882
$ 446,795
$ 464,608
Average intangible assets
(68,190)
(63,064)
(67,746)
(50,831)
(130,329)
Average tangible common equity
$ 414,784
$ 360,658
$ 373,136
$ 395,964
$ 334,279
Net income (loss) allocable to common stockholders
$
62,621
$
7,821
$
57,688
$
52,480
$ (74,970)
Amortization of intangible assets
4,408
3,518
4,186
4,242
3,898
Goodwill impairment, net of actual tax effect
—
—
—
—
99,526
Tax effect of adjustments
(926)
(739)
(879)
(891)
(819)
Adjusted net income (loss) allocable to common
stockholders
$
66,103
$
10,600
$
60,995
$
55,831
$
27,635
Net gain on acquisition
(2,131)
—
(962)
(585)
(2,145)
Net (gain) loss on securities transactions
(220)
51,909
(5)
(406)
(11)
Loss on extinguishment of debt
—
—
—
372
—
Merger expenses
4,461
297
594
9,189
299
BOLI tax expense
1,730
—
—
—
—
Tax effect of adjustments
(443)
(10,963)
78
(1,800)
390
Core net income (loss) allocable to common
stockholders
$
69,500
$
51,843
$
60,700
$
62,601
$
26,168
Return on average equity (ROAE)
12.97%
1.85%
13.08%
11.75%
(16.14)%
Core return on average equity
14.29%
11.63%
13.72%
13.85%
1.87%
Return on average tangible common equity
(ROATCE)
15.94%
2.94%
16.35%
14.10%
8.27%
Core income calculations: Core income calculations are a non-GAAP measure that management believes is an effective
alternative measure of how efficiently the company utilizes its asset base. Core income is calculated by adjusting GAAP income by
non-core gains and losses and excluding non-core expenses, net of tax, as outlined in the table below. We calculate (a) core net
income (loss) allocable to common stockholders plus merger expenses, tax effected non-core items, goodwill impairment and BOLI
tax adjustment, less gain (loss) from securities transactions; (b) adjusted operating net income as net income (loss) allocable to
common stockholders plus adjusted non-core items, tax effected non-core items and BOLI tax adjustments.
Core Net Income and Earnings Per Share: Core net income and Core earnings per share are non-GAAP financial measures
generally used to disclose core net income from the Company's operations and earnings per share. We calculated this by taking
GAAP net income less non-core impacts to net income to arrive at core net income and core diluted earnings per share. These
financial measures are used by financial statement users to evaluate the core financial performance of the Company.
Management believes that these measures are important to many investors who are interested in changes from period to period
in the Company's financial performance and quality of earnings.
The following table reconciles as of the dates set forth below, core net income and earnings per share and compares them to
GAAP net income and earnings per share.
86
December 31,
2024
2023
2022
2021
2020
(Dollars in thousands, except per share data)
Net income (loss) allocable to common stockholders
$
62,621
$
7,821
$
57,688
$
52,480
$
(74,970)
Core net income (loss) allocable to common
stockholders
$
69,500
$
51,843
$
60,700
$
62,601
$
9,459
Total average assets
$
5,075,939
$ 4,999,405
$ 5,023,112
$ 4,431,802
$ 3,999,709
Total average stockholders' equity
$
482,974
$
423,722
$
440,884
$
446,795
$
464,608
Weighted average common shares outstanding
15,489,370
15,535,772
16,214,049
15,019,221
15,098,512
Weighted average diluted common shares
15,671,674
15,648,842
16,437,906
15,306,431
15,238,499
Earnings Per Share
$
4.04
$
0.50
$
3.56
$
3.49
$
(4.97)
Diluted earnings (loss) per share
$
4.00
$
0.50
$
3.51
$
3.43
$
(4.97)
Core earnings per diluted share
$
4.43
$
3.31
$
3.69
$
4.09
$
0.62
Return on average assets (ROAA) annualized
1.23 %
0.16 %
1.15 %
1.18 %
(1.87)%
Core return on average assets
1.37 %
1.03 %
1.21 %
1.41 %
0.23 %
Return on average equity
12.97 %
1.85 %
13.08 %
11.75 %
(16.14)%
Efficiency Ratio: The efficiency ratio is a non-GAAP measure generally used by financial analysts and investment bankers to
evaluate financial institutions. We calculate the efficiency ratio by dividing non-interest expense, excluding goodwill impairment,
merger expenses and loss on debt extinguishment, by the sum of net interest income and non-interest income, excluding net gains on
the sale of available-for-sale securities and other securities transactions, and the net gain on acquisition. The GAAP-based efficiency
ratio is non-interest expense less goodwill impairment, divided by net interest income plus non-interest income.
In management’s judgment, the adjustments made to non-interest expense and non-interest income allow investors and analysts
to better assess operating expenses in relation to operating revenue by removing merger expenses, loss on debt extinguishment, net
gains on the sale of available-for-sale securities and other securities transactions, and the net gain on acquisition.
87
The following table reconciles, as of the dates set forth below, the efficiency ratio to the GAAP-based efficiency ratio.
December 31,
2024
2023
2022
2021
2020
(Dollars in thousands)
Non-interest expense
$
144,157
$
135,601
$
128,380
$
119,465
$
208,990
Goodwill impairment
—
—
—
—
(104,831)
Merger expenses
(4,461)
(297)
(594)
(9,189)
(299)
Loss on debt extinguishment
—
—
—
(372)
—
Non-interest expense, excluding merger expenses and
loss on debt extinguishment
$
139,696
$
135,304
$
127,786
$
109,904
$
103,860
Amortization of intangibles
$
(4,408)
$
(3,518)
$
(4,186)
$
(4,242)
$
(3,898)
Core Non-interest expense, excluding merger expenses,
amortization of intangibles and
loss on debt extinguishment
$
135,288
$
131,786
$
123,600
$
105,662
$
99,962
Net interest income
$
186,162
$
159,018
$
162,830
$
142,579
$
132,652
Non-interest income
$
38,822
$
(19,129)
$
35,957
$
32,842
$
26,023
Gain on acquisition and branch sales
(2,131)
—
(962)
(585)
(2,145)
Net (gains) losses from securities transactions
(220)
51,909
(5)
(406)
(11)
Non-interest income, excluding net gains (losses) from
security transactions and gain on acquisition
$
36,471
$
32,780
$
34,990
$
31,851
$
23,867
Non-interest expense to net interest income plus
non-interest income
64.07%
96.93%
64.58%
68.10%
65.64%
Efficiency Ratio
60.77%
68.71%
62.48%
60.58%
63.87%
Total average assets
$5,075,939
$4,999,405
$5,023,112
$4,431,802
$3,999,709
Core non-interest expense, less goodwill impairment /
Average assets
2.67%
2.64%
2.46%
2.38%
2.50%
Item 7A: Quantitative and Qualitative Disclosure About Market Risk
Our asset liability policy provides guidelines to management for effective funds management, and management has established
a measurement system for monitoring net interest rate sensitivity position within established guidelines.
As a financial institution, the primary component of market risk is interest rate volatility. Fluctuations in interest rates will
ultimately impact both the level of income and expense recorded on most assets and liabilities, and the market value of all interest-
earning assets and interest-bearing liabilities, other than those which have a short term to maturity. Interest rate risk is the potential of
economic gains or losses due to future interest rate changes. These changes can be reflected in future net interest income and/or fair
market values. The objective is to measure the effect on net interest income (“NII”) and economic value of equity (“EVE”) and to
adjust the balance sheet to minimize the inherent risk, while at the same time maximizing income.
We manage exposure to interest rates by structuring the balance sheet in the ordinary course of business. We have the ability to
enter into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward
delivery contracts for the purpose of reducing interest rate risk; however, currently we do not have a material exposure to these
instruments. We also have the ability to enter into interest rate swaps as an accommodation to our customers in connection with an
interest rate swap program. Based upon the nature of its operations, we are not subject to foreign exchange or commodity price risk.
We do not own any trading assets.
Our exposure to interest rate risk is managed by the Asset Liability Committee (“ALCO”), which is composed of certain
members of senior management, in accordance with policies approved by the Board of Directors. The ALCO formulates strategies
based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO considers the
impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economies,
liquidity, business strategies and other factors. The ALCO meets monthly to review, among other things, the sensitivity of assets and
liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, securities purchase
and sale activities, commitments to originate loans, and the maturities of investment securities and borrowings. Additionally, the
ALCO reviews liquidity; projected cash flows; maturities of deposits; and consumer and commercial deposit activity.
88
ALCO uses a simulation analysis to monitor and manage the pricing and maturity of assets and liabilities in order to diminish
the potential adverse impact that changes in interest rates could have on net interest income. The simulation tests the sensitivity of NII
and EVE. Contractual maturities and repricing opportunities of loans are incorporated in the simulation model as are prepayment
assumptions, maturity data and call options within the investment securities portfolio. Assumptions based on past experience are
incorporated into the model for non-maturity deposit accounts. The assumptions used are inherently uncertain and, as a result, the
model cannot precisely measure the future NII and EVE. Actual results will differ from the model’s simulated results due to timing,
magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various
management strategies.
The change in the impact of net interest income from the base case for December 31, 2024, and 2023 was primarily driven by
the rate and mix of variable and fixed rate financial instruments, the underlying duration of the financial instruments, and the level of
response to changes in the interest rate environment.
December 31, 2024, Analysis
The increase in the level of positive impact to net interest income in the up interest rate shock scenarios is due to the decrease in
fixed rate investments, the level of interest earning cash balances, increase in the level of adjustable rate loans, increase in non-interest
bearing deposits which were partially offset by the increase in interest bearing non-maturity deposits. These factors result in the
positive impacts to net interest income in the up interest rate shock scenarios that are detailed in the table below. In the down interest
rate shock scenario, the main drivers of the negative impact on net interest income are the downward pricing of variable rate loans
receivable, and the decrease in fixed rate investments. These factors result in the negative impact to net interest income in the down
interest rate shock scenario.
The change in the economic value of equity from the base case for December 31, 2024, is due to us being in a liability sensitive
position and the level of convexity in our prepayable assets. Generally, with a liability sensitive position, as interest rates increase, the
value of your assets decrease faster than the value of liabilities and, as interest rates decrease, the value of your assets increase at a
faster rate than liabilities. Due to the level of convexity in our fixed rate prepayable assets, we do not experience a similar change in
the value of assets in a down interest rate shock scenario; however, due to the current level of convexity in our fixed rate prepayable
assets becoming less negative and positive, in some cases, on a portion of our portfolio has resulted in the overall value of assets
increasing more than liabilities. In addition, the mix of interest-bearing deposit and non-interest-bearing deposits impact the level of
deposit decay and the resulting benefit of discounting from the non-interest-bearing deposits. At December 31, 2024, non-interest-
bearing deposits were approximately $1.07 billion, or 17.4%, higher than that deposit type at December 31, 2023. Substantially all
investments and approximately 37.8% of loans are prepayable and fixed rate and as rates decrease the level of modeled prepayments
increase. The prepaid principal is assumed to reprice at the assumed current rates, resulting in a smaller positive impact to the
economic value of equity.
December 31, 2023, Analysis
The increase in the level of positive impact to net interest income in the up interest rate shock scenarios is due to the decrease in
fixed rate investments, increase in interest earning cash balances and overall increase in the level of adjustable rate loans, which were
partially offset by the decreases in non-interest bearing deposits and savings accounts, which are low beta deposit products, and
increases in money market and ICS deposits, which are high beta deposit produces. These factors result in the positive impacts to net
interest income in the up interest rate shock scenarios that are detailed in the table below. In the down interest rate shock scenario, the
main drivers of the negative impact on net interest income are the downward pricing of variable rate loans receivable, increase in
interest-earning cash balances and the decrease in fixed rate investments. These factors result in the negative impact to net interest
income in the down interest rate shock scenario.
The change in the economic value of equity from the base case for December 31, 2023, is due to us being in a liability sensitive
position and the level of convexity in our prepayable assets. Generally, with a liability sensitive position, as interest rates increase, the
value of your assets decrease faster than the value of liabilities and, as interest rates decrease, the value of your assets increase at a
faster rate than liabilities. Due to the level of convexity in our fixed rate prepayable assets, we do not experience a similar change in
the value of assets in a down interest rate shock scenario; however, due to the current level of convexity in our fixed rate prepayable
assets becoming less negative and positive, in some cases, on a portion of our portfolio has resulted in the overall value of assets
increasing more than liabilities. In addition, the mix of interest-bearing deposit and non-interest-bearing deposits impact the level of
deposit decay and the resulting benefit of discounting from the non-interest-bearing deposits. At December 31, 2023, non-interest-
bearing deposits were approximately $898.1 million, or 18.2%, lower than that deposit type at December 31, 2022. Substantially all
investments and approximately 41.3% of loans are prepayable and fixed rate and as rates decrease the level of modeled prepayments
increase. The prepaid principal is assumed to reprice at the assumed current rates, resulting in a smaller positive impact to the
economic value of equity.
89
The following table summarizes the simulated immediate change in net interest income for twelve months and impact on
economic value of equity as of the dates indicated.
Market Risk
Impact on Net Interest Income
December
31,
Change in prevailing interest rates
2024
2023
+300 basis points
11.9%
10.3%
+200 basis points
7.9%
6.8%
+100 basis points
3.9%
3.3%
0 basis points
—%
—%
-100 basis points
(2.4)%
(2.1)%
-200 basis points
(4.9)%
(4.3)%
-300 basis points
(8.1)%
(7.3)%
Impact on Economic Value of Equity
December 31,
Change in prevailing interest rates
2024
2023
+300 basis points
(6.5)%
(7.4)%
+200 basis points
(4.2)%
(4.3)%
+100 basis points
(2.4)%
(2.2)%
0 basis points
—%
—%
-100 basis points
0.3%
0.3%
-200 basis points
(1.5)%
(1.5)%
-300 basis points
(5.1)%
(5.3)%
90
Item 8: Financial Statements and Supplementary Data
Our financial statements and accompanying notes, including the Report of Independent Registered Public Accounting Firm, are
set forth beginning on page F-1 of this Annual Report on Form 10-K.
Audited Financial Statements
Description
Page Number
Report of Independent Registered Public Accounting Firm ..................................................................................................
F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023.........................................................................................
F-4
Consolidated Statements of Income for the Years Ended December 31, 2024, 2023 and 2022............................................
F-5
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2024, 2023 and 2022..................
F-6
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024, 2023 and 2022......................
F-7
Consolidated Statements of Cash Flows for the Years Ended December 31, 2024, 2023 and 2022.....................................
F-8
Notes to Consolidated Financial Statements..........................................................................................................................
F-10
In the last three years, The Company has not had any retroactive change to historical quarterly data.
Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
None
Item 9A: Controls and Procedures
Disclosure Controls and Procedures
As of the end of the period covered by this report, management of the Company, under the supervision and with the
participation of the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of the Company’s disclosure controls and procedures (as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange
Act). Based upon, and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the
Company’s disclosure controls and procedures were effective, in ensuring the information relating to the Company (and its
consolidated subsidiaries) required to be disclosed by the Company in the reports it files or submits under the Exchange Act was
recorded, processed, summarized and reported in a timely manner.
Changes in Internal Control Over Financial Reporting
There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-
15(f) under the Exchange Act) during the last fiscal quarter of the fiscal year for which this Annual Report on Form 10-K is filed that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Report on Management’s Assessment of Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined under Rules 13a-15(f) and 15d-15(f) of the Exchange Act). The Company’s internal control system is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2024, management assessed the effectiveness of the Company’s internal control over financial reporting
based on the criteria for effective internal control over financial reporting established in “Internal Control-Integrated Framework,”
issued by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission in 2013. Based on the assessment,
management determined that the Company maintained effective internal control over financial reporting as of December 31, 2024.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, has been audited by
Crowe LLP, Indianapolis, Indiana, (U.S. PCAOB Auditor Firm I.D. 173), the independent registered public accounting firm who also
has audited the Company’s consolidated financial statements included in this Annual Report on Form 10-K. Crowe LLP has issued a
91
report on the Company’s internal control over financial reporting as of December 31, 2024, which is included in Item 8 of this Form
10-K and is incorporated into this item by reference.
Item 9B: Other Information
During the three months ended December 31, 2024, none of the Company's directors or officers (as defined in Rule 16a-1(f) of
the Securities Exchange Act of 1934) adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading
arrangement (as such defined in Item 408 of Regulation S-K of the Securities Act of 1933).
Item 9C: Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable
92
Part III
Item 10: Directors, Executive Officers and Corporate Governance
The information required by this item will be contained in our Proxy Statement for the 2025 Annual Meeting of Stockholders to
be held April 22, 2025, a copy of which will be filed not later than 120 days after the close of the fiscal year and is incorporated herein
by reference.
Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and
directors, including our Chief Executive Officer, Chief Financial Officer and other executive officers. The full text of our Code of
Business Conduct and Ethics is posted on the investor relations page of our website which is located at http://investor.equitybank.com.
We will post any amendments to our code of business conduct and ethics, or waivers of its requirements, on our website.
We have adopted an insider trading policy governing the purchase, sale, and/or other disposition of Company securities by
directors, officers, and employees that are reasonably designed to promote compliance with insider trading laws, rules and regulations,
and the NYSE listing standards. Among other things, the provisions of our insider trading policy applicable to our directors, executive
officers and certain other designated employees prohibits such persons from hedging or pledging our securities, subject to limited
exceptions and pre-approval under the terms of our insider trading policy. Such persons are also prohibited from engaging in various
trading practices including short sales of the Company’s securities, trading in puts, calls or other derivative securities of the Company,
and from holding our securities in a margin account. A copy our insider trading policy is attached to this Form 10-K as Exhibit 19.1.
Item 11: Executive Compensation
The information required by this item will be contained in our Proxy Statement for the 2025 Annual Meeting of Stockholders to
be held April 22, 2025, a copy of which will be filed not later than 120 days after the close of the fiscal year and is incorporated herein
by reference.
Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be contained in our Proxy Statement for the 2025 Annual Meeting of Stockholders to
be held April 22, 2025, a copy of which will be filed not later than 120 days after the close of the fiscal year and is incorporated herein
by reference.
Information relating to securities authorized for issuance under our equity compensation plans is included in Part II of this
Annual Report on Form 10-K under “Item 5 – Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities.”
Item 13: Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be contained in our Proxy Statement for the 2025 Annual Meeting of Stockholders to
be held April 22, 2025, a copy of which will be filed not later than 120 days after the close of the fiscal year and is incorporated herein
by reference.
Item 14: Principal Accounting Fees and Services
The information required by this item will be contained in our Proxy Statement for the 2025 Annual Meeting of Stockholders to
be held April 22, 2025, a copy of which will be filed not later than 120 days after the close of the fiscal year and is incorporated herein
by reference.
93
Part IV
Item 15: Exhibits, Financial Statement Schedules
a)
The following documents are filed as part of this Annual Report on Form 10-K:
1.
Financial Statements
The financial statements included as part of this Form 10-K are identified in the index to the Audited Financial Statements
appearing in Item 8 of this Form 10-K and which index is incorporated in this Item 15 by reference.
2.
Financial Statement Schedules
All supplemental schedules are omitted as inapplicable or because the required information is included in the
Consolidated Financial Statements or notes thereto.
3.
Exhibits
The information required by this Item 15(a)(3) is set forth in the Exhibit Index immediately following. The exhibits listed
herein will be furnished upon written request to Equity Bancshares, Inc., 7701 East Kellogg Drive, Suite 300, Wichita,
Kansas 67207, Attention: Investor Relations, and payment of a reasonable fee that will be limited to our reasonable
expense in furnishing such exhibits.
b)
Exhibits
The exhibits listed below are incorporated by reference or attached hereto.
Exhibit
No.
Description
2.1
Agreement and Plan of Merger, dated December 5, 2023, by and among Equity Bancshares, Inc.
Truman Merger Sub, Inc. Rockhold BanCorp and Rockhold BanCorp Stock Trust (incorporated by
reference to Exhibit 2.1 to Equity Bancshares, Inc.'s Current Report on Form 8-K, filed with the
SEC on December 6, 2023).
2.2
Agreement and Plan of Merger, dated April 18, 2024, by and among Equity Bancshares, Inc. KL
Merger Sub, Inc. and Kansasland Bancshares, Inc. (incorporated by reference to Exhibit 2.1 to
Equity Bancshares, Inc.'s Current Report on Form 8-K, filed with the SEC on April 22, 2024).
3.1
Second Amended and Restated Articles of Incorporation of Equity Bancshares, Inc. (incorporated
by reference to Exhibit 3.1 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the
SEC on May 3, 2016).
3.2
Amended and Restated Bylaws of Equity Bancshares, Inc. (incorporated by reference to Exhibit 3.2
to Equity Bancshares, Inc.’s Registration Statement on Form S-1, filed with the SEC on October 9,
2015, File No. 333-207351).
4.1
Specimen Class A Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Equity
Bancshares, Inc.’s Amendment No. 1 to Registration Statement on Form S-1, filed with the SEC on
October 27, 2015, File No. 333-207351).
4.2*
Description of Registrant’s Securities.
4.3
Indenture, dated as of June 29, 2020, by and between Equity Bancshares, Inc. and UMB Bank,
N.A., as trustee (incorporated by reference to Exhibit 4.1 to Equity Bancshares, Inc.’s Current
Report on Form 8-K, filed with the SEC on July 2, 2020).
4.4
Form of 7.00% Fixed-to-Floating Rate Subordinated Note due 2030 (incorporated by reference to
Exhibit 4.1 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2,
2020).
10.1†
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.3 to Equity
Bancshares, Inc.’s Registration Statement on Form S-1, filed with the SEC on October 9, 2015, File
No. 333-207351).
94
Exhibit
No.
Description
10.2†
Amended and Restated Employment Agreement, dated November 5, 2021, between Equity Bank,
Equity Bancshares, Inc. and Brad S. Elliott (incorporated by reference to Exhibit 10.4 to Equity
Bancshares, Inc.’s Annual Report on Form 10-K, filed with the SEC on March 9, 2022).
10.3†
Amended and Restated Employment Agreement, dated November 5, 2021, between Equity Bank,
Equity Bancshares, Inc. and Julie Huber (incorporated by reference to Exhibit 10.4 to Equity
Bancshares, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2021).
10.4†
Employment Agreement, dated May 2, 2023, among Equity Bank and Richard M. Sems,
(incorporated by reference to Exhibit 10.2 to Equity Bancshares, Inc.’s Quarterly Report on Form
10-Q, filed with the SEC on May 4, 2023).
10.5†
Employment Agreement, dated November 6, 2023, among Equity Bank, Equity Bancshares, Inc.
and Chris M. Navratil (incorporated by reference to Exhibit 10.1 to Equity Bancshares, Inc.’s
Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2023).
10.6†
Employment Agreement, dated November 5, 2021, between Equity Bank, Equity Bancshares, Inc.
and Brett A. Reber (incorporated by reference to Exhibit 10.5 to Equity Bancshares, Inc.’s
Quarterly Report on Form 10-Q, filed with the SEC on November 8, 2021).
10.7†
Equity Bancshares, Inc. Amended and Restated 2013 Stock Incentive Plan (incorporated by
reference to Appendix A to Equity Bancshares, Inc.’s Definitive Proxy Statement on Schedule
14A, filed with the SEC on March 28, 2016).
10.8†
Equity Bancshares, Inc. Annual Executive Incentive Plan (incorporated by reference to Appendix
A to Equity Bancshares, Inc.’s Definitive Proxy Statement on Schedule 14A, filed with the SEC on
March 22, 2017).
10.9†
Form of Performance-vested Restricted Stock Units Award Agreement (incorporated by reference
to Exhibit 10.1 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on
March 5, 2018).
10.10†
Form of Time-vested Restricted Stock Units Award Agreement (incorporated by reference to
Exhibit 10.2 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on
March 5, 2018).
10.11†
Equity Bancshares, Inc. 2019 Employee Stock Purchase Plan (incorporated by reference to
Appendix A to Equity Bancshares, Inc.’s Definitive Proxy Statement on Schedule 14A, filed with
the SEC on March 22, 2019).
10.12†
Equity Bancshares, Inc. 2022 Omnibus Equity Incentive Plan (incorporated by reference to
Appendix A to Equity Bancshares, Inc.’s Definitive Proxy Statement on Schedule 14A, filed with
the SEC on March 17, 2022).
10.13†
First Amendment to the Equity Bancshares, Inc. 2022 Omnibus Equity Incentive Plan
(incorporated by reference to Appendix A to Equity Bancshares, Inc.’s Definitive Proxy Statement
on Schedule 14A, filed with the SEC on March 14, 2024).
10.14†
First Amendment to the Equity Bancshares, Inc. 2022 Omnibus Equity Incentive Plan
(incorporated by reference to Appendix A to Equity Bancshares, Inc.’s Definitive Proxy Statement
on Schedule 14A, filed with the SEC on March 14, 2024).
10.15†
Equity Bancshares, Inc. Executive Deferred Compensation Plan (incorporated by reference to
Exhibit 10.1 to Equity Bancshares, Inc.’s Quarterly Report on Form 10-Q filed with the SEC on
November 8, 2022).
95
Exhibit
No.
Description
10.17
Form of Subordinated Note Purchase Agreement, dated as of June 29, 2020, by and among Equity
Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to
Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2, 2020).
10.18
Loan and Security Agreement, dated January 28, 2016, by and between Equity Bancshares, Inc.
and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity Bancshares, Inc.’s
Current Report on Form 8-K, filed with the SEC on February 3, 2016).
10.19
Amended Loan and Security Agreement, dated March 13, 2017, between Equity Bancshares, Inc.
and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity Bancshares, Inc.’s
Current Report on Form 8-K, filed with the SEC on March 16, 2017).
10.20
Second Amendment to Loan and Security Agreement, dated March 12, 2018. Between Equity
Bancshares, Inc. and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity
Bancshares, Inc.’s Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2018).
10.21
Third Amendment to Loan and Security Agreement, dated March 11, 2019, Between Equity
Bancshares, Inc. and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity
Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on March 14, 2019).
10.22
The Fourth Amendment to Loan and Security Agreement and Promissory Notes Modification
Agreement, dated June 29, 2020, by and among Equity Bancshares, Inc., as Borrower, and
ServisFirst Bank, as Lender (incorporated by reference to Exhibit 10.3 to Equity Bancshares, Inc.’s
Current Report on Form 8-K, filed with the SEC on July 2, 2020).
10.23
Fifth Amendment to Loan and Security Agreement, dated February 11, 2022, by and between
Equity Bancshares, Inc. and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity
Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on February 18, 2022).
10.24
Sixth Amendment to Loan and Security Agreement, dated February 10, 2023, by and between
Equity Bancshares, Inc. and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity
Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on March 06, 2023).
10.25
Seventh Amendment to Loan and Security Agreement, dated February 10, 2024, by and between
Equity Bancshares, Inc. and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity
Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on February 14, 2024).
10.26
Eighth Amendment to Loan and Security Agreement, dated February 10, 2025, by and between
Equity Bancshares, Inc. and ServisFirst Bank (incorporated by reference to Exhibit 10.1 to Equity
Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on February 11, 2025).
19.1*
Equity Bancshares, Inc. Insider Trading Policy
21.1*
List of Subsidiaries of Equity Bancshares, Inc.
23.1*
Consent of Crowe LLP.
24.1*
Powers of Attorney.
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
96
Exhibit
No.
Description
32.1**
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
97.1*
Equity Bancshares, Inc. Compensation Recovery Policy (incorporated by reference to Exhibit 97.1
to the Company's Annual Report on Form 10-K filed on March 7, 2024.)
101.INS*
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data
File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*
Inline XBRL Taxonomy Extension Schema Document with Embedded Linkbase Documents.
104*
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
* Filed herewith.
** These exhibits are furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or
otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under
the Securities Act or the Exchange Act.
† Represents a management contract or a compensatory plan or arrangement.
c)
Excluded Financial Statements
Not Applicable
Item 16: Form 10-K Summary
Not Applicable
97
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
EQUITY BANCSHARES, INC.
By:
/s/ Brad S. Elliott
Name: Brad S. Elliott
Title:
Chairman and Chief Executive Officer
Date:
March 7, 2025
98
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Brad S. Elliott
Chairman and
March 7, 2025
Brad S. Elliott
Chief Executive Officer (Principal Executive
Officer)
/s/ Chris M. Navratil
Executive Vice President and Chief Financial
March 7, 2025
Chris M. Navratil
Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ Leon H. Borck *
Director
March 7, 2025
Leon H. Borck
/s/ Kevin E. Cook *
Director
March 7, 2025
Kevin E. Cook
/s/ Junetta M. Everett *
Director
March 7, 2025
Junetta M. Everett
/s/ Gregory L. Gaeddert *
Director
March 7, 2025
Gregory L. Gaeddert
/s/ Benjamen M. Hutton *
Director
March 7, 2025
Benjamen M. Hutton
/s/ R. Renee Koger *
Director
March 7, 2025
R. Renee Koger
/s/ Gregory H. Kossover *
Director
March 7, 2025
Gregory H. Kossover
/s/ James S. Loving *
Director
March 7, 2025
James S. Loving
/s/ Jerry P. Maland *
Director
March 7, 2025
Jerry P. Maland
/s/ Shawn D. Penner *
Director
March 7, 2025
Shawn D. Penner
*By: /s/ Chris M. Navratil
Attorney-in-Fact
March 7, 2025
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors of Equity Bancshares, Inc.
Wichita, Kansas
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Equity Bancshares, Inc. (the
"Company") as of December 31, 2024 and 2023, the related consolidated statements of income,
comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period
ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). We
also have audited the Company’s internal control over financial reporting as of December 31, 2024, based
on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2024 in conformity with accounting
principles generally accepted in the United States of America. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31,
2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Report on Management’s Assessment of Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and
an opinion on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud, and whether effective internal control over
financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
F-2
financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of the critical audit matter
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Allowance for Credit Losses on Loans – Qualitative Adjustments
The allowance for credit losses (the “ACL”) as described in Notes 1 and 4 is an accounting estimate of
expected credit losses, measured over the contractual life of an instrument, which considers reasonable
and supportable forecasts of future economic conditions in addition to information about past events and
current conditions. As of December 31, 2024, the Company’s allowance for credit losses on loans was
$43.3 million and the provision for credit losses on loans was $2.5 million for the year then ended.
The Company measures the allowance for credit losses utilizing a probability of default (“PD”) and loss
given default (“LGD”) modeling approach for historical loss. The estimated PD and LGD rates are applied
to the estimated exposure at default (“EAD”) to calculate expected credit losses. The Company’s ACL
model utilizes a statistical regression of loss experience correlated to changes in economic factors for all
commercial banks operating within the Company’s geographical footprint. The methodologies utilized to
develop and implement the macroeconomic factors that drive the loss estimates use multivariate regression
modeling techniques. The process involved the selection of the macroeconomic factors and the evaluation
of regression analysis outputs to determine the statistical fit of the macroeconomic factors used to forecast
expected credit losses. The Company also adjusts for changes in qualitative factors not inherently
considered in the quantitative analyses. Significant management judgment is required in evaluating the
qualitative adjustments used in the analysis.
We determined that auditing the allowance for credit losses on loans was a critical audit matter because
of the extent of auditor judgment applied and significant audit effort to evaluate the significant subjective
and complex judgments made by management. The principal considerations resulting in our
determination included the following:
•
Significant auditor judgment and effort were used to evaluate reasonableness of the PD, LGD
and EAD assumptions.
•
Significant auditor judgment and audit effort were used to evaluate the application of the
reasonable and supportable forecast of economic variables.
•
Significant auditor judgment and effort were used in evaluating the qualitative adjustments used
in the calculation.
F-3
•
Significant audit effort related to the relevance and reliability of the high volume of data used in
the model computation.
The primary audit procedures we performed to address this critical audit matter included:
•
Testing the effectiveness of management’s internal controls over the Company’s significant
model assumptions and judgments, reasonable and supportable forecasts, qualitative
adjustments and model validation.
•
Testing the effectiveness of controls over the relevance and reliability of loan data used in the
computation of the PD models and LGD assumptions.
•
Testing the effectiveness of controls over the Company’s preparation and review of the
allowance for credit loss calculation, including the reasonableness of qualitative adjustments
and mathematical accuracy and appropriateness of the overall calculation.
•
Testing the effectiveness of controls over the relevant macroeconomic variables, including the
review of the regression analysis output and the relevance and reliability of third-party data used.
•
With the assistance of our valuation specialists, evaluating the reasonableness of assumptions
and judgments related to the PD, LGD, EAD and loan segmentation, the conceptual design of
the credit loss estimation models, model assumption sensitivity analysis and the adequacy of
the independent model validation.
•
Substantively tested management’s qualitative factor adjustments and assessed the relevance
and reliability of the data used, including evaluating management’s judgments and assumptions
for reasonableness.
•
Substantively testing the mathematical accuracy of the PD, LGD and EAD model on a pooled
loan level including the relevance and reliability of loan data used in the model.
Crowe LLP
We have served as the Company's auditor since 2007.
Indianapolis, Indiana
March 07, 2025
F-4
EQUITY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2024, and 2023
(Dollar amounts in thousands, except per share data)
2024
2023
ASSETS
Cash and due from banks
$
383,503
$
363,289
Federal funds sold
244
15,810
Cash and cash equivalents
383,747
379,099
Available-for-sale securities
1,004,455
919,648
Held-to-maturity securities, fair value of $5,214 and $2,250
5,217
2,209
Loans held for sale
513
476
Loans, net of allowance for credit losses of $43,267 and $43,520
3,457,549
3,289,381
Other real estate owned, net
4,773
1,833
Premises and equipment, net
117,132
112,632
Bank-owned life insurance
133,032
124,865
Federal Reserve Bank and Federal Home Loan Bank stock
27,875
20,608
Interest receivable
28,913
25,497
Goodwill
53,101
53,101
Core deposit intangibles, net
14,969
7,222
Other
100,771
98,021
Total assets
$
5,332,047
$
5,034,592
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand
$
954,065
$
898,129
Total non-interest-bearing deposits
954,065
898,129
Demand, savings and money market
2,684,197
2,483,807
Time
736,527
763,519
Total interest-bearing deposits
3,420,724
3,247,326
Total deposits
4,374,789
4,145,455
Federal funds purchased and retail repurchase agreements
37,246
43,582
Federal Home Loan Bank advances
178,073
100,000
Federal Reserve Bank borrowings
-
140,000
Subordinated debt
97,477
96,921
Contractual obligations
12,067
19,315
Interest payable and other liabilities
39,477
36,459
Total liabilities
4,739,129
4,581,732
Commitments and contingent liabilities, see Notes 20 and 21
Stockholders’ equity, see Note 12
Common stock
230
207
Additional paid-in capital
584,424
489,187
Retained earnings
194,920
141,006
Accumulated other comprehensive income (loss)
(55,181)
(57,920)
Treasury stock
(131,475)
(119,620)
Total stockholders’ equity
592,918
452,860
Total liabilities and stockholders’ equity
$
5,332,047
$
5,034,592
See accompanying notes to consolidated financial statements.
F-5
EQUITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 2024, 2023, and 2022
(Dollar amounts in thousands, except per share data)
2024
2023
2022
Interest and dividend income
Loans, including fees
$
245,815
$
211,213
$
160,859
Securities, taxable
39,091
23,873
22,713
Securities, nontaxable
1,579
1,960
2,698
Federal funds sold and other
10,358
9,666
1,978
Total interest and dividend income
296,843
246,712
188,248
Interest expense
Deposits
90,409
70,473
16,321
Federal funds purchased and retail repurchase agreements
1,151
931
232
Federal Home Loan Bank advances
10,180
3,944
2,094
Federal Reserve Bank borrowings
1,361
4,755
—
Subordinated debt
7,580
7,591
6,771
Total interest expense
110,681
87,694
25,418
Net interest income
186,162
159,018
162,830
Provision (reversal) for credit losses
2,546
1,873
125
Net interest income after provision (reversal) for credit losses
183,616
157,145
162,705
Non-interest income
Service charges and fees
9,830
10,187
10,632
Debit card income
10,246
10,322
10,677
Mortgage banking
861
652
1,416
Increase in value of bank-owned life insurance
4,966
4,059
3,113
Net gain on acquisition and branch sales
2,131
—
962
Net gain (loss) from securities transactions
220
(51,909)
5
Other
10,568
7,560
9,152
Total non-interest income
38,822
(19,129)
35,957
Non-interest expense
Salaries and employee benefits
72,786
64,384
62,006
Net occupancy and equipment
14,371
12,325
12,223
Data processing
20,004
17,433
15,883
Professional fees
6,503
5,754
4,951
Advertising and business development
5,366
5,425
5,042
Telecommunications
2,501
1,963
1,916
FDIC insurance
2,483
2,195
1,140
Courier and postage
2,599
2,046
1,881
Free nationwide ATM cost
2,127
2,073
2,103
Amortization of core deposit intangibles
4,289
3,374
4,042
Loan expense
601
540
828
Other real estate owned and repossessed assets, net
(7,525)
617
247
Merger expenses
4,461
297
594
Other
13,591
17,175
15,524
Total non-interest expense
144,157
135,601
128,380
Income (loss) before income tax
78,281
2,415
70,282
Provision (benefit) for income taxes
15,660
(5,406)
12,594
Net income (loss) and net income (loss) allocable to common
stockholders
$
62,621
$
7,821
$
57,688
Basic earnings (loss) per share
$
4.04
$
0.50
$
3.56
Diluted earnings (loss) per share
$
4.00
$
0.50
$
3.51
See accompanying notes to consolidated financial statements.
F-6
EQUITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years ended December 31, 2024, 2023, and 2022
(Dollar amounts in thousands, except per share data)
2024
2023
2022
Net income (loss)
$
62,621
$
7,821
$
57,688
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during the period on
available-for-sale securities
2,483
18,468
(150,377)
Reclassification for net securities (gains) losses included in net income
267
52,013
(79)
Unrealized holding gains (losses) arising during the period on cash flow
hedges
1,234
3,702
(2,805)
Total other comprehensive income (loss)
3,984
74,183
(153,261)
Tax effect
(1,245)
(18,592)
37,974
Other comprehensive income (loss), net of tax
2,739
55,591
(115,287)
Comprehensive income (loss)
$
65,360
$
63,412
$
(57,599)
See accompanying notes to consolidated financial statements.
F-7
EQUITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31, 2024, 2023, and 2022
(Dollar amounts in thousands, except share and per share data)
Common Stock
Accumulated
Shares
Outstanding
Amount
Additional
Paid-In
Capital
Retained
Earnings
Other
Comprehensive
Income (Loss)
Treasury
Stock
Total
Stockholders’
Equity
Balance at December 31, 2021
16,760,115
$
203
$
478,862
$
88,324
$
1,776
$
(68,534)
$
500,631
Net income
—
—
—
57,688
—
—
57,688
Other comprehensive income/(loss), net of
tax effects
—
—
—
—
(115,287)
—
(115,287)
Cash dividends - common stock, $0.36 per share
—
—
—
(5,801)
—
—
(5,801)
Dividend equivalents - restricted stock units,
$0.36 per share
—
—
—
(116)
—
—
(116)
Stock-based compensation, see Note 17
624
—
3,325
—
—
—
3,325
Common stock issued upon
exercise of stock options
102,309
1
2,010
—
—
—
2,011
Common stock issued under
stock-based incentive plans
69,089
1
—
—
—
—
1
Common stock issued under
employee stock purchase plan
28,829
—
792
—
—
—
792
Treasury stock purchases
(1,030,854)
—
—
—
—
(33,186)
(33,186)
Balance at December 31, 2022
15,930,112
$
205
$
484,989
$
140,095
$
(113,511)
$
(101,720)
$
410,058
Net income (loss)
—
—
—
7,821
—
—
7,821
Other comprehensive income/(loss), net of
tax effects
—
—
—
—
55,591
—
55,591
Cash dividends - common stock, $0.44 per share
—
—
—
(6,819)
—
—
(6,819)
Dividend equivalents - restricted stock units,
$0.44 per share
—
—
—
(91)
—
—
(91)
Stock-based compensation, see Note 17
—
3,213
—
—
—
3,213
Common stock issued upon
exercise of stock options
12,829
—
203
—
—
—
203
Common stock issued under
stock-based incentive plan
137,820
2
(2)
—
—
—
—
Common stock issued under
employee stock purchase plan
32,056
—
784
—
—
—
784
Treasury stock purchases
(669,166)
—
—
—
—
(17,900)
(17,900)
Balance at December 31, 2023
15,443,651
$
207
$
489,187
$
141,006
$
(57,920)
$
(119,620)
$
452,860
Net income (loss)
—
—
—
62,621
—
—
62,621
Other comprehensive income/(loss), net of
tax effects
—
—
—
—
2,739
—
2,739
Cash dividends - common stock, $0.54 per share
—
—
—
(8,575)
—
—
(8,575)
Dividend equivalents - restricted stock units,
$0.54 per share
—
—
—
(132)
—
—
(132)
Stock-based compensation, see Note 17
—
4,048
—
—
—
4,048
Common stock issued upon
exercise of stock options
147,777
1
3,505
—
—
—
3,506
Common stock issued under
stock-based incentive plan
102,066
1
(1)
—
—
—
—
Common stock issued under
employee stock purchase plan
29,465
—
726
—
—
—
726
Common stock issued with private
placement, net of offering costs
2,067,240
21
86,959
—
—
—
86,980
Treasury stock purchases
(362,573)
—
—
—
—
(11,855)
(11,855)
Balance at December 31, 2024
17,427,626
$
230
$
584,424
$
194,920
$
(55,181)
$
(131,475)
$
592,918
See accompanying notes to consolidated financial statements.
F-8
EQUITY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years ended December 31, 2024, 2023, and 2022
(Dollar amounts in thousands, except per share data)
2024
2023
2022
Cash flows from operating activities
Net income (loss)
$
62,621
$
7,821
$
57,688
Adjustments to reconcile net income (loss) to net cash from operating activities:
Stock-based compensation
4,048
3,213
3,325
Depreciation
5,377
4,516
4,466
Amortization of operating lease right-of-use asset
475
604
714
Amortization of cloud computing implementation costs
138
188
188
Provision (reversal) for credit losses
2,546
1,873
125
Net amortization (accretion) of purchase valuation adjustments
(1,997)
(618)
(3,979)
Amortization (accretion) of premiums and discounts on securities
(2,480)
4,041
6,302
Amortization of intangible assets
4,408
3,518
4,186
Deferred income taxes
796
(2,435)
2,594
Federal Home Loan Bank stock dividends
(1,082)
(594)
(369)
Loss (gain) on sales and valuation adjustments on other real estate owned
(7,906)
218
80
Net loss (gain) on sales and settlements of securities
267
52,013
(79)
Change in unrealized (gains) losses on equity securities
(487)
(104)
74
Loss (gain) on disposal of premises and equipment
(66)
(103)
(41)
Loss (gain) on lease termination
—
173
—
Loss (gain) on sales of foreclosed assets
95
58
(345)
Loss (gain) on sales of loans
54
(472)
(1,085)
Originations of loans held for sale
(34,506)
(24,964)
(46,140)
Proceeds from the sale of loans held for sale
37,441
24,967
50,774
Increase in the value of bank-owned life insurance
(4,966)
(4,059)
(3,113)
Change in fair value of derivatives recognized in earnings
(95)
522
(1,477)
Gain on acquisition and branch sales
(2,131)
—
(962)
Payments on operating lease payable
(612)
(915)
(771)
Net change in:
Interest receivable
(614)
(4,867)
(2,973)
Other assets
11,224
6,166
22,466
Interest payable and other liabilities
1,297
5,767
(17,575)
Net cash provided by operating activities
73,845
76,527
74,073
Cash flows (to) from investing activities
Purchases of available-for-sale securities
(183,909)
(510,224)
(182,036)
Purchases of held-to-maturity securities
(3,188)
(275)
(1,950)
Proceeds from sales, calls, pay-downs and maturities of available-for-sale
securities
288,344
789,390
168,409
Proceeds from calls, pay-downs and maturities of held-to-maturity
securities
226
17
3
Net change in loans
16,236
(23,715)
(181,896)
Purchase of mortgage loans
—
—
(1,399)
Purchase of government guaranteed loans
(49,086)
(1,235)
(2,293)
Capitalized construction cost of other real estate owned
—
(562)
(12)
Purchase of premises and equipment
(8,493)
(15,575)
(3,479)
Proceeds from sale of premises and equipment
706
163
164
Proceeds from sale of foreclosed assets
928
110
29,888
Net redemptions (purchases) of Federal Home Loan Bank and Federal Reserve
Bank stock
(5,863)
1,681
(3,816)
Net redemptions (purchases) of correspondent and miscellaneous other stock
(543)
(11,855)
(4,546)
Proceeds from sale of other real estate owned
9,397
1,874
9,323
Purchase of bank-owned life insurance
(60,000)
—
—
Proceeds from bank-owned life insurance death benefits and policy surrenders
56,799
2,376
723
Net cash (paid) received from acquisition of Rockhold
60,914
—
—
Net cash (paid) received from acquisition of KansasLand bank
1,261
—
—
Net cash (paid) received from branch sale to United Bank and Trust
—
—
(22,939)
Net cash (paid) received from branch sale to High Plains Bank
—
—
(18,328)
F-9
Net cash (used in) provided by investing activities
123,729
232,170
(214,184)
Cash flows (to) from financing activities
Net increase (decrease) in deposits
(163,038)
(96,436)
(106,330)
Net change in federal funds purchased and retail repurchase agreements
(15,934)
(2,896)
(9,528)
Net borrowings (repayments) on Federal Home Loan Bank line of credit
72,024
(138,864)
138,864
Proceeds from Federal Home Loan Bank term advances
1,200,000
1,366,091
413,973
Principal repayments on Federal Home Loan Bank term advances
(1,201,000)
(1,266,091)
(413,973)
Proceeds from Federal Reserve Bank borrowings
1,000
141,000
1,000
Principal payments on Federal Reserve Bank borrowings
(141,000)
(1,000)
(1,000)
Principal payments on bank stock loan
(691)
—
—
Proceeds from issuance of common stock, net
86,980
—
—
Proceeds from exercise of employee stock options
3,506
203
2,011
Proceeds from employee stock purchase plan
726
784
792
Purchase of treasury stock
(11,859)
(17,900)
(33,186)
Net change in contractual obligations
(15,748)
(12,303)
(2,474)
Dividends paid on common stock
(7,892)
(6,614)
(5,564)
Net cash provided by (used in) financing activities
(192,926)
(34,026)
(15,415)
Net change in cash and cash equivalents
4,648
274,671
(155,526)
Cash and cash equivalents, beginning of period
379,099
104,428
259,954
Ending cash and cash equivalents
$
383,747
$
379,099
$
104,428
Supplemental cash flow information:
Interest paid
$
116,193
$
80,807
$
25,803
Income taxes paid, net of refunds
6,195
3,467
1,218
Supplemental noncash disclosures:
Other real estate owned acquired in settlement of loans
2,656
1,086
2,369
Other real estate owned transferred from premises and equipment
1,822
—
2,210
Other repossessed assets acquired in settlement of loans
5,454
505
47
Operating leases recognized
784
690
—
Other real estate owned recorded as a result of transferring non-operational
branch right-of-use-asset
—
—
2,071
Purchase of investments in tax credit structures and resulting contractual
obligations
8,500
16,400
—
Total fair value of assets sold in branch sale to United Bank and Trust, net of cash
—
—
29,762
Total fair value of liabilities assumed in branch sale to United Bank and Trust
—
—
52,733
Total fair value of assets sold in branch sale to High Plains Bank, net of cash
—
—
490
Total fair value of liabilities assumed in branch sale to High Plains Bank
—
—
19,064
Total fair value of assets acquired in purchase of Rockhold, net of cash
301,018
—
—
Total fair value of liabilities assumed in purchase of Rockhold
360,632
—
—
Total fair value of assets acquired in purchase of KansasLand , net of cash
50,572
—
—
Total fair value of liabilities assumed in purchase of KansasLand
51,002
—
—
See accompanying notes to consolidated financial statements.
2024
2023
2022
F-10
EQUITY BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2024, 2023, and 2022
(Dollar amounts in thousands, except per share data)
NOTE 1 – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Equity Bancshares, Inc. is a financial holding company, whose principal activity is the ownership and
management of its wholly-owned subsidiaries, Equity Bank (“Equity Bank”), EBAC, LLC. (“EBAC”) and Equity Risk Management,
Inc. ("ERMI"). ERMI provides property and casualty insurance coverage to Equity Bancshares and Equity Bank and reinsurance to
other third party insurance captives for which insurance may not be currently available or economically feasible in today's insurance
marketplace. The wholly-owned subsidiaries of Equity Bank are comprised of SA Holdings, Inc. ("SA Holdings"), SA Property LLC
("SA Property"), and EQBK Investments, LLC. ("EQBK Investments"). SA Holdings and SA Property were established for the
purpose of holding and selling other real estate owned. EQBK Investments was established for the purpose to hold Equity Bank's
investment in a real estate investment trust. These entities are collectively referred to as the “Company”. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Equity Bank is a Kansas state-chartered bank and member of the Federal Reserve (state Fed member bank jointly supervised by
both the Federal Reserve Bank of Kansas City and the Office of the Kansas State Bank Commissioner).
The Company is primarily engaged in providing a full range of banking, mortgage banking and financial services to individual
and corporate customers generally in Arkansas, Kansas, Missouri and Oklahoma. Equity Bank competes with a variety of other
financial institutions including large regional banks, community banks and thrifts as well as credit unions and other non-traditional
lenders.
Use of Estimates: To prepare financial statements in conformity with U.S. generally accepted accounting principles,
management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts
reported in the financial statements and the disclosures provided and actual results could differ.
Cash Equivalents: Cash and cash equivalents include cash, deposits with other financial institutions with original maturities less
than 90 days and federal funds sold. Net cash flows are reported for customer loan and deposit transactions, interest-bearing deposits
in other financial institutions, federal funds purchased, retail repurchase agreements, Federal Home Loan Bank advances and
contractual obligations.
Securities: Securities are classified as held-to-maturity when management has the positive intent and ability to hold them to
maturity. Securities are classified as available-for-sale when they might be sold before maturity. Held-to-maturity securities are
carried at amortized cost while available-for-sale securities are carried at fair value, with unrealized holding gains and losses reported
in other comprehensive income, net of tax.
Interest income includes amortization of purchase premium or discount. Premiums and discounts on mortgage-backed securities
are amortized using the level-yield method over the estimated cash flows of the securities. This method requires retrospective
adjustment of the effective yield each time a payment is received, or changes occur in the estimated remaining cash flows, which
adjusts life-to-date amortization. Premiums and discounts on other investments are amortized using the level-yield method to
contractual maturity or first call date, if purchased at a premium.
Allowance for Credit Losses - Securities: The allowance for credit losses “ACL” on held-to-maturity securities is determined on
a collective basis by major security type and portfolio. Losses are charged against the allowance for credit losses when the Company
determines the held-to-maturity security is uncollectible. The Company does not estimate credit losses on held-to-maturity security
accrued interest receivable.
For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or is
more likely than not will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding
intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities
that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or
other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost, the current
interest rate environment, changes to rating of the security or security issuer, and adverse conditions specifically related to the
security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be
collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be
collected was less than the amortized cost basis, a credit loss existed and an allowance for credit losses would be recorded for the
F-11
credit loss, which is limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been
recorded through an allowance for credit losses is recognized in other comprehensive income. Changes in the allowance for credit
losses are recorded as provision for or reversal of credit loss expense. Losses are charged against the allowance for credit losses when
the Company determines the available-for-sale security is uncollectible or when either of the criteria regarding intent or requirement to
sell is met. The Company does not estimate credit losses on available-for-sale security accrued interest receivable.
Equity Investments with Readily determinable Fair Value: Equity investments with a readily determinable fair value are
measured at fair value with changes in fair value recognized in net income.
Loans Held for Sale: Mortgage loans originated and intended for sale in the secondary market are carried at the lower of
aggregate cost or fair value. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Mortgage
loans held for sale are sold with servicing rights released. Gains or losses on loans held for sale are recognized upon completion of the
sale and based on the difference between the net sales proceeds and the carrying value of the sold loan.
Loans: Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are
reported at the principal balance outstanding, net of previous charge-offs and an allowance for credit losses, and for purchased loans,
net of unamortized purchase premiums and discounts. Interest income is accrued on the unpaid principal balance.
Non-accrual Loans: Generally, loans are designated as non-accrual when either principal or interest payments are 90 days or
more past due based on contractual terms unless the loan is well secured and in the process of collection. Consumer loans are
typically charged off no later than 180 days past due. In all cases, loans are placed on non-accrual or charged off at an earlier date if
collection of principal or interest is considered doubtful. When a loan is placed on non-accrual status, unpaid interest credited to
income is reversed against income. Future interest income may be recorded on a cash basis after recovery of principal is reasonably
assured. Non-accrual loans are returned to accrual status when all the principal and interest amounts contractually due are brought
current and future payments are reasonably assured.
Purchased Credit Deteriorated ("PCD") Loans: The Company has purchased loans, some of which have experienced more
than insignificant credit deterioration since origination. The following indicators are used by management to determine if a loan will
be classified as a PCD loan: (1) the loan has had previous charge-offs; (2) the loan was accounted for as non-accrual by the selling
entity; (3) the loan was accounted for as a modification to a borrower experiencing financial difficulty by the selling entity; (4) the
loan was previously or currently reported as classified for regulatory reporting; (5) the loan shows significant cash flow or collateral
deterioration since origination; (6) the loan has a pattern of late or delinquent payments; (7) consumer loans to borrowers that have
had a significant negative change in credit score; (8) loans in a geographic area that has suffered negative economic conditions; (9)
borrowers that have difficulty complying with realistic loan or collateral covenants; and (10) borrower distress evidenced by deferral
requests and/or loan modifications. PCD loans are recorded at the amount paid. An allowance for credit losses is determined using
the same methodology as other loans held for investment. If the initial allowance for credit losses is determined on a collective basis it
is allocated to individual loans. The sum of the loan's purchase price and allowance for credit losses becomes its initial amortized cost
basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which
is amortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through
credit loss expense.
Allowance for Credit Losses:
Allowance for Credit Losses: Management assesses the adequacy of the allowance on a quarterly basis. This assessment
includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the
allowance is based upon management’s evaluation of historical default and loss experience, current and projected economic
conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to
repay a loan (including the timing of future payments), the estimated value of any underlying collateral, composition of the loan
portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. The
level of the allowance for credit losses maintained by management is believed adequate to absorb all expected future losses inherent in
the loan portfolio at the balance sheet date. The allowance is adjusted through provision for credit losses and charge-offs, net of
recoveries of amounts previously charged off.
The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics. The
Company has identified the following pools of financial assets with similar risk characteristics for measuring expected credit losses.
•
Commercial real estate mortgage loans – Owner occupied commercial real estate mortgage loans are secured by
commercial office buildings, industrial buildings, warehouses or retail buildings where the owner of the building occupies
the property. For such loans, repayment is largely dependent upon the operation of the borrower's business.
F-12
•
Commercial and industrial loans – Commercial and industrial loans include loans to business enterprises issued for
commercial, industrial and/or other professional purposes. These loans are generally secured by equipment, inventory and
accounts receivable of the borrower and repayment is primarily dependent on business cash flows.
•
Residential real estate mortgage loans – Residential real estate mortgage consists primarily of loans secured by 1-4 family
residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow
of the borrower.
•
Agricultural real estate loans – Agricultural real estate loans are secured by real estate related to farmland and are affected
by the value of farmland. Generally, the borrower’s ability to repay is based on the value of farmland and cash flows from
farming operations.
•
Agricultural production loans – Agricultural production loans are primarily operating lines subject to annual farming
revenues, including productivity and yield of farm products and market pricing at the time of sale.
•
Consumer – Consumer loans include all loans issued to individuals not included in the categories above. Examples of
consumer and other loans are automobile loans, consumer credit cards and loans to finance education, among others.
Many consumer loans are unsecured. Repayment is primarily dependent on the personal cash flow of the borrower.
The Company primarily utilizes a probability of default (“PD”) and loss given default (“LGD”) modeling approach for historical
loss coupled with a macroeconomic factor analysis derived from a statistical regression of loss experience correlated to changes in
economic factors for all commercial banks operating within our geographical footprint. The macroeconomic regression is based on a
multivariate approach and includes key indicators that provide the highest cumulative adjusted R-square figure. Economic factors
include, but are not limited to, national unemployment, gross domestic product, market interest rates and property pricing indices. To
arrive at the most predictive calculation, a lag factor was applied to these inputs, resulting in current and historic economic inputs
driving the projection of loss over our reasonable, supportable forecast period which management has defined as 12 months for all
portfolio segments. Following the reasonable and supportable forecast period loss experience immediately reverts to the longer run
historical loss experience of the Company. The resultant loss rates are applied to the estimated future exposure at default (“EAD”), as
determined based on contractual amortization terms through an average default month and estimated prepayment experience in
arriving at the quantitative reserve within our allowance for credit losses.
The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the
quantitative analyses. The qualitative categories and the measurements used to quantify the risks within each of these categories are
subjectively selected by management but measured by objective measurements period over period. The data for each measurement
may be obtained from internal or external sources. The current period measurements are evaluated and assigned a factor
commensurate with the current level of risk relative to past measurements over time. The resulting qualitative adjustments are applied
to the relevant collectively evaluated loan portfolios. These adjustments are based upon quarterly trend assessments in projected
economic sentiment, portfolio concentrations, policy exceptions, personnel retention, independent loan review results, collateral
considerations, risk ratings and competition. The qualitative allowance allocation, as determined by the processes noted above, is
increased or decreased for each loan segment based on the assessment of these various qualitative factors. Due to the inclusion of a
lag factor in our quantitative economic analysis discussed above, the allowance for credit losses at the reporting date, is heavily
influenced by the qualitative economic factor considered by management to be reflective of risk associated with the continued market
disruption caused by elevated inflationary levels, supply chain issues and the impact of monetary policy on consumers and businesses.
Loans that do not share similar risk characteristics with the collectively evaluated pools are evaluated on an individual basis and
are excluded from the collectively evaluated loan pools. Such loans are evaluated for credit losses based on either discounted cash
flows or the fair value of collateral. When management determines that foreclosure is probable, expected credit losses are based on
the fair value of the collateral, less selling costs. For loans for which foreclosure is not probable, but for which repayment is expected
to be provided substantially through the operation or sale of the collateral, the Company has elected the practical expedient under ASC
326 to estimate expected credit losses based on the fair value of collateral, with selling costs considered in the event sale of the
collateral is expected.
In assessing the adequacy of the allowance for credit losses, the Company considers the results of the Company’s ongoing,
independent loan review process. The Company undertakes this process both to ascertain those loans in the portfolio with elevated
credit risk and to assist in its overall evaluation of the risk characteristics of the entire loan portfolio. Its loan review process includes
the judgment of management, independent internal loan reviewers and reviews that may have been conducted by third-party reviewers
including regulatory examiners. The Company incorporates relevant loan review results when determining the allowance.
F-13
In accordance with CECL, losses are estimated over the remaining contractual terms of loans, adjusted for estimated
prepayments. The contractual term excludes expected extensions, renewals and modifications unless such extensions, renewals or
modifications are included in the original loan agreement and are not unconditionally cancellable by the Company. Credit losses are
estimated on the amortized cost basis of loans, which includes the principal balance outstanding, purchase discounts and premiums
and loan fees and costs. Accrued interest receivable, as allowed under ASU 2016-13, is excluded from the credit loss estimate. In
addition, accrued interest receivable is presented separately on the balance sheets and is excluded from the tabular loan disclosures in
Note 4.
The Company’s policies and procedures used to estimate the allowance for credit losses, as well as the resultant provision for
credit losses charged to income, are considered adequate by management and are reviewed periodically by model validators, internal
audit and regulators they are inherently approximate estimates and imprecise. There are factors beyond the Company’s control, such
as changes in projected economic conditions, real estate markets or particular industry conditions which may materially impact asset
quality and the adequacy of the allowance for credit losses and thus the resulting provision for credit losses.
Allowance for Credit Losses – Off-Balance-Sheet Credit Exposures
The Company estimates expected credit losses over the contractual term of obligations to extend credit, unless the obligation is
unconditionally cancellable. The allowance for off-balance-sheet exposures is adjusted through other non-interest expense. The
estimates are determined based on the likelihood of funding during the contractual term and an estimate of credit losses subsequent to
funding. Estimated credit losses on subsequently funded balances are based on the same assumptions used to estimate credit losses on
existing funded loans.
Transfers of Financial Assets: Transfers of financial assets are accounted for as sales when control over the assets has been
relinquished. Control over transferred assets is deemed to be surrendered when the assets have been isolated from the Company, the
transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the
transferred assets and the Company does not maintain effective control over the transferred assets through an agreement to repurchase
them before their maturity.
Bank-Owned Life Insurance: The Company maintains insurance policies on certain key executives as well as policies from
acquired institutions. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the
balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
In some cases, the Company has entered into agreements with the insured which would require it to make one-time payments to the
insured’s beneficiaries if certain conditions exist at the time of death.
Other Real Estate Owned: Assets acquired through or instead of loan foreclosure are initially recorded at fair value less
estimated cost to sell when acquired, thereby establishing a new cost basis. Generally, collateral properties are recorded as other real
estate owned when the Company takes physical possession. Physical possession of residential real estate collateral occurs when legal
title is obtained upon completion of foreclosure or when the borrower conveys all interest in the property to satisfy the loan through
completion of a deed in lieu of foreclosure or through a similar legal agreement. Other real estate owned properties are subsequently
accounted for at the lower of cost or fair value less estimated costs to sell. If fair value declines subsequent to foreclosure, a valuation
allowance is recorded through expense. Operating costs after acquisition are expensed.
Premises and Equipment: Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is an estimate and is charged to expense using the straight-line method over the estimated useful lives of the respective
assets. The useful lives buildings and related components are estimated to be 39 years. The useful lives of furniture, fixtures and
equipment are estimated to be 4 to 7 years. Leasehold improvements are capitalized and depreciated using the straight-line method
over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Property held for sale
is carried at the lower of cost or fair value.
Premises and equipment and other long-term assets are reviewed for impairment when events indicate their carrying amount
may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.
Lease Obligation. The Company evaluates contracts that convey the right to control the use of identified property, plant or
equipment for a period of time for consideration to determine if they are lease obligations. The Company evaluates each lease
component to determine if the lease qualifies as a financing lease or as an operating lease. Leases that meet any of the following
criteria are considered financing leases: (1) the lease transfers ownership of the underlying asset by the end of the lease term; (2) the
lease grants the Company an option to purchase the underlying asset that the Company is reasonably certain to exercise; (3) the lease
term is the major part of the remaining economic life of the underlying asset; (4) the present value of the sum of the lease payments
and any residual value guaranteed by the Company that is not already reflected in lease payments equals or exceeds substantially all of
F-14
the fair value of the underlying asset; or (5) the underlying asset is of such a specialized nature that it is expected to have no
alternative use to the lessor at the end of the lease term. If none of the financing lease criteria are met, the lease is considered an
operating lease.
The Company evaluates each lease to determine the lease term which will be used based on the type and use of the leased
equipment and future expected changes in operations. The resulting lease term will consist of the non-cancellable period for which
the Company has the right to use the underlying asset plus (1) periods covered by an option to extend the lease if the Company is
reasonably certain to exercise that option; (2) periods covered by an option to terminate the lease if the Company is reasonably certain
not to exercise that option; and (3) periods covered by an option to extend the lease in which exercise of the option is controlled by the
lessor. The Company has certain leases that contain options to extend the lease and contain options for changes in lease payments
which are evaluated by the Company to determine the recorded values for right-of-use assets and lease liability.
Lease payments that are contractually known at lease inception are used by the Company for calculating the right-of-use asset
and lease liability. Lease payments that vary because of facts or circumstances after the commencement date of the lease from other
than passage of time are treated as variable lease payments and are recorded to lease expense in the period in which the obligation for
the payments are incurred by the Company. Variable lease payments are not part of the lease payments for determining the right-of-
use asset or the lease liability at the lease commencement date.
The discount rate to initially determine the present value of the lease payments is based on the information available at the lease
commencement date and is either the rate implicit in the lease or the Company’s incremental borrowing rate. If the rate implicit in the
lease is known or determinable, that rate shall be used. If that rate is not known, the Company’s incremental borrowing rate shall be
used.
Operating lease right-of-use assets and lease obligations are accounted for subsequent to initial recording by amortizing the
right-of-use asset over the lease term on a straight-line method while the lease obligation is increased by the accrual of interest and
decreased by subsequent lease payments. Operating lease right-of-use asset amortization and lease obligation interest are reported in
non-interest expense in the Consolidated Statements of Income. Operating lease payments and variable lease payments are reflected
within cash flows from operating activities in the Consolidated Statement of Cash Flows.
Financing lease right-of-use assets and lease obligations are accounted for subsequent to initial recording by amortizing the
right-of-use asset similar to owned assets over the lesser of the lease term or economic life of the asset if the lease transfers ownership
of the leased asset while the lease obligation is increased by the accrual of interest and decreased by subsequent lease payments.
Financing lease right-of-use asset amortization is reported in non-interest expense, similar to other owned assets, and lease obligation
interest accruals are reported in interest expense in the Consolidated Statements of Income. Financing lease obligation principal
payments are reflected within cash flows from financing activities and interest payments and variable lease payments are reflected
with the cash flows from operating activities in the Consolidated Statements of Cash Flows.
The Company evaluates lease modifications and will consider the modification a new contract if the modification grants the
lessee an additional right of use not included in the original lease and the lease payments increase commensurate with the stand-alone
price for the additional right-of-use asset. The Company will reallocate the remaining consideration in the contract and remeasure the
lease liability using a discount rate for the lease determined at the effective date of the lease modification if the contract modification
does any of the following: (1) grants the Company an additional right of use that was not included in the original contract; (2) extends
or reduces the term of an existing lease; (3) fully or partially terminates an existing lease; or (4) changes the consideration in the
contract only. The Company will recognize the remeasurement of the lease liability for the modification as an adjustment of the right-
of-use asset when the contract modification grants additional right-of-use-assets, extends or reduces the term of the lease or changes
the consideration of the lease contract. In the case of full or partial termination of the lease, the Company will decrease the carrying
amount of the right-of-use-asset on a proportionate basis to the reduction in the lease liability with a gain or loss recognized for the
difference between the lease liability adjustment and right of use asset adjustment.
If the Company modifies an operating lease, where the Company is the lessor, and the modification is not accounted for as a
separate contract, the Company will account for the modification as if it were a termination of the existing lease and the creation of a
new lease that commences on the effective date of the modification as follows:
•
If the modified lease is classified as an operating lease, the Company will consider any prepaid or accrued lease rentals
relating to the original lease as part of the lease payments for the modified lease.
•
If the modified lease is classified as a direct financing lease or a sales-type lease, the Company will derecognize any
deferred rent liability or accrued rent asset and adjust the selling profit or loss.
If the Company modifies a direct financing lease, where the Company is the lessor, and the modification is not accounted for as
a separate contract, the Company will account for the modified lease as follows:
•
If the modified lease is classified as a direct financing lease, the Company will adjust the discount rate for the modified
lease, so the initial net investment equals the carrying amount of the original lease at the modification effective date.
F-15
•
If the modified lease is classified as a sales-type lease, the Company shall determine the selling profit/loss on
commencement date of the modified lease as the difference between the fair value of the underlying asset and net
investment in the original lease prior to modification.
•
If the modified lease is classified as an operating lease, the carrying amount of the underlying asset shall equal the net
investment in the original lease immediately before the effective date of the modification.
•
If the Company modifies a sales-type lease, where the Company is the lessor, and the modification is not accounted for as
a separate contract, the Company will account for the modified lease as follows:
•
If the modified lease is classified as a direct financing lease, the Company will adjust the discount rate for the modified
lease, so the initial net investment of the modified lease equals the carrying amount of the original lease at the
modification effective date.
•
If the modified lease is classified as a direct financing lease, the Company will adjust the discount rate for the modified
lease, so the initial net investment equals the carrying amount of the original lease at the modification effective date.
Federal Reserve Bank and Federal Home Loan Bank Stock: Federal Reserve Bank (“FRB”) and Federal Home Loan Bank
(“FHLB”) stocks are required investments for institutions that are members of the FRB and FHLB systems. FRB and FHLB stocks
are carried at cost, considered restricted securities and are periodically evaluated for impairment based on the ultimate recovery of par
value. Both cash and stock dividends are reported as income.
Goodwill and Core Deposit Intangibles: Goodwill results from business acquisitions and represents the excess of the purchase
price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Core deposit intangibles are
acquired customer relationships arising from whole bank and branch acquisitions. Core deposit intangibles are initially measured at
fair value and then amortized over their estimated useful lives using an accelerated method. The useful lives of the core deposits are
estimated to generally be between seven and ten years. Goodwill and core deposit intangibles are assessed at least annually for
impairment and any such impairment is recognized and expensed in the period identified. The Company has selected December 31 as
the date to perform its annual goodwill impairment test. Goodwill is the only intangible asset with an indefinite useful life.
Credit Related Financial Instruments: Credit related financial instruments include off-balance-sheet credit instruments, such as
commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these
items represents the exposure to loss before considering customer collateral or ability to repay. Such financial instruments are
recorded when they are funded.
Derivatives: The Company is exposed to interest rate risk primarily from the effect of interest rate changes on its interest-
earning assets and its sources of funding these assets. The Company will periodically enter into interest rate swaps or interest rate
caps/floors to manage certain interest rate risk exposure.
An interest rate swap is an agreement between two entities to exchange cash flows in the future. The agreement sets the dates on
which the cash flows will be paid and the manner in which the cash flows will be calculated. Typically, an interest rate swap
transaction is used as an exchange of cash flows based on a fixed rate for cash flows based on a variable rate.
In an interest rate cap agreement, a cash flow is generated if the price or interest rate of an underlying variable rises above a
certain threshold price or interest rate. In an interest rate floor agreement, a cash flow is generated if the price or interest rate of an
underlying variable falls below a certain threshold price or interest rate. Caps and floors are designed as protection against the interest
rate on a variable rate asset or liability rising above or falling below a certain level.
At the inception of a derivative contract, the Company designates the derivatives as one of three types. These three types are:
(1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value hedge”); (2) a hedge
of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow
hedge”); or (3) an instrument with no hedging designation (“stand-alone derivative”).
The Company presents gains/(losses) on derivatives and hedging activities for qualifying hedges in the following manner. For a
fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item and net interest
settlements, are recognized in net interest income in the same line as the earnings effect of the hedged item. For a cash flow hedge,
the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods
during which the hedged transaction affects earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting
are reported currently in earnings as non-interest income.
F-16
Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based
on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest
income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged unless
the derivative meets the criteria to be a financing derivative. All derivatives are recognized in the consolidated balance sheet at their
fair values and are reported as either derivative assets or derivative liabilities net of accrued net settlements and collateral, if any. The
individual derivative amounts are netted by counterparty when the netting requirements have been met. If these netted values are
positive, they are classified as an asset and, if negative, they are classified as a liability.
The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management
objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation
includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or
forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, at least
quarterly, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the
hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting
changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no
longer probable, a hedged firm commitment is no longer firm or treatment of the derivative as a hedge is no longer appropriate or
intended.
When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income.
When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing
basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but
the hedged cash flows or forecasted transactions are still expected to occur, gains or losses that are accumulated in other
comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.
The Company has historically entered into interest rate cap derivatives to assist with interest rate risk management. These
derivatives are not designated as hedging instruments but rather as stand-alone derivatives. The fair values of stand-alone derivatives
are included in other assets and other liabilities. Changes in fair value of stand-alone derivatives are recorded through earnings as
non-interest income.
Income Taxes: Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax
assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between
carrying amounts and tax bases of assets and liabilities and are computed using enacted tax rates. A valuation allowance, if needed,
reduces deferred tax assets to the amount expected to be realized. A tax position is recognized as a benefit only if it is “more likely
than not” that the tax position will be sustained in a tax examination, with a tax examination being presumed to occur. The amount
recognized is the largest amount of tax benefit that is more likely than not to be realized on examination.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. There were no material
amounts to report for interest or penalties incurred in 2024, 2023, or 2022.
Earnings Per Common Share: Net income, less dividends and discount accretion on preferred stock, equals net income allocable
to common stockholders. Basic earnings per common share is net income allocable to common stockholders divided by the weighted
average number of common shares and vested restricted stock units outstanding during the period. Diluted earnings per common
share include the dilutive effect of additional potential common shares of unexercised stock options, unvested restricted stock units,
and pending employee stock purchase plan shares at period end.
Share-Based Payments: The Company has share-based payments which are described more fully in a subsequent note.
Compensation expense associated with the stock option plan is based on the fair value of the options at the grant date. This
compensation is expensed over the periods during which the options vest. Options vest based on the passage of time or the
achievement of performance targets, depending on the structure of the related grant.
Compensation expense associated with restricted stock units and restricted stock agreements is based on the fair value of the
units at the grant date. This compensation expense is recognized ratably over the service period stipulated in the grant agreement.
Comprehensive Income: Comprehensive income consists of net income and other comprehensive income. Other
comprehensive income includes unrealized gains and losses on securities available-for-sale and cash flow hedges.
Loss Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are
recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Additional
discussion of loss contingencies at December 31, 2024, is presented in a subsequent note.
F-17
Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and
clearing requirements.
Dividend Restriction: Banking regulations require maintaining certain capital levels, positive undivided profits and a certain
level of net income available to shareholders and may limit the dividends paid by the wholly-owned subsidiaries to the holding
company or by the holding company to stockholders.
Fair Value: Fair values of financial instruments, impaired loans, other real estate owned and property held for sale are estimated
using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve
uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, collateral values and other factors,
especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could materially
affect the estimates.
Segment Information: As a community-oriented financial institution, substantially all of the Company’s operations involve the
delivery of loan and deposit products to customers. Management makes operating decisions and assesses performance based on an
ongoing review of these banking operations, which constitute the Company’s only operating segment for financial reporting purposes.
Reclassifications: Some items in the prior year financial statements were reclassified to conform to the current presentation.
Management determined the items reclassified are immaterial to the consolidated financial statements, taken as a whole, and did not
result in a change in equity or net income for years ended December 31, 2024, 2023, and 2022.
Recent Accounting Pronouncements:
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment
Disclosures. The amendments in ASU 2023-07 provide for new disclosures which: (1) require that a public entity disclose on an
annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker ("CODM")
and included within each reported measure of segment profit or loss; (2) require that a public entity disclose, on an annual and interim
basis, an amount for other segment items by reportable segment and a description of its composition; (3) require that a public entity
provide all annual disclosures about a reportable segment's profit or loss and assets currently required by Topic 280 in interim periods;
(4) allows more than one measure of segment profit or loss used by the CODM when assessing segment performance and deciding
how to allocate resources to be disclosed; (5) require disclosure of title and position of CODM and explain how the CODM uses the
disclosed reported measures to assess segment performance; and (6) require that a public entity that has a single reportable segment
provide all the disclosures required by the amended Topic 280. The amendments in this update are effective for the Company for
fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early
adoption permitted. The amendments in this update are required to be applied retrospectively to all prior periods presented in the
financial statements. Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on
the significant segment expense categories and the amounts disclosed in the prior periods should be based on the significant segment
expense categories identified and disclosed in the period of adoption. The Company adopted this accounting standard effective
January 1, 2024, and the Company's financial condition, results of operations and cash flows were not impacted by this guidance. The
Company has provided the required disclosures for its single reportable segment.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures.
The amendments in ASU 2023-09 require public business entities on an annual basis to disclose: (1) specific categories in the rate
reconciliation; (2) provide additional information for reconciling items that meet a quantitative threshold of five percent of pretax
income multiplied by the statutory rate; (3) provide a qualitative description of the state and local jurisdictions that make up a majority
of the state and local income tax category; (4) requires the entity to provide an explanation of the nature, effect and underlying causes
of the reconciling items disclosed and the judgment used in categorizing the reconciling items; (5) requires that all entities disclose on
an annual basis income taxes paid (net of refunds received) disaggregated by federal, state and foreign taxes, and the amount of
income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid (net of refunds
received) is equal to or greater than five percent of total income taxes paid (net of refunds); (6) requires disclosure of income from
continuing operations before income tax expense to be disaggregated between domestic and foreign, and income tax expense
disaggregated by federal, state and foreign; and (7) removes the disclosures of estimating the range of reasonably possible change in
unrecognized tax benefits balance in the next 12 months and removes the requirement to disclose the cumulative amount of each type
of temporary difference when a deferred tax liability is not recognized because of the exceptions to comprehensive recognition of
deferred taxes related to subsidiaries and corporate joint ventures. The amendments in this update are effective for annual periods
beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made
available for issuance. The amendments in this update should be applied on a prospective basis; however, retrospective application is
F-18
permitted. The Company's financial condition, results of operations and cash flows will not be impacted by this guidance; however,
this guidance will impact the Company's financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures. The amendments in ASU 2024-03, update require disclosure, in the notes to financial statements, of
specified information about certain costs and expenses. The amendments will require an the Company to disclose employee
compensation, depreciation, and intangible amortization included in each relevant expense caption on the face of the income
statement. In addition, certain amounts already required to be disclosed under other current GAAP will be disclosed in this
disaggregation and a qualitative description of the remaining amounts remaining in each relevant expense caption. The amendments
in this update are effective for annual periods beginning after December 15, 2026, and early adoptions is permitted for annual financial
statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a
prospective basis; however, retrospective application is permitted. The Company's financial condition, results of operations and cash
flows will not be impacted by this guidance; however, this guidance will impact the Company's financial statement disclosures.
In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures - Clarifying the Effective Date. The amendments in ASU 2025-01, clarify that all public entities should
initially adopt the disclosure requirements of ASU 2024-03 in the first annual reporting period beginning after December 15, 2026,
and interim reporting periods beginning after December 15, 2027. The transition guidance included in ASU 2024-03 is unchanged by
this guidance. The Company's financial condition, results of operations and cash flows will not be impacted by this guidance;
however, this guidance will impact the Company's financial statement disclosures.
NOTE 2 – BUSINESS COMBINATIONS
At close of business on February 9, 2024, the Company acquired 100% of the outstanding common shares of Rockhold
BanCorp ("Rockhold"), the holding company of the Bank of Kirksville (“BOK”), based in Kirksville, Missouri. Results of operations
of BOK were included in the Company’s results of operations beginning February 10, 2024. Acquisition-related costs associated with
this acquisition were $3,420 ($2,597 on an after-tax basis) and are included in merger expense in the Company’s income statement for
the year ended December 31, 2024.
Information necessary to recognize the fair value of assets acquired and liabilities assumed is complete. The acquisition was
and expansion to the Company's current footprint in Missouri with the addition of eight branch locations in the Kirksville area.
The following table summarizes the amounts of assets acquired and liabilities assumed by BOK on February 9, 2024.
Fair value of consideration:
Cash
$
44,304
$
44,304
Recognized amounts of identifiable assets acquired and
liabilities assumed:
Cash and due from banks
$
105,218
Available-for-sale securities
164,629
Loans
118,131
Premises and equipment
3,473
Core deposit intangibles
11,530
Other assets
3,255
Total assets acquired
406,236
Deposits
349,777
Federal funds purchased and retail repurchase agreements
8,818
Interest payable and other liabilities
2,037
Total liabilities assumed
360,632
Total identifiable net assets
45,604
Bargain purchase gain
(1,300)
$
44,304
The following tables reconcile the par value of BOK loan portfolio as of the purchase date to the fair value indicated in the table
above. For non-purchase credit deteriorated assets, the entire fair value adjustment including both interest and credit related
components is recorded as an adjustment to par (“Fair Value Marks”) and reflected as an adjustment to the carrying value of that asset
F-19
within the Consolidated Balance Sheet. Following purchase, an ACL is also established for these non-purchase credit deteriorated
assets which is not reflected in this table as it is accounted for outside of the business combination. For purchase-credit deteriorated
assets, as required by CECL, the fair value mark is divided between an adjustment to par (“Non-Credit Rate Marks”) and an addition
to the ACL (“Credit Marks in ACL”). The addition to ACL is based on the application of management’s CECL methodology to the
individual loans.
Non-Purchase Credit Deteriorated Loans
Loan Par Value
Fair Value Marks
Purchase Price
Commercial real estate
$
1,959
$
(85)
$
1,874
Commercial and industrial
32,300
(578)
31,722
Residential real estate
42,318
(1,182)
41,136
Agricultural
37,641
(949)
36,692
Consumer
1,373
(36)
1,337
Total non-PCD loans
$
115,591
$
(2,830)
$
112,761
Purchase Credit Deteriorated Loans
Loan Par Value
Fair Value Marks
Credit Marks
in ACL
Purchase Price
Commercial and industrial
$
1,366
$
(178)
$
(119)
$
1,069
Residential real estate
2,044
(210)
(183)
1,651
Agricultural
3,316
(472)
(284)
2,560
Consumer
115
(15)
(10)
90
Total PCD loans
$
6,841
$
(875)
$
(596)
$
5,370
Total Purchased Loans
Purchase Price
Non-Purchase Credit Deteriorated Loans
$
112,761
Purchase Credit Deteriorated Loans
5,370
Total loans
$
118,131
At close of business on July 1, 2024, the Company acquired 100% of the outstanding common shares of KansasLand
Bancshares, Inc. ("KansasLand"), the holding company of KansasLand Bank (“KSL”), which has two branch locations in Quinter and
Americus, Kansas. Results of operations of KSL were included in the Company’s results of operations beginning July 2, 2024.
Acquisition-related costs associated with this acquisition were $1,041 ($791 on an after-tax basis) and are included in merger expense
in the Company’s income statement for the year ended December 31, 2024.
Information necessary to recognize the fair value of assets acquired and liabilities assumed is currently still on-going. The
acquisition was and expansion to the Company's current footprint in Western Kansas with the addition of two branch locations.
F-20
The following table summarizes the amounts of assets acquired and liabilities assumed by KSL on July 1, 2024.
Fair value of consideration:
Cash
$
100
$
100
Recognized amounts of identifiable assets acquired and
liabilities assumed:
Cash and due from banks
$
1,361
Available-for-sale securities
20,004
Loans
27,926
Premises and equipment
372
Core deposit intangibles
506
Other assets
1,764
Total assets acquired
51,933
Deposits
42,418
Federal funds purchased and retail repurchase agreements
780
Federal Home Loan Bank advances
7,049
Bank Stock Loan
691
Interest payable and other liabilities
64
Total liabilities assumed
51,002
Total identifiable net assets
931
Bargain purchase gain
(831)
$
100
The following tables reconcile the par value of KSL loan portfolio as of the purchase date to the fair value indicated in the
table above. For non-purchase credit deteriorated assets, the entire fair value adjustment including both interest and credit related
components is recorded as an adjustment to par (“Fair Value Marks”) and reflected as an adjustment to the carrying value of that asset
within the Consolidated Balance Sheet. Following purchase, an ACL is also established for these non-purchase credit deteriorated
assets which is not reflected in this table as it is accounted for outside of the business combination. For purchase-credit deteriorated
assets, as required by CECL, the fair value mark is divided between an adjustment to par (“Non-Credit Rate Marks”) and an addition
to the ACL (“Credit Marks in ACL”). The addition to ACL is based on the application of management’s CECL methodology to the
individual loans.
F-21
Non-Purchase Credit Deteriorated Loans
Loan Par Value
Fair Value Marks
Purchase Price
Commercial real estate
$
163
$
(14)
$
149
Commercial and industrial
4,549
(258)
4,291
Residential real estate
7,053
(103)
6,950
Agricultural real estate
9,644
(387)
9,257
Agricultural
2,133
(7)
2,126
Consumer
1,524
(6)
1,518
Total non-PCD loans
$
25,066
$
(775)
$
24,291
Purchase Credit Deteriorated Loans
Loan Par Value
Discounts from Other
Factors Excluding
ACL
Credit Marks
in ACL
Purchase Price
Commercial and industrial
109
(14)
(9)
86
Residential real estate
479
(48)
(43)
388
Agricultural real estate
3,717
(419)
(330)
2,968
Agricultural
244
(29)
(22)
193
Total PCD loans
$
4,549
$
(510)
$
(404)
$
3,635
Total Purchased Loans
Purchase Price
Non-Purchase Credit Deteriorated Loans
$
24,291
Purchase Credit Deteriorated Loans
3,635
Total loans
$
27,926
Assuming the Rockhold and KansasLand acquisitions would have taken place on January 1, 2023, total combined revenue
would have been $226,915 for the year ended December 31, 2024, and $141,078 for the year ended December 31, 2023. Net income
would have been $65,077 at December 31, 2024, and $7,518 at December 31, 2023. The pro forma amounts disclosed exclude merger
expense from non-interest expense, which is considered a non-recurring adjustment. Separate revenue and earnings of the former
Rockhold locations are not available subsequent to the acquisition.
At the close of business on June 24, 2022, the Company sold three branch locations located in Belleville, Clyde and Concordia,
Kansas to United Bank and Trust ("UBT"). Results of the branch sale were included in the Company's results of operations beginning
June 27, 2022. Branch sale related costs were $18 ($14 on an after-tax basis) and are included in merger expense in the Company's
income statement for the year ended December 31, 2022. At December 31, 2023, there were no costs related to this branch sale.
The following table summarizes the carrying value of assets sold and liabilities assumed by UBT on June 24, 2022.
Summary of assets sold and liabilities
assumed by UBT:
Cash and due from banks
$
508
Loans
26,110
Premises and equipment
1,225
Goodwill
1,364
Core deposit intangible
164
Other assets
391
Total assets sold
29,762
Deposits
52,714
Interest payable and other liabilities
19
Total liabilities assumed by UBT
52,733
Total net assets
(22,971)
Cash paid
22,431
Gain on branch sale
$
(540)
F-22
The following tables present the carrying value of loans and deposits sold to UBT on June 24, 2022.
Commercial real estate
$
793
Commercial and industrial
537
Residential real estate
521
Agricultural real estate
23,685
Consumer
574
Total sold loans
$
26,110
Demand
$
15,817
Total non-interest-bearing deposits
15,817
Demand, savings and money markets
28,615
Time
8,282
Total interest-bearing deposits
36,897
Total deposits
$
52,714
At the close of business on November 10, 2022, the Company sold one branch location located in Cordell, Oklahoma to High
Plains Bank ("HPB"). Results of the branch sale were included in the Company's results of operations beginning November 14, 2022.
There were no branch sale related costs on the Company's income statement for the year ended December 31, 2022. At December 31,
2023, there were no costs related to this branch sale.
The following table summarizes the carrying value of assets sold and liabilities assumed by HPB on November 10, 2022.
Summary of assets sold and liabilities
assumed by HPB:
Cash and due from banks
$
176
Loans
26
Premises and equipment
211
Core deposit intangible
77
Total assets sold
490
Deposits
19,057
Interest payable and other liabilities
7
Total liabilities assumed by HPB
19,064
Total net assets
(18,574)
Cash paid
18,152
Gain on branch sale
$
(422)
The following tables present the carrying value of loans and deposits sold to HPB on November 10, 2022.
Consumer
$
26
Total sold loans
$
26
Demand, savings and money markets
$
12,889
Time
6,168
Total interest-bearing deposits
19,057
Total deposits
$
19,057
F-23
NOTE 3 – INVESTMENTS
The amortized cost and fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in
accumulated other comprehensive income (loss) were as follows.
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance
for Credit
Losses
Fair Value
December 31, 2024
Available-for-sale securities
U.S. Government-sponsored entities
$
71,173
$
68
$
(6,147) $
—
$
65,094
U.S. Treasury securities
86,523
118
(78)
—
86,563
Mortgage-backed securities
Government-sponsored residential mortgage-backed
securities
624,228
946
(36,002)
—
589,172
Private label residential mortgage-backed securities
144,971
—
(20,307)
—
124,664
Corporate
61,947
177
(3,472)
—
58,652
Small Business Administration loan pools
6,542
—
(276)
—
6,266
State and political subdivisions
83,868
27
(9,851)
—
74,044
$ 1,079,252
$
1,336
$
(76,133) $
—
$ 1,004,455
December 31, 2023
Available-for-sale securities
U.S. Government-sponsored entities
$
39,103
$
—
$
(6,016) $
—
$
33,087
U.S. Treasury securities
89,999
28
(771)
—
89,256
Mortgage-backed securities
Government-sponsored residential mortgage-backed
securities
560,674
3,872
(35,403)
—
529,143
Private label residential mortgage-backed securities
161,174
—
(23,333)
—
137,841
Corporate
56,722
—
(7,039)
—
49,683
Small Business Administration loan pools
8,066
—
(339)
—
7,727
State and political subdivisions
81,458
74
(8,621)
—
72,911
$
997,196
$
3,974
$
(81,522) $
—
$
919,648
F-24
The amortized cost and fair value of held-to-maturity securities and the related gross unrealized gains and losses were as
follows.
Amortized
Cost
Gross
Unrecognized
Gains
Gross
Unrecognized
Losses
Allowance for
Credit Losses
Fair Value
December 31, 2024
Held-to-maturity securities
Mortgage-backed securities
Government-sponsored residential mortgage-
backed securities
$
3,932
$
3
$
(26)
$
—
$
3,909
State and political subdivisions
1,285
26
(6)
—
$
1,305
$
5,217
$
29
$
(32)
$
—
$
5,214
December 31, 2023
Held-to-maturity securities
Mortgage-backed securities
Government-sponsored residential mortgage-
backed securities
$
1,094
$
3
$
—
$
—
$
1,097
State and political subdivisions
1,115
38
—
—
1,153
$
2,209
$
41
$
—
$
—
$
2,250
The fair value and amortized cost of debt securities at December 31, 2024, by contractual maturity, is shown below. Expected
maturities will differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call
or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.
Available-for-Sale
Held-to-Maturity
Amortized
Cost
Fair
Value
Amortized
Cost
Fair
Value
Within one year
$
89,422
$
89,390
$
—
$
—
One to five years
52,916
52,734
—
—
Five to ten years
129,925
117,105
172
167
After ten years
37,790
31,390
1,113
1,138
Mortgage-backed securities
769,199
713,836
3,932
3,909
Total debt securities
$1,079,252
$1,004,455
$
5,217
$
5,214
The following table shows the carrying value and fair value of securities pledged as collateral, to secure public deposits,
borrowings from the Federal Reserve Bank and retail purchase obligations at December 31, 2024, and December 31, 2023.
December 31, 2024
December 31, 2023
Book Value
Fair Value
Book Value
Fair Value
Public fund deposits
$
732,935
$
690,855
$
509,010
$
488,270
Federal Home Loan Bank pledging
104,888
90,406
84,421
72,293
Federal Reserve Bank borrowings
10,481
10,358
158,382
141,125
Retail repurchase agreements
49,021
45,249
51,548
47,282
Total securities pledged
$
897,325
$
836,868
$
803,361
$
748,970
F-25
The following tables show gross unrealized losses and fair value aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position at December 31, 2024, and 2023.
Less Than 12 Months
12 Months or More
Total
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
Fair
Value
Unrealized
Loss
December 31, 2024
Available-for-sale securities
U.S. Government-sponsored entities
$
15,084
$
(62) $
32,195
$
(6,085) $
47,279
$
(6,147)
U.S. Treasury securities
2,940
(1)
19,943
(77)
22,883
(78)
Mortgage-backed securities
Government-sponsored residential mortgage-
backed securities
168,783
(1,600)
268,364
(34,402)
437,147
(36,002)
Private label residential mortgage-backed securities
—
—
124,664
(20,307)
124,664
(20,307)
Corporate
1,765
(34)
47,022
(3,438)
48,787
(3,472)
Small Business Administration loan pools
3,983
(3)
2,284
(273)
6,267
(276)
State and political subdivisions
7,948
(89)
62,119
(9,762)
70,067
(9,851)
Total
$ 200,503
$
(1,789) $ 556,591
$
(74,344) $ 757,094
$
(76,133)
December 31, 2023
Available-for-sale securities
U.S. Government-sponsored entities
$
—
$
—
$
33,087
$
(6,016) $
33,087
$
(6,016)
U.S. Treasury securities
—
—
19,413
(771)
19,413
(771)
Mortgage-backed securities
Government-sponsored residential mortgage-
backed securities
7,799
(5)
306,858
(35,398)
314,657
(35,403)
Private label residential mortgage-backed securities
—
—
137,841
(23,333)
137,841
(23,333)
Corporate
—
—
49,683
(7,039)
49,683
(7,039)
Small Business Administration loan pools
5,097
(14)
2,630
(325)
7,727
(339)
State and political subdivisions
11,386
(768)
57,326
(7,853)
68,712
(8,621)
Total
$
24,282
$
(787) $ 606,838
$
(80,735) $ 631,120
$
(81,522)
Less Than 12 Months
12 Months or More
Total
Fair
Value
Unrecognized
Loss
Fair
Value
Unrecognized
Loss
Fair
Value
Unrecognized
Loss
December 31, 2024
Held-to-maturity securities
Residential mortgage-backed (issued by government-
sponsored entities)
$
853
$
(26) $
—
$
—
$
853
$
(26)
State and political subdivisions
167
(6)
—
—
167
(6)
Total
$
1,020
$
(32) $
—
$
—
$
1,020
$
(32)
December 31, 2023
Held-to-maturity securities
Residential mortgage-backed (issued by government-
sponsored entities)
$
—
$
—
$
—
$
—
$
—
$
—
State and political subdivisions
—
—
—
—
—
—
Total
$
—
$
—
$
—
$
—
$
—
$
—
The tables above present unrealized losses on available-for-sale securities since the date of purchase, independent of the impact
associated with changes in cost basis upon transfer from the available-for-sale designation to the held-to-maturity designation. As of
December 31, 2024, the Company held 485 available-for-sale securities in an unrealized loss position and two held-to-maturity
security in an unrecognized loss position.
Unrealized losses on securities have not been recognized into income because the security issuers are of high credit quality,
management does not intend to sell and it is more likely than not that the Company will not be required to sell the securities prior to
their anticipated recovery, and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover
as the securities approach maturity.
The Company's available-for-sale and held-to-maturity investments that carry some form of credit risk are the investments in
private label residential mortgage-backed securities, corporate securities and state and political subdivisions securities.
F-26
The Company's private label residential mortgage-backed exposure consists of 32 securities held by the Company and are senior
in the capital structure, carry substantial credit enhancement and are 20% risk weighted by the Simplified Supervisory Formula
Approach ("SSFA"). At December 31, 2024, the Company does not anticipate any credit losses in the private label residential
mortgage-backed securities portfolio.
The Company's corporate debt exposure consists of 19 separate positions in U.S. financial institutions, all of which the
Company has determined to be investment grade either by a Nationally Recognized Statistical Ratings Organization ("NRSRO") or by
internal review. Substantially all of the positions are subordinated debt issued by bank holding companies. The Company periodically
reviews financial data of the issuers to ensure their continued investment grade status. At December 31, 2024, the Company does not
anticipate any credit losses in the corporate debt securities portfolio.
The Company's portfolio of state and political subdivisions securities is comprised of 168 positions of which 86% of the
positions are rated "A" or better by a NRSRO, and 62% of the overall portfolio is made up of general obligation bonds. The Company
periodically reviews financial data of the entities and regularly monitors credit ratings changes of the entities. At December 31, 2024,
the Company does not anticipate any credit losses in the state and political subdivisions securities portfolio.
The proceeds from sales and the associated gains and losses on available-for-sale securities reclassified from other
comprehensive income to income are listed below.
2024
2023
2022
Proceeds
$
16,133
$
490,108
$
3,265
Gross gains
31
—
115
Gross losses
298
52,013
36
Income tax expense (benefit) on net realized gains (losses)
(65)
(12,740)
20
The Company also invests in several other investments, including investments in stocks and partnerships, which are included in
other assets. The following table shows the various investment balances and method of accounting at December 31, 2024 and 2023.
December 31, 2024
December 31, 2023
Investments in equity securities
Accounted for at fair value through net income
$
1,009
$
674
Accounted for at amortized cost assessed for impairment
1,982
1,397
Total investments in stocks
2,991
2,071
Investments in partnerships
Accounted for at equity method
2,500
2,345
Accounted for at hypothetical liquidation book value
1,961
2,403
Accounted for at proportional amortization
23,498
24,296
Total investments in partnerships
27,959
29,044
Total other investments
$
30,950
$
31,115
The unrealized gain/(loss) for investments accounted for at fair value that were still held at the reporting period were $3, $104
and ($74) at December 31, 2024, 2023, and 2022.
The Company invests in certain qualified affordable housing projects, solar tax credits, and historic tax credits which are
designated as being accounted for under proportional amortization. These investment balances are reflected in the other assets line in
the consolidated balance sheets. Total unfunded commitments accounted for using the proportional amortization method totaled
$12,067, $19,315 and $15,218 at December 31, 2024, 2023, and 2022. The Company expects to fulfill these commitments during the
years 2025 through 2039.
F-27
The following table discloses the financial statement impact of tax credit investments at December 31, 2024 and 2023.
Income Tax Credits
Recognized During
Period (a)
Other Income Tax
Benefits (a)
Total Tax Benefits
Investment Amortization
Included in Income Tax
Expense
December 31, 2024
Investments and tax credit structures:
Included in proportional amortization
$
(10,757)
$
(844)
$
(11,601)
$
9,299
Not included in proportional amortization
$
8
$
210
$
218
$
—
(a) Reported in income tax expense on consolidated statements of income and reported in net change in other assets on consolidated
statements of cash flows.
Income Tax Credits
Recognized During
Period (a)
Other Income Tax
Benefits (a)
Total Tax Benefits
Investment Amortization
Included in Income Tax
Expense
December 31, 2023
Investments and tax credit structures:
Included in proportional amortization
$
(11,734)
$
(1,615)
$
(13,349)
$
11,865
Not included in proportional amortization
$
(3,745)
$
(664)
$
(4,409)
$
—
(a) Reported in income tax expense on consolidated statements of income and reported in net change in other assets on consolidated
statements of cash flows.
The investments and tax credit structures that are included in proportional amortization are low income housing tax credits,
historic tax credits and solar tax credits. The amortization plus the total tax benefits for these investments are recorded in the income
tax expense line in the consolidated statements of income and change in other assets in the consolidated statements of cash flows. Any
cash distributions received on these investments are recorded to the other non-interest income line in the consolidated statements of
income and net redemptions or purchases of correspondent and miscellaneous other stock line in the consolidated statements of cash
flows. The investments and tax credit structures not included in proportional amortization have the losses reported in other non-
interest expense and gains/losses from regular distributions and distributions from liquidation are reported in other non-interest income
consolidated statements of income. Net redemptions or purchases of these investment and tax credit structures is reported in net
redemptions (purchases) of correspondent and miscellaneous other stock in the consolidated statements of cash flows. During the year
ended December 31, 2022, the Company recognized amortization expense of low income housing tax credits of $1,953, which was
included in pretax income on the consolidated statements of income. The amortization expense for the year ended December 31,
2024, and 2023 is included in the table above in the investment amortization included in income tax expense. Additionally, during the
years ended December 31, 2024, 2023, and 2022 the Company recognized tax credits from its investment in affordable housing tax
credits of $1,793, $1,327 and $906.
Contingent contributions for investment tax credit structures not subject to proportional amortization were zero and $4 for the
years ended December 31, 2024, and 2023.
F-28
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES
Types of loans and normal collateral securing those loans are listed below.
Commercial real estate mortgage loans: Owner occupied commercial real estate mortgage loans are secured by commercial
office buildings, industrial buildings, warehouses or retail buildings where the owner of the building occupies the property. For such
loans, repayment is largely dependent upon the operation of the borrower's business.
Commercial and industrial: Commercial and industrial loans include loans to business enterprises issued for commercial,
industrial and/or other professional purposes. These loans are generally secured by equipment, inventory and accounts receivable of
the borrower and repayment is primarily dependent on business cash flows.
Residential real estate mortgage loans: Residential real estate mortgage consists primarily of loans secured by 1-4 family
residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the
borrower.
Agricultural real estate loans: Agricultural real estate loans are secured by real estate related to farmland and are affected by
the value of farmland. Generally, the borrower’s ability to repay is based on the value of farmland and cash flows from farming
operations.
Agricultural production loans: Agricultural production loans are primarily operating lines subject to annual farming revenues,
including productivity and yield of farm products and market pricing at the time of sale.
Consumer: Consumer loans include all loans issued to individuals not included in the categories above. Examples of consumer
and other loans are automobile loans, consumer credit cards and loans to finance education, among others. Many consumer loans are
unsecured. Repayment is primarily dependent on the personal cash flow of the borrower.
The following table reconciles the outstanding balance of loans at December 31, 2024 and 2023.
2024
2023
Net loan balance
$
3,504,218
$ 3,333,689
Loan origination fees and expenses
(848)
(1,375)
Merger fair value adjustments
(6,300)
(3,650)
Hedge fair market value adjustments
(1,658)
(1,826)
Purchased premium and discounts
5,404
6,063
Total
$
3,500,816
$ 3,332,901
The following table lists categories of loans at December 31, 2024 and 2023.
2024
2023
Commercial real estate
$ 1,830,514
$ 1,759,855
Commercial and industrial
658,865
598,327
Residential real estate
566,766
556,328
Agricultural real estate
267,248
196,114
Agricultural
87,339
118,587
Consumer
90,084
103,690
Total loans
3,500,816
3,332,901
Allowance for credit losses
(43,267)
(43,520)
Net loans
$ 3,457,549
$ 3,289,381
From time to time the Company has purchased pools of residential real estate loans originated by other financial institutions to
hold for investment with the intent to diversify the residential real estate portfolio. During 2024 and 2023 the Company did not
purchase any pools of residential loans. As of December 31, 2024, and 2023, residential real estate loans include $274,922 and
$299,448 of purchased residential real estate loans.
The Company occasionally purchases the government guaranteed portion of loans originated by other financial institutions to
hold for investment. During 2024 and 2023, the Company purchased $49,086 and $1,235 in loans guaranteed by governmental
agencies.
F-29
The unamortized discount of merger purchase accounting adjustments related to non-purchase credit deteriorated loans included
in the loan totals above are $4,659 and $2,424 with related loans of $252,309 and $209,662 at December 31, 2024, and 2023.
Overdraft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $329 and $387 at
December 31, 2024, and 2023.
The Company estimates the allowance for credit losses under CECL using relevant available information, from internal and
external sources, relating to past events, current conditions and reasonable and supportable forecasts. Internal historical loss
experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for
differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency levels
or loan terms, as well as, for changes in environmental conditions, such as changes in unemployment rates, property values, consumer
price index, gross domestic product, housing starts or relevant index, U.S. personal income, U.S. housing price indices, federal funds
target and various U.S. Government interest rates.
The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company
has identified commercial real estate, commercial and industrial, residential real estate, agricultural real estate, agricultural production
and consumer as portfolio segments and measures the allowance for credit losses using a historical loss rate method for each segment
to estimate credit losses on a collective basis. The Company’s CECL calculation utilizes historical loss rates, average default month,
average prepayment rates and exposure at default as assumptions to calculate an unadjusted historical loss estimate for the contractual
term of the loans adjusted for prepayment. The historical loss estimate is then adjusted for the anticipated changes in the Company’s
historical loss rate using a regression analysis and current economic variables over the next 12 months. The Company has selected 12
months as its reasonable and supportable forecast period and has selected an immediate reversion back to unadjusted historical loss
rates for periods beyond the reasonable and supportable forecast period. The calculated historical loss estimate and the economic
qualitative adjustment are further evaluated for change via a management qualitative adjustment factor. Management qualitative
adjustments typically are anticipated changes in loss trends that are not reflected in the historical data to be used in forecasting.
The Company evaluates all loans that do not share risk characteristics on an individual basis for estimating the allowance for
credit loss. Loans evaluated on an individual basis are not included in the collective basis. The Company currently reviews all loans
that are classified as non-accrual on an individual basis. The Company typically elects the collateral-dependent practical expedient on
all loans individually assessed for credit losses and expected credit losses are based on the fair value of the collateral at the reporting
date adjusted for selling costs as appropriate.
The Company’s ACL is highly dependent on credit quality, macroeconomic forecasts and conditions, the composition of our
loan portfolio and other management judgments. The current management adjustment represents a significant portion of the
Company’s ACL and is comprised of the estimated impact to ACL from the impact of inflation and the associated monetary policy
response and the impact of global market disruption.
The following tables present the activity in the allowance for credit losses by class for the years ended December 31, 2024,
2023, and 2022.
December 31, 2024
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real
Estate
Agricultural
Real
Estate
Agricultural
Consumer
Total
Allowance for credit losses:
Beginning balance
$
13,476
$
17,954
$
7,784
$
1,718
$
995
$
1,593
$
43,520
Provision (reversal) for credit
losses
1,525
(1,290)
681
1,464
(859)
1,025
2,546
Initial PCD on Acquired loans
—
128
227
330
306
9
1,000
Loans charged-off
(97)
(3,185)
(183)
(100)
(28)
(1,023)
(4,616)
Recoveries
44
398
44
92
25
214
817
Total ending allowance balance
$
14,948
$
14,005
$
8,553
$
3,504
$
439
$
1,818
$
43,267
F-30
December 31, 2023
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real
Estate
Agricultural
Real
Estate
Agricultural
Consumer
Total
Allowance for credit losses:
Beginning balance
$
16,731
$
14,951
$
8,608
$
819
$
2,457
$
2,281
$
45,847
Provision (reversal) for credit losses
(3,330)
6,703
(806)
945
(1,509)
(130)
1,873
Loans charged-off
(20)
(3,791)
(80)
(54)
(108)
(901)
(4,954)
Recoveries
95
91
62
8
155
343
754
Total ending allowance balance
$
13,476
$
17,954
$
7,784
$
1,718
$
995
$
1,593
$
43,520
December 31, 2022
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real
Estate
Agricultural
Real
Estate
Agricultural
Consumer
Total
Allowance for loan losses:
Beginning balance
$
22,478
$
12,248
$
5,560
$
2,235
$
3,756
$
2,088
$ 48,365
Provision (reversal) for credit losses
(4,554)
3,293
3,104
(1,389)
(1,264)
935
125
Loans charged-off
(1,297)
(857)
(99)
(35)
(46)
(1,009)
(3,343)
Recoveries
104
267
43
8
11
267
700
Total ending allowance balance
$
16,731
$
14,951
$
8,608
$
819
$
2,457
$
2,281
$ 45,847
The following tables present the recorded investment in loans and the balance in the allowance for credit losses by portfolio and
class based on impairment method as of December 31, 2024, and 2023.
December 31, 2024
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real
Estate
Agricultural
Real
Estate
Agricultural
Consumer
Total
Allowance for credit losses:
Individually evaluated for credit
losses
$
1,053
$
1,618
$
1,167
$
701
$
147
$
201
$
4,887
Collectively evaluated for credit
losses
13,895
12,387
7,386
2,803
292
1,617
38,380
Total
$
14,948
$
14,005
$
8,553
$
3,504
$
439
$
1,818
$
43,267
Loan Balance:
Individually evaluated for credit
losses
$
7,854
$
8,593
$
4,996
$
5,839
$
1,740
$
871
$
29,893
Collectively evaluated for credit
losses
1,822,660
650,272
561,770
261,409
85,599
89,213
3,470,923
Total
$ 1,830,514
$ 658,865
$ 566,766
$
267,248
$
87,339
$
90,084
$3,500,816
December 31, 2023
Commercial
Real Estate
Commercial
and
Industrial
Residential
Real
Estate
Agricultural
Real
Estate
Agricultural
Consumer
Total
Allowance for credit losses:
Individually evaluated for credit
losses
$
582
$
1,644
$
1,113
$
674
$
598
$
154
$
4,765
Collectively evaluated for credit
losses
12,894
16,310
6,671
1,044
397
1,439
38,755
Total
$
13,476
$
17,954
$
7,784
$
1,718
$
995
$
1,593
$
43,520
Loan Balance:
Individually evaluated for credit
losses
$
6,031
$
5,498
$
7,495
$
4,672
$
3,598
$
669
$
27,963
Collectively evaluated for credit
losses
1,753,824
592,829
548,833
191,442
114,989
103,021
3,304,938
Total
$ 1,759,855
$ 598,327
$ 556,328
$
196,114
$
118,587
$ 103,690
$3,332,901
F-31
The following table presents information related to non-accrual loans at December 31, 2024.
December 31, 2024
Unpaid
Principal
Balance
Recorded
Investment
Allowance for
Credit Losses
Allocated
Average
Recorded
Investment
Interest
Income
Recognized
With no related allowance recorded:
Commercial real estate
$
3,068
$
3,068
$
—
$
3,542
$
104
Commercial and industrial
—
—
—
398
—
Residential real estate
19
—
—
—
1
Agricultural real estate
2,490
2,014
—
2,009
140
Agricultural
—
—
—
109
—
Consumer
31
—
—
—
—
Subtotal
5,608
5,082
—
6,058
245
With an allowance recorded:
Commercial real estate
4,719
4,390
1,015
3,382
105
Commercial and industrial
12,424
7,798
1,482
6,760
164
Residential real estate
5,260
4,670
1,145
5,011
40
Agricultural real estate
5,594
3,737
697
3,520
10
Agricultural
953
592
73
1,390
6
Consumer
846
781
187
706
22
Subtotal
29,796
21,968
4,599
20,769
347
Total
$
35,404
$
27,050
$
4,599
$
26,827
$
592
The above table presents interest income for the twelve months ended December 31, 2024. Interest income recognized in the
above table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due
to immateriality.
The following table presents information related to non-accrual loans at December 31, 2023.
December 31, 2023
Unpaid
Principal
Balance
Recorded
Investment
Allowance for
Credit Losses
Allocated
Average
Recorded
Investment
Interest
Income
Recognized
With no related allowance recorded:
Commercial real estate
$
3,948
$
3,376
$
—
$
2,117
$
53
Commercial and industrial
2,925
—
—
251
1
Residential real estate
21
—
—
5
1
Agricultural real estate
1,342
948
—
939
—
Agricultural
2,303
—
—
—
3
Consumer
23
—
—
—
1
Subtotal
10,562
4,324
—
3,312
59
With an allowance recorded:
Commercial real estate
2,297
2,071
455
1,214
37
Commercial and industrial
8,452
5,041
1,335
5,059
249
Residential real estate
7,605
7,251
1,086
3,912
156
Agricultural real estate
4,753
3,266
660
1,950
1
Agricultural
2,946
2,470
481
2,791
1
Consumer
689
603
150
477
17
Subtotal
26,742
20,702
4,167
15,403
461
Total
$
37,304
$
25,026
$
4,167
$
18,715
$
520
The above table presents interest income for the twelve months ended December 31, 2023. Interest income recognized in the
above table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due
to immateriality.
The following table presents the amount of non-accrual interest income written off for the twelve months ended December 31,
2024, 2023 and 2022.
F-32
2024
2023
2022
Commercial real estate
$
227
$
115
$
87
Commercial and industrial
405
309
226
Residential real estate
55
277
30
Agricultural real estate
203
6
5
Agricultural
103
2
6
Consumer
16
10
11
Total
$
1,009
$
719
$
365
The following tables present the aging of the recorded investment in past due loans as of December 31, 2024 and 2023, by
portfolio and class of loans.
December 31, 2024
30 – 59
Days
Past Due
60 – 89
Days
Past Due
Greater Than
90 Days Past
Due Still On
Accrual
Non-accrual
Loans Not
Past Due
Total
Commercial real estate
$
3,502
$
2,030
$
156
$
7,458
$ 1,817,368
$ 1,830,514
Commercial and industrial
1,314
644
25
7,798
649,084
658,865
Residential real estate
2,396
634
—
4,670
559,066
566,766
Agricultural real estate
457
312
—
5,751
260,728
267,248
Agricultural
411
80
—
592
86,256
87,339
Consumer
666
196
—
781
88,441
90,084
Total
$
8,746
$
3,896
$
181
$
27,050
$ 3,460,943
$ 3,500,816
December 31, 2023
30 – 59
Days
Past Due
60 – 89
Days
Past Due
Greater Than
90 Days Past
Due Still On
Accrual
Non-accrual
Loans Not
Past Due
Total
Commercial real estate
$
2,397
$
198
$
189
$
5,447
$ 1,751,624
$ 1,759,855
Commercial and industrial
1,853
2,713
71
5,041
588,649
598,327
Residential real estate
1,444
676
—
7,251
546,957
556,328
Agricultural real estate
949
—
—
4,214
190,951
196,114
Agricultural
559
65
19
2,470
115,474
118,587
Consumer
443
118
—
603
102,526
103,690
Total
$
7,645
$
3,770
$
279
$
25,026
$ 3,296,181
$ 3,332,901
Allowance for Credit Losses on Off-Balance-Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk from
a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for
credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit loss expense recognized within other non-
interest expense on the consolidated statements of income and included in other liabilities on the consolidated balance sheets. The
estimated credit loss includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on
commitments expected to be funded over its estimated life. The estimate of expected credit loss is based on the historical loss rate for
the class of loan the commitments would be classified as if funded.
F-33
The following table lists allowance for credit losses on off-balance sheet credit exposures as of December 31, 2024 and 2023.
December 31, 2024
December 31, 2023
Commercial real estate
$
188
$
285
Commercial and industrial
1,170
1,053
Residential real estate
69
35
Agricultural real estate
1
2
Agricultural
12
3
Consumer
2
247
Total
$
1,442
$
1,625
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their
debt such as: current financial information, historical payment experience, credit documentation, public information and current
economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. Consumer
loans are considered unclassified credits unless downgraded due to payment status or reviewed as part of a larger credit relationship.
The Company uses the following definitions for risk ratings:
Pass: Loans classified as pass include all loans that do not fall under one of the three following categories. These loans are
considered unclassified.
Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If
left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the
Company’s credit position at some future date. These loans are considered classified.
Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the
liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the
deficiencies are not corrected. These loans are considered classified.
Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added
characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and
values, highly questionable and improbable. These loans are considered classified.
F-34
Based on the most recent analysis performed, the risk category of loans by type and year of origination, at December 31, 2024,
is as follows.
December 31, 2024
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Amortized
Cost
Revolving
Loans
Converted to
Term
Total
Commercial real estate
Risk rating
Pass
$
332,078
$
191,947
$
337,048
$
162,180
$
148,732
$
166,614
$
474,324
$
855
$
1,813,778
Special Mention
331
—
103
—
—
378
497
—
1,309
Substandard
795
459
3,693
3,499
365
6,277
339
—
15,427
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial real estate
$
333,204
$
192,406
$
340,844
$
165,679
$
149,097
$
173,269
$
475,160
$
855
$
1,830,514
Commercial and industrial
Risk rating
Pass
$
114,421
$
78,335
$
69,294
$
32,227
$
53,119
$
16,902
$
261,227
$
994
$
626,519
Special Mention
121
—
160
18
—
870
131
—
1,300
Substandard
8,256
8,189
315
274
1,113
1,592
10,563
667
30,969
Doubtful
—
—
—
—
—
77
—
—
77
Total commercial and
industrial
$
122,798
$
86,524
$
69,769
$
32,519
$
54,232
$
19,441
$
271,921
$
1,661
$
658,865
Residential real estate
Risk rating
Pass
$
25,981
$
33,933
$
35,687
$
260,180
$
7,622
$
130,242
$
66,981
$
572
$
561,198
Special Mention
—
—
—
—
—
300
72
—
372
Substandard
—
195
253
403
123
3,370
807
45
5,196
Doubtful
—
—
—
—
—
—
—
—
—
Total residential real estate
$
25,981
$
34,128
$
35,940
$
260,583
$
7,745
$
133,912
$
67,860
$
617
$
566,766
Agricultural real estate
Risk rating
Pass
$
52,369
$
16,936
$
24,551
$
11,468
$
20,508
$
36,834
$
95,410
$
277
$
258,353
Special Mention
1,541
—
151
—
—
138
595
—
2,425
Substandard
—
2,054
56
571
76
3,659
54
—
6,470
Doubtful
—
—
—
—
—
—
—
—
—
Total agricultural real estate
$
53,910
$
18,990
$
24,758
$
12,039
$
20,584
$
40,631
$
96,059
$
277
$
267,248
Agricultural
Risk rating
Pass
$
15,428
$
4,045
$
5,364
$
2,576
$
3,674
$
1,308
$
53,757
$
49
$
86,201
Special Mention
—
—
—
—
—
32
—
—
32
Substandard
45
185
19
274
404
36
143
—
1,106
Doubtful
—
—
—
—
—
—
—
—
—
Total agricultural
$
15,473
$
4,230
$
5,383
$
2,850
$
4,078
$
1,376
$
53,900
$
49
$
87,339
Consumer
Risk rating
Pass
$
35,412
$
17,503
$
14,157
$
5,765
$
2,732
$
2,724
$
11,007
$
—
$
89,300
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
13
234
289
170
43
35
—
—
784
Doubtful
—
—
—
—
—
—
—
—
—
Total consumer
$
35,425
$
17,737
$
14,446
$
5,935
$
2,775
$
2,759
$
11,007
$
—
$
90,084
Total loans
Risk rating
Pass
$
575,689
$
342,699
$
486,101
$
474,396
$
236,387
$
354,624
$
962,706
$
2,747
$
3,435,349
Special Mention
1,993
—
414
18
—
1,718
1,295
—
5,438
Substandard
9,109
11,316
4,625
5,191
2,124
14,969
11,906
712
59,952
Doubtful
—
—
—
—
—
77
—
—
77
Total loans
$
586,791
$
354,015
$
491,140
$
479,605
$
238,511
$
371,388
$
975,907
$
3,459
$
3,500,816
F-35
The risk category of loans by type and year of origination, at December 31, 2023, is as follows.
December 31, 2023
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Amortized
Cost
Revolving
Loans
Converted to
Term
Total
Commercial real estate
Risk rating
Pass
$
212,229
$
379,233
$
253,837
$
179,935
$
75,472
$
186,073
$
461,346
$
753
$
1,748,878
Special Mention
257
—
119
—
—
399
—
—
775
Substandard
84
2,501
3,481
256
1,463
2,336
81
—
10,202
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial real estate
$
212,570
$
381,734
$
257,437
$
180,191
$
76,935
$
188,808
$
461,427
$
753
$
1,759,855
Commercial and industrial
Risk rating
Pass
$
128,598
$
110,817
$
54,416
$
49,557
$
29,931
$
7,293
$
204,237
$
1,780
$
586,629
Special Mention
—
—
15
—
—
992
—
—
1,007
Substandard
1,317
468
230
2,922
237
2,171
3,346
—
10,691
Doubtful
—
—
—
—
—
—
—
—
—
Total commercial and
industrial
$
129,915
$
111,285
$
54,661
$
52,479
$
30,168
$
10,456
$
207,583
$
1,780
$
598,327
Residential real estate
Risk rating
Pass
$
35,040
$
29,766
$
277,611
$
5,183
$
12,506
$
130,144
$
57,699
$
1,065
$
549,014
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
—
213
187
22
156
1,960
4,710
66
7,314
Doubtful
—
—
—
—
—
—
—
—
—
Total residential real estate
$
35,040
$
29,979
$
277,798
$
5,205
$
12,662
$
132,104
$
62,409
$
1,131
$
556,328
Agricultural real estate
Risk rating
Pass
$
22,368
$
26,762
$
17,987
$
18,551
$
10,653
$
20,039
$
74,010
$
289
$
190,659
Special Mention
903
158
—
—
—
164
605
—
1,830
Substandard
40
—
24
—
101
3,423
37
—
3,625
Doubtful
—
—
—
—
—
—
—
—
—
Total agricultural real estate
$
23,311
$
26,920
$
18,011
$
18,551
$
10,754
$
23,626
$
74,652
$
289
$
196,114
Agricultural
Risk rating
Pass
$
12,424
$
7,363
$
4,815
$
7,148
$
1,385
$
3,809
$
78,285
$
55
$
115,284
Special Mention
—
—
—
—
—
33
9
—
42
Substandard
39
10
464
629
1,861
52
206
—
3,261
Doubtful
—
—
—
—
—
—
—
—
—
Total agricultural
$
12,463
$
7,373
$
5,279
$
7,777
$
3,246
$
3,894
$
78,500
$
55
$
118,587
Consumer
Risk rating
Pass
$
47,019
$
24,620
$
10,384
$
4,841
$
1,281
$
2,885
$
12,035
$
1
$
103,066
Special Mention
—
—
—
—
—
—
—
—
—
Substandard
50
241
163
98
49
23
—
—
624
Doubtful
—
—
—
—
—
—
—
—
—
Total consumer
$
47,069
$
24,861
$
10,547
$
4,939
$
1,330
$
2,908
$
12,035
$
1
$
103,690
Total loans
Risk rating
Pass
$
457,678
$
578,561
$
619,050
$
265,215
$
131,228
$
350,243
$
887,612
$
3,943
$
3,293,530
Special Mention
1,160
158
134
—
—
1,588
614
—
3,654
Substandard
1,530
3,433
4,549
3,927
3,867
9,965
8,380
66
35,717
Doubtful
—
—
—
—
—
—
—
—
—
Total loans
$
460,368
$
582,152
$
623,733
$
269,142
$
135,095
$
361,796
$
896,606
$
4,009
$
3,332,901
F-36
The following table discloses the charge-off and recovery activity by loan type and year of origination at December 31, 2024.
December 31, 2024
2024
2023
2022
2021
2020
Prior
Revolving
Loans
Amortized
Cost
Revolving
Loans
Converted
to Term
Total
Commercial real estate
Gross charge-offs
$
—
$
—
$
(17) $
—
$
—
$
—
$
(80) $
—
$
(97)
Gross recoveries
—
—
8
—
1
34
1
—
44
Net charge-offs
$
—
$
—
$
(9) $
—
$
1
$
34
$
(79) $
—
$
(53)
Commercial and industrial
Gross charge-offs
$
—
$
(31) $
(360) $
(176) $
(486) $
(839) $ (1,293) $
—
$ (3,185)
Gross recoveries
—
—
247
13
21
56
59
2
398
Net charge-offs
$
—
$
(31) $
(113) $
(163) $
(465) $
(783) $ (1,234) $
2
$ (2,787)
Residential real estate
Gross charge-offs
$
—
$
—
$
(134) $
(2) $
—
$
(21) $
(26) $
—
$
(183)
Gross recoveries
—
—
—
1
—
39
4
—
44
Net charge-offs
$
—
$
—
$
(134) $
(1) $
—
$
18
$
(22) $
—
$
(139)
Agricultural real estate
Gross charge-offs
$
—
$
—
$
(11) $
(12) $
(1) $
(76) $
—
$
—
$
(100)
Gross recoveries
4
—
10
—
—
78
—
—
92
Net charge-offs
$
4
$
—
$
(1) $
(12) $
(1) $
2
$
—
$
—
$
(8)
Agricultural
Gross charge-offs
$
—
$
(2) $
(25) $
(1) $
—
$
—
$
—
$
—
$
(28)
Gross recoveries
—
1
22
1
1
—
—
—
25
Net charge-offs
$
—
$
(1) $
(3) $
—
$
1
$
—
$
—
$
—
$
(3)
Consumer
Gross charge-offs
$
(206) $
(105) $
(216) $
(183) $
(49) $
(191) $
(73) $
—
$ (1,023)
Gross recoveries
8
10
19
34
10
122
11
—
214
Net charge-offs
$
(198) $
(95) $
(197) $
(149) $
(39) $
(69) $
(62) $
—
$
(809)
Total loans
Gross charge-offs
$
(206) $
(138) $
(763) $
(374) $
(536) $ (1,127) $ (1,472) $
—
$ (4,616)
Gross recoveries
12
11
306
49
33
329
75
2
817
Net charge-offs
$
(194) $
(127) $
(457) $
(325) $
(503) $
(798) $ (1,397) $
2
$ (3,799)
F-37
The following table discloses the charge-off and recovery activity by loan type and year of origination at December 31, 2023.
December 31, 2023
2023
2022
2021
2020
2019
Prior
Revolving
Loans
Amortized
Cost
Revolving
Loans
Converted
to Term
Total
Commercial real estate
Gross charge-offs
$
—
$
—
$
—
$
—
$
(11) $
(9) $
—
$
—
$
(20)
Gross recoveries
—
63
—
—
—
32
—
—
95
Net charge-offs
$
—
$
63
$
—
$
—
$
(11) $
23
$
—
$
—
$
75
Commercial and industrial
Gross charge-offs
$
(10) $
(226) $
(22) $
(18) $
(2) $
(25) $ (3,488) $
—
$ (3,791)
Gross recoveries
—
32
—
15
—
10
34
—
91
Net charge-offs
$
(10) $
(194) $
(22) $
(3) $
(2) $
(15) $ (3,454) $
—
$ (3,700)
Residential real estate
Gross charge-offs
$
—
$
—
$
—
$
—
$
(14) $
(62) $
(4) $
—
$
(80)
Gross recoveries
—
—
—
—
—
62
—
—
62
Net charge-offs
$
—
$
—
$
—
$
—
$
(14) $
—
$
(4) $
—
$
(18)
Agricultural real estate
Gross charge-offs
$
—
$
—
$
—
$
—
$
—
$
(4) $
(50) $
—
$
(54)
Gross recoveries
—
—
—
—
—
8
—
—
8
Net charge-offs
$
—
$
—
$
—
$
—
$
—
$
4
$
(50) $
—
$
(46)
Agricultural
Gross charge-offs
$
—
$
—
$
(107) $
—
$
—
$
(1) $
—
$
—
$
(108)
Gross recoveries
—
—
—
—
—
155
—
—
155
Net charge-offs
$
—
$
—
$
(107) $
—
$
—
$
154
$
—
$
—
$
47
Consumer
Gross charge-offs
$
(240) $
(168) $
(120) $
(58) $
(51) $
(186) $
(78) $
—
$
(901)
Gross recoveries
20
53
58
22
24
152
14
—
343
Net charge-offs
$
(220) $
(115) $
(62) $
(36) $
(27) $
(34) $
(64) $
—
$
(558)
Total loans
Gross charge-offs
$
(250) $
(394) $
(249) $
(76) $
(78) $
(287) $ (3,620) $
—
$ (4,954)
Gross recoveries
20
148
58
37
24
419
48
—
754
Net charge-offs
$
(230) $
(246) $
(191) $
(39) $
(54) $
132
$ (3,572) $
—
$ (4,200)
F-38
Modifications to Debtors Experiencing Financial Difficulty
The following table presents the amortized cost basis of loans at December 31, 2024, and 2023, that were both experiencing
financial difficulty and modified during the twelve months ended December 31, 2024 and 2023, by class and by type of modification.
The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized
cost basis of each class of financing receivable is also presented below.
December 31, 2024
Payment Delay
Term Extension
Combination Rate
Change and Term
Extension
Combination Payment
Delay and Term
Extension
Total
Modifications
Total Class of
Financing
Receivable
Commercial real estate
$
—
$
1,515
$
—
$
9,933
$
11,448
0.63%
Commercial and industrial
3,667
2,470
—
1,736
7,873
1.19%
Residential real estate
—
—
—
—
—
0.00%
Agricultural real estate
—
3,222
—
—
3,222
1.21%
Agricultural
—
1,641
—
168
1,809
2.07%
Consumer
—
—
—
—
—
0.00%
Total
$
3,667
$
8,848
$
—
$
11,837
$
24,352
0.70%
December 31, 2023
Payment Delay
Term Extension
Combination Rate
Change and Term
Extension
Combination Payment
Delay and Term
Extension
Total
Modifications
Total Class of
Financing
Receivable
Commercial real estate
$
—
$
—
$
—
$
3,547
$
3,547
0.20%
Commercial and industrial
—
1,433
—
11,492
12,925
2.16%
Residential real estate
—
—
—
12
12
0.00%
Agricultural real estate
—
858
—
1,098
1,956
1.00%
Agricultural
122
—
—
421
543
0.46%
Consumer
—
—
21
—
21
0.02%
Total
$
122
$
2,291
$
21
$
16,570
$
19,004
0.57%
At December 31, 2024, and 2023, there were $1,145 and $849 in commitments to lend additional amounts on these loans.
At modification date, the Company considers loans modified to borrowers in financial distress as loans that do not share similar
risk characteristics with collectively evaluated loans at modification date for the purposes of calculating the allowance for credit
losses. These loans will be evaluated for credit losses based on either discounted cash flows or the fair value of collateral at
modification date; however, subsequent to the modification date these loans will be evaluated for credit losses as part of the
collectively evaluated pools after a period of ongoing performance under the terms of the modified loan.
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to
understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been
modified during the twelve months ended December 31, 2024, and 2023.
December 31, 2024
30 - 59 Days
Past Due
60 - 89 Days
Past Due
Greater Than
89 days Past
Due
Total Past
Due
Commercial real estate
$
—
$
—
$
643
$
643
Commercial and industrial
393
2,967
617
3,977
Residential real estate
—
—
—
—
Agricultural real estate
—
—
—
—
Agricultural
—
—
—
—
Consumer
—
—
—
—
Total
$
393
$
2,967
$
1,260
$
4,620
December 31, 2023
30 - 59 Days
Past Due
60 - 89 Days
Past Due
Greater Than
89 days Past
Due
Total Past
Due
Commercial real estate
$
258
$
—
$
—
$
258
Commercial and industrial
—
211
—
211
Residential real estate
—
—
11
11
Agricultural real estate
—
—
—
—
Agricultural
122
—
—
122
Consumer
21
—
—
21
Total
$
401
$
211
$
11
$
623
F-39
The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial
difficulty for the twelve months ended December 31, 2024, and 2023.
December 31, 2024
Principal Forgiveness
Weighted Average
Interest Rate Reduction
Weighted Average
Term Extension in
Years
Commercial real estate
$
—
— %
0.41
Commercial and industrial
—
— %
0.70
Residential real estate
—
— %
—
Agricultural real estate
—
— %
5.16
Agricultural
—
— %
0.80
Consumer
—
— %
—
Total loans
$
—
— %
1.24
December 31, 2023
Principal Forgiveness
Weighted Average
Interest Rate Reduction
Weighted Average
Term Extension in
Years
Commercial real estate
$
—
— %
0.36
Commercial and industrial
2,254
— %
1.05
Residential real estate
—
— %
3.42
Agricultural real estate
—
— %
0.85
Agricultural
—
— %
0.58
Consumer
—
— %
2.16
Total loans
$
2,254
— %
0.81
F-40
NOTE 5 – OTHER REAL ESTATE OWNED AND OTHER REPOSSESSED ASSETS
Changes in other real estate owned and other repossessed assets for the years ended December 31, 2024 and 2023 were as
follows.
December 31, 2024
Other Real Estate
Owned
Other
Repossessed
Assets
Total
Beginning of year
$
1,833
$
380
$
2,213
Transfers in
4,478
5,454
9,932
Net (loss) gain on sales
8,688
(95)
8,593
Proceeds from sales
(9,397)
(928)
(10,325)
5,602
4,811
10,413
Additions to valuation reserve
(829)
—
(829)
Capitalized cost
—
—
—
Lease termination
—
—
—
Right-of-use asset amortization
—
—
—
Recorded investment
$
4,773
$
4,811
$
9,584
December 31, 2023
Other Real Estate
Owned
Other
Repossessed
Assets
Total
Beginning of year
$
4,409
$
46
$
4,455
Transfers in
1,086
505
1,591
Net (loss) gain on sales
(78)
(61)
(139)
Proceeds from sales
(1,874)
(110)
(1,984)
3,543
380
3,923
Additions to valuation reserve
(201)
—
(201)
Capitalized cost
562
—
562
Lease termination
(1,852)
—
(1,852)
Right-of-use asset amortization
(219)
—
(219)
Recorded investment
$
1,833
$
380
$
2,213
F-41
Expenses related to other real estate owned and other repossessed assets for the years ended December 31, 2024, 2023, and 2022
were as follows.
December 31, 2024
Other Real
Estate Owned
Other
Repossessed
Assets
Total
Net loss (gain) on sales
$
(8,688) $
95
$
(8,593)
Gain on initial valuation of collateral
(47)
—
(47)
Provision for unrealized losses
829
—
829
Operating expenses, net of rental income
169
117
286
Total
$
(7,737) $
212
$
(7,525)
December 31, 2023
Other Real
Estate Owned
Other
Repossessed
Assets
Total
Net loss (gain) on sales
$
78
$
61
$
139
Gain on initial valuation of collateral
(61)
(3)
(64)
Provision for unrealized losses
201
—
201
Operating expenses, net of rental income
324
17
341
Total
$
542
$
75
$
617
December 31, 2022
Other Real
Estate Owned
Other
Repossessed
Assets
Total
Net loss (gain) on sales
$
(260) $
(345) $
(605)
Gain on initial valuation of collateral
(162)
—
(162)
Provision for unrealized losses
502
—
502
Operating expenses, net of rental income
509
3
512
Total
$
589
$
(342) $
247
The balance of other real estate owned includes $134 of foreclosed residential real estate properties recorded as a result of
obtaining physical possession of the property at December 31, 2024, and $133 at December 31, 2023. The recorded investment of
consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was
$553 at December 31, 2024, and $1,404 at December 31, 2023. Included in the other real estate owned balance at December 31, 2024
and 2023, is $2,141 and $1,061 related to closed bank locations transferred from premises and equipment.
NOTE 6 – PREMISES AND EQUIPMENT
Major classifications of premises and equipment, stated at cost, are as follows.
2024
2023
Land
$
21,104
$
21,161
Buildings and improvements
101,513
96,204
Furniture, fixtures and equipment
34,003
30,582
156,620
147,947
Less: accumulated depreciation
(39,488)
(35,315)
Premises and equipment, net
$
117,132
$
112,632
At December 31, 2024, the Company had lease liabilities totaling $3,601 and right-of-use assets totaling $3,600 related to
operating leases. At December 31, 2023, the Company had lease liabilities totaling $3,307 and right-of-use assets totaling $3,291
related to operating leases. Lease liabilities and right-of-use assets are reflected in other liabilities and other assets.
F-42
Right-of-use asset and lease obligations by type of property are listed below.
December 31, 2024
Right-of-Use
Asset
Lease
Liability
Weighted
Average
Lease Term in
Years
Weighted
Average
Discount
Rate
Operating Leases
Land and building leases
$
3,600
$
3,601
12.5
3.29%
Total operating leases
$
3,600
$
3,601
12.5
3.29%
December 31, 2023
Right-of-Use
Asset
Lease
Liability
Weighted
Average
Lease Term in
Years
Weighted
Average
Discount
Rate
Operating leases
Land and building leases
$
3,291
$
3,307
14.8
3.00%
Total operating leases
$
3,291
$
3,307
14.8
3.00%
During 2023, the Company terminated two leases with a right-of-use asset balance of $2,051, lease liability of $2,062 and fees
paid of $184, resulting in a loss of $173.
Operating lease costs are listed below.
2024
2023
2022
Operating lease cost
$
597
$
745
$
844
Short-term lease cost
—
—
—
Variable lease cost
79
110
59
Total operating lease cost
$
676
$
855
$
903
There were no sales and leaseback transactions, leverage leases, lease transactions with related parties or leases that had not yet
commenced during the periods ended December 31, 2024 or 2023.
A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease
liability as of December 31, 2024, is listed below.
Lease payments
Due in one year or less
$
578
Due after one year through two years
623
Due after two years through three years
561
Due after three years through four years
435
Due after four years through five years
243
Thereafter
1,993
Total undiscounted cash flows
4,433
Discount on cash flows
(832)
Total
$
3,601
NOTE 7 – GOODWILL AND CORE DEPOSIT INTANGIBLES
The assets and liabilities acquired in business combinations are recorded at their estimated fair values at the acquisition date.
The excess of the purchase price over the estimated fair value of the net assets for tax free acquisitions is recorded as goodwill, none
of which is deductible for tax purposes. The excess of the purchase price over the estimated fair value of the net assets for taxable
acquisitions is recorded as goodwill and is deductible for tax purposes.
As of December 31, 2024, and December 31, 2023, management conducted a qualitative evaluation of current economic
conditions, Company performance, stock price and other pertinent factors, finally concluding that no goodwill impairment is
warranted at this time.
F-43
The carrying basis of goodwill and core deposit intangibles as of and for the years ended December 31, 2024 and 2023, were as
follows.
Goodwill
Core Deposit
Balance as of January 1, 2023
$
53,101
$
10,596
Sold in acquisition
—
—
Amortization
—
(3,374)
Balance as of December 31, 2023
53,101
7,222
Acquired in acquisition
—
12,036
Amortization
—
(4,289)
Balance as of December 31, 2024
$
53,101
$
14,969
Estimated core deposit intangibles amortization expense for each of the following five years and thereafter is listed in the
following table.
Expensed in one year or less
$
3,794
Expensed after one year through two years
2,942
Expensed after two years through three years
2,244
Expensed after three years through four years
1,638
Expensed after four years through five years
1,259
Thereafter
3,092
Total
$
14,969
NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS
Interest Rate Swaps Designated as Fair Value Hedges
The Company periodically enters into interest rate swaps to hedge the fair value of certain commercial real estate loans. These
transactions are designated as fair value hedges. In this type of transaction, the Company typically receives from the counterparty a
variable-rate cash flow based on the one-month London Interbank Offered Rate (LIBOR) or one-month SOFR plus a spread to the
index and pays a fixed-rate cash flow equal to the customer loan rate. At December 31, 2024, the portfolio of interest rate swaps had a
weighted average maturity of 5.9 years, a weighted average pay rate of 4.60% and a weighted average rate received of 7.70%. At
December 31, 2023, the portfolio of interest rate swaps had a weighted average maturity of 6.9 years, a weighted average pay rate of
4.60% and a weighted average rate received of 8.50%.
Interest Rate Swaps Designated as Cash Flow Hedges
The Company has entered into cash flow hedges to hedge future cash flows related to subordinated notes and Federal Home
Loan Bank advance interest expense and prime rate adjustable rate loans interest income. These agreements are designated as cash
flow hedges and are marked to market through other comprehensive income.
The following table lists the cash flow hedges at December 31, 2024 and 2023.
December 31, 2024
December 31, 2023
Weighted
average
Maturity in
years
Weighted
average pay
rate
Weighted
average rate
received
Weighted
average
Maturity in
years
Weighted
average pay
rate
Weighted
average rate
received
Subordinated note hedges
10.7
2.81%
7.01%
11.7
2.80%
7.43%
Variable rate FHLB advance
hedges
1.2
3.58%
4.42%
2.2
3.58%
5.35%
Prime based receivable loan
hedges
—
—%
—%
0.2
8.50%
5.60%
Total cash flow hedges
1.9
3.54%
4.60%
1.4
6.43%
5.56%
Stand-Alone Derivatives
The Company periodically enters into interest rate swaps with our borrowers and simultaneously enters into swaps with a
counterparty with offsetting terms for the purpose of providing our borrowers long-term fixed rate loans. Neither swap is designated
as a hedge and both are marked to market through earnings. Through prior acquisitions, the Company obtained swap agreements with
counterparties designed to offset the economic impact of fixed-rate loans. These swaps did not have corresponding agreements with
F-44
the borrowers. At December 31, 2024, this portfolio of interest rate swaps had a weighted average maturity of 5.6 years, weighed
average pay rate of 6.72% and a weighted average rate received of 6.85%. At December 31, 2023, this portfolio of interest rate swaps
had a weighted average maturity of 4.6 years, a weighted average pay rate of 8.31% and a weighted average rate received of 8.46%.
Reconciliation of Derivative Fair Values and Gains/(Losses)
The notional amount of a derivative contract is a factor in determining periodic interest payments or cash flows received or paid.
The notional amount of derivatives serves as a level of involvement in various types of derivatives. The notional amount does not
represent the Company’s overall exposure to credit or market risk, generally, the exposure is significantly smaller.
The following table shows the notional balances and fair values (including net accrued interest) of the derivatives outstanding by
derivative type at December 31, 2024, and December 31, 2023.
December 31, 2024
December 31, 2023
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Notional
Amount
Derivative
Assets
Derivative
Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps
$
14,503
$
1,465
$
—
$
15,461
$
1,580
$
—
Derivatives designated as cash flow hedges:
Interest rate swaps
107,500
2,753
—
257,500
1,976
631
Total derivatives designated as hedging relationships
122,003
4,218
—
272,961
3,556
631
Derivatives not designated as hedging instruments:
Interest rate swaps
143,831
3,837
3,546
180,911
3,446
3,025
Total derivatives not designated as hedging
instruments
143,831
3,837
3,546
180,911
3,446
3,025
Total
$ 265,834
8,055
3,546
$ 453,872
7,002
3,656
Cash collateral
—
7,270
—
5,952
Netting adjustments
(7,173)
(7,173)
(6,406)
(6,406)
Net amount presented in balance sheet
$
882
$
3,643
$
596
$
3,202
The table below lists designated and qualifying hedged items in fair value hedges at December 31, 2024, and December 31,
2023.
December 31, 2024
December 31, 2023
Carrying
Amount
Hedging Fair
Value
Adjustment
Fair Value
Adjustments
on
Discontinued
Hedges
Carrying
Amount
Hedging Fair
Value
Adjustment
Fair Value
Adjustments
on
Discontinued
Hedges
Commercial real estate loans
$
14,985
$
(1,658)
$
(399)
$
15,795
$
(1,826)
$
(446)
Total
$
14,985
$
(1,658)
$
(399)
$
15,795
$
(1,826)
$
(446)
F-45
The following table shows net gains or losses on derivatives and hedging activities for the years ended December 31, 2024,
2023, and 2022.
2024
2023
2022
Derivatives designated as hedging instruments:
Interest rate swaps
$
18
$
(17) $
150
Total net gains (losses) related to derivatives designated
as hedging instruments
18
(17)
150
Derivatives designated as cash flow hedges:
Interest rate swaps
—
—
—
Total net gains (losses) related to derivatives designated
as cash flow hedges
—
—
—
Total net gain (loss) related to hedging relationships
18
(17)
150
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps
314
227
1,729
Total net gains (losses) related to derivatives not designated
as hedging instruments
314
227
1,729
Net gains (losses) on derivatives and hedging activities
$
332
$
210
$
1,879
The following table shows the recorded net gains or losses on derivatives and the related hedged items in fair value hedging
relationships and the impact of those derivatives on the Company’s net interest income for the years ended December 31, 2024, 2023,
and 2022.
December 31, 2024
Gain/(Loss)
on
Derivatives
Gain/(Loss)
on Hedged
Items
Net Fair
Value
Hedge
Gain/(Loss)
Effect of
Derivatives on
Net Interest
Income
Commercial real estate loans
$
(103) $
121
$
18
$
612
Total
$
(103) $
121
$
18
$
612
December 31, 2023
Gain/(Loss)
on
Derivatives
Gain/(Loss)
on Hedged
Items
Net Fair
Value
Hedge
Gain/(Loss)
Effect of
Derivatives on
Net Interest
Income
Commercial real estate loans
$
(508) $
525
$
17
$
717
Total
$
(508) $
525
$
17
$
717
December 31, 2022
Gain/(Loss)
on
Derivatives
Gain/(Loss)
on Hedged
Items
Net Fair
Value
Hedge
Gain/(Loss)
Effect of
Derivatives on
Net Interest
Income
Commercial real estate loans
$
2,747
$
(2,597) $
150
$
(246)
Total
$
2,747
$
(2,597) $
150
$
(246)
The following table shows the recorded net gains or losses on derivatives and the related hedged items in cash flow hedging
relationships and the impact of those derivatives on the Company’s net interest income for the years ended December 31, 2024, 2023
and 2022.
F-46
December 31, 2024
Gain/(Loss)
on
Derivatives
Gain/(Loss)
Recorded in
Accumulated
Other
Comprehensive
Income
Effect of
Derivatives on
Net Interest
Income
Prime based receivable loan hedges
$
1,157
$
876
$
(1,267)
FHLB Advance hedges
(116)
(86)
1,580
Subordinated note hedges
193
152
340
Total
$
1,234
$
942
$
653
December 31, 2023
Gain/(Loss)
on
Derivatives
Gain/(Loss)
Recorded in
Accumulated
Other
Comprehensive
Income
Effect of
Derivatives on
Net Interest
Income
Prime based receivable loan hedges
$
3,164
$
2,376
$
(3,942)
FHLB advance hedges
684
517
1,246
Subordinated note hedges
(146)
(105)
246
Total
$
3,702
$
2,788
$
(2,450)
December 31, 2022
Gain/(Loss)
on
Derivatives
Gain/(Loss)
Recorded in
Accumulated
Other
Comprehensive
Income
Effect of
Derivatives on
Net Interest
Income
Prime based receivable loan hedges
$
(4,323)
$
(3,252)
$
217
FHLB advance hedges
—
—
—
Subordinated note hedges
1,518
1,141
72
Total
$
(2,805)
$
(2,111)
$
289
NOTE 9 – DEPOSITS
Time deposits that met or exceeded the FDIC insurance limit of $250 totaled $335,565 and $196,767 as of December 31, 2024
and 2023.
At December 31, 2024 and 2023, Insured Cash Sweep (“ICS”) reciprocal demand deposits of $469,551 and $382,613 were
included in the Company’s interest bearing deposits. Also included in savings and money market deposits are $100,596 and
$230,750 of ICS reciprocal money market deposits. ICS allows Equity Bank to break large deposits into smaller amounts and place
them in a network of other ICS banks to ensure FDIC coverage on the entire deposit.
At December 31, 2024 and 2023, Certificate of Deposit Account Registry Services (“CDARS”) deposits of $35,393 and
$21,841 were included in the Company’s time deposit balance. Of the CDARS deposits at December 31, 2024 and 2023, $35,393 and
$21,841 were reciprocal customer funds placed in the CDARS program. CDARS allows Equity Bank to break large deposits into
smaller amounts and place them in a network of other CDARS banks to ensure that FDIC insurance coverage is gained on the entire
deposit. Reciprocal deposits are not considered brokered deposits as long as the aggregate balance is less than the lesser of 20% of
total liabilities or $5 billion and Equity Bank is well capitalized and well rated. All non-reciprocal deposits and reciprocal deposits in
excess of regulatory limits are considered brokered deposits.
The following table lists reciprocal and brokered deposits included in total deposits categorized by type.
F-47
December 31, 2024
December 31, 2023
Interest bearing demand
Reciprocal
$
469,551
$
382,613
Non-reciprocal brokered
75,115
1
Total interest-bearing demand
544,666
382,614
Savings and money market
Reciprocal
100,596
230,750
Total saving and money market
100,596
230,750
Time
Reciprocal
35,393
21,841
Non-reciprocal brokered
49,998
199,940
Total time
85,391
221,781
Total reciprocal and brokered deposits
$
730,653
$
835,145
At December 31, 2024, the scheduled maturities of time deposits are as follows.
Due in one year or less
$
630,199
Due after one year through two years
80,170
Due after two years through three years
20,175
Due after three years through four years
2,507
Due after four years through five years
3,158
Thereafter
318
Total
$
736,527
NOTE 10 – BORROWINGS
Federal Funds Purchased and Retail Repurchase Agreements
Federal funds purchased and retail repurchase agreements included the following at December 31, 2024 and 2023.
2024
2023
Federal funds purchased
$
—
$
—
Retail repurchase agreements
$
37,247
$
43,582
Securities sold under agreements to repurchase (retail repurchase agreements) consist of obligations of the Company to other
parties. The obligations are secured by residential mortgage-backed securities held by the Company with a fair value of $45,249 and
$47,282 at December 31, 2024 and 2023. The agreements are on a day-to-day basis and can be terminated on demand.
The following table presents the borrowing usage and interest rate information for federal funds purchased and retail repurchase
agreements at and for the years ended December 31, 2024 and 2023.
2024
2023
Average daily balance during the period
$
39,791
$
43,469
Average interest rate during the period
1.89%
1.43%
Maximum month-end balance during the period
$
47,312
$
46,798
Weighted average interest rate at period-end
1.74%
1.69%
Federal Home Loan Bank advances
The Federal Home Loan Bank advances as of December 31, 2024, and 2023 were as follows.
2024
2023
Federal Home Loan Bank line of credit advances
$
78,073 $
—
Federal Home Loan Bank fixed-rate term advances
100,000
100,000
Total Federal Home Loan Bank advances
$
178,073 $
100,000
F-48
At December 31, 2024 and 2023, the Company had undisbursed advance commitments (letters of credit) with the Federal Home
Loan Bank of $118,326 and $39,922. These letters of credit were obtained in lieu of pledging securities to secure public fund deposits
that are over the FDIC insurance limit.
The advances, Mortgage Partnership Finance credit enhancement obligations and letters of credit were collateralized by certain
qualifying loans of $885,128 and securities of $79,417 for a total of $964,545 at December 31, 2024, and qualifying loans of $846,601
and securities of $65,209 for a total of $911,810 at December 31, 2023. Based on this collateral and the Company’s holdings of
Federal Home Loan Bank stock, the Company was eligible to borrow an additional $667,092 and $770,711 at December 31, 2024 and
2023.
Federal Reserve Bank Borrowings
At December 31, 2024 and 2023, the Company had a borrowing capacity of $648,183 and $471,569, for which the Company has
pledged loans with an outstanding balance of $852,957 and $394,810 and securities with a fair value of $9,070 and $155,934. At
December 31, 2023 there was $140,000 in borrowings secured from this facility under the Federal Reserve's Bank Term Funding
Program with a rate of 4.38% and a maturity date of March 22, 2024. The Company repaid this borrowing at maturity and there were
no outstanding borrowings at December 31, 2024.
Bank Stock Loan
The Company entered into an agreement with an unaffiliated financial institution secured by the Company’s stock in Equity
Bank. The loan had a maturity date of August 15, 2021, and was extended to February 11, 2022. Each draw of funds on the facility
will create a separate note that is repayable over a term of five years. Each note will bear interest at the greater of a variable interest
rate equal to the prime rate published in the “Money Rates” section of The Wall Street Journal (or any generally recognized
successor), floating daily, or a floor of 3.50%. Accrued interest and principal payments will be due quarterly with one final payment
of unpaid principal and interest due at the end of the five-year term of each separate note. The Company is also required to pay an
unused commitment fee in an amount equal to 20 basis points per annum on the unused portion of the maximum borrowing facility.
The loan was renewed and amended on February 11, 2022, with the same terms as the previous renewal, a new maturity date of
February 11, 2023 and a new floor of 3.25%. With this amendment, the maximum borrowing amount was decreased from $40,000 to
$25,000.
The loan was renewed and amended on February 10, 2023, with the same terms as the previous renewal and a new maturity date
of February 10, 2024.
The loan was renewed and amended on February 10, 2024, with the same terms as the previous renewal and a new maturity date
of February 10, 2025. The maximum borrowing amount at December 31, 2024, was $25,000.
There were no bank stock loan advances as of December 31, 2024, or December 31, 2023.
The terms of the borrowing facility require the Company and Equity Bank to maintain minimum capital ratios and other
covenants. For the twelve months ended December 31, 2024, the Company was in compliance with all terms of the borrowing facility.
For the twelve months ended December 31, 2023, the Company failed to satisfy the return on assets ratio covenant set forth in the
terms of the borrowing facility.
NOTE 11 – SUBORDINATED DEBT
The following table lists outstanding subordinated debt as of December 31, 2024 and 2023.
2024
2023
Subordinated debentures
$
23,946
$
23,594
Subordinated notes
73,531
73,327
Total
$
97,477
$
96,921
Subordinated Debentures
In conjunction with the 2012 acquisition of First Community Bancshares, Inc. (FCB), the Company assumed certain
subordinated debentures owed to special purpose unconsolidated subsidiaries that are controlled by the Company, FCB Capital Trust
II and FCB Capital Trust III, (“CTII” and “CTIII”, respectively).
On March 24, 2005, CTII, an unconsolidated subsidiary of the Company, issued $10,000 of variable rate trust preferred
securities, all of which are outstanding at December 31, 2024 and 2023. The trust preferred securities issued by CTII were initially
issued to accrue and pay distributions quarterly at three-month LIBOR plus 2.00%; however, on July 12, 2023, after the LIBOR
F-49
transition it will now accrue and pay distributions quarterly at three-month CME term SOFR plus a tenor spread adjustment of 0.26%
plus 2.00% on the stated liquidation amount of the trust preferred securities. As an integral part of the acquisition of FCB, the
Company has guaranteed fully and unconditionally all of the obligations of CTII. The guaranty covers the quarterly distributions and
payments on liquidation or redemption of the trust preferred securities. These trust preferred securities are mandatorily redeemable
upon maturity on April 15, 2035, or upon earlier redemption. The Company has the right to redeem the trust preferred securities in
whole or in part, on or after April 15, 2015, at a redemption price specified in the indenture plus any accrued but unpaid interest to the
redemption date. The proceeds from the sale of the trust preferred securities and the issuance of $310 in common securities to FCB
were used by CTII to purchase $10,310 of floating rate subordinated debentures of FCB which have the same payment terms as the
trust preferred securities.
On March 30, 2007, CTIII, an unconsolidated subsidiary of the Company, issued $5,000 of variable rate trust preferred
securities, all of which are outstanding at December 31, 2023 and 2022. The trust preferred securities issued by CTIII were initially
issued to accrue and pay distributions quarterly at three-month LIBOR plus 1.89%; however, on September 15, 2023, after the LIBOR
transition it will now accrue and pay distributions quarterly at three-month CME term SOFR plus a tenor spread adjustment of 0.26%
plus 1.89% on the stated liquidation amount of the trust preferred securities. As an integral part of the acquisition of FCB, the
Company has guaranteed fully and unconditionally all of the obligations of CTIII. The guaranty covers the quarterly distributions and
payments on liquidation or redemption of the trust preferred securities. These trust preferred securities are mandatorily redeemable
upon maturity on June 15, 2037, or upon earlier redemption. The Company has the right to redeem the trust preferred securities in
whole or in part at a redemption price specified in the indenture plus any accrued but unpaid interest to the redemption date. The
proceeds from the sale of the trust preferred securities and the issuance of $155 in common securities to FCB were used by CTIII to
purchase $5,155 of floating rate subordinated debentures of FCB which have the same payment terms as the trust preferred securities.
In conjunction with the 2016 acquisition of Community First Bancshares, Inc. (CFBI), the Company assumed certain
subordinated debentures owed to a special purpose unconsolidated subsidiary, Community First (AR) Statutory Trust I, (“CFSTI”).
The trust preferred securities issued by CFSTI were initially issued to accrue and pay distributions quarterly at three-month LIBOR
plus 3.25%; however, on September 26, 2023, after the LIBOR transition it will now accrue and pay distributions quarterly at three-
month CME term SOFR plus a tenor spread adjustment of 0.26% plus 3.25% on the stated liquidation amount of the trust preferred
securities. These trust preferred securities are mandatorily redeemable upon maturity on December 26, 2032, or upon earlier
redemption.
The common securities issued to the Company by the trusts possess sole voting rights with respect to matters involving those
entities. The Company has the right to defer the payment of interest on all of its outstanding trust preferred securities. The Company
has the right to declare such a deferral for up to 20 consecutive quarterly periods and deferral may only be declared as long as the
Company is not then in default under the provisions of the Amended and Restated Trust Agreements. During the deferral period,
interest on the indebtedness continues to accrue and the unpaid interest is compounded. As long as the deferral period continues, the
Company is prohibited from: (i) declaring or paying any dividend on any of its capital stock, which would include both its common
stock and the outstanding preferred stock issued to the Treasury, or (ii) making any payment on any debt security that is ranked
equally with or junior to the securities issued by the trust.
In conjunction with the 2021 acquisition of ASBI, the Company assumed certain subordinated debentures owed to a special
purpose unconsolidated subsidiary, American State Bank Statutory Trust I, (“ASBSTI”). The trust preferred securities issued by
ASBSTI were initially issued to accrue and pay distributions quarterly at three-month LIBOR plus 1.80%; however, on September 15,
2023, after the LIBOR transition it will now accrue and pay distributions quarterly at three-month CME term SOFR plus a tenor
spread adjustment of .26% plus 1.80% on the stated liquidation amount of the trust preferred securities. These trust preferred
securities are mandatorily redeemable upon maturity on September 15, 2035, or upon earlier redemption.
On September 15, 2005, ASBSTI, an unconsolidated subsidiary of the Company, issued $7,500 of variable rate trust preferred
securities, all of which are outstanding at December 31, 2023, and December 31, 2022. As an integral part of the acquisition of ASBI,
the Company has guaranteed fully and unconditionally all of the obligations of ASBSTI. The guaranty covers the quarterly
distributions and payments on liquidation or redemption of the trust preferred securities. These trust preferred securities are
mandatorily redeemable upon maturity on September 15, 2035, or upon earlier redemption. The Company has the right to redeem the
trust preferred securities in whole or in part at a redemption price specified in the indenture plus any accrued but unpaid interest to the
redemption date. The proceeds from the sale of the trust preferred securities and the issuance of $232 in common securities to ASBI
were used by ASBSTI to purchase $7,732 of floating rate subordinated debentures of ASBI which have the same payment terms as the
trust preferred securities.
The Company recorded debentures at an estimated fair value of $8,270, $4,187 and $7,732 as part of the acquisitions of
FCB,CFBI and ASBSTI. The initial fair value adjustments will be amortized against earnings on a prospective basis.
F-50
At December 31, 2024 and 2023, the contractual balance and the unamortized fair value adjustments were as shown below.
2024
2023
Weighted
Average
Rate
Weighted
Average
Term in
Years
Weighted
Average
Rate
Weighted
Average
Term in
Years
CTII subordinated debentures
$
10,310
6.92%
10.3
$
10,310
7.66%
11.3
CTIII subordinated debentures
5,155
6.51%
12.5
5,155
7.54%
13.5
CFSTI subordinated debentures
5,155
7.84%
8.0
5,155
8.87%
9.0
ASBII subordinated debentures
7,732
6.42%
10.7
7,732
7.45%
11.7
Total contractual balance
28,352
28,352
Fair market value adjustments
(4,406)
(4,758)
Total subordinated debentures
$
23,946
$
23,594
Subordinated debentures are included in Tier 1 capital for purposes of determining the Company’s compliance with regulatory
capital requirements.
Subordinated Notes
On June 29, 2020, the Company entered into Subordinated Note Purchase Agreements with certain qualified institutional buyers
and institutional accredited investors pursuant to which the Company issued and sold $42,000 in aggregate principal amount of its
7.00% Fixed-to-Floating Rate Subordinated Notes due 2030. The notes were issued under an Indenture, dated as of June 29, 2020 (the
“Indenture”), by and between the Company and UMB Bank, N.A., as trustee. The notes will mature on June 30, 2030. From June 29,
2020, through June 29, 2025, the Company will pay interest on the notes semi-annually in arrears on June 30 and December 30 of
each year, commencing on December 30, 2020, at a fixed interest rate of 7.00%. Beginning June 30, 2025, the notes convert to a
floating interest rate, to be reset quarterly, equal to the then-current Three-Month Term SOFR, as defined in the Indenture, plus 688
basis points. Interest payments during the floating-rate period will be paid quarterly in arrears on March 30, June 30, September 30
and December 30 of each year, commencing on September 30, 2025. On July 23, 2020, the Company closed on an additional $33,000
of subordinated notes with the same terms as the June 29, 2020, issue.
Subordinated notes as of December 31, 2024, and December 31, 2023, are listed below.
December 31, 2024
December 31, 2023
Weighted
Average
Rate
Weighted
Average
Term in
Years
Weighted
Average
Rate
Weighted
Average
Term in
Years
Subordinated notes
$
75,000
7.00%
5.5
$
75,000
7.00%
6.5
Total principal outstanding
75,000
75,000
Debt issuance cost
(1,469)
(1,673)
Total subordinated notes
$
73,531
$
73,327
Subordinated notes are included in Tier 2 capital for purposes of determining the Company’s compliance with regulatory capital
requirements.
Future Principal Repayments
Future principal repayments of the December 31, 2024, outstanding balances for all borrowings are as follows.
Retail
Repurchase
Agreements
FHLB
Advances
Subordinated
Debentures
Subordinated
Notes
FRB
Borrowings
Total
Due in one year or less
$
37,246 $178,073 $
— $
— $
— $215,319
Due after one year through two years
—
—
—
—
—
—
Due after two years through three years
—
—
—
—
—
—
Due after three years through four years
—
—
—
—
—
—
Due after four years through five years
—
—
—
—
—
—
Thereafter
—
—
23,946
73,531
—
97,477
Total
$
37,246 $178,073 $
23,946 $
73,531 $
— $312,796
F-51
NOTE 12 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company’s articles of incorporation provide for the issuance of shares of preferred stock. There were no shares of
preferred stock outstanding at December 31, 2024, 2023, or 2022.
Common stock
The Company’s articles of incorporation provide for the issuance of 45,000,000 shares of Class A voting common stock (“Class
A common stock”) and 5,000,000 shares of Class B non-voting common stock (“Class B common stock”), both of which have a par
value of $0.01 per share.
On December 2, 2024, the Company entered into an underwriting agreement in connection with the registered private offering
of 1,797,600 shares of the Company's Class A common stock at a price of $44.50 per share, including the underwriters' option to
purchase 269,640 additional shares of Class A common stock, with an underwriter discount price of $27.44 per share. On December 4,
2024, the company issued and sold 2,067,240 shares of its Class A common stock pursuant to the underwriting agreement, which
included the exercise in full of the underwriters' option to purchase additional shares of Class A common stock. The net proceeds to
the Company from the common stock offering after deducting underwriting discounts and offering expenses payable by the Company,
were approximately $87.4 million.
At December 31, 2024 and 2023, the following table presents shares that were issued and were held in treasury or were
outstanding.
2024
2023
Class A common stock – issued
22,807,163
20,460,615
Class A common stock – held in treasury
(5,379,537)
(5,016,964)
Class A common stock – outstanding
17,427,626
15,443,651
Class B common stock – issued
234,903
234,903
Class B common stock – held in treasury
(234,903)
(234,903)
Class B common stock – outstanding
—
—
Treasury stock is stated at cost, determined by the first-in, first-out method.
In September of 2021, the Company’s Board of Directors authorized an additional repurchase of up to 1,000,000 shares of the
Company’s outstanding common stock, from time to time, beginning October 29, 2021, and concluding October 28, 2022. Under this
program, during the year ended December 31, 2022 and 2021, the Company repurchased a total of 1,000,000 shares of the Company’s
outstanding common stock at an average price paid of $32.11 per share.
In September of 2022, the Company’s Board of Directors authorized an additional repurchase of up to 1,000,000 shares of the
Company’s outstanding common stock, from time to time, beginning October 1, 2022, and concluding September 30, 2023. Under this
program, during the year ended December 31, 2023 and 2022, the company repurchased a total of 832,893 shares of the Company’s
outstanding common stock at an average price paid of $27.89 per share.
In July of 2023, the Company’s Board of Directors authorized an additional repurchase of up to 1,000,000 shares of the
Company’s outstanding common stock, from time to time, beginning October 1, 2023, and concluding September 30, 2024. The
repurchase program does not obligate the Company to acquire a specific dollar amount or number of shares and it could be extended,
modified or discontinued at any time without notice. Under this program, during the years ended December 2024 and 2023, the
company repurchased a total of 362,573 shares of the Company's outstanding common stock at an average price paid of $32.71 per
share. At September 30, 2024 there were 637,427 shares remaining under the program that expired.
In September of 2024, the Company's Board of Directors approved a share repurchase plan for up to 1,000,0000 shares of
outstanding common stock beginning on October 1, 2024, and concluding on September 30, 2025. The repurchase program does not
obligate the Company to acquire a specific dollar amount or number of shares and it could be extended, modified or discontinued at
any time without notice. Non-objection from the Federal Reserve Bank of Kansas City related to this repurchase plan was received
October 7, 2024. No shares were repurchased under this program during 2024.
Accumulated Other Comprehensive Income (Loss)
For the years ended December 31, 2024 and December 31, 2023, accumulated other comprehensive income consisted of (i) the
after-tax effect of unrealized gains (losses) on available-for-sale securities and (ii) unrealized gains (losses) on cash flow hedges.
F-52
During 2024, 2023, and 2022, there were $(267), $(52,013) and $79 of gains/(losses) reclassified from accumulated other
comprehensive income to net gains on sales of and settlement of securities within the consolidated statements of income.
Components of accumulated other comprehensive income as of December 31, 2024 and 2023, were as follows.
Available
-for-Sale
Securities
Cash Flow
Hedges
Accumulated
Other
Comprehensive
Income
December 31, 2024
Net unrealized or unamortized gains (losses)
$
(74,797)
$
2,073
$
(72,724)
Tax effect
18,041
(498)
17,543
$
(56,756)
$
1,575
$
(55,181)
December 31, 2023
Net unrealized or unamortized gains (losses)
$
(77,548)
$
839
$
(76,709)
Tax effect
18,995
(206)
18,789
$
(58,553)
$
633
$
(57,920)
NOTE 13 – INCOME TAXES
Income tax expense for the year ended December 31, 2024, 2023, and 2022 is listed in the following table
2024
2023
2022
Current income tax expense
Federal
$
13,847
$
(3,072) $
6,679
State
1,017
101
3,321
Total current income tax expense
14,864
(2,971)
10,000
Deferred income tax expense (benefit)
Federal
2,703
(2,349)
2,197
State
(1,907)
(86)
397
Total deferred income tax expense (benefit)
796
(2,435)
2,594
Total income tax expense
$
15,660
$
(5,406) $
12,594
A reconciliation of income tax expense at the U.S. federal statutory rate (21% in 2024, 2023, and 2022) to the Company’s actual
income tax expense for the year ended December 31, 2024, 2023, and 2022 is shown below.
2024
2023
2022
Computed at the statutory rate
$
16,439
$
507
$
14,759
Increase (decrease) resulting from:
State and local taxes, net of federal benefit
364
(517)
2,665
Tax-exempt interest
(332)
(412)
(749)
Non-taxable life insurance income
(1,043)
(852)
(654)
Non-deductible expenses
426
814
258
Share-based payments
(477)
2
(200)
Federal tax credits
(92)
(3,715)
(4,330)
Investments reported under proportional amortization
method
(1,441)
(1,253)
—
Bargain purchase gain
(448)
—
—
Change in valuation allowance
(1,410)
98
354
Other
316
171
491
Non-deductible transactions costs
56
62
—
Captive insurance company
(273)
(311)
—
BOLI surrender
3,575
—
—
Income tax expense
$
15,660
$
(5,406) $
12,594
The increase in income tax expense when comparing December 31, 2023 to December 31, 2024 is the result of non-recurring
reductions in pre-tax income due to losses generated in the sale of bonds in the prior year, current year gains and related tax penalties
on the surrender of BOLI, and current year reductions in benefits reported under federal tax credits as new investments were reported
F-53
under ASC 740-323 using the Proportional Amortization Method ("PAM"), offset by a reduction in income tax expense resulting from
current year non-taxable bargain purchase gains and the reversal of a deferred tax asset valuation allowance for the expected current
and future utilization of state net operating loss carryforwards. Under PAM, an election is made for qualifying investments on a tax
credit by program basis and the cost of the investment is amortized through income tax expense or benefit as an offset to the non-
refundable income tax credits and other income tax benefits that it received from the project entity.
Components of deferred tax assets and liabilities at December 31, 2024 and 2023 are shown in the table below.
2024
2023
Deferred tax assets
Allowance for credit losses
$
10,812
$
11,075
Tax credit carryforwards
635
635
Goodwill amortization
1,952
2,311
Accrued compensation
2,270
1,850
Net operating loss and attribute carryforwards
3,473
4,763
Net unrealized (gains) losses on securities and cash flow
hedges
17,544
18,789
Other real estate owned
661
475
Acquired loans fair market value adjustments
81
—
Deferred Revenue
209
336
Acquired securities retained
1,114
683
Other
650
542
Gross deferred tax assets
39,401
41,459
Deferred tax liabilities
Assumed debt fair market value adjustments
1,061
1,166
Depreciation
5,222
5,241
Federal Home Loan Bank stock dividends
121
15
Core deposit intangibles
2,644
662
Acquired loans fair market value adjustments
—
842
Prepaid expenses
684
658
Other
841
485
Gross deferred tax liabilities
10,573
9,069
Valuation allowance
(852)
(2,262)
Net deferred tax asset (liability)
$
27,976
$
30,128
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities
and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Federal net
operating losses and capital losses generated in 2023 were fully utilized at December 31, 2024. Acquired federal tax credits totaling
$635 at December 31, 2024, will expire between 2031 and 2034. The utilization of these tax credit carryforwards is not expected to be
limited by Internal Revenue Code (“IRC”) sections 382 and 383.
The Company and its subsidiaries are subject to U.S. federal income tax as well as state income tax in multiple jurisdictions.
The company utilized a portion of state net operating losses generated in previous periods. These net operating losses (excluding the
state of Kansas) do not have a valuation allowance as they are expected to be utilized prior to their expiration which varies by state
ranging from December 31, 2034, to December 31, 2043. Commercial banks are not allowed to file consolidated Kansas returns with
non-bank group members. The state of Kansas allows net operating losses incurred for tax years beginning after December 31, 2017,
to be carried forward indefinitely while those generated prior to this can be carried forward ten years. The Company utilized
$11,008 of Kansas net operating loss for the year ended December 31, 2024. At the end of the period, the Company had unused
Kansas net operating loss carryforwards of approximately $48,180 generated through operations and $12,090 acquired through
acquisitions. These net operating losses have a valuation allowance of $16,591 recorded against them and expire between 2026 and
2027 for those incurred for tax years beginning before December 31, 2017, with the remaining carried forward indefinitely.
F-54
The valuation allowance for deferred tax assets as of December 31, 2023, and December 31, 2024 was $2,262 and $852
respectively. The valuation allowance at each date was primarily related to Kansas state net operating recognized for financial
reporting purposes. In establishing a valuation allowance, management considers whether it is more likely than not that some or all
the deferred tax assets will not be realized. Based on this analysis, certain deferred tax assets have a valuation allowance recorded
against them resulting in a zero carrying value. The ultimate realization of deferred tax assets depends on the generation of future
taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal
of deferred tax liabilities (including the effect in available carryback and carryforward periods), projected taxable income, and tax-
planning strategies in making this assessment. For the year ending December 31, 2024, the Company recorded a net valuation
allowance release of $1,410 as a result of management’s reassessment of the amount of net operating loss deferred tax assets that are
more likely than not to be realized.
There are no material unrecognized tax benefits for the years ended December 31, 2024 and 2023. The Company does not
expect the total amount of unrecognized tax benefits to significantly increase or decrease in the next twelve months.
The Company is generally no longer subject to U.S. federal, state and local tax examinations for years before 2020. There are
currently no examinations open at the federal or state level.
NOTE 14 – REGULATORY MATTERS
Banks and bank holding companies are subject to regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets,
liabilities and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are
also subject to qualitative judgments by regulators. Failure to meet capital requirements can initiate regulatory action. Regulatory
capital rules require banks to maintain a Common Equity Tier 1 capital ratio of 6.5%, a total Tier 1 capital ratio of 8%, a total capital
ratio of 10% and a leverage ratio of 5% to be deemed “well capitalized” for purposes of certain rules and prompt corrective action
requirements. The risk-based ratios include a “capital conservation buffer” of 2.5%. An institution is subject to limitations on certain
activities, including payment of dividends, share repurchases and discretionary bonuses to executive officers, if its capital level is
below the buffer amount. Management believes as of December 31, 2024, the Company and Bank meet all capital adequacy
requirements to which they are subject.
Prompt corrective action regulations provide five classifications: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized and critically undercapitalized, although these terms are not used to represent overall financial
condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital
distributions are limited, as are asset growth and acquisitions and capital restoration plans are required.
As of December 31, 2024, the most recent notifications from the federal regulatory agencies categorized Equity Bank as well
capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, Equity Bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed Equity Bank’s category.
F-55
The Company’s and Equity Bank’s capital amounts and ratios at December 31, 2024 and 2023, are presented in the tables
below. Ratios provided for Equity Bancshares, Inc. represent the ratios of the Company on a consolidated basis.
Actual
Minimum Required for
Capital Adequacy
Under Basel III
To Be Well
Capitalized Under
Prompt Corrective
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2024
Total capital to risk weighted assets
Equity Bancshares, Inc.
$
720,736
18.07% $
418,716
10.50%$
N/A
N/A
Equity Bank
607,579
15.27%
417,722
10.50%
397,830
10.00%
Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.
602,496
15.11%
338,961
8.50%
N/A
N/A
Equity Bank
562,870
14.15%
338,156
8.50%
318,264
8.00%
Common equity Tier 1 capital to risk
weighted assets
Equity Bancshares, Inc.
578,550
14.51%
279,144
7.00%
N/A
N/A
Equity Bank
562,870
14.15%
278,481
7.00%
258,590
6.50%
Tier 1 leverage to average assets
Equity Bancshares, Inc.
602,496
11.67%
206,442
4.00%
N/A
N/A
Equity Bank
562,870
10.93%
206,000
4.00%
257,500
5.00%
Actual
Minimum Required for
Capital Adequacy
Under Basel III
To Be Well
Capitalized Under
Prompt Corrective
Provisions
Amount
Ratio
Amount
Ratio
Amount
Ratio
December 31, 2023
Total capital to risk weighted assets
Equity Bancshares, Inc.
$
589,131
15.48% $
399,729
10.50%$
N/A
N/A
Equity Bank
571,938
15.05%
399,006
10.50%
380,006
10.00%
Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.
470,659
12.36%
323,590
8.50%
N/A
N/A
Equity Bank
526,793
13.86%
323,005
8.50%
304,004
8.00%
Common equity Tier 1 capital to risk
weighted assets
Equity Bancshares, Inc.
447,064
11.74%
266,486
7.00%
N/A
N/A
Equity Bank
526,793
13.86%
266,004
7.00%
247,004
6.50%
Tier 1 leverage to average assets
Equity Bancshares, Inc.
470,659
9.46%
199,112
4.00%
N/A
N/A
Equity Bank
526,793
10.60%
198,782
4.00%
248,477
5.00%
Equity Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.
NOTE 15 – RELATED PARTY TRANSACTIONS
At December 31, 2024 and 2023, the Company had loans outstanding to executive officers, directors, significant stockholders
and their affiliates (related parties) in the amount of $11,696 and $8,331. Changes during 2024 are listed below.
2024
Balance at January 1, 2024
$
8,331
New loans/advances
5,790
Repayments
(2,425)
Balance at December 31, 2024
$
11,696
At December 31, 2024 and 2023, the Company had deposits from executive officers, directors, significant stockholders and their
affiliates (related parties) in the amount of $11,652 and $10,157.
The Company has a director that is the Chief Executive Officer of a design and construction firm that the Company periodically
engages to perform general contractor services. For the years ended December 31, 2024, 2023 and 2022, the Company paid the
F-56
design and construction firm $2,180, $5,768, and $287, and substantially all of these payments are capitalized as premises and
equipment and depreciated over the estimated life of the property. At December 31, 2024 and 2023, the Company had no accrued
payables outstanding to the design and construction firm.
NOTE 16 – EMPLOYEE BENEFITS
The Company has a defined contribution profit sharing plan and a retirement savings 401(k) plan covering substantially all
employees. Employees may contribute up to IRS maximum contribution limit. Contributions to the profit-sharing plan and 401(k)
plan are discretionary and are determined annually by the Board of Directors. Employer contributions charged to expense for 2024,
2023, and 2022 were $1,291 $1,346 and $1,253.
As a result of the acquisition of First Independence, the Company assumed the obligations related to First Independence’s
participation in the Pentegra Defined Benefit Plan for Financial Institutions, a tax-qualified defined benefit pension plan. The
Pentegra Defined Benefit Plan is treated as a multi-employer plan for accounting purposes but operates as a multiple-employer plan
under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. As a result, certain multi-
employer plan disclosures are not applicable to the Pentegra Defined Benefit Plan. Under the Pentegra Defined Benefit Plan,
contributions made by a participating employer may be used to provide benefits to employees of other participating employers
because assets contributed by an employer are not segregated in a separate account or restricted to provide benefits only to employees
of that employer. Also, in the event a participating employer is unable to meet its contribution requirements, the required
contributions for the other participating employers could increase proportionately.
The Pentegra Defined Benefit Plan covered substantially all officers and employees of First Independence who began
employment prior to December 31, 2009, with 49 participants retaining benefits under the plan.
The Pentegra Defined Benefit Plan operates on a fiscal year from July 1 through June 30 and files one Form 5500 on behalf of
all employers who participate in the plan. The Employer Identification Number is 13-5645888 and the three-digit plan number is 333.
There are no collective bargaining agreements in place at the Company.
The Pentegra Defined Benefit Plan’s annual valuation process includes calculating the plan’s funded status and separately
calculating the funded status of each participating employer. The funded status is defined as the market value of assets divided by the
funding target (100 percent of the present value of all benefit liabilities accrued at that date). As permitted by ERISA, the Pentegra
Defined Benefit Plan accepts contributions for the prior plan year up to eight and a half months after the asset valuation date. As a
result, the fair value of assets at the valuation date (July 1) will increase by any subsequent contributions designated for the
immediately preceding plan year ended June 30. The most recent Form 5500 available for the Pentegra Defined Benefit Plan is for the
year ended June 30, 2023.
The following table presents the net pension cost and funded status of the Company relating to the Pentegra Defined Benefit
Plan since the date of acquisition (dollar amounts in thousands).
2024
2023
Net pension cost charged to salaries and employee
benefits
$
65
$
54
Pentegra defined benefit plan funded status as of
July 1
111.97%
113.64%
Plan's funded status as of July 1
88.99%
87.84%
Contributions paid to the plan
$
74
$
53
The Company’s contributions to the Pentegra Defined Benefit Plan were less than 5.00% of the total contributions to the
Pentegra Defined Benefit plan for the plan year ended June 30, 2023.
The Bank sponsors and maintains the Equity Bank Executive Deferred Compensation Plan (the “SERP”). The SERP is an
unfunded nonqualified deferred compensation plan intended to provide supplemental retirement benefits to key employees of the
Company (which may include any of our named executive officers). Participants in the SERP receive notional contributions to their
SERP accounts at such time(s) and in such amount(s) as approved by the Compensation Committee. Amounts notionally credited to a
participant’s account under the SERP will be adjusted for earnings and losses based on the participant’s investment elections (which
currently mirror the investment fund options available under the Bank’s 401(k) retirement savings plan). A participant becomes vested
in his or her SERP account based on the participant’s completed years of SERP participation, with vesting currently at a rate of 10%
for each completed year of SERP participation. Employer contributions charged to expense for 2024, 2023, and 2022 were $408, $66
and $0.
F-57
NOTE 17 – SHARE-BASED PAYMENTS
The Company’s 2022 Omnibus Equity Plan (the Plan) reserved 760,000 shares for the grant of non-qualified stock options,
restricted stock units, restricted stock and unrestricted stock to its employees and directors. The Plan replaced the Amended and
Restated 2013 Stock Incentive Plan (2013 Plan). Under the 2013 Plan, there were 148,768 and 271,491 remaining fully vested and
exercisable options outstanding at December 31, 2024 and 2023. No new grants of options may be made under the 2013 Plan. The
Company believes that stock-based awards better align the interests of its employees with those of its stockholders. Under the
Company’s 2024 and 2023 director compensation policy, the directors receive a portion of their compensation in stock.
The following tables summarize the share and expense activity for the directors for the years ended December 31, 2024, and
2023.
December 31, 2024
December 31, 2023
Stock
Options
Restricted
Stock Units
Restricted
Stock
Awards
Total
Stock
Options
Restricted
Stock Units
Restricted
Stock
Awards
Total
Outstanding at beginning of
year
56,339
—
15,400
71,739
105,567
10,700
—
116,267
Granted
9,838
—
7,768
17,606
—
—
15,400
15,400
Vested
—
—
(15,400)
(15,400)
—
(10,700)
—
(10,700)
Exercised
(34,046)
—
—
(34,046)
(7,579)
—
—
(7,579)
Forfeited or expired
—
—
—
—
(41,649)
—
—
(41,649)
Outstanding at end of year
32,131
—
7,768
39,899
56,339
—
15,400
71,739
December 31, 2024
December 31, 2023
Stock
Options
Expense
Restricted
Stock Units
Expense
Restricted
Stock
Awards
Expense
Total
Stock
Options
Expense
Restricted
Stock Units
Expense
Restricted
Stock
Awards
Expense
Total
Granted
$
94
$
—
$
175
$ 269
$
—
$
—
$
165
$ 165
Vested
—
—
112
112
—
163
—
163
Forfeited or expired
—
—
—
—
—
—
—
—
Outstanding at end of year
$
94
$
—
$
287
$ 381
$
—
$
163
$
165
$ 328
Stock Option Awards: Options granted to directors and employees under the Plan vest depending on the passage of time or the
achievement of performance targets, depending on the terms of the underlying grant.
The following tables summarize stock option activity for the years ended December 31, 2024 and 2023.
December 31, 2024
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
Outstanding at beginning of year
376,446
$
26.71
5
$
2,780
Granted
307,872
31.48
9
3,068
Exercised
(147,777)
23.73
1
(2,762)
Forfeited or expired
(41,361)
32.68
8
(403)
Outstanding at end of year
495,180
$
30.07
9
$
6,101
Fully vested and expected to vest
495,180
$
30.07
9
$
6,101
Exercisable at end of year
148,768
$
30.37
8
$
1,793
F-58
December 31, 2023
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
Outstanding at beginning of year
379,096
$
27.72
4
$
2,118
Granted
101,387
24.41
10
963
Exercised
(12,829)
15.83
2
(232)
Forfeited or expired
(91,208)
31.53
6
(1)
Outstanding at end of year
376,446
$
26.71
5
$
2,780
Fully vested and expected to vest
376,446
$
26.71
5
$
2,780
Exercisable at end of year
271,491
$
27.40
3
$
1,838
The fair values of stock options granted during the years ended December 31, 2024, 2023, and 2022, were estimated to be
$13.06 per share, $9.86 per share, and $11.23 per share. The fair value of each option award is estimated on the date of grant using a
closed form option valuation (Black-Scholes) model. Expected stock price volatility is based on the weighted average of historical
volatility of Equity Bank stock and the KBW Nasdaq Bank Index. The expected term of options granted is based on the Simplified
Method. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of
the grant.
The fair values of options granted were determined using the following weighted-average assumptions as of grant dates.
2024
2023
Risk free rate
4.28%
3.67%
Market value of stock on grant date
$
31.48
$
24.41
Expected term (in years)
7.1
6.2
Expected volatility
34.31%
33.76%
Dividend rate
1.29%
— %
Compensation expense for stock options is recognized as the options vest. Total stock option compensation cost that has been
charged against income was $808, $342, and $260 for 2024, 2023, and 2022. The total income tax benefit was $200, $85 and $64. At
December 31, 2024, there was $3,516 of unrecognized compensation expense related to non-vested stock options granted under the
Plan. Unrecognized compensation expense at December 31, 2024, will be recognized over a remaining weighted average period of
3.7 years.
F-59
Restricted Stock Unit Awards: Restricted stock units (RSUs) granted to employees under the Plan represent the right to receive
one share of Company stock upon vesting, in accordance with the vesting schedule provided in each award agreement. To the extent
vested, the RSUs become Class A voting common stock within ten calendar days of the vesting date. Non-vested RSUs have no
voting rights and are not considered outstanding until vesting. The fair value of the RSUs is determined by the closing price of the
Company’s stock on the date of grant.
A summary of changes in the Company’s non-vested RSUs is shown below.
Non-vested Restricted Stock Units
Shares
Weighted
Average
Grant Date Fair
Value
Non-vested RSUs at January 1, 2024
267,975
$
26.19
Granted
148,954
32.87
Vested
(94,298)
26.25
Forfeited
(45,068)
29.86
Outstanding at December 31, 2024
277,563
$
30.95
Non-vested Restricted Stock Units
Shares
Weighted
Average
Grant Date Fair
Value
Non-vested RSUs at January 1, 2023
337,250
$
27.35
Granted
152,029
28.68
Vested
(122,420)
27.72
Forfeited
(98,884)
27.06
Outstanding at December 31, 2023
267,975
$
26.19
Compensation expense is recognized over the vesting period of the award based on the fair value of RSU awards at the grant
date. The Company recognized share-based compensation attributable to RSUs of $2,726, $2,193 and $2,897 for the years ended
December 31, 2024, 2023, and 2022. The total income tax benefit was $675, $543 and $719 for the same time periods. Unrecognized
RSU compensation expense of $5,589 at December 31, 2024, will be recognized over a remaining weighted average period of 2.8
years.
Restricted Stock Awards: Restricted stock awards (RSAs) granted to employees under the Plan represent the right to receive one
share of Company stock upon vesting, in accordance with the vesting schedule provided in each award agreement. To the extent
vested, the RSAs become Class A voting common stock within ten calendar days of the vesting date. Non-vested RSAs have no
voting rights and are not considered outstanding until vesting. The fair value of the RSAs is determined by the closing price of the
Company’s stock on the date of grant.
A summary of changes in the Company's non-vested RSAs is shown below.
F-60
Non-vested Restricted Stock Awards
Shares
Weighted
Average
Grant Date Fair
Value
Non-vested RSAs at January 1, 2024
15,400
$
21.44
Granted
7,768
33.49
Vested
(15,400)
21.44
Forfeited
—
—
Outstanding at December 31, 2024
7,768
$
33.49
Non-vested Restricted Stock Awards
Shares
Weighted
Average
Grant Date Fair
Value
Non-vested RSAs at January 1, 2023
—
$
—
Granted
15,400
21.44
Vested
—
—
Forfeited
—
—
Outstanding at December 31, 2023
15,400
$
21.44
Compensation expense is recognized over the vesting period of the award based on the fair value of RSA awards at the grant
date. The Company recognized share-based compensation attributable to RSAs of $286, $218 and $0 for the years ended December
31, 2024, 2023, and 2022. The total income tax benefit was $71, $54 and $0 for the same time periods. Unrecognized RSA
compensation expense of $86 at December 31, 2024, will be recognized over a remaining weighted average period of 0.3 years.
Employee Stock Purchase Plan:
On January 27, 2019, the Company’s Board of Directors adopted the Equity Bancshares, Inc. 2019 Employee Stock Purchase
Plan (“ESPP”) and reserved 500,000 shares of common stock for issuance. The ESPP was approved by the Company’s stockholders
on April 24, 2019. The ESPP enables eligible employees to purchase the Company’s common stock at a price per share equal to 85%
of the lower of the fair market value of the common stock at the beginning or end of each offering period. The following table
presents the offering periods and costs associated with this program.
Offering Period
Shares
Purchased
Cost Per Share
Compensation
Expense
August 15, 2021 to February 14, 2022
14,274
27.37
69
February 15, 2022 to August 14, 2022
14,555
27.61
71
August 15, 2022 to February 14, 2023
17,058
26.18
81
February 15, 2023 to August 14, 2023
14,548
22.34
57
August 15, 2023 to February 14, 2024
16,884
21.79
65
February 15, 2024 to August 14, 2024
12,581
28.52
63
F-61
NOTE 18 – EARNINGS PER SHARE
Earnings per share were computed as shown below.
2024
2023
2022
Basic:
Net income (loss) allocable to common stockholders
$
62,621
$
7,821
$
57,688
Weighted average common shares outstanding
15,486,928
15,531,712
16,212,429
Weighted average vested restricted stock units
2,442
4,060
1,620
Weighted average shares
15,489,370
15,535,772
16,214,049
Basic earnings (losses) per common share
$
4.04
$
0.50
$
3.56
Diluted:
Net income (loss) allocable to common stockholders
$
62,621
$
7,821
$
57,688
Weighted average common shares outstanding for:
Basic earnings per common share
15,489,370
15,535,772
16,214,049
Dilutive effects of the assumed exercise of
stock options
72,760
37,952
92,893
Dilutive effects of the assumed redemption of RSUs
108,049
72,448
129,056
Dilutive effects of the assumed exercise of
Employee Stock Purchase Plan
1,495
2,670
1,908
Average shares and dilutive potential common shares
15,671,674
15,648,842
16,437,906
Diluted earnings (losses) per common share
$
4.00
$
0.50
$
3.51
Average outstanding stock options and RSUs not included in the computation of diluted earnings (loss) because they were
antidilutive are shown below.
2024
2023
2022
Stock options
181,918
272,414
78,645
Restricted stock units
5,415
66,279
452
Total antidilutive shares
187,333
338,693
79,097
NOTE 19 – FAIR VALUE
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the
fair value of its financial instruments. Fair value is the exchange price that would be received for an asset or paid to transfer a liability
(exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. For disclosure purposes, the Company groups its financial and non-financial assets and liabilities into three
different levels based on the nature of the instrument and the availability and reliability of the information that is used to determine
fair value. The three levels of inputs that may be used to measure fair values are defined as follows.
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as
of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market
data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market
participants would use in pricing an asset or liability.
Level 1 inputs are considered to be the most transparent and reliable. The Company assumes the use of the principal market to
conduct a transaction of each particular asset or liability being measured and then considers the assumptions that market participants
would use when pricing the asset or liability. Whenever possible, the Company first looks for quoted prices for identical assets or
liabilities in active markets (Level 1 inputs) to value each asset or liability. However, when inputs from identical assets or liabilities
on active markets are not available, the Company utilizes market observable data for similar assets and liabilities. The Company
maximizes the use of observable inputs and limits the use of unobservable inputs to occasions when observable inputs are not
available. The need to use unobservable inputs generally results from the lack of market liquidity of the actual financial instrument or
of the underlying collateral. Although, in some instances, third party price indications may be available, limited trading activity can
challenge the implied value of those quotations.
F-62
The following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the
general classification of each instrument under the hierarchy.
Fair Value of Assets and Liabilities Measured on a Recurring Basis
The fair values of available-for-sale securities are carried at fair value on a recurring basis. To the extent possible, observable
quoted prices in an active market are used to determine fair value and, as such, these securities are classified as Level 1. For securities
where quoted prices are not available, fair values are calculated based on market prices of similar securities, generally determined by
matrix pricing, which is a mathematical technique widely used in the industry to value securities without relying exclusively on quoted
prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2
inputs). The Company’s available-for-sale securities include residential mortgage-backed securities (all of which are issued or
guaranteed by government sponsored agencies) and are classified as Level 2.
The fair values of derivatives are determined based on a valuation pricing model using readily available observable market
parameters such as interest rate yield curves (Level 2 inputs) adjusted for credit risk attributable to the seller of the derivative.
Assets and liabilities measured at fair value on a recurring basis are summarized below.
December 31, 2024
Level 1
Level 2
Level 3
Assets:
Available-for-sale securities:
U.S. Government-sponsored entities
$
—
$
65,094
$
—
U.S. Treasury securities
86,563
—
—
Mortgage backed securities
Government-sponsored residential mortgage backed securities
—
589,172
—
Private label residential mortgage backed securities
—
124,664
—
Corporate
—
58,652
—
Small Business Administration loan pools
—
6,266
—
State and political subdivisions
—
74,044
—
Derivative assets:
Derivative assets (included in other assets)
—
8,055
—
Cash collateral held by counterparty and netting
adjustments
(7,173)
—
—
Total derivative assets
(7,173)
8,055
—
Other assets:
Equity securities with readily determinable fair value
1,031
—
—
Total other assets
1,031
—
—
Total assets
$
80,421
$
925,947
$
—
Liabilities:
Derivative liabilities:
Derivative liabilities (included in other liabilities)
$
—
$
3,546
$
—
Cash collateral held by counterparty and netting
adjustments
97
—
—
Total derivative liabilities
97
3,546
—
Total liabilities
$
97
$
3,546
$
—
F-63
December 31, 2023
Level 1
Level 2
Level 3
Assets:
Available-for-sale securities:
U.S. Government-sponsored entities
$
—
$
33,087
$
—
U.S. Treasury securities
89,256
—
—
Mortgage backed securities
Government-sponsored residential mortgage backed securities
—
529,143
—
Private label residential mortgage backed securities
—
137,841
—
Corporate
—
49,683
—
Small Business Administration loan pools
—
7,727
—
State and political subdivisions
—
72,911
—
Derivative assets:
Derivative assets (included in other assets)
—
7,002
—
Cash collateral held by counterparty and netting
adjustments
(6,406)
—
—
Total derivative assets
(6,406)
7,002
—
Other assets:
Equity securities with readily determinable fair value
674
—
—
Total other assets
674
—
—
Total assets
$
83,524
$
837,394
$
—
Liabilities:
Derivative liabilities:
Derivative liabilities (included in other liabilities)
$
—
$
3,656
$
—
Cash collateral held by counterparty and netting
adjustments
(454)
—
—
Total derivative liabilities
(454)
3,656
—
Total liabilities
$
(454)
$
3,656
$
—
There were no transfers between Levels during 2024 or 2023. The Company’s policy is to recognize transfers into or out of a
level as of the end of a reporting period.
Fair Value of Assets and Liabilities Measured on a Non-recurring Basis
Certain assets are measured at fair value on a non-recurring basis when there is evidence of loans individually assessed for credit
losses. The fair values of loans individually assessed for credit losses with specific allocations of the allowance for credit losses are
generally based on recent real estate appraisals of the collateral. Declines in the fair values of other real estate owned, subsequent to
their initial acquisitions, are also based on recent real estate appraisals less selling costs.
Real estate appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and
the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the
comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the
inputs for determining fair value.
Assets measured at fair value on a non-recurring basis are summarized below.
December 31, 2024
Level 1
Level 2
Level 3
Loans individually evaluated for credit losses:
Commercial real estate
$
—
$
—
$
3,375
Commercial and industrial
—
—
6,316
Residential real estate
—
—
3,525
Agricultural real estate
—
—
3,040
Other
—
—
1,113
Other real estate owned:
Commercial real estate
—
—
2,173
Residential real estate
—
—
25
F-64
December 31, 2023
Level 1
Level 2
Level 3
Loans individually evaluated for credit losses:
Commercial real estate
$
—
$
—
$
1,616
Commercial and industrial
—
—
3,706
Residential real estate
—
—
6,165
Agricultural real estate
—
—
2,606
Other
—
—
2,442
Other real estate owned:
Commercial real estate
—
—
1,061
Residential real estate
—
—
170
The Company did not record any liabilities for which the fair value was measured on a non-recurring basis during the years
ended December 31, 2024 and 2023.
Valuations of loans and other real estate owned individually assessed for credit losses utilize third party appraisals or broker
price opinions and are classified as Level 3 due to the significant judgment involved. Appraisals may include the utilization of
unobservable inputs, subjective factors and utilize quantitative data to estimate fair market value.
The following table presents additional information about the unobservable inputs used in the fair value measurement of
financial assets measured on a nonrecurring basis that were categorized with Level 3 of the fair value hierarchy.
Fair
Value
Valuation
Technique
Unobservable
Input
Range
(weighted
average)
December 31, 2024
Real estate loans individually evaluated
for credit losses
$
17,369
Sales Comparison
Approach
Adjustments for differences
between comparable sales
5% - 44%
(24%)
Other real estate owned individually
evaluated
for credit losses
$
2,198
Sales Comparison
Approach
Adjustments for differences
between comparable sales
3% - 13%
(8%)
December 31, 2023
Real estate loans individually evaluated
for credit losses
$
16,535
Sales Comparison
Approach
Adjustments for differences
between comparable sales
3% - 34%
(19%)
Other real estate owned individually
evaluated
for credit losses
$
1,231
Sales Comparison
Approach
Adjustments for differences
between comparable sales
7% - 28%
(18%)
F-65
Carrying amounts and estimated fair values of financial instruments at year end were as follows as of the date indicated.
December 31, 2024
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
Financial assets:
Cash and cash equivalents
$
383,747
$
383,747
$
383,747
$
—
$
—
Available-for-sale securities
1,004,455
1,004,455
86,563
917,892
—
Held-to-maturity securities
5,217
5,214
—
5,214
—
Loans held for sale
513
513
—
513
Loans, net of allowance for credit losses
3,457,549
3,405,767
—
—
3,405,767
Federal Reserve Bank and Federal Home Loan
Bank stock
27,875
27,875
—
27,875
—
Interest receivable
28,913
28,913
—
28,913
—
Derivative assets
8,055
8,055
—
8,055
—
Cash collateral held by derivative counterparty and
netting adjustments
(7,173)
(7,173)
(7,173)
—
—
Total derivative assets
882
882
(7,173)
8,055
—
Equity securities with readily determinable fair value
1,031
1,031
1,031
—
—
Total assets
$ 4,910,182
$ 4,858,397
$
464,168
$
988,462
$ 3,405,767
Financial liabilities:
Deposits
$ 4,374,789
$ 4,370,728
$
—
$ 4,370,728
$
—
Federal funds purchased and retail repurchase
agreements
37,246
37,246
—
37,246
—
Federal Home Loan Bank advances
178,073
178,073
—
178,073
—
Subordinated debentures
23,946
23,946
—
23,946
—
Subordinated notes
73,531
73,156
—
73,156
—
Contractual obligations
12,067
12,067
—
12,067
—
Interest payable
5,032
5,032
—
5,032
—
Derivative liabilities
3,546
3,546
—
3,546
—
Cash collateral held by derivative counterparty and
netting adjustments
97
97
97
—
—
Total derivative liabilities
3,643
3,643
97
3,546
—
Total liabilities
$ 4,708,327
$ 4,703,891
$
97
$ 4,703,794
$
—
F-66
December 31, 2023
Carrying
Amount
Estimated
Fair Value
Level 1
Level 2
Level 3
Financial assets:
Cash and cash equivalents
$
379,099
$
379,099
$
379,099
$
—
$
—
Available-for-sale securities
919,648
919,648
89,256
830,392
—
Held-to-maturity securities
2,209
2,250
—
2,250
—
Loans held for sale
476
476
—
476
—
Loans, net of allowance for credit losses
3,289,381
3,227,789
—
—
3,227,789
Federal Reserve Bank and Federal Home Loan
Bank stock
20,608
20,608
—
20,608
—
Interest receivable
25,497
25,497
—
25,497
—
Derivative assets
7,002
7,002
—
7,002
—
Cash collateral held by derivative counterparty and
netting adjustments
(6,406)
(6,406)
(6,406)
—
—
Total derivative assets
596
596
(6,406)
7,002
—
Equity securities with readily determinable fair value
674
674
674
—
—
Total assets
$ 4,638,188
$ 4,576,637
$
462,623
$
886,225
$ 3,227,789
Financial liabilities:
Deposits
$ 4,145,455
$ 4,140,501
$
—
$ 4,140,501
$
—
Federal funds purchased and retail repurchase
agreements
43,582
43,582
—
43,582
—
Federal Home Loan Bank advances
100,000
100,000
—
100,000
—
Federal Reserve Bank borrowings
140,000
140,000
—
140,000
—
Subordinated debentures
23,594
23,594
—
23,594
—
Subordinated notes
73,327
71,827
—
71,827
—
Contractual obligations
19,315
19,315
—
19,315
—
Interest payable
9,180
9,180
—
9,180
—
Derivative liabilities
3,656
3,656
—
3,656
—
Cash collateral held by derivative counterparty and
netting adjustments
(454)
(454)
(454)
—
—
Total derivative liabilities
3,202
3,202
(454)
3,656
—
Total liabilities
$ 4,557,655
$ 4,551,201
$
(454) $ 4,551,655
$
—
The fair value of off-balance-sheet items is not considered material.
NOTE 20 – COMMITMENTS AND CREDIT RISK
The Company extends credit for commercial real estate mortgages, residential mortgages, working capital financing and loans to
businesses and consumers.
Commitments to Originate Loans and Available Lines of Credit
Commitments to originate loans and available lines of credit are agreements to lend to a customer as long as there is no violation
of any condition established in the contract. Commitments and lines of credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since a portion of the commitments and lines of credit may expire without
being drawn upon, the total commitment and lines of credit amounts do not necessarily represent future cash requirements. Each
customer’s creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on
management’s credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property,
plant and equipment, commercial real estate, and residential real estate. Mortgage loans in the process of origination represent
amounts that the Company plans to fund within a normal period of 60 to 90 days and are intended for sale to investors in the
secondary market.
F-67
The contractual amounts of commitments to originate loans and available lines of credit as of December 31, 2024 and 2023
were as follows.
December 31, 2024
December 31, 2023
Fixed
Rate
Variable
Rate
Fixed
Rate
Variable
Rate
Commitments to make loans
$
28,758
$
389,370
$
47,465
$
343,715
Mortgage loans in the process of origination
1,345
2,252
4,574
357
Unused lines of credit
162,753
377,091
124,893
355,270
At December 31, 2024, the fixed rate loan commitments have interest rates ranging from 3.75% to 18.00% and maturities
ranging from 1 month to 150 months.
Standby Letters of Credit:
Standby letters of credit are irrevocable commitments issued by the Company to guarantee the performance of a customer to a
third party once specified preconditions are met. Financial standby letters of credit are primarily issued to support public and private
borrowing arrangements, including commercial paper, bond financing and similar transactions. Performance standby letters of credit
are issued to guarantee performance of certain customers under non-financial contractual obligations. The credit risk involved in
issuing standby letters of credit is essentially the same as that involved in extending loans to customers. The contractual amounts of
standby letters of credit as of December 31, 2024 and 2023 are listed below.
December 31, 2024
December 31, 2023
Fixed
Rate
Variable
Rate
Fixed
Rate
Variable
Rate
Standby letters of credit
$
15,081
$
27,715
$
18,145
$
30,680
NOTE 21 – LEGAL MATTERS
The Company is party to various matters of litigation in the ordinary course of business. The Company periodically reviews all
outstanding pending or threatened legal proceedings and determines if such matters will have an adverse effect on the business,
financial condition, results of operations or cash flows. A loss contingency is recorded when the outcome is probable and reasonably
able to be estimated. Any loss contingency described below has been identified by the Company as reasonably possible to result in an
unfavorable outcome for the Company or the Bank.
Equity Bank is party to a lawsuit filed on January 28, 2022, in the Sedgwick County Kansas District Court on behalf of one of
our customers, alleging improperly collected overdraft fees. The plaintiff seeks to have the case certified as a class action. The
Company believes that the lawsuit is without merit, and it intends to vigorously defend against the claim asserted. At this time, the
Company is unable to reasonably estimate the loss amount of this litigation.
Equity Bank is party to a lawsuit filed on February 2, 2022, in Jackson County, Missouri District Court against the Bank on
behalf of one of our Missouri customers alleging improperly collected overdraft fees. The plaintiff seeks to have the case certified as a
class action. The Company believes that the lawsuit is without merit, and it intends to vigorously defend against the claims now
asserted. At this time, the Company is unable to reasonably estimate the loss amount of this litigation.
Equity Bank is party to a lawsuit filed on February 28, 2023, in Saline County, Missouri District Court against the Bank on
behalf of one of our Missouri customers alleging improperly collected overdraft fees. The plaintiff seeks to have the case certified as a
class action. The Company believes that the lawsuit is without merit, and it intends to vigorously defend against the claims now
asserted. At this time, the Company is unable to reasonably estimate the loss amount of this litigation.
NOTE 22 – REVENUE RECOGNITION
The majority of the Company’s revenues come from interest income on financial instruments, including loans, leases, securities
and derivatives, which are outside the scope of ASC 606. The Company’s services that fall within the scope of ASC 606 are
presented with non-interest income and are recognized as revenue as the Company satisfies its obligation to the customer. Services
within the scope of ASC 606 include service charges and fees on deposits, debit card income, investment referral income, insurance
sales commissions and other non-interest income related to loans and deposits.
Except for gains or losses from the sale of other real estate owned, all of the Company’s revenue from contracts with customers
within the scope of ASC 606 are recognized in non-interest income. The following table presents the Company’s sources of non-
interest income for the years ended December 31, 2024, 2023 and 2022.
F-68
2024
2023
2022
Non-interest income
Service charges and fees
$
9,830
$
10,187
$
10,632
Debit card income
10,246
10,322
10,677
Mortgage banking(a)
861
652
1,416
Increase in bank-owned life insurance(a)
4,966
4,059
3,113
Net gain on acquisition and branch sales(a)
2,131
—
962
Net gain (loss) from securities transactions(a)
220
(51,909)
5
Other non-interest income
Investment referral income
500
424
539
Trust income
1,624
1,123
1,036
Insurance sales commissions
555
582
566
Recovery on zero-basis purchased loans(a)
4,380
517
249
Income (loss) from equity method investments(a)
(87)
(222)
(222)
Other non-interest income related to loans
and deposits
4,084
5,013
6,894
Other non-interest income not related to
loans and deposits(a)
(488)
123
90
Total other non-interest income
10,568
7,560
9,152
Total
$
38,822
$
(19,129) $
35,957
(a) Not within the scope of ASC 606
A description of the Company’s revenue streams accounted for under ASC 606 follows.
Service Charges and Fees
The Company earns fees from its deposit customers for transaction-based account maintenance and overdraft services.
Transaction-based fees, which include services such as stop payment charges, statement rendering and ACH fees, are recognized at
the time the transaction is executed as that is the point in time the Company fulfills the customer’s request. Account maintenance fees,
which relate primarily to monthly maintenance, are earned over the course of a month, representing the period over which the
Company satisfies the performance obligation. Overdraft fees are recognized at the point in time that the overdraft occurs. Service
charges on deposits are collected through withdrawal from the customer’s account balance.
Debit Card Income
The Company earns debit card income from cardholder transactions conducted through payment processors. Debit card income
from cardholder transactions represents a percentage of the underlying transaction value and is recognized concurrently with the
transaction processing services provided to the cardholder.
Investment Referral Income
Investment referral services are offered through an unaffiliated registered broker-dealer and investment advisor. Investment
referral income consists of transaction-based fees (i.e., trade commissions) and account fees (i.e., custodial fees). The service
obligation for transaction-based fees relates to processing of individual transactions and is considered earned at the time the
transaction occurs. The Company currently records this income when payment is received and at each month end for current-month
transactions. Account fees are considered earned over the period for which the fees relate. These fees are received during the first
month of each quarter and represent advance payment for the current quarter. These fees are amortized ratably over the three months
during the quarter. Therefore, all account-based fees are currently recorded as performance obligations are satisfied.
Trust Income
Trust income includes fees from asset management, custody, recordkeeping, investment advisory and administration services.
Revenue is recognized at the time the services are performed and may be based on either the fair value of the account or the services
provided.
Insurance Sales Commissions
Insurance commissions are received based on contracts with insurance companies which provide for a percentage of premiums
to be paid to the Company in exchange for placement of policies with customers. The commissions generally relate to a period of one
year or less. Under certain contracts, the Company may also assist with the claims processing, but this performance obligation is
considered insignificant compared to the initial placement of the policy. As such, the performance obligation is considered to have
been substantially satisfied at the time of policy placement. While this indicates that all related revenue would be appropriately
accrued at policy inception, in some cases, recognition occurs over the policy period if received in installments from the insurance
F-69
company. In no cases would this deferral extend beyond 12 months and the effect is considered immaterial compared to recognition at
the time of policy placement. The Company also receives commissions based on renewals of policies previously placed. However,
additional work is required to process the renewals, resulting in future performance obligations to earn the related revenues. In
addition, the occurrence of such renewals is not certain as initial policies are generally for one year or less and the fees earned are not
determined until the time of renewal, based on underwriting at that time. As such, the Company has determined that accrual of
income for future renewals is not appropriate.
Other Non-interest Income
Other non-interest income related to loans and deposits is earned when the specific transaction is processed, similar to service
charges and fees.
Gain or Loss on Sale of Other Real Estate
Gain or loss on sale of other real estate is reported in non-interest expense and is netted with other real estate expenses. The
Company records a gain or loss from the sale of other real estate when control of the property transfers to the buyer, which generally
occurs at the time of an executed deed. When the Company finances the sale of other real estate to the buyer, the Company assesses
whether the buyer is committed to perform their obligation under the contract and whether collectability of the transaction price is
probable. Once these criteria are met, the other real estate is derecognized and the gain or loss on sale is recorded upon the transfer of
control of the property to the buyer. In determining the gain or loss on the sale, the Company adjusts the transaction price and related
gain or loss on sale if a significant financing component is present. As a result, the Company has concluded that ASC 606 will affect
the decision to recognize or defer gains on sales of other real estate in circumstances where the Company has financed the sale.
NOTE 23 – SEGMENT REPORTING
Equity Bancshares, Inc. is a financial holding company, whose principal activity is the ownership and management of its
wholly-owned subsidiaries, including Equity Bank (“Equity Bank”). As a community-oriented financial institution, substantially all
of the Company’s operations involve the delivery of loan and deposit products to customers. Management makes operating decisions
and assesses performance based on an ongoing review of these banking operations, which constitute the Company’s only operating
segment for financial reporting purposes.
The Company’s chief operating decision maker is comprised of the executive leadership team. For Equity Bancshares Inc., the
executive leadership team uses gross profit and profit or loss from operations before interest and income taxes to allocate resources for
in the annual budget and forecasting process. The chief operating decision maker considers budget-to-actual variances on a monthly
basis for profit measures when making decisions about allocating capital and personnel to the operating segment. For Equity Bank, the
executive leadership team uses net-interest income and non-interest income to allocate resources (including employees, financial, or
capital resources) to that segment in the annual budget and forecasting process and uses that measure as a basis for evaluating lending
terms for customer loans.
The following tables present information about reported segment revenue, measures of a segment’s profit or loss, significant
segment expenses, and measure of a segment’s assets as of December 31, 2024, 2023, and 2022. The Company does not allocate all
holding company expenses, income taxes or unusual items to the reportable segment. The following tables present the reconciliations
of reportable segment revenues and measures of profit or loss and line item reconciliation to the Company’s consolidated financial
statement totals.
F-70
Unallocated
Holding
Company
Equity Bank
Amounts
Eliminations
Total
Year ended December 31, 2024
Interest and dividend income
$
296,359
$
484
$
—
$
296,843
Interest expense
103,014
7,667
—
110,681
Net interest income
193,345
(7,183)
—
186,162
Provision (reversal) for credit losses
2,546
—
—
2,546
Net interest income after provision (reversal) for credit
losses
190,799
(7,183)
—
183,616
Non-interest income
Service charges and fees
9,830
—
—
9,830
Debit card income
10,246
—
—
10,246
Mortgage banking
861
—
—
861
Increase in value of bank-owned life insurance
4,966
—
—
4,966
Net gain on acquisition and branch sales
2,131
—
—
2,131
Net gain (loss) from securities transactions
(74)
294
—
220
Other
10,567
61,562
(61,561) (a)
10,568
Total non-interest income
38,527
61,856
(61,561)
38,822
Non-interest expense
Salaries and employee benefits
72,621
165
—
72,786
Net occupancy and equipment
14,371
—
—
14,371
Data processing
20,003
1
—
20,004
Professional fees
5,642
861
—
6,503
Advertising and business development
5,365
1
—
5,366
Telecommunications
2,501
—
—
2,501
FDIC insurance
2,483
—
—
2,483
Courier and postage
2,599
—
—
2,599
Free nationwide ATM cost
2,127
—
—
2,127
Amortization of core deposit intangibles
4,289
—
—
4,289
Loan expense
601
—
—
601
Other real estate owned and repossessed assets, net
967
(8,492)
—
(7,525)
Merger expenses
3,893
568
—
4,461
Other
13,921
(330)
—
13,591
Intersegment service charges
(1,440)
1,440
—
—
Total non-interest expense
149,943
(5,786)
—
144,157
Income (loss) before income tax
79,383
60,459
(61,561)
78,281
Provision (benefit) for income taxes
18,916
(3,256)
—
15,660
Total segment profit/(loss)
$
60,467
$
63,715
$
(61,561)
$
62,621
(a) Elimination of equity in earnings of subsidiary
F-71
Unallocated
Holding
Company
Equity Bank
Amounts
Eliminations
Total
Year ended December 31, 2023
Interest and dividend income
$
246,082
$
630
$
—
$
246,712
Interest expense
80,016
7,678
—
87,694
Net interest income
166,066
(7,048)
—
159,018
Provision (reversal) for credit losses
1,873
—
—
1,873
Net interest income after provision (reversal) for credit
losses
164,193
(7,048)
—
157,145
Non-interest income
Service charges and fees
10,187
—
—
10,187
Debit card income
10,322
—
—
10,322
Mortgage banking
652
—
—
652
Increase in value of bank-owned life insurance
4,059
—
—
4,059
Net gain on acquisition and branch sales
—
—
—
-
Net gain (loss) from securities transactions
(51,909)
—
—
(51,909)
Other
7,559
15,902
(15,901) (a)
7,560
Total non-interest income
(19,130)
15,902
(15,901)
(19,129)
Non-interest expense
Salaries and employee benefits
64,227
157
—
64,384
Net occupancy and equipment
12,325
—
—
12,325
Data processing
17,433
—
—
17,433
Professional fees
5,175
579
—
5,754
Advertising and business development
5,425
—
—
5,425
Telecommunications
1,962
1
—
1,963
FDIC insurance
2,195
—
—
2,195
Courier and postage
2,046
—
—
2,046
Free nationwide ATM cost
2,073
—
—
2,073
Amortization of core deposit intangibles
3,374
—
—
3,374
Loan expense
540
—
—
540
Other real estate owned and repossessed assets, net
617
—
—
617
Merger expenses
—
297
—
297
Other
17,678
(503)
—
17,175
Intersegment service charges
(1,352)
1,352
—
—
Total non-interest expense
133,718
1,883
—
135,601
Income (loss) before income tax
11,345
6,971
(15,901)
2,415
Provision (benefit) for income taxes
(3,311)
(2,095)
—
(5,406)
Total segment profit/(loss)
$
14,656
$
9,066
$
(15,901)
$
7,821
(a) Elimination of equity in earnings of subsidiary
F-72
Unallocated
Holding
Company
Equity Bank
Amounts
Eliminations
Total
Year ended December 31, 2022
Interest and dividend income
$
188,248
$
—
$
—
$
188,248
Interest expense
18,622
6,796
—
25,418
Net interest income
169,626
(6,796)
—
162,830
Provision (reversal) for credit losses
125
—
—
125
Net interest income after provision (reversal) for credit
losses
169,501
(6,796)
—
162,705
Non-interest income
Service charges and fees
10,632
—
—
10,632
Debit card income
10,677
—
—
10,677
Mortgage banking
1,416
—
—
1,416
Increase in value of bank-owned life insurance
3,113
—
—
3,113
Net gain on acquisition and branch sales
962
—
—
962
Net gain (loss) from securities transactions
5
—
—
5
Other
9,127
64,982
(64,957) (a)
9,152
Total non-interest income
35,932
64,982
(64,957)
35,957
Non-interest expense
Salaries and employee benefits
61,852
154
—
62,006
Net occupancy and equipment
12,223
—
—
12,223
Data processing
15,883
—
—
15,883
Professional fees
4,545
406
—
4,951
Advertising and business development
5,042
—
—
5,042
Telecommunications
1,916
—
—
1,916
FDIC insurance
1,140
—
—
1,140
Courier and postage
1,881
—
—
1,881
Free nationwide ATM cost
2,103
—
—
2,103
Amortization of core deposit intangibles
4,042
—
—
4,042
Loan expense
828
—
—
828
Other real estate owned and repossessed assets, net
247
—
—
247
Merger expenses
594
—
—
594
Other
14,436
1,088
—
15,524
Intersegment service charges
(1,296)
1,296
—
—
Total non-interest expense
125,436
2,944
—
128,380
Income (loss) before income tax
79,997
55,242
(64,957)
70,282
Provision (benefit) for income taxes
14,633
(2,039)
—
12,594
Total segment profit/(loss)
$
65,364
$
57,281
$
(64,957)
$
57,688
(a) Elimination of equity in earnings of subsidiary
For the Year ended December 31,
2024
2023
2022
Equity
Bank
Administrative
Adjustments
Total
Equity
Bank
Administrative
Adjustments
Total
Equity
Bank
Administrative
Adjustments
Total
Depreciation
$ 5,391 $
180 $ 5,571 $ 4,553 $
156 $ 4,709 $ 4,494 $
148 $ 4,642
Amortization of operating
lease
right-of-use-asset
475
—
475
604
—
604
714
—
714
Amortization of cloud
computing
implementation costs
138
—
138
188
—
188
188
—
188
Amortization of intangible
assets
4,408
—
4,408
3,518
—
3,518
4,186
—
4,186
Purchase of long lived assets
12,542
—
12,542
15,762
92
15,854
3,630
—
3,630
Provision (benefit) for income
taxes
18,916
(3,256)
15,660
(3,311)
(2,095)
(5,406) 14,633
(2,039)
12,594
F-73
December 31,
December 31,
2024
2023
Assets
Total assets for reportable segments
$
5,316,222
$
5,024,161
Holding company administrative adjustments
703,685
560,434
Elimination of bank cash and equity in earnings of subsidiaries
(107,522)
(13,515)
Elimination of investment in subsidiaries
(580,338)
(536,488)
Consolidated total assets
$
5,332,047
$
5,034,592
NOTE 24 – CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
Presented below is the condensed financial information as to financial position, results of operations and cash flows of the
Parent Company.
CONDENSED BALANCE SHEETS
December 31, 2024, and 2023
(Dollar Amounts in thousands, except per share data)
2024
2023
ASSETS
Cash and due from banks
$
105,071
$
12,729
Investment in Equity Bank
573,809
531,272
Investment in EBAC
3,120
3,261
Investment in ERMI
3,409
1,955
Other assets
8,080
3,009
Total assets
$
693,489
$
552,226
LIABILITIES AND STOCKHOLDERS’ EQUITY
Subordinated debt
97,477
96,921
Interest payable and other liabilities
3,094
2,445
Total liabilities
100,571
99,366
Stockholders’ equity
592,918
452,860
Total liabilities and stockholders’ equity
$
693,489
$
552,226
F-74
CONDENSED STATEMENTS OF INCOME
Years ended December 31, 2024, 2023, and 2022
(Dollar Amounts in thousands, except per share data)
2024
2023
2022
Dividends from Equity Bank
$
25,000
$
32,500
$
33,903
Interest income
291
$
—
$
—
Other income
295
542
4
Total income
25,586
33,042
33,907
Expenses
Interest expense
7,668
7,678
6,796
Other expenses
(4,845)
3,058
2,516
Total expenses
2,823
10,736
9,312
Income before income tax and equity in undistributed
income (loss) of subsidiaries
22,763
22,306
24,595
Income tax benefit
3,297
2,114
2,039
Income before equity in undistributed income (loss)
of subsidiaries
26,060
24,420
26,634
Equity in undistributed income (loss) of Equity Bank
35,468
(17,844)
31,462
Equity in undistributed income (loss) of EBAC
(358)
(305)
(413)
Equity in undistributed income (loss) of ERMI
1,451
1,550
5
Net income (loss) and net income (loss) allocable to common stockholders
$
62,621
$
7,821
$
57,688
F-75
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31, 2024, 2023, and 2022
(Dollar Amounts in thousands, except per share data)
2024
2023
2022
Cash flows from operating activities
Net income (loss)
$
62,621
$
7,821
$
57,688
Adjustments to reconcile net income to net cash from
operating activities:
Stock based compensation
4,048
3,213
3,325
Equity in undistributed (income) loss of Equity Bank
(35,468)
17,844
(31,462)
Equity in undistributed (income) loss of EBAC
358
305
413
Equity in undistributed (income) loss of ERMI
(1,451)
(1,550)
(5)
Net amortization of purchase valuation adjustments
555
530
506
(Gain)/loss on sales and valuation adjustments on other real estate owned
(8,500)
—
—
Change in unrealized (gains)/losses on equity securities
(294)
—
—
Change in fair value of derivatives recognized in earnings
4
—
—
Net change in:
Other assets
(4,938)
(658)
1,464
Interest payable and other liabilities
(3,175)
(2,556)
(5,912)
Net cash from (to) operating activities
13,760
24,949
26,017
Cash flows (to) from investing activities
Net redemptions (purchases) of correspondent and miscellaneous other
stock
(493)
(751)
(2,425)
Proceeds from sale of other real estate owned
8,500
—
—
Purchase of net assets of KansasLand Bank, net of cash acquired
(95)
—
—
Additional investment in EBAC
(100)
(50)
(200)
Additional investment in ERMI
—
—
(400)
Net cash (used in) investing activities
7,812
(801)
(3,025)
Cash flows (to) from financing activities
Principal payments on bank stock loan
(691)
—
—
Proceeds from issuance of common stock, net
86,980
—
—
Proceeds from exercise of employee stock options
3,506
203
2,011
Proceeds from employee stock purchase plan
726
784
792
Purchase of treasury stock
(11,859)
(17,900)
(33,186)
Dividends paid on common stock
(7,892)
(6,614)
(5,564)
Net cash provided by (used in) financing activities
70,770
(23,527)
(35,947)
Net change in cash and cash equivalents
92,342
621
(12,955)
Cash and cash equivalents, beginning of period
12,729
12,108
25,063
Ending cash and cash equivalents
$
105,071
$
12,729
$
12,108
CORPORATE HEADQUARTERS
7701 East Kellogg Avenue, Suite 850
Wichita, Kansas 67207
(316) 612-6000
investor@equitybank.com
FORM 10K AND INVESTOR INQUIRIES
Analysts, investors, and others with additional questions
about Equity Bancshares, Inc. are encouraged to contact
Brian J. Katzfey, VP, Investor Relations,
at (316) 858-3128 or investor@equitybank.com.
TRANSFER AGENT
Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, NY 10004-1561
(212) 509-4000
INVESTOR.EQUITYBANK.COM
© Equity Bancshares, Inc.
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the financial well-being of our clients
and the communities we serve,
creating a great culture to grow our
team members, while providing a
strong return for our stockholders.