EQUITY BANCSHARES INC - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2021

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

For the transition period from ________ to ________

Commission File Number 001-37624

EQUITY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)


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

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

Registrant’s telephone number, including area code: 316.612.6000

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

Title of each class

Class A, Common Stock, par value $0.01 per share

Trading Symbol

EQBK

Name of each exchange on which registered

The Nasdaq Stock Market LLC

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

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

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


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

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

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

As of July 31, 2021, the registrant had 14,362,526 shares of Class A common stock, $0.01 par value per share, outstanding.

TABLE OF CONTENTS

Part I	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets	5
	Consolidated Statements of Income	6
	Consolidated Statements of Comprehensive Income	7
	Consolidated Statements of Stockholders’ Equity	8
	Consolidated Statements of Cash Flows	10
	Condensed Notes to Interim Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
	Overview	48
	Critical Accounting Policies	50
	Results of Operations	51
	Financial Condition	63
	Liquidity and Capital Resources	72
	Non-GAAP Financial Measures	74
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	77
Item 4.	Controls and Procedures	79
Part II	Other Information	80
Item 1.	Legal Proceedings	80
Item 1A.	Risk Factors	80
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	80
Item 3.	Defaults Upon Senior Securities	80
Item 4.	Mine Safety Disclosures	80
Item 5.	Other Information	80
Item 6.	Exhibits	80

Important Notice about Information in this Quarterly Report

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

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

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “project,” “forecast,” “goal,” “target,” “would” and “outlook,” or the negative variations of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control, particularly with regard to developments related to the COVID-19 pandemic. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Item 1A - Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2021, and in Item 1A – Risk Factors of this Quarterly Report.

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

•

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

•

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

•

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

•

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

•

the loss of our largest loan and depositor relationships;

•

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

•

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

•

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

•

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

•

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

•

a continued economic downturn related to the COVID-19 pandemic, especially one affecting our core market areas;

•

inability of borrowers on deferral to make payments on their loans following the end of the deferral period;

•

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

•

the effects of 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;

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

other factors, if any, or changes to previously disclosed risk factors are discussed in “Item 1A - Risk Factors.”

The foregoing factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included in this Quarterly Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New risks and uncertainties arise from time to time, and it is not possible for us to predict those events or how they may affect us. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements, expressed or implied, included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or verbal forward-looking statements that we or persons acting on our behalf may issue.

PART I

Item 1: Financial Statements

EQUITY BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2021 and December 31, 2020

(Dollar amounts in thousands)

	(Unaudited) June 30,			December 31,
	2021			2020
ASSETS
Cash and due from banks	$	138,869		$	280,150
Federal funds sold		452			548
Cash and cash equivalents		139,321			280,698
Interest-bearing time deposits in other banks		—			249
Available-for-sale securities		1,041,613			871,827
Loans held for sale		6,183			12,394
Loans, net of allowance for credit losses of $51,834 and $33,709		2,763,227			2,557,987
Other real estate owned, net		10,861			11,733
Premises and equipment, net		90,876			89,412
Bank-owned life insurance		103,321			77,044
Federal Reserve Bank and Federal Home Loan Bank stock		18,454			16,415
Interest receivable		15,064			15,831
Goodwill		31,601			31,601
Core deposit intangibles, net		13,993			16,057
Other		33,702			32,108
Total assets	$	4,268,216		$	4,013,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand	$	992,565		$	791,639
Total non-interest-bearing deposits		992,565			791,639
Savings, NOW and money market		2,035,496			2,029,097
Time		659,494			626,854
Total interest-bearing deposits		2,694,990			2,655,951
Total deposits		3,687,555			3,447,590
Federal funds purchased and retail repurchase agreements		47,184			36,029
Federal Home Loan Bank advances		9,208			10,144
Subordinated debt		87,908			87,684
Contractual obligations		4,469			5,189
Interest payable and other liabilities		18,897			19,071
Total liabilities		3,855,221			3,605,707
Commitments and contingent liabilities, see Notes 11 and 12
Stockholders’ equity, see Note 7
Common stock		176			174
Additional paid-in capital		389,394			386,820
Retained earnings		68,625			50,787
Accumulated other comprehensive income, net of tax		13,450			19,781
Employee stock loans		—			(43	)
Treasury stock		(58,650	)		(49,870	)
Total stockholders’ equity		412,995			407,649
Total liabilities and stockholders’ equity	$	4,268,216		$	4,013,356

See accompanying condensed notes to interim consolidated financial statements.

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

For the Three and Six Months ended June 30, 2021 and 2020

(Dollar amounts in thousands, except per share data)

	(Unaudited) Three Months Ended June 30,					(Unaudited) Six Months Ended June 30,
	2021			2020		2021			2020
Interest and dividend income
Loans, including fees	$	33,810		$	32,627	$	64,811		$	67,003
Securities, taxable		3,523			4,017		7,322			8,637
Securities, nontaxable		717			880		1,441			1,846
Federal funds sold and other		268			409		556			1,004
Total interest and dividend income		38,318			37,933		74,130			78,490
Interest expense
Deposits		2,025			3,899		4,435			10,763
Federal funds purchased and retail repurchase agreements		26			24		48			55
Federal Home Loan Bank advances		80			552		145			1,727
Federal Reserve Bank discount window		—			6		—			6
Bank stock loan		—			306		—			415
Subordinated debt		1,557			255		3,113			538
Total interest expense		3,688			5,042		7,741			13,504
Net interest income		34,630			32,891		66,389			64,986
Provision (reversal) for credit losses		(1,657	)		12,500		(7,413	)		22,440
Net interest income after provision (reversal) for credit losses		36,287			20,391		73,802			42,546
Non-interest income
Service charges and fees		2,169			1,365		3,765			3,391
Debit card income		2,679			2,201		5,029			4,244
Mortgage banking		848			831		1,783			1,421
Increase in value of bank-owned life insurance		676			481		1,277			963
Net gain on acquisition		663			—		585			—
Net gain from securities transactions		—			4		17			12
Other		2,065			850		3,356			1,007
Total non-interest income		9,100			5,732		15,812			11,038
Non-interest expense
Salaries and employee benefits		12,769			12,695		25,491			26,199
Net occupancy and equipment		2,327			2,119		4,695			4,354
Data processing		3,474			2,763		6,137			5,426
Professional fees		999			943		2,072			2,310
Advertising and business development		799			403		1,481			1,099
Telecommunications		512			390		1,092			877
FDIC insurance		425			414		840			931
Courier and postage		327			353		696			737
Free nationwide ATM cost		513			327		985			747
Amortization of core deposit intangibles		1,030			974		2,064			1,776
Loan expense		181			287		419			521
Other real estate owned		(468	)		269		(463	)		577
Merger expenses		460			—		612			—
Other		2,458			2,000		4,566			4,141
Total non-interest expense		25,806			23,937		50,687			49,695
Income before income taxes		19,581			2,186		38,927			3,889
Provision for income taxes		4,415			497		8,686			942
Net income and net income allocable to common stockholders	$	15,166		$	1,689	$	30,241		$	2,947
Basic earnings per share	$	1.06		$	0.11	$	2.10		$	0.19
Diluted earnings per share	$	1.03		$	0.11	$	2.06		$	0.19

See accompanying condensed notes to interim consolidated financial statements.

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three and Six Months ended June 30, 2021 and 2020

(Dollar amounts in thousands)

	(Unaudited) Three Months Ended June 30,						(Unaudited) Six Months Ended June 30,
	2021			2020			2021			2020
Net income	$	15,166		$	1,689		$	30,241		$	2,947
Other comprehensive income (loss):
Unrealized holding gain (loss) arising during the period on available-for-sale securities		1,911			(698	)		(8,458	)		4,164
Amortization of unrealized loss on held-to-maturity securities		—			191			—			368
Total other comprehensive income		1,911			(507	)		(8,458	)		4,532
Tax effect		(480	)		128			2,127			(1,139	)
Other comprehensive income (loss), net of tax		1,431			(379	)		(6,331	)		3,393
Comprehensive income	$	16,597		$	1,310		$	23,910		$	6,340

See accompanying condensed notes to interim consolidated financial statements.

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months ended June 30, 2021 and 2020

(Unaudited)

(Dollar amounts in thousands, except share data)

	Common Stock					Additional				Accumulated Other			Employee						Total
	Shares Outstanding			Amount		Paid-In Capital		Retained Earnings		Comprehensive Income (Loss)			Stock Loans			Treasury Stock			Stockholders’ Equity
Balance at April 1, 2020		15,198,986		$	174	$	383,850	$	127,015	$	3,769		$	(43	)	$	(37,414	)	$	477,351
Net income		—			—		—		1,689		—			—			—			1,689
Other comprehensive income, net of tax effects		—			—		—		—		(379	)		—			—			(379	)
Stock-based compensation		17,703			—		1,102		—		—			—			—			1,102
Common stock issued upon exercise of stock options		250			—		3		—		—			—			—			3
Common stock issued under stock-based incentive plan		1,362			—		—		—		—			—			—			—
Balance at June 30, 2020		15,218,301		$	174	$	384,955	$	128,704	$	3,390		$	(43	)	$	(37,414	)	$	479,766

Balance at April 1, 2021		14,383,913		$	175	$	387,939	$	53,459	$	12,019		$	—		$	(55,777	)	$	397,815
Net income		—			—		—		15,166		—			—			—			15,166
Other comprehensive income (loss), net of tax effects		—			—		—		—		1,431			—			—			1,431
Stock-based compensation		9,351			—		948		—		—			—			—			948
Common stock issued upon exercise of stock options		37,753			1		507		—		—			—			—			508
Common stock issued under stock-based incentive plan		25,159			—		—		—		—			—			—			—
Treasury stock purchases		(96,004	)		—		—		—		—			—			(2,873	)		(2,873	)
Balance at June 30, 2021		14,360,172		$	176	$	389,394	$	68,625	$	13,450		$	—		$	(58,650	)	$	412,995

See accompanying condensed notes to interim consolidated financial statements.

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months ended June 30, 2021 and 2020

(Unaudited)

(Dollar amounts in thousands, except share data)

	Common Stock					Additional						Accumulated Other			Employee						Total
	Shares Outstanding			Amount		Paid-In Capital			Retained Earnings			Comprehensive Income (loss)			Stock Loans			Treasury Stock			Stockholders’ Equity
Balance at January 1, 2020		15,444,434		$	174	$	382,731		$	125,757		$	(3	)	$	(77	)	$	(30,522	)	$	478,060
Net income		—			—		—			2,947			—			—			—			2,947
Other comprehensive income (loss), net of tax effects		—			—		—			—			3,393			—			—			3,393
Stock-based compensation		17,703			—		1,858			—			—			—			—			1,858
Common stock issued upon exercise of stock options		650			—		12			—			—			—			—			12
Common stock issued under stock-based incentive plan		34,211			—		—			—			—			—			—			—
Common stock issued under employee stock purchase plan		16,764			—		354			—			—			—			—			354
Repayment on employee stock loans		—			—		—			—			—			34			—			34
Treasury stock purchases		(295,461	)		—		—			—			—			—			(6,892	)		(6,892	)
Balance at June 30, 2020		15,218,301		$	174	$	384,955		$	128,704		$	3,390		$	(43	)	$	(37,414	)	$	479,766

Balance at January 1, 2021		14,540,556		$	174	$	386,820		$	50,787		$	19,781		$	(43	)	$	(49,870	)	$	407,649
Net income		—			—		—			30,241			—			—			—			30,241
Other comprehensive income (loss), net of tax effects		—			—		—			—			(6,331	)		—			—			(6,331	)
Stock-based compensation		9,351			—		1,660			—			—			—			—			1,660
Common stock issued upon exercise of stock options		49,236			1		674			—			—			—			—			675
Common stock issued under stock-based incentive plan		72,424			1		(1	)		—			—			—			—			—
Common stock issued under employee stock purchase plan		17,621			—		241			—			—			—			—			241
Repayment on employee stock loans		—			—		—			—			—			43			—			43
Treasury stock purchases		(329,016	)		—		—			—			—			—			(8,780	)		(8,780	)
Implementation of ASU 2016-13, Current Expected Credit Losses		—			—		—			(12,403	)		—			—			—			(12,403	)
Balance at June 30, 2021		14,360,172		$	176	$	389,394		$	68,625		$	13,450		$	—		$	(58,650	)	$	412,995

EQUITY BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months ended June 30, 2021 and 2020

(Dollar amounts in thousands, except per share data)

	(Unaudited) June 30,
	2021			2020
Cash flows from operating activities
Net income	$	30,241		$	2,947
Adjustments to reconcile net income to net cash from operating activities:
Stock-based compensation		1,660			1,858
Depreciation		2,024			1,837
Amortization of operating lease right-of-use asset		200			306
Amortization of cloud computing implementation costs		77			54
Provision (reversal) for credit losses		(7,413	)		22,440
Net (accretion) amortization of premiums, discounts and deferred fees and costs on loans		8,847			(1,194	)
Amortization (accretion) of premiums and discounts on securities		4,890			3,288
Amortization of intangibles		2,086			1,800
Deferred income taxes		905			318
Federal Home Loan Bank stock dividends		(22	)		(435	)
Loss (gain) on sales and valuation adjustments on other real estate owned		(775	)		120
Change in unrealized loss (gain) on equity securities		(17	)		(12	)
Loss (gain) on disposal of premises and equipment		(17	)	—
Loss (gain) on lease termination		(2	)	—
Loss (gain) on sale of foreclosed assets		(6	)		48
Loss (gain) on sales of loans		(1,515	)		(1,155	)
Originations of loans held for sale		(53,218	)		(55,131	)
Proceeds from the sale of loans held for sale		60,859			56,992
Increase in the value of bank-owned life insurance		(1,277	)		(963	)
Change in fair value of derivatives recognized in earnings		(245	)		488
Gain on acquisition		(585	)	—
Payments on operating lease payable		(246	)		(360	)
Net change in:
Interest receivable		767			(3,860	)
Other assets		3,806			(5,688	)
Interest payable and other liabilities		(3,788	)		948
Net cash provided by (used in) operating activities		47,236			24,646
Cash flows from (to) investing activities
Purchases of available-for-sale securities		(410,487	)		(57,868	)
Purchases of held-to-maturity securities		—			(2,754	)
Proceeds from sales, calls, pay-downs and maturities of available-for-sale securities		227,352			25,818
Proceeds from calls, pay-downs and maturities of held-to-maturity securities		—			107,423
Net change in interest-bearing time deposits in other banks		249			250
Net change in loans		(47,046	)		(251,898	)
Purchases of mortgage loans		(167,983	)		—
Purchases of government guaranteed loans		(3,861	)		—
Capitalized construction cost of other real estate owned		—			(62	)
Purchase of premises and equipment		(3,494	)		(4,431	)
Proceeds from sale of premises and equipment		23			17
Proceeds from sale of foreclosed assets		123			219
Net redemption (purchase) of Federal Home Loan Bank and Federal Reserve Bank stock		(2,017	)		(260	)
Net redemption (purchase) of correspondent and miscellaneous other stock		(68	)	—
Proceeds from sale of other real estate owned		1,974			2,706
Purchase of bank-owned life insurance		(25,000	)	—
Net cash provided by (used in) investing activities		(430,235	)		(180,840	)

Cash flows from (to) financing activities
Net increase (decrease) in deposits		239,953			183,694
Net change in federal funds purchased and retail repurchase agreements		11,155			15,849
Net borrowings (payments) on Federal Home Loan Bank line of credit		—			(231,223	)
Proceeds from Federal Home Loan Bank term advances		70,000			253,000
Principal payments on Federal Home Loan Bank term advances		(70,929	)		(1,240	)
Proceeds from Federal Reserve Bank discount window		1,000			62,000
Principal payments on Federal Reserve Bank discount window		(1,000	)		(62,000	)
Proceeds from bank stock loan		—			38,354
Principal payments on bank stock loan		—			(47,344	)
Principal payments on employee stock loans		43			34
Proceeds from the exercise of employee stock options		675			12
Proceeds from employee stock purchase plan		241			354
Proceeds from subordinated notes		—			42,000
Debt issuance cost		(16	)		(1,140	)
Purchase of treasury stock		(8,780	)		(6,892	)
Net change in contractual obligations		(720	)		(265	)
Net cash provided by (used in) financing activities		241,622			245,193
Net change in cash and cash equivalents		(141,377	)		88,999
Cash and cash equivalents, beginning of period		280,698			89,291
Ending cash and cash equivalents	$	139,321		$	178,290
Supplemental cash flow information:
Interest paid	$	8,157		$	14,547
Income taxes paid, net of refunds		6,920			330
Supplemental noncash disclosures:
Other real estate owned acquired in settlement of loans	$	705		$	1,845
Other repossessed assets acquired in settlement of loans		67			2,035

See accompanying condensed notes to interim consolidated financial statements.

EQUITY BANCSHARES, INC.

CONDENSED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(Unaudited)

(Dollar amounts in thousands, except per share data)

NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements include the accounts of Equity Bancshares, Inc., its wholly-owned subsidiaries, EBAC, LLC and Equity Bank and Equity Bank’s wholly-owned subsidiaries, EBHQ, LLC and SA Holdings, Inc. These entities are collectively referred to as the “Company”. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) for interim financial information and in accordance with guidance provided by the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial information. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature. These financial statements and the accompanying notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2021. Operating results for the six months ended June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, or any other period.

Reclassifications

Some items in prior 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 the periods reported.

Risk and Uncertainties

The outbreak of COVID-19 has adversely impacted a broad range of industries in which the Company’s customers operate and could impair their ability to fulfill their financial obligations to the Company. The World Health Organization has declared COVID-19 to be a global pandemic indicating that almost all public commerce and related business activities could be impacted, to varying degrees, with the goal of decreasing the rate of new infections. The spread of the outbreak has caused significant disruptions in the U.S. economy and has disrupted banking and other financial activity in the areas in which the Company operates. While there has been no material impact to the Company’s employees to date, COVID-19 could also potentially create widespread business continuity issues for the Company. Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout from COVID-19.

The Company’s business is dependent upon the willingness and ability of its employees and customers to conduct banking and other financial transactions. If the global response to contain COVID-19 is unsuccessful, the Company could experience a material adverse effect on its business, financial condition, results of operations and cash flows. It is not possible to know the full universe or extent of impact to the Company’s operations brought about from COVID-19 and resulting measures to curtail its spread.

Financial position and results of operations

The Company’s interest income and fees could be reduced due to COVID-19. In keeping with guidance from regulators, the Company is actively working with COVID-19 affected borrowers to defer their payments, interest and fees. While interest and fees will still accrue to income, through normal GAAP accounting, should eventual credit losses on these deferred payments emerge, interest income and fees accrued would need to be reversed. In such a scenario, interest income in future periods could be negatively impacted. At this time, the Company is unable to project the materiality of such an impact but recognizes the breadth of the economic impact may affect its borrowers’ ability to repay in future periods.

Asset valuation

Currently, the Company does not expect COVID-19 to affect its ability to account timely for the assets on its balance sheet; however, this could change in future periods. While certain valuation assumptions and judgments will change to account for pandemic-related circumstances such as widening credit spreads, the Company does not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP.

Credit

As a result of the current economic environment caused by the COVID-19 virus, the Company is engaging in frequent communication with borrowers to better understand their situation and the challenges faced, allowing the Company to respond proactively as needs and issues arise. Should economic conditions worsen, the Company could experience further increases in its required allowance for credit losses and record additional provision for credit losses. It is possible that the Company’s asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged.

Many industries have and will continue to experience adverse impacts as a result of COVID-19. Our exposure from outstanding loans and commitments to industries which we consider a higher risk totaled approximately $296,658 in hospitality and $37,723 in aircraft manufacturing at June 30, 2021.

Allowance for Credit Losses - Loans

As described below under Recently Adopted Accounting Pronouncements, the Company adopted the FASB ASU 2016-13 effective January 1, 2021, which requires the estimation of an allowance for credit losses in accordance with the current expected credit loss (“CECL”) methodology. 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 Company adopted ASC Topic 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for the reporting periods beginning after January 1, 2021 are presented under ASC Topic 326, while prior amounts continue to be reported in accordance with previously applicable GAAP.

The Company adopted ASC 326 using the prospective transition approach for financial assets purchased with credit deterioration (“PCD”) that were previously classified as purchased credit impaired (“PCI”) and accounted for under ASC 310-30. In accordance with the standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2021, the amortized cost basis of the PCD assets were adjusted to reflect the addition of $10,438 to the allowance for credit losses. The remaining noncredit discount (based on the adjusted amortized cost basis) will be accreted into interest income at the effective interest rate as of January 1, 2021.

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.

• 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, 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 projective 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, as of implementation and through the reporting date, is heavily influenced by the qualitative economic factor considered by management to be reflective of risk associated with the COVID-19 pandemic.

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 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. Loans for which terms have been modified in a troubled debt restructuring (“TDR”) are evaluated using these same individual evaluation methods. In the event the discounted cash flow method is used for a TDR, the original interest rate is used to discount expected cash flows.

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 in the allowance.

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 management has a reasonable expectation at the reporting date that a troubled debt restructuring will be executed or such renewals, extensions 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 deferred loan fees and costs. Accrued interest receivable, as allowed under ASU 2016-13, is excluded from the credit loss estimate, is presented separately on the balance sheets and is excluded from the tabular loan disclosures in Note 3.

While its 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 regulators, model validators and internal audit, they are inherently approximate 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 noninterest 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.

Allowance for Credit Losses – Securities Available-for-Sale

For any securities classified as available-for-sale that are in an unrealized loss position at the balance sheet date, the Company assesses whether or not it intends to sell the security, or more likely than not will be required to sell the security, before recovery of its amortized cost basis. If either criterion is met, the security's amortized cost basis is written down to fair value through net income. If neither criterion is met, the Company evaluates whether any portion of the decline in fair value is the result of credit deterioration. Such evaluations consider the extent to which the amortized cost of the security exceeds its fair value, changes in credit ratings and any other known adverse conditions related to the specific security. If the evaluation indicates that a credit loss exists, an allowance for credit losses is recorded for the amount by which the amortized cost basis of the security exceeds the present value of cash flows expected to be collected, limited by the amount by which the amortized cost exceeds fair value. Any impairment not recognized in the allowance for credit losses is recognized in other comprehensive income.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses, which changed how the Company measures credit losses for most of its financial assets. This guidance is applicable to loans held for investment, off-balance-sheet credit exposures, such as loan commitments and standby letters of credit, and held-to-maturity investment securities. The Company is required to use a new forward-looking current expected credit losses (CECL) model that will result in the earlier recognition of allowances for credit losses. For available-for-sale securities with unrealized losses, the Company will measure credit losses in a manner similar to current practice but will recognize those credit losses as allowances rather than reductions in the amortized cost of the securities. In addition, the ASU requires significantly more disclosure including information about credit quality by year of origination for most loans. Generally, the amendments will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The ASU was originally effective for the Company beginning in the first quarter of 2020; however, the CARES Act, issued in 2020, provided temporary relief related to the implementation of this accounting guidance until the earlier of the date on which the national emergency concerning the COVID-19 virus terminates or December 31, 2020. The Company elected to utilize this relief and has calculated the allowance for loan losses and the resulting provision for loan losses using the prior incurred loss method through December 31, 2020. Further implementation relief for this standard was provided on December 27, 2020, by section 540 of the Consolidated Appropriations Act (“CAA”) which allowed for an additional extension to the earlier of 60 days after the national emergency termination date or January 1, 2022. The Company has elected not to extend the implementation any further and has adopted effective January 1, 2021. The adoption of CECL resulted in an increase to our total allowance for credit losses (“ACL”) on loans held for investment of $15,732, an increase in allowance for credit losses on unfunded loan commitments of $838, a reclassification of purchased credit-impaired discount from loans to the ACL of $10,438, an increase in deferred tax asset of $4,167 and a decrease in retained earnings of $12,403. The increase in the ACL is largely attributable to moving to a life of loan allowance methodology and the transition of certain purchase discounts from an adjustment to amortized cost into the ACL.

In March 2020, various regulatory agencies, including the Federal Reserve and the Federal Deposit Insurance Corporation, (“the agencies”) issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by the Coronavirus. The interagency statement was effective immediately and impacted accounting for loan modifications. This interagency statement was later revised in April 2020 to clarify the interaction between the original interagency statement and section 4013 of the CARES Act, as well as the agencies’ views on consumer protection considerations. Under Accounting Standards Codification 310-40, Receivables – Troubled Debt Restructurings by Creditors, (“ASC 310-40”), a restructuring of debt constitutes a troubled debt restructuring (“TDR”) if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. The agencies confirmed with the staff of the FASB that short-term

modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term modifications such as payment deferrals, fee waivers, extensions of repayment terms or other delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. The CARES Act provisions were further extended to the earlier of 60 days after the national emergency termination date or January 1, 2022, by section 541 of the CAA. In addition, loan deferrals can be qualified under section 4013 of the CARES Act during the extended relief period if certain criteria are met. This interagency guidance and CARES Act provisions have had a material impact on the Company’s financial statements as reflected in Note 3.

In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate reform if certain criteria are met. The transactions primarily include contract modifications; hedging relationships; and sale or transfer of debt securities classified as held-to-maturity. The guidance was effective immediately for the Company and the amendments may be applied prospectively through December 31, 2022. The Company is in the process of evaluating the guidance, and its effect on the Company’s financial condition, results of operations and cash flows has not yet been determined.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848). ASU 2021-01 clarify that certain optional expedients and exceptions that are noted in Topic 848 apply to derivatives that are affected by the discounting transition. Certain provisions, if elected by the Company, apply to derivative instruments that use an interest rate for managing, discounting or contract price alignment that is modified as a result of reference rate reform. The guidance was effective immediately for the Company and the amendments may be applied prospectively through December 31, 2022. The Company is in the process of evaluating the guidance, and its effect on the Company’s financial condition, results of operations and cash flows has not yet been determined.

NOTE 2 – SECURITIES

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) are listed below.

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
June 30, 2021
Available-for-sale securities
U.S. Government-sponsored entities	$	50,231	$	203	$	(72	)	$	—	$	50,362
U.S. Treasury securities		11,641		108		—			—		11,749
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		661,938		14,837		(2,281	)		—		674,494
Private label residential mortgage-backed securities		136,671		4		(229	)		—		136,446
Corporate		52,514		1,480		—			—		53,994
Small Business Administration loan pools		11,037		38		(63	)		—		11,012
State and political subdivisions		99,613		3,943		—			—		103,556
	$	1,023,645	$	20,613	$	(2,645	)	$	—	$	1,041,613

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2020
Available-for-sale securities
U.S. Government-sponsored entities	$	996	$	27	$	—		$	1,023
U.S. Treasury securities		4,024		1		—			4,025
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		630,485		21,049		(109	)		651,425
Private label residential mortgage-backed securities		44,302		5		(129	)		44,178
Corporate		52,503		1,153		(6	)		53,650
Small Business Administration loan pools		1,226		44		—			1,270
State and political subdivisions		111,865		4,391		—			116,256
	$	845,401	$	26,670	$	(244	)	$	871,827

The fair value and amortized cost of debt securities at June 30, 2021, 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
	Amortized Cost		Fair Value
Within one year	$	6,621	$	6,671
One to five years		41,939		42,433
Five to ten years		134,428		137,390
After ten years		42,048		44,178
Mortgage-backed securities		798,609		810,941
Total debt securities	$	1,023,645	$	1,041,613

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately $742,793 at June 30, 2021, and $713,001 at December 31, 2020.

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 June 30, 2021, and December 31, 2020.

	Less Than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
June 30, 2021
Available-for-sale securities
U.S. Government-sponsored entities	$	19,928	$	(72	)	$	—	$	—	$	19,928	$	(72	)
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		224,511		(2,281	)		—		—		224,511		(2,281	)
Private label residential mortgage-backed securities		90,016		(229	)		—		—		90,016		(229	)
Small Business Administration loan pools		9,711		(63	)		—		—		9,711		(63	)
Total temporarily impaired securities	$	344,166	$	(2,645	)	$	—	$	—	$	344,166	$	(2,645	)
December 31, 2020
Available-for-sale securities
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities	$	28,770	$	(109	)	$	—	$	—	$	28,770	$	(109	)
Private label residential mortgage-backed securities		28,367		(129	)		—		—		28,367		(129	)
Corporate		3,908		(6	)		—		—		3,908		(6	)
Total temporarily impaired securities	$	61,045	$	(244	)	$	—	$	—	$	61,045	$	(244	)

As of June 30, 2021, the Company held 50 available-for-sale securities in an unrealized 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, 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.

There were no sales of available-for-sale securities during the six months ended June 30, 2021 or 2020.

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

Types of loans and normal collateral securing those loans are listed below.

Commercial real estate: Commercial real estate loans include all loans secured by nonfarm, nonresidential properties and by multifamily residential properties, as well as 1-4 family investment-purpose real estate loans.

Commercial and industrial: Commercial and industrial loans include loans used to purchase fixed assets, provide working capital or meet other financing needs of the business. Loans are normally secured by the assets being purchased or already owned by the borrower, inventory or accounts receivable. These may include SBA and other guaranteed or partially guaranteed types of loans.

Residential real estate: Residential real estate loans include loans secured by primary or secondary personal residences.

Agricultural real estate: Agricultural real estate loans are loans typically secured by farmland.

Agricultural: Agricultural loans are primarily operating lines subject to annual farming revenues including productivity/yield of the agricultural commodities produced. These loans may be secured by growing crops, stored crops, livestock, equipment and miscellaneous receivables.

Consumer: Consumer loans may include installment loans, unsecured and secured personal lines of credit, overdraft protection and letters of credit. These loans are generally secured by consumer assets but may be unsecured.

The following table lists categories of loans at June 30, 2021, and December 31, 2020.

	June 30, 2021			December 31, 2020
Commercial real estate	$	1,261,214		$	1,188,696
Commercial and industrial		732,126			734,495
Residential real estate		503,110			381,958
Agricultural real estate		129,020			133,693
Agricultural		97,912			94,322
Consumer		91,679			58,532
Total loans		2,815,061			2,591,696
Allowance for credit losses		(51,834	)		(33,709	)
Net loans	$	2,763,227		$	2,557,987

Included in the commercial and industrial loan balances at June 30, 2021 and December 31, 2020, are $271,461 and $253,741 of loans that were originated under the SBA PPP program.

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 the quarter ended June 30, 2021, the Company purchased one pool of residential real estate loans totaling $78,533. During the first six months of 2021, the Company purchased three pools of residential real estate loans totaling $167,983. As of June 30, 2021, and December 31, 2020, residential real estate loans include $244,112 and $86,093 of purchased residential real estate loans.

The unamortized discount of merger purchase accounting adjustments related to non-purchase credit impaired loans included in the loan totals above are $7,407 with related loans of $293,355 at June 30, 2021. At December 31, 2020, excluding purchased credit impaired loans, there were $380,058 of loans with a related discount of $5,510 that were purchased as part of a merger. Effective January 1, 2021, with the adoption of CECL, amortizable non-credit discounts on purchase credit impaired loans are included in unamortized discount of merger purchase accounting adjustments.

Overdraft deposit accounts are reclassified and included in consumer loans above. These accounts totaled $444 at June 30, 2021, and $597 at December 31, 2020.

The Company adopted ASU 2016-13, also referred to as CECL, effective January 1, 2021, and with that adoption the Company’s method for estimating the allowance for credit losses has changed. 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, US personal income, U.S. housing price indexes, 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 individual impairment assessments 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 judgements. The current management adjustment represents a significant portion of the Company’s ACL and is comprised of the estimated impact to ACL from the COVID-19 pandemic and associated response.

During the three and six months ended June 30, 2021, the Company updated the purchase accounting conclusions related to PCD assets acquired through the Almena State Bank transaction and the adjustment is reflected in the table below within “Adjustment to impact of adopting ASC 326 – PCD loans.” During the quarter, additional information was obtained and additional analysis was performed by the management team which led to a modification of purchase date accounting. The adjustment resulted in a reduction in the allowance for credit losses which was offset by an increase in loan repurchase obligation, which is reported in interest payable and other liabilities in the consolidated balance sheets; decrease in deferred tax asset and an increase in gain on acquisition.

The following tables present the activity in the allowance for credit losses by class for the three-month periods ended June 30, 2021 and 2020.

June 30, 2021	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for credit losses:
Beginning balance	$	15,118		$	19,965		$	11,511		$	1,900		$	4,349		$	2,682		$	55,525
Reclassification to allowance on unfunded commitments		72			52			(11	)		(1	)		—			3			115
Adjustment to impact of adopting ASC 326 - PCD loans		(56	)		(1,898	)		(1	)		(226	)		599			—			(1,582	)
Provision for credit losses		91			578			(1,692	)		(354	)		(253	)		(27	)		(1,657	)
Loans charged-off		—			(54	)		(3	)		(490	)		(1	)		(165	)		(713	)
Recoveries		—			47			4			18			1			76			146
Total ending allowance balance	$	15,225		$	18,690		$	9,808		$	847		$	4,695		$	2,569		$	51,834

June 30, 2020	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for loan losses:
Beginning balance	$	5,223		$	4,979		$	4,128		$	456		$	592		$	6,537		$	21,915
Provision for loan losses		4,095			5,435			1,318			526			219			907			12,500
Loans charged-off		(51	)		(255	)		(134	)		(7	)		(1	)		(175	)		(623	)
Recoveries		200			9			3			—			—			74			286
Total ending allowance balance	$	9,467		$	10,168		$	5,315		$	975		$	810		$	7,343		$	34,078

The following tables present the activity in the allowance for credit losses by class for the six-month periods ended June 30, 2021 and 2020.

June 30, 2021	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for credit losses:
Beginning balance, prior to adoption of ASC 326	$	9,012		$	12,456		$	4,559		$	904		$	758		$	6,020		$	33,709
Cumulative effect adjustment of adopting ASC 326		5,612			4,167			8,870			167			(207	)		(2,877	)		15,732
Impact of adopting ASC 326 - PCD loans		4,571			(218	)		220			960			4,905			—			10,438
Provision for credit losses		(4,044	)		2,276			(3,834	)		(700	)		(764	)		(347	)		(7,413	)
Loans charged-off		(53	)		(61	)		(12	)		(502	)		(1	)		(375	)		(1,004	)
Recoveries		127			70			5			18			4			148			372
Total ending allowance balance	$	15,225		$	18,690		$	9,808		$	847		$	4,695		$	2,569		$	51,834

June 30, 2020	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for loan losses:
Beginning balance	$	3,919		$	3,061		$	2,676		$	608		$	546		$	1,422		$	12,232
Provision for loan losses		5,407			7,350			2,794			391			264			6,234			22,440
Loans charged-off		(59	)		(284	)		(159	)		(24	)		(1	)		(453	)		(980	)
Recoveries		200			41			4			—			1			140			386
Total ending allowance balance	$	9,467		$	10,168		$	5,315		$	975		$	810		$	7,343		$	34,078

The following tables present the recorded investment in loans and the balance in the allowance for credit losses by portfolio and class based on method to determine allowance for credit loss as of June 30, 2021, and December 31, 2020.

June 30, 2021	Commercial Real Estate		Commercial and Industrial		Residential Real Estate		Agricultural Real Estate		Agricultural		Consumer		Total
Allowance for credit losses:
Individually evaluated for impairment	$	3,807	$	8,777	$	659	$	512	$	4,487	$	58	$	18,300
Collectively evaluated for impairment		11,418		9,913		9,149		335		208		2,511		33,534
Total	$	15,225	$	18,690	$	9,808	$	847	$	4,695	$	2,569	$	51,834
Loan Balance:
Individually evaluated for impairment	$	8,042	$	29,510	$	2,647	$	6,535	$	9,843	$	231	$	56,808
Collectively evaluated for impairment		1,253,172		702,616		500,463		122,485		88,069		91,448		2,758,253
Total	$	1,261,214	$	732,126	$	503,110	$	129,020	$	97,912	$	91,679	$	2,815,061

December 31, 2020	Commercial Real Estate		Commercial and Industrial		Residential Real Estate		Agricultural Real Estate		Agricultural		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	2,159	$	5,457	$	485	$	595	$	96	$	68	$	8,860
Collectively evaluated for impairment		6,472		5,985		3,949		266		586		5,952		23,210
Purchased credit impaired loans		381		1,014		125		43		76		—		1,639
Total	$	9,012	$	12,456	$	4,559	$	904	$	758	$	6,020	$	33,709
Loan Balance:
Individually evaluated for impairment	$	4,752	$	20,421	$	1,939	$	2,711	$	2,201	$	272	$	32,296
Collectively evaluated for impairment		1,176,403		710,038		377,331		126,256		87,158		58,242		2,535,428
Purchased credit impaired loans		7,541		4,036		2,688		4,726		4,963		18		23,972
Total	$	1,188,696	$	734,495	$	381,958	$	133,693	$	94,322	$	58,532	$	2,591,696

The following table presents information related to nonaccrual loans at June 30, 2021.

	June 30, 2021
	Unpaid Principal Balance		Recorded Investment		Allowance for Credit Losses Allocated
With no related allowance recorded:
Commercial real estate	$	—	$	—	$	—
Commercial and industrial		—		—		—
Residential real estate		37		—		—
Agricultural real estate		4,794		4,304		—
Agricultural		1,801		1,751		—
Consumer		—		—		—
Subtotal		6,632		6,055		—
With an allowance recorded:
Commercial real estate		8,685		8,042		3,807
Commercial and industrial		36,901		29,510		8,777
Residential real estate		2,742		2,647		659
Agricultural real estate		2,652		2,231		512
Agricultural		10,561		8,092		4,487
Consumer		261		231		58
Subtotal		61,802		50,753		18,300
Total	$	68,434	$	56,808	$	18,300

The following table presents information related to impaired loans, excluding purchased credit impaired loans which have not deteriorated since acquisition, by class of loans as of December 31, 2020. The recorded investment in loans excludes accrued interest receivable due to immateriality.

	December 31, 2020
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial real estate	$	6,279	$	1,683	$	—
Commercial and industrial		2,087		643		—
Residential real estate		270		180		—
Agricultural real estate		3,408		1,090		—
Agricultural		11,326		4,492		—
Consumer		—		—		—
Subtotal		23,370		8,088		—
With an allowance recorded:
Commercial real estate		7,134		5,899		2,540
Commercial and industrial		29,245		22,814		6,471
Residential real estate		3,023		2,775		610
Agricultural real estate		3,474		3,021		638
Agricultural		1,330		820		172
Consumer		294		272		68
Subtotal		44,500		35,601		10,499
Total	$	67,870	$	43,689	$	10,499

The table below presents average recorded investment and interest income related to nonaccrual loans for the three and six months ended June 30, 2021 and 2020. Interest income recognized in the following table was substantially recognized on the cash basis. The recorded investment in loans excludes accrued interest receivable due to immateriality.

	As of and for the three months ended
	June 30, 2021				June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	—	$	2	$	37	$	1
Commercial and industrial		—		—		14,113		—
Residential real estate		11		—		4,318		—
Agricultural real estate		3,210		83		365		—
Agricultural		2,066		33		—		—
Consumer		—		1		—		—
Subtotal		5,287		119		18,833		1
With an allowance recorded:
Commercial real estate		8,010		3		6,734		19
Commercial and industrial		29,034		11		9,129		172
Residential real estate		2,752		2		4,030		2
Agricultural real estate		3,787		—		3,655		6
Agricultural		8,033		10		1,618		—
Consumer		253		1		317		—
Subtotal		51,869		27		25,483		199
Total	$	57,156	$	146	$	44,316	$	200

	As of and for the six months ended
	June 30, 2021				June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	561	$	3	$	741	$	1
Commercial and industrial		214		—		14,353		23
Residential real estate		67		—		4,320		—
Agricultural real estate		2,504		83		754		5
Agricultural		2,874		33		—		—
Consumer		—		1		—		—
Subtotal		6,220		120		20,168		29
With an allowance recorded:
Commercial real estate		7,306		18		5,405		19
Commercial and industrial		26,961		119		6,633		172
Residential real estate		2,760		2		3,768		3
Agricultural real estate		3,531		20		2,775		6
Agricultural		5,629		44		1,532		—
Consumer		260		1		338		—
Subtotal		46,447		204		20,451		200
Total	$	52,667	$	324	$	40,619	$	229

The following tables present the aging of the recorded investment in past due loans as of June 30, 2021, and December 31, 2020, by portfolio and class of loans.

June 30, 2021	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due Still On Accrual		Nonaccrual		Loans Not Past Due		Total
Commercial real estate	$	154	$	—	$	—	$	8,042	$	1,253,018	$	1,261,214
Commercial and industrial		533		33		—		29,510		702,050		732,126
Residential real estate		500		184		—		2,647		499,779		503,110
Agricultural real estate		439		—		—		6,535		122,046		129,020
Agricultural		30		40		—		9,843		87,999		97,912
Consumer		144		13		45		231		91,246		91,679
Total	$	1,800	$	270	$	45	$	56,808	$	2,756,138	$	2,815,061

December 31, 2020	30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 90 Days Past Due Still On Accrual		Nonaccrual		Loans Not Past Due		Total
Commercial real estate	$	1,374	$	172	$	—	$	7,582	$	1,179,568	$	1,188,696
Commercial and industrial		261		—		—		23,457		710,777		734,495
Residential real estate		377		4,712		—		2,955		373,914		381,958
Agricultural real estate		260		—		98		4,111		129,224		133,693
Agricultural		196		—		—		5,312		88,814		94,322
Consumer		336		60		45		272		57,819		58,532
Total	$	2,804	$	4,944	$	143	$	43,689	$	2,540,116	$	2,591,696

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 pass credits unless downgraded due to payment status or reviewed as part of a larger credit relationship. Loans that participated in the short-term deferral program are not automatically considered classified solely due to a deferral, are subject to ongoing monitoring and will be downgraded or placed on nonaccrual if a noted weakness exists. 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.

Based on the most recent analysis performed, the risk category of loans, by type and year of origination, at June 30, 2021, is as follows.

June 30, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost		Revolving Loans Converted to Term		Total
Commercial real estate
Risk rating
Pass	$	134,193	$	231,037	$	168,682	$	123,155	$	80,636	$	157,523	$	356,078	$	86	$	1,251,390
Special mention		127		—		—		—		—		—		—		—		127
Substandard		1,793		820		188		100		1,147		5,644		5		—		9,697
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial real estate	$	136,113	$	231,857	$	168,870	$	123,255	$	81,783	$	163,167	$	356,083	$	86	$	1,261,214
Commercial and industrial
Risk rating
Pass	$	289,441	$	140,043	$	75,307	$	20,865	$	15,235	$	14,113	$	104,988	$	10,303	$	670,295
Special mention		—		—		—		4,224		10,130		—		2,637		2,735		19,726
Substandard		23		10,101		15,924		2,791		672		2,510		10,049		35		42,105
Doubtful		—		—		—		—		—		—		—		—		—
Total commercial and industrial	$	289,464	$	150,144	$	91,231	$	27,880	$	26,037	$	16,623	$	117,674	$	13,073	$	732,126
Residential real estate
Risk rating
Pass	$	104,952	$	88,158	$	32,407	$	71,137	$	42,330	$	111,421	$	49,913	$	145	$	500,463
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		147		56		497		1,712		235		—		2,647
Doubtful		—		—		—		—		—		—		—		—		—
Total residential real estate	$	104,952	$	88,158	$	32,554	$	71,193	$	42,827	$	113,133	$	50,148	$	145	$	503,110
Agricultural real estate
Risk rating
Pass	$	12,824	$	29,315	$	13,455	$	11,373	$	6,844	$	14,314	$	32,489	$	—	$	120,614
Special mention		—		—		—		—		—		—		—		—		—
Substandard		557		65		1,536		1,838		2,666		754		990		—		8,406
Doubtful		—		—		—		—		—		—		—		—		—
Total agricultural real estate	$	13,381	$	29,380	$	14,991	$	13,211	$	9,510	$	15,068	$	33,479	$	—	$	129,020
Agricultural
Risk rating
Pass	$	14,196	$	14,071	$	3,431	$	2,035	$	3,565	$	1,675	$	48,181	$	74	$	87,228
Special mention		—		—		—		—		—		—		—		—		—
Substandard		237		2,153		2,395		3,232		247		1,657		763		—		10,684
Doubtful		—		—		—		—		—		—		—		—		—
Total consumer	$	14,433	$	16,224	$	5,826	$	5,267	$	3,812	$	3,332	$	48,944	$	74	$	97,912
Consumer
Risk rating
Pass	$	13,624	$	14,234	$	8,947	$	4,664	$	2,039	$	1,127	$	46,719	$	47	$	91,401
Special mention		—		—		—		—		—		—		—		—		—
Substandard		—		95		55		35		37		56		—		—		278
Doubtful		—		—		—		—		—		—		—		—		—
Total agricultural	$	13,624	$	14,329	$	9,002	$	4,699	$	2,076	$	1,183	$	46,719	$	47	$	91,679
Total loans
Risk rating
Pass	$	569,230	$	516,858	$	302,229	$	233,229	$	150,649	$	300,173	$	638,368	$	10,655	$	2,721,391
Special mention		127		—		—		4,224		10,130		—		2,637		2,735		19,853
Substandard		2,610		13,234		20,245		8,052		5,266		12,333		12,042		35		73,817
Doubtful		—		—		—		—		—		—		—		—		—
Total loans	$	571,967	$	530,092	$	322,474	$	245,505	$	166,045	$	312,506	$	653,047	$	13,425	$	2,815,061

The classification status of loans by class of loans is as follows at December 31, 2020.

December 31, 2020	Unclassified		Classified		Total
Commercial real estate	$	1,171,961	$	16,735	$	1,188,696
Commercial and industrial		674,392		60,103		734,495
Residential real estate		378,868		3,090		381,958
Agricultural real estate		125,425		8,268		133,693
Agricultural		86,629		7,693		94,322
Consumer		58,253		279		58,532
Total	$	2,495,528	$	96,168	$	2,591,696

Purchased Credit Impaired Loans

The Company has acquired loans, for which there was, at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. Upon the Company’s adoption of ASU 2016-13, remaining credit-related discount on these assets was re-classified to the allowance for credit losses. The Company elected the prospective transition approach and all loans previously considered purchased credit impaired are now classified as purchased with credit deterioration. The remaining non-credit discount will continue to be accreted into income over the remaining lives of the assets.

The table below lists recorded investments in purchased credit impaired loans as of December 31, 2020.

	December 31, 2020
Contractually required principal payments	$	41,658
Discount		(17,686	)
Recorded investment	$	23,972

The accretable yield associated with these loans was $2,630 as of December 31, 2020. The interest income recognized on these loans for the three and six-month periods ended June 30, 2020, was $345 and $861. For the three and six-month periods ended June 30, 2020, there was a provision for loan losses of $1,350 and $2,018 recorded for these loans.

Troubled Debt Restructurings

Consistent with accounting and regulatory guidance, the Company recognizes a TDR when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that would not normally be considered. Regardless of the form of concession granted, the Company’s objective in offering a TDR is to increase the probability of repayment of the borrower’s loans.

The following table summarizes the Company’s TDRs by accrual status at June 30, 2021, and December 31, 2020.

June 30, 2021	Nonaccrual		Related Allowance for Credit Losses
Commercial real estate	$	1,807	$	867
Commercial and industrial		12,771		1,236
Total troubles debt restructurings	$	14,578	$	2,103

December 31, 2020	Nonaccrual		Related Allowance for Loan Losses
Commercial real estate	$	1,167	$	342
Commercial and industrial		13,613		1,954
Total troubles debt restructurings	$	14,780	$	2,296

At June 30, 2021, and December 31, 2020, there were no commitments to lend additional amounts on these loans.

There were no loan modifications considered to be troubled debt restructurings that occurred during the three or six-month periods ended June 30, 2021 or 2020.

There were no troubled debt restructurings within the twelve months preceding June 30, 2021. No restructured loans that were modified within the twelve months preceding June 30, 2020, have subsequently had a payment default. Default is determined at 90 or more days past due, charge-off or foreclosure.

As of June 30, 2021, and December 31, 2020, we had 36 and 28 deferrals of either the full loan payment or the principal component of the loan payment on outstanding loan balances of $68,355 and $60,880 in connection with the COVID-19 relief provided by the CARES Act. These deferrals were not considered troubled debt restructurings based on the CARES Act, CAA or regulatory guidance.

The following table lists loans included in the payment deferral program under the Cares Act by deferment type and category at June 30, 2021, and December 31, 2020.

	June 30, 2021
	Commercial Real Estate		Commercial and Industrial		Agricultural Real Estate		Total
12 months partial principal only	$	—	$	1,920	$	—	$	1,920
6 months principal only		284		2,824		—		3,108
8 months principal only		2,459		—		—		2,459
9 months principal only		11,196		973		—		12,169
12 months principal only		11,626		3,533		112		15,271
6 months principal and interest, then 9 months principal only		30,815		2,613		—		33,428
Total loans	$	56,380	$	11,863	$	112	$	68,355

	December 31, 2020
	Commercial Real Estate		Commercial and Industrial		Total
12 months partial principal only	$	—	$	1,965	$	1,965
6 months principal only		2,262		4,175		6,437
9 months principal only		2,459		—		2,459
12 months principal only		10,092		3,675		13,767
3 months principal and interest, then 6 months principal only		—		2,824		2,824
6 months principal and interest, then 9 months principal only		30,815		2,613		33,428
Total loans	$	45,628	$	15,252	$	60,880

The classification status of loans participating in the payment deferral program at June 30, 2021, and December 31, 2020, is listed below.

	June 30, 2021						December 31, 2020
	Unclassified		Classified		Total		Unclassified		Classified		Total
Commercial real estate	$	56,380	$	—	$	56,380	$	45,628	$	—	$	45,628
Commercial and industrial		4,968		6,895		11,863		5,095		10,157		15,252
Agricultural real estate		112		—		112		—		—		—
Total loans	$	61,460	$	6,895	$	68,355	$	50,723	$	10,157	$	60,880

While all industries have and will continue to experience adverse impacts as a result of COVID-19, the Company had exposures (on balance sheet loans and commitments to lend) in the following loan categories that are considered to be most at-risk of a significant impact as of June 30, 2021.

Hospitality Lending – The Company’s exposure to the hospitality sector at June 30, 2021, was $296.7 million, or 11.7%, of total loans excluding PPP loans. As of June 30, 2021, $26.2 million of these loans were actively participating in a deferral program.

The top 20 loans within this portfolio comprise $229.4 million, or 77.3%, of the total exposure. These loans are geographically diversified and well secured. The borrowers are well known to the Company and experienced hoteliers who have evidenced efforts to

enhance profitability in the current economic environment by driving down costs and creatively occupying their properties, including arrangements with medical professionals and others on the front line of this pandemic. Historically, the portfolio has exhibited strong operational cash flows. The remainder of the portfolio is comprised of many smaller balance loans.

Aircraft Manufacturing – The Company’s exposure to the aircraft manufacturing category at June 30, 2021, was $37.7 million, or 1.5%, of total loans excluding PPP loans. As of June 30, 2021, none of these loans were actively participating in a deferral program. The portfolio is comprised of experienced industry operators who have historically performed without exception.

The Company has worked with customers directly affected by COVID-19 and is prepared to offer short-term assistance in accordance with regulatory guidelines. As a result of the current economic environment caused by the COVID-19 virus, the Company is engaging in frequent communication with borrowers to better understand their situation and the challenges faced, allowing us to respond proactively as needs and issues arise.

While management is optimistic about the performance of the above addressed portions of the portfolio as a whole, the Company acknowledges the risks associated with the current economic conditions and related unknowns. These risks are believed to have been addressed and reserved for through our allowance for credit losses and associated provision for credit losses as of and for the period ended June 30, 2021.

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.

The following table lists allowance for credit losses on off-balance sheet credit exposures as of June 30, 2021.

June 30, 2021	Allowance for Credit Losses
Commercial real estate	$	331
Commercial and industrial		191
Residential real estate		43
Agricultural real estate		—
Agricultural		—
Consumer		437
Total allowance for credit losses	$	1,002

NOTE 4 – DERIVATIVE FINANCIAL INSTRUMENTS

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.

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”) plus a spread to this index and pays a fixed-rate cash flow equal to the customer loan rate. At June 30, 2021, the portfolio of interest rate swaps had a weighted average maturity of 5.8 years, a weighted average pay rate of 5.19% and a weighted average rate received of 3.14%. At December 31, 2020, the portfolio of interest rate swaps had a weighted average maturity of 6.3 years, a weighted average pay rate of 5.19% and a weighted average rate received of 3.21%.

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. At June 30, 2021, this portfolio of interest rate swaps had a weighted average maturity of 7.4 years, weighted average pay rate of 4.32% and a weighted average rate received of 4.32%. At December 31, 2020, this portfolio of interest rate swaps had a weighted average maturity of 7.9 years, weighted average pay rate of 4.34% and weighted average rate received of 4.34%.

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 June 30, 2021, and December 31, 2020.

	June 30, 2021							December 31, 2020
	Notional Amount		Derivative Assets		Derivative Liabilities			Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	5,474	$	—	$	326		$	5,585	$	—	$	497
Total derivatives designated as hedging relationships		5,474		—		326			5,585		—		497
Derivatives not designated as hedging instruments:
Interest rate swaps		117,760		5,213		5,616			119,341		7,172		7,820
Total derivatives not designated as hedging instruments		117,760		5,213		5,616			119,341		7,172		7,820
Total	$	123,234		5,213		5,942		$	124,926		7,172		8,317
Cash collateral				—		(6,110	)				—		(8,440	)
Netting adjustments				239		239					123		123
Net amount presented in Balance Sheet			$	5,452	$	71				$	7,295	$	—

The table below lists designated and qualifying hedged items in fair value hedges at June 30, 2021, and December 31, 2020.

	June 30, 2021						December 31, 2020
	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	$	5,474	$	320	$	—	$	5,583	$	491	$	—
Total	$	5,474	$	320	$	—	$	5,583	$	491	$	—

The Company reports hedging derivative gains (losses) as adjustments to loan interest income along with the related net interest settlements and the derivative gains (losses) and net interest settlements for economic derivatives are reported in other income. For the three and six-month periods ended June 30, 2021 and 2020, the Company recorded net gains (losses) on derivatives and hedging activities.

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021		2020
Derivatives designated as hedging instruments:
Interest rate swaps	$	—		$	—	$	—	$	—
Total net gain (loss) related to fair value hedges		—			—		—		—
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps		(105	)		8		245		(484	)
Total net gains (losses) related to derivatives not designated as hedging instruments		(105	)		8		245		(484	)
Net gains (losses) on derivatives and hedging activities	$	(105	)	$	8	$	245	$	(484	)

The following table shows the recorded net gains (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 three-month periods ended June 30, 2021 and 2020.

	June 30, 2021
	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	$	33	$	(33	)	$	—	$	(28	)
Total	$	33	$	(33	)	$	—	$	(28	)

	June 30, 2020
	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	$	(37	)	$	37	$	—	$	(24	)
Total	$	(37	)	$	37	$	—	$	(24	)

	June 30, 2021
	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	$	(171	)	$	171	$	—	$	(56	)
Total	$	(171	)	$	171	$	—	$	(56	)

	June 30, 2020
	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	$	(436	)	$	436	$	—	$	(33	)
Total	$	(436	)	$	436	$	—	$	(33	)

NOTE 5 – LEASE OBLIGATIONS

Right-of-use asset and lease obligations by type of property for the periods ended June 30, 2021, and December 31, 2020, are listed below.

	June 30, 2021
Operating Leases	Right-of-Use Asset		Lease Liability		Weighted Average Lease Term in Years		Weighted Average Discount Rate
Land and building leases	$	3,331	$	3,317		17.0		2.99	%
Total operating leases	$	3,331	$	3,317		17.0		2.99	%

	December 31, 2020
Operating Leases	Right-of-Use Asset		Lease Liability		Weighted Average Lease Term in Years		Weighted Average Discount Rate
Land and building leases	$	3,540	$	3,524		16.9		2.99	%
Total operating leases	$	3,540	$	3,524		16.9		2.99	%

Operating lease costs for the three and six-month periods ended June 30, 2021 and 2020, are listed below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Operating lease cost	$	126	$	183	$	251	$	365
Short-term lease cost		—		—		—		—
Variable lease cost		3		8		13		19
Total operating lease cost	$	129	$	191	$	264	$	384

There were no sales and leaseback transactions, leverage leases, lease transactions with related parties or leases that had not yet commenced during the three or six-month periods ended June 30, 2021.

A maturity analysis of operating lease liabilities and reconciliation of the undiscounted cash flows to the total operating lease liability is listed below.

Lease Payments	June 30, 2021
Due in one year or less	$	459
Due after one year through two years		468
Due after two years through three years		276
Due after three years through four years		212
Due after four years through five years		213
Thereafter		2,725
Total undiscounted cash flows		4,353
Discount on cash flows		(1,036	)
Total operating lease liability	$	3,317

NOTE 6 – BORROWINGS

Federal funds purchased and retail repurchase agreements

Federal funds purchased and retail repurchase agreements as of June 30, 2021, and December 31, 2020, are listed below.

June 30,

2021

December 31,

2020

Federal funds purchased

—

Retail repurchase agreements

47,184

36,029

The Company has available federal funds lines of credit with its correspondent banks.

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 $47,668 and $47,113 at June 30, 2021, and December 31, 2020. The agreements are on a day-to-day basis and can be terminated on demand.

	June 30, 2021			December 31, 2020
Year-to-date average daily balance during the period	$	43,904		$	45,041
Maximum month-end balance year-to-date	$	47,184		$	53,543
Weighted average interest rate at period-end		0.22	%		0.22	%

Federal Home Loan Bank advances

Federal Home Loan Bank advances as of June 30, 2021, are listed below.

	June 30, 2021		Weighted Average Rate			Weighted Average Term in Years
Federal Home Loan Bank line of credit advances	$	—		—		—
Federal Home Loan Bank fixed-rate term advances		9,179		2.79	%		2.0
Total principal outstanding		9,179
Merger purchase accounting adjustment		29
Total Federal Home Loan Bank advances	$	9,208

Federal Home Loan Bank advances as of December 31, 2020, are listed below.

	December 31, 2020		Weighted Average Rate			Weighted Average Term in Years
Federal Home Loan Bank line of credit advances	$	—		—		—
Federal Home Loan Bank fixed-rate term advances		10,107		2.79	%		2.3
Total principal outstanding		10,107
Merger purchase accounting adjustment		37
Total Federal Home Loan Bank advances	$	10,144

The advances, Mortgage Partnership Finance credit enhancement obligations and letters of credit were collateralized by certain qualifying loans totaling $822,009 and $763,506 at June 30, 2021, and December 31, 2020. Based on this collateral and the Company’s holdings of Federal Home Loan Bank stock, the Company was eligible to borrow an additional $797,072 and $661,490 at June 30, 2021, and December 31, 2020.

Federal Reserve Bank discount window

At June 30, 2021, to support the $250,295 borrowing capacity from the Federal Reserve Bank, the Company has pledged loans with an outstanding balance of $263,144 and securities with a fair value of $50,025. No borrowings were secured from this facility at periods ended June 30, 2021 or 2020.

Bank stock loan

The Company entered into an agreement with an unaffiliated financial institution that provided for a maximum borrowing facility of $40,000, secured by the Company’s stock in Equity Bank. The loan was renewed and amended on June 30, 2020, with a maturity date of August 15, 2021, and has recently been extended to November 13, 2021. 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.

There were no outstanding principal balances on the bank stock loan at June 30, 2021, or December 31, 2020.

The terms of the borrowing facility require the Company and Equity Bank to maintain minimum capital ratios and other covenants. In the event of default, the lender has the option to declare all outstanding balances immediately due. The Company believes it is in compliance with the terms of the borrowing facility and has not been otherwise notified of noncompliance.

Subordinated debt

Subordinated debt as of June 30, 2021, and December 31, 2020, are listed below.

	June 30, 2021		December 31, 2020
Subordinated debentures	$	15,031	$	14,872
Subordinated notes		72,877		72,812
Total	$	87,908	$	87,684

Subordinated debentures

In conjunction with prior acquisitions, the Company assumed certain subordinated debentures owed to special purpose unconsolidated subsidiaries that are controlled by the Company. These subordinated debentures have the same terms as the trust preferred securities issued by the special purpose unconsolidated subsidiaries.

FCB Capital Trust II (“CTII”): The trust preferred securities issued by CTII accrue and pay distributions quarterly at three-month LIBOR plus 2.00% on the stated liquidation amount of the trust preferred securities. These trust preferred securities are mandatorily redeemable upon maturity on April 15, 2035, or upon earlier redemption.

FCB Capital Trust III (“CTIII”): The trust preferred securities issued by CTIII accrue and pay distributions quarterly at three-month LIBOR plus 1.89% on the stated liquidation amount of the trust preferred securities. These trust preferred securities are mandatorily redeemable upon maturity on June 15, 2037, or upon earlier redemption.

Community First (AR) Statutory Trust I (“CFSTI”): The trust preferred securities issued by CFSTI accrue and pay distributions quarterly at three-month LIBOR 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.

Subordinated debentures as of June 30, 2021, and December 31, 2020, are listed below.

	June 30, 2021			Weighted Average Rate			Weighted Average Term in Years
CTII subordinated debentures	$	10,310			2.18	%		13.8
CTIII subordinated debentures		5,155			2.01	%		16.0
CFSTI subordinated debentures		5,155			3.40	%		11.5
Total contractual balance		20,620
Fair market value adjustments		(5,589	)
Total subordinated debentures	$	15,031

	December 31, 2020			Weighted Average Rate			Weighted Average Term in Years
CTII subordinated debentures	$	10,310			2.24	%	14.3
CTIII subordinated debentures		5,155			2.11	%		16.5
CFSTI subordinated debentures		5,155			3.50	%		12.0
Total contractual balance		20,620
Fair market value adjustments		(5,748	)
Total subordinated debentures	$	14,872

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 June 30, 2021, are listed below.

	June 30, 2021			Weighted Average Rate			Weighted Average Term in Years
Subordinated notes	$	75,000			7.00	%		9.0
Total principal outstanding		75,000
Debt issuance cost		(2,123	)
Total subordinated notes	$	72,877

Subordinated notes as of December 31, 2020, are listed below.

	December 31, 2020			Weighted Average Rate			Weighted Average Term in Years
Subordinated notes	$	75,000			7.00	%		9.5
Total principal outstanding		75,000
Debt issuance cost		(2,188	)
Total subordinated notes	$	72,812

Future principal repayments

Future principal repayments of the June 30, 2021, outstanding balances are as follows.

	Retail Repurchase Agreements		FHLB Advances		Subordinated Debentures		Subordinated Notes		Total
Due in one year or less	$	47,184	$	2,357	$	—	$	—	$	49,541
Due after one year through two years		—		2,357		—		—		2,357
Due after two years through three years		—		2,107		—		—		2,107
Due after three years through four years		—		1,857		—		—		1,857
Due after four years through five years		—		501		—		—		501
Thereafter		—		—		20,620		75,000		95,620
Total	$	47,184	$	9,179	$	20,620	$	75,000	$	151,983

NOTE 7 – STOCKHOLDERS’ EQUITY

Preferred stock

The Company’s articles of incorporation provide for the issuance of 10,000,000 shares of preferred stock. At June 30, 2021, and December 31, 2020, there was no preferred stock outstanding.

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.

The following table presents shares that were issued, held in treasury or were outstanding at June 30, 2021, and December 31, 2020.

	June 30, 2021			December 31, 2020
Class A common stock – issued		17,373,462			17,224,830
Class A common stock – held in treasury		(3,013,290	)		(2,684,274	)
Class A common stock – outstanding		14,360,172			14,540,556
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		—			—

In 2019, the Company’s Board of Directors adopted the Equity Bancshares, Inc. 2019 Employee Stock Purchase Plan (“ESPP”). 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. ESPP compensation expense of $30 and $55 was recorded for the three and six-month periods ended June 30, 2021. ESPP compensation expense of $21 and $50 was recorded for the three and six-month periods ended June 30, 2020. The following table presents the offering periods and costs associated with this program during the reporting period.

Offering Period	Shares Purchased		Cost Per Share		Compensation Expense
August 15, 2019 to February 14, 2020		16,764	$	21.11	$	63
February 15, 2020 to August 14, 2020		17,829		13.61		43
August 15, 2020 to February 14, 2021		17,621		13.68		42

Treasury stock is stated at cost, determined by the first-in first-out method.

On April 18, 2019, the Company’s Board of Directors authorized the repurchase of up to 1,100,000 shares of the Company’s outstanding common stock, from time to time, beginning April 29, 2019, and concluding October 30, 2020. The repurchase program did 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. The Company repurchased the total authorized amount of 1,100,000 shares at a weighted average price paid of $21.54 under the repurchase program authorized in April 2019.

In September of 2020, the Company’s Board of Directors authorized an additional repurchase of up to 800,000 shares of the Company’s outstanding common stock, from time to time, beginning October 30, 2020, and concluding October 29, 2021. 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 year ended December 31, 2020, the Company repurchased a total of 313,231 shares of the Company’s outstanding common stock at an average price paid of $20.82 per share. During the three and six-months ended June 30, 2021, the Company repurchased a total of 73,070 and 306,082 shares of the Company’s outstanding common stock at an average price paid of $28.94 and $26.20 per share. At June 30, 2021, there are 180,687 shares remaining available for repurchase under the program.

Accumulated other comprehensive income (loss)

At June 30, 2021, and December 31, 2020, accumulated other comprehensive income consisted of (i) the after-tax effect of unrealized gains on available-for-sale securities and (ii) the after-tax effect of unamortized unrealized gains (losses) on securities transferred from the available-for-sale designation to the held-to-maturity designation.

Components of accumulated other comprehensive income as of June 30, 2021, and December 31, 2020, are listed below.

	Available-for- Sale Securities			Accumulated Other Comprehensive Income (Loss)
June 30, 2021
Net unrealized or unamortized gains	$	17,969		$	17,969
Tax effect		(4,519	)		(4,519	)
	$	13,450		$	13,450
December 31, 2020
Net unrealized or unamortized gains	$	26,426		$	26,426
Tax effect		(6,645	)		(6,645	)
	$	19,781		$	19,781

NOTE 8 – REGULATORY MATTERS

Banks and bank holding companies (on a consolidated basis) 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. The final rules implementing the Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (Basel III rules) became effective for the Company on January 1, 2015 and became fully phased in January 1, 2019. The Basel III 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% which can limit certain activities of an institution, 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 June 30, 2021, 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 June 30, 2021, 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 below. There are no conditions or events since that notification that management believes have changed Equity Bank’s category.

The Company’s and Equity Bank’s capital amounts and ratios at June 30, 2021, and December 31, 2020, are presented in the table 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
June 30, 2021
Total capital to risk weighted assets
Equity Bancshares, Inc.	$	478,757		16.74	%	$	300,338		10.50	%	$	N/A	N/A
Equity Bank		446,154		15.62	%		299,919		10.50	%		285,637		10.00	%
Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		369,915		12.93	%		243,131		8.50	%	N/A		N/A
Equity Bank		410,238		14.36	%		242,791		8.50	%		228,509		8.00	%
Common equity Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		354,884		12.41	%		200,225		7.00	%	N/A		N/A
Equity Bank		410,238		14.36	%		199,946		7.00	%		185,664		6.50	%
Tier 1 leverage to average assets
Equity Bancshares, Inc.		369,915		8.88	%		166,628		4.00	%	N/A		N/A
Equity Bank		410,238		9.86	%		166,450		4.00	%		208,062		5.00	%
December 31, 2020
Total capital to risk weighted assets
Equity Bancshares, Inc.	$	462,865		17.35	%	$	280,072		10.50	%	$	N/A	N/A
Equity Bank		418,992		15.73	%		279,646		10.50	%		266,329		10.00	%
Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		356,707		13.37	%		226,725		8.50	%	N/A		N/A
Equity Bank		385,696		14.48	%		226,380		8.50	%		213,064		8.00	%
Common equity Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		341,835		12.82	%		186,714		7.00	%	N/A		N/A
Equity Bank		385,696		14.48	%		186,431		7.00	%		173,114		6.50	%
Tier 1 leverage to average assets
Equity Bancshares, Inc.		356,707		9.30	%		153,490		4.00	%	N/A		N/A
Equity Bank		385,696		10.07	%		153,276		4.00	%		191,595		5.00	%

Equity Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.

NOTE 9 – EARNINGS PER SHARE

The following table presents earnings per share for the three and six-month periods ended June 30, 2021 and 2020.

	Three months ended				Six months ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Basic:
Net income (loss) allocable to common stockholders	$	15,166	$	1,689	$	30,241	$	2,947
Weighted average common shares outstanding		14,355,310		15,209,388		14,405,370		15,297,028
Weighted average vested restricted stock units		1,648		95		4,958		1,562
Weighted average shares		14,356,958		15,209,483		14,410,328		15,298,590
Basic earnings (loss) per common share	$	1.06	$	0.11	$	2.10	$	0.19
Diluted:
Net income (loss) allocable to common stockholders	$	15,166	$	1,689	$	30,241	$	2,947
Weighted average common shares outstanding for:
Basic earnings per common share		14,356,958		15,209,483		14,410,328		15,298,590
Dilutive effects of the assumed exercise of stock options		207,322		69,802		188,083		118,999
Dilutive effects of the assumed vesting of restricted stock units		107,286		23,453		103,267		28,016
Dilutive effects of the assumed exercise of ESPP purchases		3,272		1,271		2,562		3,912
Average shares and dilutive potential common shares		14,674,838		15,304,009		14,704,240		15,449,517
Diluted earnings (loss) per common share	$	1.03	$	0.11	$	2.06	$	0.19

Average shares not included in the computation of diluted earnings per share because they were antidilutive are shown in the following table.

	Three months ended				Six months ended
	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Stock options		301,709		439,060		302,165		346,574
Restricted stock units		7,575		201,790		8,799		149,124
Total antidilutive shares		309,284		640,850		310,964		495,698

NOTE 10 – 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.

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 securities available-for-sale and equity securities with readily determinable fair value 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, including U.S. Government sponsored entity securities, residential mortgage-backed securities (all of which are issued or guaranteed by government sponsored agencies), corporate securities, Small Business Administration securities, and State and Political Subdivision securities 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 interest rate derivative. Cash collateral received from or delivered to a derivative counterparty is classified as Level 1.

Assets and liabilities measured at fair value on a recurring basis are summarized in the following table.

	June 30, 2021
	(Level 1)			(Level 2)		(Level 3)
Assets:
Available-for-sale securities:
U.S. Government-sponsored entities	$	—		$	50,362	$	—
U.S. Treasury securities		—			11,749		—
Mortgage backed securities
Government-sponsored residential mortgage backed securities		—			674,494		—
Private label residential mortgage backed securities		—			136,446		—
Corporate		—			53,994		—
Small Business Administration loan pools		—			11,012		—
State and political subdivisions		—			103,556		—
Derivative assets:
Derivative assets (included in other assets)		—			5,213		—
Cash collateral held by counterparty and netting adjustments		239			—		—
Total derivative assets		239			5,213		—
Other assets:
Equity securities with readily determinable fair value		591			—		—
Total other assets		591			—		—
Total assets	$	830		$	1,046,826	$	—
Liabilities:
Derivative liabilities:
Derivative liabilities (included in other liabilities)	$	—		$	5,942	$	—
Cash collateral held by counterparty and netting adjustments		(5,871	)		—		—
Total derivative liabilities		(5,871	)		5,942		—
Total liabilities	$	(5,871	)	$	5,942	$	—

	December 31, 2020
	(Level 1)			(Level 2)		(Level 3)
Assets:
Available-for-sale securities:
U.S. Government-sponsored entities	$	—		$	1,023	$	—
U.S. Treasury securities		—			4,025		—
Mortgage backed securities
Government-sponsored residential mortgage backed securities		—			651,425		—
Private label residential mortgage backed securities		—			44,178		—
Corporate		—			53,650		—
Small Business Administration loan pools		—			1,270		—
State and political subdivisions		—			116,256		—
Derivative assets:
Derivative assets (included in other assets)		—			7,172		—
Cash collateral held by counterparty and netting adjustments		123			—		—
Total derivative assets		123			7,172		—
Other assets:
Equity securities with readily determinable fair value		506			—		—
Total other assets		506			—		—
Total assets	$	629		$	878,999	$	—
Liabilities:
Derivative liabilities:
Derivative liabilities (included in other liabilities)	$	—		$	8,317	$	—
Cash collateral held by counterparty		(8,317	)		—		—
Total derivative liabilities		(8,317	)		8,317		—
Total liabilities	$	(8,317	)	$	8,317	$	—

There were no material transfers between levels during the six months ended June 30, 2021, or the year ended December 31, 2020. 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 impairment. The fair value of individually evaluated securities is determined as discussed previously for available-for-sale securities. The fair values of individually evaluated loans with specific allocations of the allowance for credit losses are generally based on recent real estate appraisals of the collateral less estimated cost to sell. Declines in the fair values of other real estate owned subsequent to their initial acquisitions are also based on recent real estate appraisals less estimated 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. We routinely value loans other than real estate as multiples of earnings or with the discounted cash flow approach and adjustments are made to observable market data to make the valuation consistent with the underlying credit. Such adjustments made to real estate appraisals and other loan valuations 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.

	June 30, 2021
	(Level 1)		(Level 2)		(Level 3)
Individually evaluated loans:
Commercial real estate	$	—	$	—	$	4,235
Commercial and industrial		—		—		20,733
Residential real estate		—		—		1,988
Agricultural real estate		—		—		1,720
Other		—		—		3,777
Other real estate owned:
Commercial real estate		—		—		3,049
Residential real estate		—		—		649

	December 31, 2020
	(Level 1)		(Level 2)		(Level 3)
Individually evaluated loans:
Commercial real estate	$	—	$	—	$	3,359
Commercial and industrial		—		—		16,343
Residential real estate		—		—		2,165
Agricultural real estate		—		—		2,383
Other		—		—		852
Other real estate owned:
Commercial real estate		—		—		3,882
Residential real estate		—		—		469

The Company did not record any liabilities for which the fair value was measured on a non-recurring basis at June 30, 2021, or December 31, 2020.

Valuations of individually evaluated loans and other real estate owned utilize third party appraisals or broker price opinions and were classified as Level 3 due to the significant judgment involved. Appraisals may include the utilization of unobservable inputs, subjective factors and 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) or Multiple of Earnings
June 30, 2021
Individually evaluated real estate loans	$	20,918	Sales Comparison Approach	Adjustments for differences between comparable sales	5% - 38% (22%)
Individually evaluated other loans	$	11,535	Multiple of Earnings	Multiples of earnings for comparable entities	4.5X - 5.5X (5X)
Individually evaluated other real estate owned	$	3,698	Sales Comparison Approach	Adjustments for differences between comparable sales	8% - 24% (16%)
December 31, 2020
Individually evaluated real estate loans	$	13,443	Sales Comparison Approach	Adjustments for differences between comparable sales	2% - 22% (12%)
Individually evaluated other loans	$	11,659	Multiple of Earnings	Multiples of earnings for comparable entities	4.5X - 5.5X (5X)
Individually evaluated other real estate owned	$	4,351	Sales Comparison Approach	Adjustments for differences between comparable sales	16% - 42% (29%)

Carrying amount and estimated fair values of financial instruments at period end were as follows.

	June 30, 2021
	Carrying Amount			Estimated Fair Value			(Level 1)			(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	139,321		$	139,321		$	139,321		$	—	$	—
Available-for-sale securities		1,041,613			1,041,613			—			1,041,613		—
Loans held for sale		6,183			6,183			—			6,183		—
Loans, net of allowance for credit losses		2,763,227			2,736,784			—			—		2,736,784
Federal Reserve Bank and Federal Home Loan Bank stock		18,454			18,454			—			18,454		—
Interest receivable		15,064			15,064			—			15,064		—
Derivative assets		5,213			5,213			—			5,213		—
Cash collateral held by derivative counterparty and netting adjustments		239			239			239			—		—
Total derivative assets		5,452			5,452			239			5,213		—
Equity securities with readily determinable fair value		591			591			591			—		—
Total assets	$	3,989,905		$	3,963,462		$	140,151		$	1,086,527	$	2,736,784
Financial liabilities:
Deposits	$	3,687,555		$	3,689,814		$	—		$	3,689,814	$	—
Federal funds purchased and retail repurchase agreements		47,184			47,184			—			47,184		—
Federal Home Loan Bank advances		9,208			9,547			—			9,547		—
Subordinated debentures		15,031			15,031			—			15,031		—
Subordinated notes		72,877			81,127			—			81,127		—
Contractual obligations		4,469			4,469			—			4,469		—
Interest payable		573			573			—			573		—
Derivative liabilities		5,942			5,942			—			5,942		—
Cash collateral held by derivative counterparty and netting adjustments		(5,871	)		(5,871	)		(5,871	)		—		—
Total derivative liabilities		71			71			(5,871	)		5,942		—
Total liabilities	$	3,836,968		$	3,847,816		$	(5,871	)	$	3,853,687	$	—

	December 31, 2020
	Carrying Amount			Estimated Fair Value			(Level 1)			(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	280,698		$	280,698		$	280,698		$	—	$	—
Interest-bearing time deposits in other banks		249			249			—			249		—
Available-for-sale securities		871,827			871,827			—			871,827		—
Loans held for sale		12,394			12,394			—			12,394		—
Loans, net of allowance for credit losses		2,557,987			2,430,325			—			—		2,430,325
Federal Reserve Bank and Federal Home Loan Bank stock		16,415			16,415			—			16,415		—
Interest receivable		15,831			15,831			—			15,831		—
Derivative assets		7,172			7,172			—			7,172		—
Cash collateral held by derivative counterparty and netting adjustments		123			123			123			—		—
Total derivative assets		7,295			7,295			123			7,172		—
Equity securities with readily determinable fair value		506			506			506			—		—
Total assets	$	3,763,202		$	3,635,540		$	281,327		$	923,888	$	2,430,325
Financial liabilities:
Deposits	$	3,447,590		$	3,451,366		$	—		$	3,451,366	$	—
Federal funds purchased and retail repurchase agreements		36,029			36,029			—			36,029		—
Federal Home Loan Bank advances		10,144			10,656			—			10,656		—
Subordinated debentures		14,872			14,872			—			14,872		—
Subordinated notes		72,812			80,448			—			80,448		—
Contractual obligations		5,189			5,189			—			5,189		—
Interest payable		1,231			1,231			—			1,231		—
Derivative liabilities		8,317			8,317			—			8,317		—
Cash collateral held by derivative counterparty and netting adjustments		(8,317	)		(8,317	)		(8,317	)		—		—
Total derivative liabilities		—			—			(8,317	)		8,317		—
Total liabilities	$	3,587,867		$	3,599,791		$	(8,317	)	$	3,608,108	$	—

The fair value of off-balance-sheet items is not considered material.

NOTE 11 – 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 which are intended for sale to investors in the secondary market.

The contractual amounts of commitments to originate loans and available lines of credit as of June 30, 2021, and December 31, 2020, were as follows.

	June 30, 2021				December 31, 2020
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	48,077	$	184,249	$	50,123	$	129,860
Mortgage loans in the process of origination		10,483		6,839		13,826		1,713
Unused lines of credit		96,290		215,178		120,720		226,731

The fixed rate loan commitments have interest rates ranging from 2.33% to 6.58% and maturities ranging from 1 month to 180 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 pre-conditions 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 June 30, 2021, and December 31, 2020, were as follows.

June 30, 2021

December 31, 2020

Fixed

Rate

Variable

Rate

Fixed

Rate

Variable

Rate

Standby letters of credit

8,671

2,250

9,020

3,314

NOTE 12 – 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 or results of operations or cash flows. A loss contingency is recorded when the outcome is probable and reasonably able to be estimated. The 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 a party to a lawsuit filed on November 5, 2020, in Missouri federal court on behalf of one of our customers, alleging improperly collected overdraft fees on two separate legal theories. The plaintiff seeks to have the case certified as a class action. The Bank was served on February 2, 2021. The Company filed a motion to dismiss the claims on April 26, 2021. In response, the Plaintiff amended its lawsuit and dropped one of the two claims. The Company filed a motion to dismiss the remaining claim in the Amended Complaint on June 26, 2021. The Company believes that the lawsuit is without merit and it intends to vigorously defend against the claim now asserted. At this time, the Company is unable to reasonably estimate the outcome of this litigation.

NOTE 13 – 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 is recognized in non-interest income. The following table presents the Company’s sources of non-interest income for the three and six-month periods ended June 30, 2021 and 2020.

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Non-interest income
Service charges and fees	$	2,169		$	1,365	$	3,765		$	3,391
Debit card income		2,679			2,201		5,029			4,244
Mortgage banking^(a)		848			831		1,783			1,421
Increase in bank-owned life insurance^(a)		676			481		1,277			963
Net gain (loss) on acquisition^(a)		663			—		585			—
Net gain (loss) from securities transactions^(a)		—			4		17			12
Other
Investment referral income		194			133		317			299
Trust income		336			83		496			154
Insurance sales commissions		46			11		106			29
Recovery on zero-basis purchased loans^(a)		19			92		53			106
Income (loss) from equity method investments^(a)		(56	)		5		(111	)		—
Other non-interest income related to loans and deposits		1,481			345		2,448			217
Other non-interest income not related to loans and deposits^(a)		45			181		47			202
Total other non-interest income		2,065			850		3,356			1,007
Total	$	9,100		$	5,732	$	15,812		$	11,038
^(a) Not within the scope of ASC 606.

NOTE 14 – BUSINESS COMBINATIONS

At the close of business on October 23, 2020, the Company acquired the assets and assumed the deposit liabilities of Almena State Bank (“Almena”), based in Norton, Kansas, pursuant to a Purchase and Assumption Agreement facilitated by the Federal Deposit Insurance Corporation (“FDIC”). Acquisition costs related to this acquisition during the six months ended June 30, 2021 were $218 ($163 on an after-tax basis).

During the six months ended June 30, 2021, the Company updated the valuation for certain Almena loans which at acquisition showed evidence of credit quality deterioration since origination. The net result of this valuation was a $585 addition to the gain on acquisition recorded during the fourth quarter of 2020.

On May 14, 2021, the Company entered into an agreement and plan of reorganization with American State Bancshares, Inc. (“ASBI”). ASBI is the parent company of American State Bank & Trust Company (“American State Bank”), which has a total of seventeen locations in Kansas. The transaction is expected to close in the fourth quarter of 2021, subject to customary closing conditions, including the receipt of regulatory approval. Acquisition costs related to this acquisition during the six months ended June 30, 2021 were $394 ($337 on an after-tax basis).

In their June 30, 2021, unaudited Consolidated Report of Condition, American State Bank reported total assets of $786,135, which included total loans of $470,974 and securities of $195,473. At June 30, 2021, total liabilities of $689,017 were reported by American State Bank, which included deposits of $659,006. American State Bank reported $2,930 in net income before income taxes for the six months ended June 30, 2021. The Company anticipates there will be goodwill and core deposit intangibles recorded with this acquisition. Goodwill is calculated as the excess of the cash consideration transferred over the net of the acquisition-date fair value of identifiable assets acquired and liabilities assumed.

On July 19, 2021, the Company announced that Equity Bank, a wholly owned subsidiary of the Company, signed a definitive branch purchase and assumption agreement to acquire the assets and assume the deposits of three bank locations in St. Joseph, Missouri, from Security Bank of Kansas City, a subsidiary of Valley View Financial Co. of Overland Park, Kansas. The Company anticipates closing the transaction in the fourth quarter of 2021, subject to customary closing conditions, including the receipt of regulatory approval.

Item 2: 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K filed with the SEC on March 9, 2021, and our consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. 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 Note Regarding Forward-Looking Statements.” Also, see the risk factors and other cautionary statements described under the heading “Item 1A: Risk Factors” included in the Annual Report on Form 10-K and in Item 1A of this Quarterly Report. 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:

•

Overview – a general description of our business and financial highlights;

•

Critical Accounting Policies – a discussion of accounting policies that require critical estimates and assumptions;

•

Recent Developments – a discussion of COVID-19 and the CARES Act

•

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 – a reconciliation of non-GAAP measures.

Overview

We are a bank 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 51 full-service banking sites located in Arkansas, Kansas, Missouri and Oklahoma. As of June 30, 2021, we had consolidated total assets of $4.27 billion, total loans held for investment, net of allowance, of $2.76 billion, total deposits of $3.69 billion and total stockholders’ equity of $413.0 million. During the three-month period ended June 30, 2021, the Company had net income of $15.2 million as compared to net income of $1.7 million for the three-month period ended June 30, 2020. During the six-month periods ended June 30, 2021 and 2020, net income was $30.2 million and $2.9 million.

Selected Financial Data for the periods indicated (dollars in thousands, except per share amounts).

	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
Statement of Income Data (for the quarterly period ended)
Interest and dividend income	$	38,318		$	35,812		$	39,989		$	37,082		$	37,933
Interest expense		3,688			4,053			4,430			4,975			5,042
Net interest income		34,630			31,759			35,559			32,107			32,891
Provision (reversal) for credit losses		(1,657	)		(5,756	)		1,000			815			12,500
Net gain (loss) from securities transactions		—			17			(1	)		—			4
Other non-interest income		9,100			6,695			8,501			6,485			5,728
Merger expenses		460			152			299			—			—
Goodwill impairment		—			—			—			104,831			—
Other non-interest expense		25,346			24,729			28,161			26,004			23,937
Income (loss) before income taxes		19,581			19,346			14,599			(93,058	)		2,186
Provision for income taxes		4,415			4,271			2,111			(2,653	)		497
Net income (loss)		15,166			15,075			12,488			(90,405	)		1,689
Net income (loss) allocable to common stockholders		15,166			15,075			12,488			(90,405	)		1,689
Basic earnings (loss) per share	$	1.06		$	1.04		$	0.85		$	(6.01	)	$	0.11
Diluted earnings (loss)per share	$	1.03		$	1.02		$	0.84		$	(6.01	)	$	0.11
Balance Sheet Data (at period end)
Cash and cash equivalents	$	139,321		$	136,688		$	280,698		$	65,839		$	178,290
Available-for-sale securities		1,041,613			998,100			871,827			798,576			177,228
Held-to-maturity securities		—			—			—			—			662,522
Loans held for sale		6,183			8,609			12,394			9,053			4,802
Gross loans held for investment		2,815,061			2,795,740			2,591,696			2,725,713			2,806,334
Allowance for credit losses		51,834			55,525			33,709			34,087			34,078
Loans held for investment, net of allowance for credit losses		2,763,227			2,740,215			2,557,987			2,691,626			2,772,256
Goodwill and core deposit intangibles, net		45,594			46,624			47,658			48,702			154,563
Other intangible assets, net		1,109			1,119			1,130			1,142			1,154
Total assets		4,268,216			4,196,184			4,013,356			3,865,571			4,205,269
Total deposits		3,687,555			3,634,530			3,447,590			3,133,618			3,247,267
Borrowings		144,300			138,053			133,857			301,694			452,032
Total liabilities		3,855,221			3,798,369			3,605,707			3,463,399			3,725,503
Total stockholders’ equity		412,995			397,815			407,649			402,172			479,766
Tangible common equity*		366,292			350,072			358,861			352,328			324,049
Performance ratios
Return on average assets (ROAA) annualized		1.44	%		1.48	%		1.27	%		(8.90	)%		0.16	%
Return on average equity (ROAE) annualized		15.06	%		15.45	%		12.13	%		(74.45	)%		1.40	%
Return on average tangible common equity (ROATCE) annualized*		17.98	%		18.57	%		14.93	%		(108.31	)%		3.03	%
Yield on loans annualized		4.75	%		4.59	%		5.23	%		4.65	%		4.68	%
Cost of interest-bearing deposits annualized		0.31	%		0.36	%		0.43	%		0.50	%		0.63	%
Net interest margin annualized		3.50	%		3.31	%		3.88	%		3.47	%		3.49	%
Efficiency ratio*		58.85	%		64.18	%		67.19	%		67.38	%		61.98	%
Non-interest income / average assets annualized		0.86	%		0.66	%		0.86	%		0.64	%		0.55	%
Non-interest expense / average assets annualized		2.45	%		2.44	%		2.90	%		12.88	%		2.31	%
Capital Ratios
Tier 1 Leverage Ratio		8.88	%		8.73	%		9.30	%		8.76	%		8.52	%

Common Equity Tier 1 Capital Ratio		12.41	%		12.53	%		12.82	%		12.76	%		12.02	%
Tier 1 Risk Based Capital Ratio		12.93	%		13.08	%		13.37	%		13.32	%		12.57	%
Total Risk Based Capital Ratio		16.74	%		17.02	%		17.35	%		17.35	%		15.33	%
Equity / Assets		9.68	%		9.48	%		10.16	%		10.40	%		11.41	%
Tangible common equity to tangible assets*		8.68	%		8.44	%		9.05	%		9.23	%		8.00	%
Book value per share	$	28.76		$	27.66		$	28.04		$	27.08		$	31.53
Tangible common book value per share*	$	25.51		$	24.34		$	24.68		$	23.72		$	21.29
Tangible common book value per diluted share*	$	24.98		$	23.87		$	24.32		$	23.57		$	21.13

* The value noted is considered a Non-GAAP financial measure. For a reconciliation of Non-GAAP financial measures see “Non-GAAP Financial Measures” in this Item 2.

Critical Accounting Policies

Our significant accounting policies are integral to understanding the results reported. Our accounting policies are described in detail in Note 1 to the December 31, 2020, audited financial statements included in our Annual Report on Form 10-K filed with the SEC on March 9, 2021. We adopted ASU 2016-13 effective January 1, 2021, prior to that we utilized the probable incurred loss method for determining the allowance for loan losses. Other than the adoption of ASU 2016-13 we have not had any changes in our critical accounting policies. We have identified the following accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of our financial statements to those judgments and assumptions, are critical to an understanding of our financial condition and results of operations. We believe that the judgments, estimates and assumptions used in the preparation of our financial statements are appropriate. For additional information, see “NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” in the Condensed Notes to Interim Consolidated Financial Statements.

Allowance for Credit Losses for Loans: 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. 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 of loan 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. 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 projective 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. 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 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 downturns in circumstances relating to loan quality and economic conditions could result in a requirement for additional allowance. Likewise, an upturn in loan quality and improved economic conditions may allow a reduction in the required allowance. In either instance, unanticipated changes could have a significant impact on results of operations.

Goodwill Impairment: For a business combination, we are required to record the assets acquired, including identified intangible assets, and the liabilities assumed at fair value. Estimating fair value often involves estimates based on third party valuations, such as appraisals, internal valuations based on discounted cash flow analyses or other valuation techniques that may include estimates of attrition, inflation, interest rates, asset growth rates or other relevant factors. Goodwill recorded must be reviewed for impairment on an annual basis, as well as on an interim basis, if triggering events indicate that the asset might be impaired. An impairment loss must be recognized for any excess of carrying value over the fair value of the goodwill.

Significant downturns in economic or business conditions could have a significant adverse impact on the carrying value of goodwill and could result in impairment losses affecting our financial statements.

Income Taxes: We are subject to the income tax laws of the U.S., its states and the municipalities in which we operate. These laws are complex and subject to different interpretations by the taxpayer and the relevant government taxing authorities. We review income tax expense and the carrying value of deferred tax assets quarterly, and as new information becomes available, the balances are adjusted as appropriate. The FASB ASC 740-10 prescribes a recognition threshold of more-likely-than-not, and a measurement attribute for all tax positions taken or expected to be taken on a tax return, in order for those tax positions to be recognized in the financial statements.

In establishing a provision for income tax expense, we must make judgements and interpretations about the application of these inherently complex tax laws. We must also make estimates about when in the future certain items will affect taxable income in the various tax jurisdictions. Disputes over interpretations of the tax laws may be subject to review/adjudication by the court systems of the various tax jurisdictions or may be settled with the tax authority upon examination or audit.

Although management believes that the judgements and estimates used are reasonable, actual results could differ and we may be exposed to losses or gains that could be material.

Recent Developments

The Company has been, and may continue to be, impacted by the COVID-19 pandemic. In recent months, vaccination rates have been increasing and restrictive measures have eased in certain areas. However, uncertainty remains about the duration of the pandemic and the timing and strength of the global economy’s recovery. To address the economic impact of the pandemic in the U.S., multiple stimulus packages have been enacted to provide economic relief to individuals and businesses, including the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), which established the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), and the American Rescue Plan Act of 2021, enacted in March 2021.

As the pandemic evolves, we continue to evaluate protocols and processes in place to execute our business continuity plans while promoting the health and safety of our employees and continuing to support our customers and communities.

We have been an active participant in all phases of the PPP, administered by the SBA, and have helped many of our customers obtain loans through the program. PPP loans have a two or five-year term and earn interest at 1.0%. As of June 30, 2021, the Company has 2,751 loans, with an outstanding balance of $271.5 million that were originated under this program. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government.

The Company also participates in the Main Street Lending Program (“MSL Program”), created by the Federal Reserve to support lending to small and medium-sized businesses and nonprofit organizations that were in sound financial condition before the onset of the COVID-19 pandemic. There was a total of $14.2 million outstanding under the MSL Program for the period ended June 30, 2021.

Results of Operations

We generate the majority 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, trust and wealth management fees 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. On October 23, 2020, we completed our acquisition of the assets and assumption of the deposits and certain other liabilities for two branches in Almena and Norton, Kansas (“Almena acquisition”), pursuant to a Purchase and Assumption Agreement facilitated by the Federal Deposit Insurance Corporation (“FDIC”). Results of operations from our Almena acquisition were included in our financial results beginning October 24, 2020.

Changes in interest rates on interest-earning assets or on interest-bearing liabilities, as well as the volume and types of interest-earning assets and interest-bearing liabilities are 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 environments and conditions in 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 commercial, consumer and real estate sectors within these markets.

Net Income

Three months ended June 30, 2021, compared with three months ended June 30, 2020: Net income and net income allocable to common stockholders for the three months ended June 30, 2021, was $15.2 million as compared to $1.7 million for the three months ended June 30, 2020, an increase of $13.5 million. During the three-month period ended June 30, 2021, a decrease in provision for credit losses of $14.2 million, an increase in non-interest income of $3.4 million and an increase in net interest income of $1.7 million were partially offset by a $3.9 million increase in provision for income taxes and a $1.9 million increase in non-interest expense when compared with the three months ended June 30, 2020. The changes in the components of net income are discussed in more detail in the following “Results of Operations” sections.

Six months ended June 30, 2021, compared with six months ended June 30, 2020: Net income and net income allocable to common stockholders for the six months ended June 30, 2021, was $30.2 million as compared to $2.9 million for the six months ended June 30, 2020, an increase of $27.3 million. During the six-month period ended June 30, 2021, a decrease in provision for credit losses of $29.9 million, an increase in non-interest income of $4.8 million and an increase in net interest income of $1.4 million were partially offset by an increase in provision for income taxes of $7.7 million and an increase in non-interest expense of $992 thousand when compared with the six months ended June 30, 2020. The changes in the components of net income are discussed in more detail in the following “Results of Operations” sections.

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 a “volume change,” and 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 a “yield/rate change.”

Three months ended June 30, 2021, compared with three months ended June 30, 2020: 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 three months ended June 30, 2021 and 2020. The yields and rates are calculated by dividing annualized income or annualized expense by the average daily balances of the associated assets or liabilities.

Average Balance Sheets and Net Interest Analysis

	For the Three Months Ended June 30,
	2021							2020
(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⁾
Interest-earning assets:
Loans⁽¹⁾
Commercial and industrial	$	826,647	$	11,729		5.69	%	$	868,302	$	8,378		3.88	%
Commercial real estate		991,033		11,433		4.63	%		934,186		12,192		5.25	%
Real estate construction		253,947		2,352		3.71	%		253,672		2,837		4.50	%
Residential real estate		465,525		4,642		4.00	%		467,246		4,854		4.18	%
Agricultural real estate		131,906		1,687		5.13	%		130,533		1,955		6.02	%
Agricultural		94,407		1,024		4.35	%		87,830		1,266		5.80	%
Consumer		89,680		943		4.22	%		65,096		1,145		7.07	%
Total loans		2,853,145		33,810		4.75	%		2,806,865		32,627		4.68	%
Taxable securities		887,983		3,523		1.59	%		753,332		4,017		2.14	%
Nontaxable securities		99,003		717		2.90	%		123,976		880		2.86	%
Federal funds sold and other		124,502		268		0.86	%		102,456		409		1.61	%
Total interest-earning assets		3,964,633		38,318		3.88	%		3,786,629		37,933		4.03	%
Non-interest-earning assets:
Other real estate owned, net		10,466							6,091
Premises and equipment, net		90,720							85,793
Bank-owned life insurance		102,877							75,754
Goodwill, core deposit and other intangibles, net		47,334							156,194
Other non-interest-earning assets		15,409							48,875
Total assets	$	4,231,439						$	4,159,336
Interest-bearing liabilities:
Interest-bearing demand deposits	$	1,004,030		523		0.21	%	$	757,233		493		0.26	%
Savings and money market		1,064,289		372		0.14	%		997,047		430		0.17	%
Savings, NOW and money market		2,068,319		895		0.17	%		1,754,280		923		0.21	%
Certificates of deposit		587,733		1,130		0.77	%		732,907		2,976		1.63	%
Total interest-bearing deposits		2,656,052		2,025		0.31	%		2,487,187		3,899		0.63	%
FHLB term and line of credit advances		37,656		80		0.86	%		270,785		552		0.82	%
Federal Reserve Bank discount window		—		—		0.00	%		9,901		6		0.25	%
Bank stock loan		—		—		0.00	%		39,347		306		3.13	%
Subordinated debt		87,841		1,557		7.11	%		15,117		255		6.80	%
Other borrowings		46,161		26		0.22	%		49,577		24		0.19	%
Total interest-bearing liabilities		2,827,710		3,688		0.52	%		2,871,914		5,042		0.71	%
Non-interest-bearing liabilities and stockholders’ equity:
Non-interest-bearing checking accounts		968,898							770,444
Non-interest-bearing liabilities		30,792							33,373
Stockholders’ equity		404,039							483,605
Total liabilities and stockholders’ equity	$	4,231,439						$	4,159,336
Net interest income			$	34,630						$	32,891
Interest rate spread						3.36	%						3.32	%
Net interest margin⁽²⁾						3.50	%						3.49	%
Total cost of deposits, including non-interest bearing deposits	$	3,624,950	$	2,025		0.22	%	$	3,257,631	$	3,899		0.48	%

Average interest-earning assets to

interest-bearing liabilities

140.21

131.85

(1)	Average loan balances include nonaccrual loans.

(2)	Net interest margin is calculated by dividing annualized net interest income by average interest-earnings assets for the period.

(3)	Tax exempt income is not included in the above table on a tax equivalent basis.

(4)	Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest yields/rates. The following table analyzes the change in volume variances and yield/rate variances for the three-month periods ended June 30, 2021 and 2020.

Analysis of Changes in Net Interest Income

For the Three Months Ended June 30, 2021 and 2020

	Increase (Decrease) Due to:						Total Increase /
(Dollars in thousands)	Volume⁽¹⁾			Yield/Rate⁽¹⁾			(Decrease)
Interest-earning assets:
Loans
Commercial and industrial	$	(419	)	$	3,770		$	3,351
Commercial real estate		712			(1,471	)		(759	)
Real estate construction		3			(488	)		(485	)
Residential real estate		(18	)		(194	)		(212	)
Agricultural real estate		20			(288	)		(268	)
Agricultural		89			(331	)		(242	)
Consumer		348			(550	)		(202	)
Total loans		735			448			1,183
Taxable securities		642			(1,136	)		(494	)
Nontaxable securities		(180	)		17			(163	)
Federal funds sold and other		75			(216	)		(141	)
Total interest-earning assets	$	1,272		$	(887	)	$	385
Interest-bearing liabilities:
Savings, NOW and money market	$	169		$	(197	)	$	(28	)
Certificates of deposit		(505	)		(1,341	)		(1,846	)
Total interest-bearing deposits		(336	)		(1,538	)		(1,874	)
FHLB term and line of credit advances		(497	)		25			(472	)
Federal Reserve Bank discount window		(6	)		—			(6	)
Bank stock loan		(306	)		—			(306	)
Subordinated debt		1,289			13			1,302
Other borrowings		(2	)		4			2
Total interest-bearing liabilities		142			(1,496	)		(1,354	)
Net Interest Income	$	1,130		$	609		$	1,739

(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.

As compared to the three months ended June 30, 2020, the Company experienced increased volume of $46.3 million, contributing to the growth in loan interest income. The comparative yield on these assets increased by 7 basis points to 4.75% for the quarter ended June 30, 2021. The increase in yield is primarily driven by the forgiveness of SBA PPP loans during the quarter, leading to the recognition of $5.7 million in loan interest income. These positive factors were partially offset by a reduced interest rate environment impacting current period originations and repricing of variable rate assets.

The reduction in expense on interest-bearing deposits was due to a 32 basis point decrease in cost on these deposits from 0.63% for the three months ended June 30, 2020, to 0.31% for the three months ended June 30, 2021. Average borrowings from the FHLB decreased by $233.1 million from an average balance of $270.8 million for the three months ended June 30, 2020, to an average balance of $37.7 million for the three months ended June 30, 2021. The bank stock loan did not carry an outstanding balance during the second quarter of 2021 and therefore no interest expense was recorded on our bank stock loan for the three months ended June 30, 2021, as compared to $306 thousand for the same time period in 2020. Costs associated with interest-bearing liabilities decreased 19

basis points in the quarter as compared to the quarter ended June 30, 2020. The reduction is reflective of the Company’s continued efforts to attract and retain strong, low-cost deposit relationships, excess liquidity in the economy leading to higher carrying balances and less demand for loan volume and the Company’s prudent efforts to decrease leverage while managing our balance sheet position. The positive factors were partially offset by the cost of the Company’s subordinated debt issuance which solidified capital and positioned the Company to be able to take advantage of potential growth opportunities coming out of the COVID economic cycle.

Six months ended June 30, 2021, compared with six months ended June 30, 2020: 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 six months ended June 30, 2021 and 2020. The yields and rates are calculated by dividing annualized income or annualized expense by the average daily balances of the associated assets or liabilities.

Average Balance Sheets and Net Interest Analysis

	For the Six Months Ended June 30,
	2021							2020
(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⁾
Interest-earning assets:
Loans⁽¹⁾
Commercial and industrial	$	814,895	$	20,962		5.19	%	$	712,115	$	16,258		4.59	%
Commercial real estate		981,482		22,873		4.70	%		923,625		25,134		5.47	%
Real estate construction		254,807		4,531		3.59	%		260,530		6,413		4.95	%
Residential real estate		430,123		9,093		4.26	%		481,716		10,156		4.24	%
Agricultural real estate		136,366		3,384		5.00	%		134,098		4,046		6.07	%
Agricultural		94,596		2,062		4.40	%		87,892		2,576		5.89	%
Consumer		83,083		1,906		4.63	%		66,128		2,420		7.36	%
Total loans		2,795,352		64,811		4.68	%		2,666,104		67,003		5.05	%
Taxable securities		863,801		7,322		1.71	%		763,992		8,637		2.27	%
Nontaxable securities		103,529		1,441		2.81	%		128,616		1,846		2.89	%
Federal funds sold and other		165,408		556		0.68	%		94,234		1,004		2.14	%
Total interest-earning assets		3,928,090		74,130		3.81	%		3,652,946		78,490		4.32	%
Non-interest-earning assets:
Other real estate owned, net		10,792							6,913
Premises and equipment, net		90,266							85,113
Bank-owned life insurance		94,405							75,512
Goodwill, core deposit and other intangibles, net		47,852							156,646
Other non-interest-earning assets		16,432							46,639
Total assets	$	4,187,837						$	4,023,769
Interest-bearing liabilities:
Interest-bearing demand deposits	$	1,016,621		1,104		0.22	%	$	732,775		2,117		0.58	%
Savings and money market		1,057,037		761		0.15	%		1,006,752		1,931		0.39	%
Savings, NOW and money market		2,073,658		1,865		0.18	%		1,739,527		4,048		0.47	%
Certificates of deposit		599,353		2,570		0.86	%		769,820		6,715		1.75	%
Total interest-bearing deposits		2,673,011		4,435		0.33	%		2,509,347		10,763		0.86	%
FHLB term and line of credit advances		23,911		145		1.22	%		283,231		1,727		1.23	%
Federal Reserve Bank discount window		5		—		0.25	%		4,951		6		0.25	%
Bank stock loan		—		—		0.00	%		24,255		415		3.44	%
Subordinated debt		87,778		3,113		7.15	%		14,856		538		7.28	%
Other borrowings		43,904		48		0.22	%		42,722		55		0.26	%
Total interest-bearing liabilities		2,828,609		7,741		0.55	%		2,879,362		13,504		0.94	%
Non-interest-bearing liabilities and stockholders’ equity:
Non-interest-bearing checking accounts		928,407							630,058
Non-interest-bearing liabilities		30,959							31,263
Stockholders’ equity		399,862							483,086
Total liabilities and stockholders’ equity	$	4,187,837						$	4,023,769
Net interest income			$	66,389						$	64,986
Interest rate spread						3.26	%						3.38	%
Net interest margin⁽²⁾						3.41	%						3.58	%
Total cost of deposits, including non-interest bearing deposits	$	3,601,418	$	4,435		0.25	%	$	3,139,405	$	10,763		0.69	%

Average interest-earning assets to interest-bearing

liabilities

138.87

126.87

(1)	Average loan balances include nonaccrual loans.

(2)	Net interest margin is calculated by dividing annualized net interest income by average interest-earnings assets for the period.

(3)	Tax exempt income is not included in the above table on a tax equivalent basis.

(4)	Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

Analysis of Changes in Net Interest Income

For the Six Months Ended June 30, 2021 and 2020

	Increase (Decrease) Due to:						Total Increase /
(Dollars in thousands)	Volume(1)			Yield/Rate(1)			(Decrease)
Interest-earning assets:
Loans
Commercial and industrial	$	2,505		$	2,199		$	4,704
Commercial real estate		1,506			(3,767	)		(2,261	)
Real estate construction		(138	)		(1,744	)		(1,882	)
Residential real estate		(1,092	)		29			(1,063	)
Agricultural real estate		67			(729	)		(662	)
Agricultural		185			(699	)		(514	)
Consumer		526			(1,040	)		(514	)
Total loans		3,559			(5,751	)		(2,192	)
Taxable securities		1,032			(2,347	)		(1,315	)
Nontaxable securities		(350	)		(55	)		(405	)
Federal funds sold and other		486			(934	)		(448	)
Total interest-earning assets	$	4,727		$	(9,087	)	$	(4,360	)
Interest-bearing liabilities:
Savings, NOW and money market	$	716		$	(2,899	)	$	(2,183	)
Certificates of deposit		(1,258	)		(2,887	)		(4,145	)
Total interest-bearing deposits		(542	)		(5,786	)		(6,328	)
FHLB term and line of credit advances		(1,572	)		(10	)		(1,582	)
Federal Reserve Bank discount window		(6	)		—			(6	)
Bank stock loan		(415	)		—			(415	)
Subordinated debt		2,586			(11	)		2,575
Other borrowings		1			(8	)		(7	)
Total interest-bearing liabilities		52			(5,815	)		(5,763	)
Net Interest Income	$	4,675		$	(3,272	)	$	1,403

(1)

The decrease in loan interest income, including loan fees, was driven by a 37 basis point decrease in yield on the loan portfolio from 5.05% for the six months ended June 30, 2020, to 4.68% for the six months ended June 30, 2021, which was partially offset by an increase in average loan volume. The Company, during a turbulent and competitive time in the cycle, experienced average loan growth of $129.2 million as compared to the previous year-to-date period, contributing to increased loan interest income during the quarter. The Company was also successful in processing forgiveness applications for SBA PPP borrowers, driving a comparative increase in fee income of $6.8 million. These drivers of increasing interest income were partially offset by a comparatively low interest rate environment impacting both originations and repricing of loan assets.

The reduction in expense on interest-bearing deposits was due to a 53 basis point decrease in cost on these deposits from 0.86% for the six months ended June 30, 2020, to 0.33% for the six months ended June 30, 2021. Average borrowings from the FHLB decreased by $259.3 million from an average balance of $283.2 million for the six months ended June 30, 2020, to an average balance of $23.9 million for the six months ended June 30, 2021. The bank stock loan did not carry an outstanding balance during the first six

months of 2021 and therefore there was no interest expense on our bank stock loan for the six months ended June 30, 2021, as compared to $415 thousand for the same time period in 2020. Total cost of interest-bearing liabilities decreased 39 basis points for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The reduction is reflective of the Company’s continued efforts to attract and retain strong, low-cost deposit relationships, excess liquidity in the economy leading to higher carrying balances and less demand for loan volume and the Company’s prudent efforts to decrease leverage while managing our balance sheet position.

The decrease in net interest margin is largely due to yields on interest-earning assets decreasing at a faster rate than costs of interest-bearing liabilities. The rate decrease in interest-earning assets can be primarily attributed to a decreasing interest rate environment.

Provision for Credit Losses and Provision for Loan Losses

The Company adopted the FASB ASU 326 effective January 1, 2021, which requires the estimation of an allowance for credit losses in accordance with the CECL methodology. The allowance for credit losses is increased by a provision for credit losses, 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 required using 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, as described in “Part I – Item 2 – Financial Condition – Allowance for Credit Losses.” As these factors change, the amount of the credit loss provision changes. Prior to the adoption of CECL we maintained an allowance for loan losses for probable incurred credit losses.

Three months ended June 30, 2021, compared with three months ended June 30, 2020: The reversal of provision for credit losses for the three months ended June 30, 2021, was $1.7 million compared with a provision for loan losses of $12.5 million for the three months ended June 30, 2020. Subsequent to the January 1, 2021, adoption of CECL, the reversal of provision for credit losses in the second quarter of 2021 is attributed primarily to a decrease in specific reserves on loans individually assessed for impairment. Net charge-offs for the three months ended June 30, 2021, were $567 thousand compared to net charge-offs of $337 thousand for the three months ended June 30, 2020. Following CECL adoption, PCD assets are now shown gross of discount and associated charge-offs are reflected in periodic results irrespective of purchase discounts. During the quarter, we recognized $490 thousand in charge-offs on these assets. Excluding this charge-off for comparative purposes, net charge-offs for the period would have been $77 thousand. For the three months ended June 30, 2021, gross charge-offs were $713 thousand offset by gross recoveries of $146 thousand. In comparison, gross charge-offs were $623 thousand for the three months ended June 30, 2020, offset by gross recoveries of $286 thousand.

Six months ended June 30, 2021, compared with six months ended June 30, 2020: The reversal of provision for credit losses for the six months ended June 30, 2021, was $7.4 million compared with a provision for loan losses of $22.4 million for the six months ended June 30, 2020. Subsequent to the January 1, 2021, adoption of CECL, the reversal of provision for credit losses in the first six months of 2021 is attributed primarily to improved economic inputs into the CECL model, a decrease in specific reserves on loans individually assessed for impairment and, to a lesser extent, an improvement in historical loss experience and associated impact on the allowance for credit losses. Net charge-offs for the six months ended June 30, 2021, were $632 thousand compared to net charge-offs of $594 thousand for the six months ended June 30, 2020. Following CECL adoption, PCD assets are now shown gross of discount and associated charge-offs are reflected in periodic results irrespective of purchase discounts. During the six-month period, we recognized $490 thousand in charge-offs on these assets. Excluding this charge-off for comparative purposes, net charge-offs for the period would have been $142 thousand. For the six months ended June 30, 2021, gross charge-offs were $1.0 million offset by gross recoveries of $372 thousand. In comparison, gross charge-offs were $980 thousand for the six months ended June 30, 2020, offset by gross recoveries of $386 thousand.

Non-Interest Income

The primary sources of non-interest income are service charges and fees, debit card income, mortgage banking income and increases in the value of bank-owned life insurance. Non-interest income does not include loan origination or other loan fees which are recognized as an adjustment to yield using the interest method.

Three months ended June 30, 2021, compared with three months ended June 30, 2020: The following table provides a comparison of the major components of non-interest income for the three months ended June 30, 2021 and 2020.

Non-Interest Income

For the Three Months Ended June 30,

						2021 vs. 2020
(Dollars in thousands)	2021			2020		Change			%
Service charges and fees	$	2,169		$	1,365	$	804			58.9	%
Debit card income		2,679			2,201		478			21.7	%
Mortgage banking		848			831		17			2.0	%
Increase in value of bank-owned life insurance		676			481		195			40.5	%
Other
Investment referral income		194			133		61			45.9	%
Trust income		336			83		253			304.8	%
Insurance sales commissions		46			11		35			318.2	%
Recovery on zero-basis purchased loans		19			92		(73	)		(79.3	)%
Income (loss) from equity method investments		(56	)		5		(61	)		(1220.0	)%
Other non-interest income		1,526			526		1,000			190.1	%
Total other		2,065			850		1,215			142.9	%
Subtotal		8,437			5,728		2,709			47.3	%
Net gain (loss) on acquisition		663			—		663			100.0	%
Net gain (loss) from securities transactions		—			4		(4	)		(100.0	)%
Total non-interest income	$	9,100		$	5,732	$	3,368			58.8	%

Other non-interest income increased $1.0 million during the three months ended June 30, 2021, as compared to the same time period in 2020, primarily from a $917 thousand valuation adjustment related to Almena. When comparing the three months ended June 30, 2021, to the same three month period in 2020, the balance of the increase in non-interest income came principally from increases of $804 thousand in service charges and fees, $663 thousand in gain on acquisition related to Almena, $478 thousand in debit card income, $253 thousand in trust income and $195 thousand increase in value of bank-owned life insurance. During the quarter, management’s continued focus on relationship development and provision of value to our customer base, resulted in a comparative increase in service charges and fees, debit card income and trust income through increasing product adoption and utilization. Additionally, as the real estate market continues to carry high demand, mortgage banking revenue has remained relatively constant. As a percent of net revenue, non-interest income was 20.8% for quarter ended June 30, 2021, as compared to 14.8% in the comparable quarter last year.

Six months ended June 30, 2021, compared with six months ended June 30, 2020: The following table provides a comparison of the major components of non-interest income for the six months ended June 30, 2021 and 2020.

Non-Interest Income

For the Six Months Ended June 30,

						2021 vs. 2020
(Dollars in thousands)	2021			2020		Change			%
Service charges and fees	$	3,765		$	3,391	$	374			11.0	%
Debit card income		5,029			4,244		785			18.5	%
Mortgage banking		1,783			1,421		362			25.5	%
Increase in value of bank-owned life insurance		1,277			963		314			32.6	%
Other
Investment referral income		317			299		18			6.0	%
Trust income		496			154		342			222.1	%
Insurance sales commissions		106			29		77			265.5	%
Recovery on zero-basis purchased loans		53			106		(53	)		(50.0	)%
Income from equity method investments		(111	)		—		(111	)		100.0	%
Other non-interest income		2,495			419		2,076			495.5	%
Total other		3,356			1,007		2,349			233.3	%
Subtotal		15,210			11,026		4,184			37.9	%
Net gain (loss) on acquisition		585			—		585			100.0	%
Net gain (loss) from securities transactions		17			12		5			41.7	%
Total non-interest income	$	15,812		$	11,038	$	4,774			43.3	%

Other non-interest income increased $2.1 million during the six months ended June 30, 2021, as compared to the same time period in 2020, primarily from a valuation adjustment related to Almena and derivative mark-to-market valuation changes. Other changes contributing to the increase in non-interest income when comparing the first six months of 2021 to the same time period in 2020, are increases of $785 thousand in debit card income, $585 thousand from the net gain on acquisition, $374 thousand in service charges and fees, $362 thousand in mortgage banking, $342 thousand in trust income and a $314 thousand increase in the value of bank-owned life insurance.

Non-Interest Expense

Three months ended June 30, 2021, compared with three months ended June 30, 2020: For the three months ended June 30, 2021, non-interest expense totaled $25.8 million, an increase of $1.9 million, when compared to the three months ended June 30, 2020. Changes in the various components of non-interest expense for the three months ended June 30, 2021 and 2020, are discussed in more detail in the following table.

Non-Interest Expense

For the Three Months Ended June 30,

						2021 vs. 2020
(Dollars in thousands)	2021			2020		Change			%
Salaries and employee benefits	$	12,769		$	12,695	$	74			0.6	%
Net occupancy and equipment		2,327			2,119		208			9.8	%
Data processing		3,474			2,763		711			25.7	%
Professional fees		999			943		56			5.9	%
Advertising and business development		799			403		396			98.3	%
Telecommunications		512			390		122			31.3	%
FDIC insurance		425			414		11			2.7	%
Courier and postage		327			353		(26	)		(7.4	)%
Free nationwide ATM cost		513			327		186			56.9	%
Amortization of core deposit intangible		1,030			974		56			5.7	%
Loan expense		181			287		(106	)		(36.9	)%
Other real estate owned		(468	)		269		(737	)		(274.0	)%
Other		2,458			2,000		458			22.9	%
Subtotal		25,346			23,937		1,409			5.9	%
Merger expenses		460			—		460			100.0	%
Total non-interest expense	$	25,806		$	23,937	$	1,869			7.8	%

Data processing: Data processing costs increased $711 thousand for the period ended June 30, 2021, as compared to the same time period in 2020. The increase was primarily related to increases in expense related to higher debit card transactions and software licensing expense.

Other real estate owned: Other real estate owned includes operating expenses, provision for unrealized losses, initial valuation gains on acquisition, gains or losses on sales and other operating income. For the three months ended June 30, 2021, there was $376 thousand of initial valuation gains on acquisition, $228 thousand of net gains on sales and $121 thousand from other operating income, partially offset by $257 thousand in operating expenses. For the three months ended June 30, 2020, there was $334 thousand in operating expenses, partially offset by $57 thousand of net gains on sales and $8 thousand of other operating income.

Other: Other non-interest expenses consist 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 and other operating expenses. Overall, in the other expense category, there was a net $458 thousand variance, or 22.9%, between quarters ending June 30, 2021 and 2020. Included in other non-interest expense for the three months ended June 30, 2021, is $164 thousand provision for loss on unfunded commitments.

Six months ended June 30, 2021, compared with six months ended June 30, 2020: For the six months ended June 30, 2021, non-interest expense totaled $50.7 million, an increase of $992 thousand, when compared to the six months ended June 30, 2020. Changes in the various components of non-interest expense for the six months ended June 30, 2021 and 2020 are discussed in more detail in the following table.

Non-Interest Expense

For the Six Months Ended June 30,

						2021 vs. 2020
(Dollars in thousands)	2021			2020		Change			%
Salaries and employee benefits	$	25,491		$	26,199	$	(708	)		(2.7	)%
Net occupancy and equipment		4,695			4,354		341			7.8	%
Data processing		6,137			5,426		711			13.1	%
Professional fees		2,072			2,310		(238	)		(10.3	)%
Advertising and business development		1,481			1,099		382			34.8	%
Telecommunications		1,092			877		215			24.5	%
FDIC insurance		840			931		(91	)		(9.8	)%
Courier and postage		696			737		(41	)		(5.6	)%
Free nationwide ATM cost		985			747		238			31.9	%
Amortization of core deposit intangibles		2,064			1,776		288			16.2	%
Loan expense		419			521		(102	)		(19.6	)%
Other real estate owned		(463	)		577		(1,040	)		(180.2	)%
Other		4,566			4,141		425			10.3	%
Sub-Total		50,075			49,695		380			0.8	%
Merger expenses		612			—		612			100.0	%
Total non-interest expense	$	50,687		$	49,695	$	992			2.0	%

Other real estate owned: Other real estate owned includes operating expenses, provision for unrealized losses, initial valuation gains on acquisition, gains or losses on sales and other operating income. For the six months ended June 30, 2021, there was $398 thousand of net gains on sales, $379 thousand of initial valuation gains on acquisition and a net $227 thousand from other operating income, partially offset by $539 thousand in operating expenses and $2 thousand of provision for unrealized losses. For the six months ended June 30, 2020, there was $901 thousand provision for unrealized losses and $471 thousand in operating expenses, partially offset by $781 thousand of net gains on sales and $14 thousand of other operating income.

Other: Other non-interest expense 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 and other operating expenses. Overall, in the other expense, category there was a net $425 thousand variance, or 10.3%, between the six-month periods ending June 30, 2021 and 2020, with the largest variance being a $164 thousand provision for loss on unfunded commitments.

Efficiency Ratio

The efficiency ratio is a supplemental financial measure utilized in the internal evaluation of performance and is not defined under GAAP. For a reconciliation of non-GAAP financial measures see “Non-GAAP Financial Measures” in this Item 2. Our efficiency ratio is computed by dividing non-interest expense, excluding merger expenses and goodwill impairment, by the sum of net interest income and non-interest income, excluding net gain on acquisition and net gain or loss from securities transactions. 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 efficiency ratio was 58.9% for the three months ended June 30, 2021, compared with 62.0% for the three months ended June 30, 2020. The decrease was primarily due to increases in non-interest income and net interest income, partially offset by an increase in non-interest expense.

The efficiency ratio was 61.4% for the six months ended June 30, 2021, compared with 65.4% for the six months ended June 30, 2020. The decrease was primarily due to increases in non-interest income and net interest income, partially offset by an increase in non-interest expense.

Income Taxes

The provision for income taxes is influenced by the amount of pre-tax income (loss), the amount of tax-exempt income, the amount of non-deductible expenses and available tax credits.

Three months ended June 30, 2021, compared with three months ended June 30, 2020: The effective income tax rate for the quarter ended June 30, 2021 was 22.6% as compared to 22.7% for the quarter ended June 30, 2020. In general, the Company records income tax expense each quarter based on its estimate as to the full year’s effective tax which includes, in addition to statutory tax rates, estimated amounts for tax-exempt interest income, non-taxable life insurance income, non-deductible executive compensation, valuation allowance on deferred assets, other non-deductible expense and federal income tax credits anticipated to be available in proportion to anticipated annual income before income taxes. Certain items, however, are given discrete period treatment and the tax effects for such items are therefore reported in the quarter that an event arises. Events or items that may give rise to discrete recognition include excess tax benefits or shortfalls with respect to share-based compensation, changes in tax law, non-deductible merger expense and benefits related to tax credits secured within the quarter.

Six months ended June 30, 2021, compared with six months ended June 30, 2020: The effective income tax rate for the six-month period ended June 30, 2021 was 22.3% as compared to 24.2% for the six-month period ended June 30, 2020. For both comparable periods, the estimated annual effective rate at which income tax expense has been provided reflect, in addition to statutory rates, estimated tax-exempt interest income, non-taxable life insurance income, non-deductible executive compensation, valuation allowance on deferred assets, other non-deductible expense and federal income tax credits to be available in proportion to anticipated annual income before income taxes. Certain items, however, are given discrete period treatment and the tax effects for such items are therefore reported in the quarter that an event arises. Events or items that may give rise to discrete recognition include excess tax benefits or shortfalls with respect to share-based compensation, changes in tax law, non-deductible merger expense and benefits related to tax credits secured within the quarter. Income tax expense for the six-month period ended June 30, 2021, includes $61 thousand of tax benefit attributable to the settlement in stock of restricted stock units and the exercise of options. The exercise of stock options and the settlement of restricted stock units in the first six months of 2020 resulted in $67 thousand of additional tax expense.

Financial Condition

Total assets increased $254.9 million from December 31, 2020, to $4.27 billion at June 30, 2021. This variance was primarily due to increases of $205.2 million in loans, net of allowance for credit losses, and $169.8 million in total securities, partially offset by a decrease of $141.4 million in cash and cash equivalents. Our total liabilities increased $249.5 million to $3.86 billion at June 30, 2021. The change in total liabilities came primarily from an increase in total deposits of $240.0 million. Total stockholders’ equity increased $5.3 million from $407.6 million at December 31, 2020, to $413.0 million at June 30, 2021.

Loan Portfolio

The following table summarizes our loan portfolio by type of loan as of the dates indicated.

Composition of Loan Portfolio

	June 30, 2021					December 31, 2020
	Amount		Percent			Amount		Percent			Change			%
	(Dollars in thousands)
Commercial and industrial	$	732,126		26.0	%	$	734,495		28.3	%	$	(2,369	)		(0.3	)%
Real estate loans:
Commercial real estate		1,019,278		36.2	%		986,288		38.1	%		32,990			3.3	%
Real estate construction		241,936		8.6	%		202,408		7.8	%		39,528			19.5	%
Residential real estate		503,110		17.9	%		381,958		14.7	%		121,152			31.7	%
Agricultural real estate		129,020		4.6	%		133,693		5.2	%		(4,673	)		(3.5	)%
Total real estate loans		1,893,344		67.3	%		1,704,347		65.8	%		188,997			11.1	%
Agricultural		97,912		3.5	%		94,322		3.6	%		3,590			3.8	%
Consumer		91,679		3.2	%		58,532		2.3	%		33,147			56.6	%
Total loans held for investment	$	2,815,061		100.0	%	$	2,591,696		100.0	%	$	223,365			8.6	%
Total loans held for sale	$	6,183		100.0	%	$	12,394		100.0	%	$	(6,211	)		(50.1	)%
Total loans held for investment (net of allowances)	$	2,763,227		100.0	%	$	2,557,987		100.0	%	$	205,240			8.0	%

Our commercial loan portfolio consists of various types of loans, most of which are generally made to borrowers located in the Wichita, Kansas City and Tulsa Metropolitan Statistical Areas (“MSAs”), as well as various community markets throughout Arkansas, Kansas, Missouri and Oklahoma. Most 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 economies in which they operate.

At June 30, 2021, gross total loans, including loans held for sale, were 76.5% of deposits and 66.1% of total assets. At December 31, 2020, gross total loans, including loans held for sale, were 75.5% of deposits and 64.9% of total assets.

We provide commercial lines of credit, working capital loans, commercial real estate-backed loans (including loans secured by owner-occupied commercial properties), term loans, equipment financing, aircraft financing, real property acquisition and development loans, borrowing base loans, real estate construction loans, homebuilder loans, SBA loans, agricultural and agricultural real estate loans, letters of credit and other loan products to national and regional companies, real estate developers, mortgage lenders, manufacturing and industrial companies and other businesses. The types of loans we make to consumers include residential real estate loans, home equity loans, home equity lines of credit, installment loans, unsecured and secured personal lines of credit, overdraft protection and letters of credit.

Real estate construction: Real estate construction loans include loans made for the purpose of acquisition, development or construction of real property, both commercial and consumer.

Commercial and industrial: Commercial and industrial loans include loans used to purchase fixed assets, provide working capital or meet other financing needs of the business.

Residential real estate: Residential real estate loans include loans secured by primary or secondary personal residences.

Agricultural real estate: Agricultural real estate loans are loans typically secured by farmland.

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 June 30, 2021, are summarized in the following table.

Loan Maturity and Sensitivity to Changes in Interest Rates

	As of June 30, 2021
	One year or less		After one year through five years		After five years		Total
	(Dollars in thousands)
Commercial and industrial	$	194,029	$	451,177	$	86,920	$	732,126
Real Estate:
Commercial real estate		131,834		597,695		289,749		1,019,278
Real estate construction		63,093		103,568		75,275		241,936
Residential real estate		4,844		9,479		488,787		503,110
Agricultural real estate		49,070		56,677		23,273		129,020
Total real estate		248,841		767,419		877,084		1,893,344
Agricultural		64,148		25,656		8,108		97,912
Consumer		48,389		34,812		8,478		91,679
Total	$	555,407	$	1,279,064	$	980,590	$	2,815,061
Loans with a predetermined fixed interest rate	$	292,582	$	888,497	$	412,589	$	1,593,668
Loans with an adjustable/floating interest rate		262,825		390,567		568,001		1,221,393
Total	$	555,407	$	1,279,064	$	980,590	$	2,815,061

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, 2020, are summarized in the following table.

Loan Maturity and Sensitivity to Changes in Interest Rates

	As of December 31, 2020
	One year or less		After one year through five years		After five years		Total
	(Dollars in thousands)
Commercial and industrial	$	157,313	$	487,729	$	89,453	$	734,495
Real Estate:
Commercial real estate		144,627		569,366		272,295		986,288
Real estate construction		75,659		76,295		50,454		202,408
Residential real estate		5,048		9,848		367,062		381,958
Agricultural real estate		50,527		56,514		26,652		133,693
Total real estate		275,861		712,023		716,463		1,704,347
Agricultural		62,804		25,911		5,607		94,322
Consumer		13,804		37,599		7,129		58,532
Total	$	509,782	$	1,263,262	$	818,652	$	2,591,696
Loans with a predetermined fixed interest rate	$	261,736	$	896,899	$	291,649	$	1,450,284
Loans with an adjustable/floating interest rate		248,046		366,363		527,003		1,141,412
Total	$	509,782	$	1,263,262	$	818,652	$	2,591,696

Credit Quality Indicators

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 credits unless downgraded due to payment status or reviewed as part of a larger credit relationship. Loans that participated in the short-term deferral program are not automatically considered classified solely due to a deferral, are subject to ongoing monitoring and will be downgraded or placed on nonaccrual if a noted weakness exists.

For additional information, see “NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES” in the Condensed Notes to Interim Consolidated Financial Statements.

Nonperforming Assets

The following table presents information regarding nonperforming assets at the dates indicated.

Nonperforming Assets

	June 30, 2021			December 31, 2020
	(Dollars in thousands)
Nonaccrual loans	$	56,808		$	43,689
Accruing loans 90 or more days past due		45			143
Restructured loans-accruing		—			—
OREO acquired through foreclosure, net		9,826			10,698
Other repossessed assets		15			67
Total nonperforming assets	$	66,694		$	54,597
Ratios:
Nonperforming assets to total assets		1.56	%		1.36	%
Nonperforming assets to total loans plus OREO		2.36	%		2.10	%

Following adoption of CECL, PCD loan assets are carried at their contractual value with the purchase accounting discount being reflected within the allowance for credit loss. This gross-up, comparatively, increased nonaccrual assets by $12.6 million. Excluding this impact, each of the above ratios has improved as compared to December 31, 2020.

Generally, loans are designated as nonaccrual 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 nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful. When a loan is placed on nonaccrual status, unpaid interest credited to income earned in the current year is reversed against income and unpaid interest earned in prior years is charged off. Future interest income may be recorded on a cash basis after recovery of principal is reasonably assured. Nonaccrual loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Prior to January 1, 2021, nonaccrual loans include purchased loans that were identified upon acquisition as having experienced credit deterioration since origination (“purchased credit impaired loans”). However, if the purchased credit impaired loan included in nonaccrual loans has not experienced further deterioration since acquisition the loan is not considered impaired for purposes of determining the allowance for credit losses.

The nonperforming loans at June 30, 2021, consisted of 222 separate credits and 150 separate borrowers. We had fourteen non-performing loan relationships, totaling $40.2 million, with an outstanding balance in excess of $1.0 million as of June 30, 2021.

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. 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. 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.

Potential Problem Loans

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 June 30, 2021, the Company had $36.8 million in potential problem loans which were not included in either non-accrual or 90 days past due categories, compared to $52.3 million at December 31, 2020.

With respect to potential problem loans, all monitored and under-performing loans are reviewed and evaluated to determine if they are impaired. If we determine that a loan is impaired, then we evaluate the borrower’s overall financial condition to determine the need, if any, for 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.

The Company also monitors the aging of loans less than 90 days past due and the loans that have been deferred under the Company’s COVID-19 related payment deferral program as reported in “NOTE 1 – BASIS OF PRESENTATION” and “NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES” in the Condensed Notes to Interim Consolidated Financial Statements.

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. Some of the risk elements include the following items.

•

Commercial and industrial loans are dependent on the strength of the industries of the related borrowers and the success of their businesses. Commercial and industrial loans are advanced for equipment purchases, to provide working capital or to meet other financing needs of the business. These loans may be secured by accounts receivable, inventory, equipment or other business assets. Financial information is obtained from the borrower to evaluate the debt service coverage and ability to repay the loans.

•

Commercial real estate loans are dependent on the industries tied to these loans as well as the local commercial real estate market. The loans are secured by the real estate and appraisals are obtained to support the loan amount. An evaluation of the project’s cash flows is performed to evaluate the borrower’s ability to repay the loan at the time of origination and periodically updated during the life of the loan.

•

Residential real estate loans are affected by the local residential real estate market, the local economy and movement in interest rates. We evaluate the borrower’s repayment ability through a review of credit reports and debt to income ratios. Appraisals are obtained to support the loan amount.

•

Agricultural real estate loans are real estate loans related to farmland and are affected by the value of farmland. We evaluate the borrower’s ability to repay based on cash flows from farming operations.

•

Agricultural loans are primarily operating lines subject to annual farming revenues including productivity/yield of the agricultural commodities produced and the market pricing at the time of sale.

•

Consumer loans are dependent on the local economy. Consumer loans are generally secured by consumer assets but may be unsecured. We evaluate the borrower’s repayment ability through a review of credit scores and an evaluation of debt to income ratios.

Analysis of allowance for credit losses: At June 30, 2021, the allowance for credit losses totaled $51.8 million, or 1.84% of total loans. At December 31, 2020, the allowance for loan losses totaled $33.7 million, or 1.30% of total loans.

The allowance for credit losses on loans measured on a collective basis totaled $33.5 million, or 1.22% of the $2.76 billion in loans measured on a collective basis at June 30, 2021, compared to an allowance for credit losses of $23.2 million, or 0.92% of the $2.54 billion in loans measured on a collective basis at December 31, 2020. Exclusive of PPP loan balances, the reserve percentage increased to 1.35% as of June 30, 2021, compared to 1.02% as of December 31, 2020. The increase in the allowance for credit losses and of loans measured on a collective basis principally reflect the adoption of CECL.

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

	As of and for the Three Months Ended June 30,						As of and for the Six Months Ended June 30,
	2021			2020			2021			2020
	(Dollars in thousands)						(Dollars in thousands)
Average loans outstanding	$	2,853,145		$	2,806,865		$	2,795,352		$	2,666,104
Gross loans outstanding at end of period⁽¹⁾	$	2,815,061		$	2,806,334		$	2,815,061		$	2,806,334
Allowance for credit losses at beginning of the period	$	55,525		$	21,915		$	33,709		$	12,232
ASC 326 implementation:
Commercial and industrial		(1,898	)		—			3,949			—
Real estate:
Commercial real estate		(56	)		—			8,617			—
Real estate construction		—			—			1,566			—
Residential real estate		(1	)		—			9,090			—
Agricultural real estate		(226	)		—			1,127			—
Agricultural		599			—			4,698			—
Consumer		—			—			(2,877	)		—
Total ASC 326 implementation		(1,582	)		—			26,170			—
Reclassification to allowance on unfunded commitments		115			—			—			—
Provision (reversal) for credit losses		(1,657	)		12,500			(7,413	)		22,440
Charge-offs:
Commercial and industrial		(54	)		(255	)		(61	)		(284	)
Real estate:
Commercial real estate		—			(51	)		(53	)		(59	)
Real estate construction		—			—			—			—
Residential real estate		(3	)		(134	)		(12	)		(159	)
Agricultural real estate		(490	)		(7	)		(502	)		(24	)
Agricultural		(1	)		(1	)		(1	)		(1	)
Consumer		(165	)		(175	)		(375	)		(453	)
Total charge-offs		(713	)		(623	)		(1,004	)		(980	)
Recoveries:
Commercial and industrial		47			9			70			41
Real estate:
Commercial real estate		—			6			127			6
Real estate construction		—			194			—			194
Residential real estate		4			3			5			4
Agricultural real estate		18			—			18			—
Agricultural		1			—			4			1
Consumer		76			74			148			140
Total recoveries		146			286			372			386
Net recoveries (charge-offs)		(567	)		(337	)		(632	)		(594	)
Allowance for credit losses at end of the period	$	51,834		$	34,078		$	51,834		$	34,078
Ratio of allowance to period-end loans		1.84	%		1.21	%		1.84	%		1.21	%
Annualized ratio of net charge-offs (recoveries) to average loans		0.08	%		0.05	%		0.05	%		0.04	%

(1)Excluding loans held for sale.

The following table shows the allocation of the allowance for credit losses among our loan categories and certain other information as of the dates indicated. The total allowance is available to absorb losses from any loan category.

Analysis of the Allowance for Credit Losses

	June 30, 2021					December 31, 2020
	Amount		% of Total Allowance			Amount		% of Total Allowance
	(Dollars in thousands)
Balance of allowance for credit losses applicable to:
Commercial and industrial	$	18,690		36.0	%	$	12,456		37.0	%
Real estate:
Commercial real estate		13,776		26.6	%		8,776		26.0	%
Real estate construction		1,449		2.8	%		236		0.7	%
Residential real estate		9,808		18.9	%		4,559		13.5	%
Agricultural real estate		847		1.6	%		904		2.7	%
Agricultural		4,695		9.1	%		758		2.2	%
Consumer		2,569		5.0	%		6,020		17.9	%
Total allowance for credit losses	$	51,834		100.0	%	$	33,709		100.0	%

Management believes that the allowance for credit losses at June 30, 2021, was adequate to cover current expected credit losses in the loan portfolio as of such date. There can be no assurance, however, that we will not sustain losses in future periods, which could be substantial in relation to the size of the allowance at June 30, 2021.

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 June 30, 2021, the carrying amount of investment securities totaled $1.04 billion, an increase of $169.8 million compared with December 31, 2020. At June 30, 2021, securities represented 24.4% of total assets compared with 21.7% at December 31, 2020.

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, 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 financial statements with unrealized gains and losses reported, net of 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

	June 30, 2021				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
U.S. Government-sponsored entities	$	50,231	$	50,362	$	996	$	1,023
U.S. Treasury securities		11,641		11,749		4,024		4,025
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		661,938		674,494		630,485		651,425
Private label residential mortgage-backed securities		136,671		136,446		44,302		44,178
Corporate		52,514		53,994		52,503		53,650
Small Business Administration loan pools		11,037		11,012		1,226		1,270
State and political subdivisions		99,613		103,556		111,865		116,256
Total available-for-sale securities	$	1,023,645	$	1,041,613	$	845,401	$	871,827

At June 30, 2021, and December 31, 2020, we did not own any securities classified as held-to-maturity.

At June 30, 2021, and December 31, 2020, we did not own securities of any one issuer (other than the U.S. government and its agencies or sponsored entities) for which aggregate par value exceeded 10% of consolidated stockholders’ equity at the reporting dates noted.

The following tables summarize the contractual maturity of debt securities and their weighted average yields as of June 30, 2021, and December 31, 2020. 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.

	June 30, 2021
	Due in one year or less					Due after one year through five years					Due after five years through 10 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	$	1,012		2.78	%	$	19,928		1.05	%	$	29,422		1.60	%	$	—	—%			$	50,362		1.40	%
U.S. Treasury securities		2,006		0.16	%		—	—%				9,743		1.33	%		—	—%				11,749		1.13	%
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		11		5.33	%		47,043		1.66	%		159,572		1.68	%		467,868		1.98	%		674,494		1.89	%
Private label residential mortgage-backed securities		—	—%				—	—%				—	—%				136,446		1.40	%		136,446		1.40	%
Corporate		—	—%				—	—%				53,994		4.18	%		—	—%				53,994		4.18	%
Small Business Administration loan pools		—	—%				—	—%				9,878		0.77	%		1,134		2.39	%		11,012		0.94	%
State and political subdivisions⁽¹⁾		3,653		2.87	%		22,505		2.46	%		34,354		2.72	%		43,044		3.06	%		103,556		2.81	%
Total available-for-sale securities		6,682		2.05	%		89,476		1.72	%		296,963		2.20	%		648,492		1.93	%		1,041,613		1.99	%
Total debt securities	$	6,682		2.05	%	$	89,476		1.72	%	$	296,963		2.20	%	$	648,492		1.93	%	$	1,041,613		1.99	%

⁽¹⁾	The calculated yield is not presented on a tax equivalent basis.

	December 31, 2020
	Due in one year or less					Due after one year through five years					Due after five years through 10 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	$	—		—	%	$	1,023		2.78	%	$	—		—	%	$	—		—	%	$	1,023		2.78	%
U.S. Treasury securities		4,025		0.14	%		—		—	%		—		—	%		—		—	%		4,025		0.14	%
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		5		5.77	%		2,093		3.26	%		101,352		2.12	%		547,975		2.10	%		651,425		2.10	%
Private label residential mortgage-backed securities		—		—	%		—		—	%		—		—	%		44,178		0.23	%		44,178		0.23	%
Corporate		5,050		2.17	%		—		—	%		48,600		4.25	%		—		—	%		53,650		4.05	%
Small Business Administration loan pools		—		—	%		—		—	%		—		—	%		1,270		2.38	%		1,270		2.38	%
State and political subdivisions⁽¹⁾		3,765		2.41	%		26,679		2.45	%		24,212		2.93	%		61,600		3.17	%		116,256		2.93	%
Total available-for-sale securities		12,845		1.61	%		29,795		2.52	%		174,164		2.83	%		655,023		2.07	%		871,827		2.23	%
Total debt securities	$	12,845		1.61	%	$	29,795		2.52	%	$	174,164		2.83	%	$	655,023		2.07	%	$	871,827		2.23	%

⁽¹⁾	The calculated yield is not presented 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 and Freddie Mac. 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 which are 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.

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 June 30, 2021, and December 31, 2020, 69.4% and 84.1% of the government-sponsored residential mortgage-backed securities held by us had contractual final maturities of more than ten years with a weighted average life of 3.9 years and 2.5 years and a modified duration of 3.7 years and 2.5 years. At June 30, 2021, and December 31, 2020, 100.0% and 100.0% of the private label residential mortgage-backed securities held by us had contractual final maturities of more than ten years with a weighted average life of 2.7 years and 2.2 years and a modified duration of 2.6 years and 2.1 years.

Goodwill Impairment Assessment

At June 30, 2021, we performed an interim qualitative analysis and concluded there were not any indications that goodwill was impaired.

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.

The following table shows our composition of deposits at June 30, 2021, and December 31, 2020.

Composition of Deposits

	June 30, 2021					December 31, 2020
	Amount		Percent of Total			Amount		Percent of Total
	(Dollars in thousands)
Non-interest-bearing demand	$	992,565		26.9	%	$	791,639		22.9	%
Interest-bearing demand		989,043		26.8	%		1,016,424		29.5	%
Savings and money market		1,046,453		28.4	%		1,012,673		29.4	%
Time		659,494		17.9	%		626,854		18.2	%
Total deposits	$	3,687,555		100.0	%	$	3,447,590		100.0	%

Total deposits at June 30, 2021, were $3.69 billion, an increase of $240.0 million, or 7.0%, compared to total deposits of $3.45 billion at December 31, 2020.

Equity Bank participates in the Insured Cash Sweep (“ICS”) service that allows the bank to break large 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 through ICS services, but are Equity Bank’s customer relationships that management views as core funding. The bank also participates in the Certificate of Deposit Account Registry Service (“CDARS”) program. CDARS allows the bank to break large time 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.

The following table lists reciprocal and brokered deposits included in total deposits categorized by type.

	June 30, 2021		December 31, 2020
Interest-bearing demand
Reciprocal	$	271,279	$	256,037
Total interest-bearing demand		271,279		256,037
Savings and money market
Reciprocal		25,812		23,733
Total savings and money market		25,812		23,733
Time
Reciprocal		8,064		14,859
Non-reciprocal brokered		49,057		—
Total time		57,121		14,859
Total reciprocal and brokered deposits	$	354,212	$	294,629

The following table provides information on the maturity distribution of time deposits of $100 thousand or more as of June 30, 2021, and December 31, 2020.

	June 30, 2021		December 31, 2020		Change			%
	(Dollars in thousands)
3 months or less	$	123,741	$	93,025	$	30,716			33.0	%
Over 3 through 6 months		66,353		70,737		(4,384	)		(6.2	)%
Over 6 through 12 months		162,659		120,006		42,653			35.5	%
Over 12 months		70,108		100,877		(30,769	)		(30.5	)%
Total Time Deposits	$	422,861	$	384,645	$	38,216			9.9	%

Other Borrowed Funds

We utilize borrowings to supplement deposits to fund our lending and investing activities. Short-term borrowings and long-term borrowings include federal funds purchased and retail repurchase agreements, FHLB advances, Federal Reserve Bank discount window, a bank stock loan and subordinated debt. For additional information see “NOTE 6 – BORROWINGS” in the Condensed Notes to Interim Consolidated Financial Statements for additional information.

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 considering 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 the way they combine to provide adequate liquidity to meet our needs.

During the six-month periods ended June 30, 2021 and 2020, our liquidity needs have primarily been met by core deposits, security and loan maturities and amortizing investment and loan portfolios. Other funding sources include federal funds purchased, brokered certificates of deposit, borrowings from the FHLB and the Federal Reserve discount window.

Our largest sources of funds are deposits and FHLB borrowings and largest uses of funds are loans and securities. Average loans were $2.80 billion for the six months ended June 30, 2021, an increase of 3.7% over the December 31, 2020, average balance. 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 securities portfolio has a weighted average life of 4.0 years and a modified duration of 3.7 years at June 30, 2021.

Cash and cash equivalents were $139.3 million at June 30, 2021, a decrease of $141.4 million from the $280.7 million cash and cash equivalents at December 31, 2020. The decrease in cash and cash equivalents is driven primarily by $430.2 million net cash used in investing activities, partially offset by $241.6 provided by financing activities and $47.2 million provided by operating activities. Cash and cash equivalents at January 1, 2021, plus liquidity provided by operating activities, pay downs, sales and maturities of investment securities and FHLB borrowings during the first six months of 2021 were used to originate or purchase loans and to purchase investment securities. We believe that our daily funding needs can be met through cash provided by operating activities, payments and maturities on loans and investment securities, the core deposit base and FHLB advances and other borrowing relationships.

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.

Our commitments associated with outstanding standby and performance letters of credit and commitments to extend credit expiring by period as of June 30, 2021, are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect the actual future cash funding requirements.

Credit Extensions Commitments

As of June 30, 2021

	1 Year or Less		More Than 1 Year but Less Than 3 Years		3 Years or More but Less Than 5 Years		5 Years or More		Total
	(Dollars in thousands)
Standby and performance letters of credit	$	10,383	$	350	$	188	$	—	$	10,921
Commitments to extend credit		308,628		50,503		126,032		75,953		561,116
Total	$	319,011	$	50,853	$	126,220	$	75,953	$	572,037

Standby and Performance Letters of Credit: Standby letters of credit are irrevocable commitments issued by us to guarantee the performance of a customer to a third party once specified pre-conditions 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.

Commitments to Extend 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. Commitments to extend credit include mortgage loans in the process of origination that we plan to fund within a normal period of 60 to 90 days, and which are intended for sale to investors in the secondary market.

Capital Resources

Capital management consists of providing equity to support our current and future operations. The federal 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 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, 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. Management believes as of June 30, 2021, and December 31, 2020, 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 June 30, 2021, 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. For additional information, see “NOTE 8 – REGULATORY MATTERS” in the Condensed Notes to Interim Consolidated Financial Statements. There are no conditions or events since that notification that management believes have changed Equity Bank’s category.

Non-GAAP Financial Measures

We identify certain financial measures discussed in this Quarterly Report as being “non-GAAP financial measures.” In accordance with 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 GAAP as in effect from time to time in the United States in our statements of income, balance sheet 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 Quarterly Report 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 way we calculate the non-GAAP financial measures that we discuss in this Quarterly Report 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 like the non-GAAP financial measures we have discussed in this Quarterly Report 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) and other intangible assets (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 diluted shares of common stock outstanding. 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.

	For the three months ended
	June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
	(Dollars in thousands, except per share data)
Total stockholders’ equity	$	412,995	$	397,815	$	407,649	$	402,172	$	479,766
Less: goodwill		31,601		31,601		31,601		31,601		136,432
Less: core deposit intangibles, net		13,993		15,023		16,057		17,101		18,131
Less: mortgage servicing asset, net		—		—		—		1		2
Less: naming rights, net		1,109		1,119		1,130		1,141		1,152
Tangible common equity	$	366,292	$	350,072	$	358,861	$	352,328	$	324,049
Common shares issued at period end		14,360,172		14,383,913		14,540,556		14,853,487		15,218,301
Diluted common shares outstanding at period end		14,664,603		14,668,287		14,756,378		14,853,487		15,334,144
Book value per common share	$	28.76	$	27.66	$	28.04	$	27.08	$	31.53
Tangible book value per common share	$	25.51	$	24.34	$	24.68	$	23.72	$	21.29
Tangible book value per diluted common share	$	24.98	$	23.87	$	24.32	$	23.57	$	21.13

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) and other intangible assets (net of accumulated amortization); (b) tangible assets as total assets less goodwill, core deposit intangibles (net of accumulated amortization) and other intangible assets (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 tangible 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.

	For the three months ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in thousands)
Total stockholders’ equity	$	412,995		$	397,815		$	407,649		$	402,172		$	479,766
Less: goodwill		31,601			31,601			31,601			31,601			136,432
Less: core deposit intangibles, net		13,993			15,023			16,057			17,101			18,131
Less: mortgage servicing asset, net		—			—			—			1			2
Less: naming rights, net		1,109			1,119			1,130			1,141			1,152
Tangible common equity	$	366,292		$	350,072		$	358,861		$	352,328		$	324,049
Total assets	$	4,268,216		$	4,196,184		$	4,013,356		$	3,865,571		$	4,205,269
Less: goodwill		31,601			31,601			31,601			31,601			136,432
Less: core deposit intangibles, net		13,993			15,023			16,057			17,101			18,131
Less: mortgage servicing asset, net		—			—			—			1			2
Less: naming rights, net		1,109			1,119			1,130			1,141			1,152
Tangible assets	$	4,221,513		$	4,148,441		$	3,964,568		$	3,815,727		$	4,049,552
Equity to assets		9.68	%		9.48	%		10.16	%		10.40	%		11.41	%
Tangible common equity to tangible assets		8.68	%		8.44	%		9.05	%		9.23	%		8.00	%

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 goodwill, core deposit intangibles (net of accumulated amortization) and other intangible assets (net of accumulated amortization); (b) adjusted net income allocable to common stockholders as net income allocable to common stockholders plus intangible asset amortization less tax effect on intangible assets amortization; and (c) return on average tangible common equity as annualized adjusted 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 who are interested in earnings quality on tangible common equity. Goodwill and other intangible assets have the effect of increasing total stockholders’ equity while not increasing tangible common equity.

The following table reconciles, as of the dates set forth below, return on average stockholders’ equity and return on average tangible common equity.

	For the three months ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in thousands)
Total average stockholders’ equity	$	404,039		$	395,638		$	409,572		$	483,088		$	483,605
Less: average intangible assets		47,334			48,376			54,547			154,049			156,194
Average tangible common equity	$	356,705		$	347,262		$	355,025		$	329,039		$	327,411
Net income (loss) allocable to common stockholders	$	15,166		$	15,075		$	12,488		$	(90,405	)	$	1,689
Goodwill impairment		—			—			—			104,831			—
Amortization of intangible assets		1,041			1,045			1,055			1,043			986
Less: tax effect		219			219			222			5,539			207
Adjusted net income allocable to common stockholders	$	15,988		$	15,901		$	13,321		$	9,930		$	2,468
Return on total average stockholders’ equity (ROAE) annualized		15.06	%		15.45	%		12.13	%		(74.45	)%		1.40	%
Return on average tangible common equity (ROATCE) annualized		17.98	%		18.57	%		14.93	%		12.01	%		3.03	%

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 merger expenses and goodwill impairment, by the sum of net interest income and non-interest income, excluding net gain on acquisition and net gain (loss) from securities transactions. The GAAP-based efficiency ratio is non-interest expense 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 and net gain (loss) from securities transactions.

The following table reconciles, as of the dates set forth below, the efficiency ratio to the GAAP-based efficiency ratio.

	For the three months ended
	June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in thousands)
Non-interest expense	$	25,806		$	24,881		$	28,460		$	130,835		$	23,937
Less: goodwill impairment		—			—			—			104,831			—
Less: merger expense		460			152			299			—			—
Non-interest expense, excluding goodwill impairment and merger expense	$	25,346		$	24,729		$	28,161		$	26,004		$	23,937
Net interest income	$	34,630		$	31,759		$	35,559		$	32,107		$	32,891
Non-interest income	$	9,100		$	6,712		$	8,500		$	6,485		$	5,732
Less: net gain on acquisition		663			(78	)		2,145			—			—
Less: net gain (loss) from securities transactions		—			17			(1	)		—			4
Non-interest income, excluding net gain (loss) from securities transactions and net gain on acquisition	$	8,437		$	6,773		$	6,356		$	6,485		$	5,728
Net interest income plus non-interest income, excluding net gain on acquisition and net gain (loss) from securities transactions	$	43,067		$	38,532		$	41,915		$	38,592		$	38,619
Non-interest expense to net interest income plus non-interest income		59.01	%		64.67	%		64.60	%		339.02	%		61.98	%
Efficiency Ratio		58.85	%		64.18	%		67.19	%		67.38	%		61.98	%

Item 3: Quantitative and Qualitative Disclosures about Market Risk

Our asset-liability policy provides guidelines 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 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 interest rate exposure 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 futures contracts or forward delivery contracts for the purpose of reducing interest rate risk. 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 our 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. ALCO formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, 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. 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, ALCO reviews liquidity, projected cash flows, maturities of deposits and consumer and commercial deposit activity.

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 June 30, 2021, and December 31, 2020, 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. The increase in the level of negative impact to net interest income in the up interest rate shock scenarios is due to the assumed migration of non-term deposit liabilities to higher rate term deposits; the level of fixed rate investments and loans receivable that will not reprice to higher rates; advances; the variable rate subordinated debentures and the non-term deposits that are assumed not to migrate to term deposits that are variable rate and will reprice to the higher rates; and a portion of our portfolio of variable rate loans contain restrictions on the amount of repricing and frequency of repricing that limit the amount of repricing to the current higher rates. These factors result in the negative 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 decrease in investment income due to the negative convexity features of the fixed rate mortgage backed securities, assumed prepayment of existing fixed rate loans receivable, the downward pricing of variable rate loans receivable, the constraint of the shock on non-term deposits and the level of term deposit repricing. Our mortgage backed security portfolio is primarily comprised of fixed rate investments and as rates decrease, the level of prepayments is assumed to increase and cause the current higher rate investments to prepay and the assumed reinvestment will be at lower interest rates. Similar to our mortgage backed securities, the model assumes that our fixed rate loans receivable will prepay at a faster rate and reinvestment will occur at lower rates. The level of downward shock on the non-term deposits is constrained to limit the downward shock to a non-zero rate which results in a minimal reduction in the average rate paid. Term deposits repricing will only decrease the average cost paid by a minimal amount due to the assumed repricing occurring at maturity. These factors result in the negative impact to net interest income in the down interest rate shock scenario.

The change in the EVE from the base case for June 30, 2021, and December 31, 2020, is due to being in a liability sensitive position and the level of convexity in pre-payable assets. Generally, with a liability sensitive position, as interest rates increase, the value of assets decrease faster than the value of liabilities and as interest rates decrease, the value of assets increase at a faster rate than liabilities. However, due to the level of convexity in fixed rate pre-payable assets, we do not experience a similar change in the value of assets in a down interest rate shock scenario. 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 June 30, 2021, non-interest-bearing deposits were approximately $200.9 million or 25.4% higher than that deposit type at December 31, 2020. Substantially all investments and approximately 56.6% of loans are pre-payable 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 EVE.

Management utilizes static balance sheet rate shocks to estimate the potential impact on various rate scenarios. This analysis estimates a percentage of change in the metric from the stable rate base scenario versus alternative scenarios of rising and falling market interest rates by instantaneously shocking a static balance sheet. The following table summarizes the simulated immediate change in net interest income for twelve months as of the dates indicated.

Market Risk

	Impact on Net Interest Income
Change in prevailing interest rates	June 30, 2021			December 31, 2020
+300 basis points		(5.3	)%		(1.2	)%
+200 basis points		(2.7	)%		0.4	%
+100 basis points		(1.1	)%		1.0	%
0 basis points		—			—
-100 basis points		(4.7	)%		(2.3	)%

The following table summarizes the simulated immediate impact on economic value of equity as of the dates indicated.

	Impact on Economic Value of Equity
Change in prevailing interest rates	June 30, 2021			December 31, 2020
+300 basis points		2.2	%		12.8	%
+200 basis points		6.1	%		14.4	%
+100 basis points		4.3	%		9.2	%
0 basis points		—			—
-100 basis points		(19.1	)%		(21.2	)%

Item 4: Controls and Procedures

Evaluation of disclosure controls and procedures

An evaluation of the effectiveness of the design and operation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and management was required to apply judgement in evaluating its controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms.

Changes in internal control over financial reporting

There were no changes in the Company’s 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 period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1: Legal Proceedings

From time to time, we are a party to various litigation matters incidental to the conduct of our business. See “NOTE 12 – LEGAL MATTERS” of the Condensed Notes to Interim Consolidated Financial Statements under Item 1 to this Quarterly report for a complete discussion of litigation matters.

Item 1A: Risk Factors

There have been no material changes in the Company’s risk factors previously disclosed in our Annual Report on Form 10-K filed with the SEC on March 9, 2021.

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Repurchase of Common Stock

In September of 2020, the Company’s Board of Directors authorized the repurchase of up to 800,000 shares of the Company’s outstanding common stock, from time to time, beginning October 30, 2020, and concluding October 29, 2021. The repurchase program does not obligate us to acquire a specific dollar amount or number of shares and it may be extended, modified or discontinued at any time without notice.

The following table presents shares that have been repurchased under the program during the second quarter of 2021.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
April 1, 2021 through April 30, 2021		69,768	$	28.89		69,768		183,989
May 1, 2021 through May 31, 2021		3,302	$	29.99		3,302		180,687
June 1, 2021 through June 30, 2021		—	$	—		—		180,687
Total		73,070	$	28.94		73,070		180,687

Item 3: Defaults Upon Senior Securities

None

Item 4: Mine Safety Disclosures

Not applicable.

Item 5: Other Information

None

Item 6: Exhibits

Exhibit No.		Description
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.
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.
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.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.
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.

SIGNATURES

Pursuant to the requirements 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.

August 5, 2021	By:	/s/ Brad S. Elliott
Date		Brad S. Elliott
		Chairman and Chief Executive Officer

August 5, 2021	By:	/s/ Eric R. Newell
Date		Eric R. Newell
		Executive Vice President and Chief Financial Officer