EQUITY BANCSHARES INC

Results of Operations

We generate 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 mortgage banking income. We incur interest expense on deposits and other borrowed funds and non-interest expense, such as salaries and employee benefits and occupancy expenses.

Changes in interest rates earned on interest-earning assets or incurred on interest-bearing liabilities, as well as the volume and types of interest-earning assets, interest-bearing and non-interest-bearing liabilities and stockholders’ equity, are usually the largest drivers of periodic change in net interest income. Fluctuations in interest rates are driven by many factors, including governmental monetary policies, inflation, deflation, macroeconomic developments, changes in unemployment, the money supply, political and international circumstances and domestic and foreign financial markets. Periodic changes in the volume and types of loans in our loan portfolio are affected by, among other factors, economic and competitive conditions in Arkansas, Kansas, Missouri and Oklahoma, as well as developments affecting the consumer, commercial and real estate sectors within these markets.

Net Income

Three months ended September 30, 2025, compared with three months ended September 30, 2024: Net income/(loss) allocable to common stockholders for the three months ended September 30, 2025, was $(29.7) million, or $(1.55) diluted earnings per share as compared to $19.9 million, or $1.28 diluted earnings per share for the three months ended September 30, 2024, a decrease of $49.5 million. The decrease was largely due to the repositioning of investment securities resulting in a loss of $53.4 million, a $5.0 million increase in the provision for loan losses, offset by a decrease in the provision for taxes of $11.6 million.

Excluding the pre-tax expenses and CECL provisioning associated with our merger with NBC and the loss on the repositioning of the investment portfolio, pre-tax income for the period was $28.4 million. Using an assumed 21% tax rate, adjusted net income was $22.5 million, or $1.17 per diluted share.

Nine months ended September 30, 2025, compared with nine months ended September 30, 2024: Net income allocable to common stockholders for the nine months ended September 30, 2025, was $642 thousand, or $0.04 diluted earnings per share as compared to $45.6 million, or $2.95 diluted earnings per share for the nine months ended September 30, 2024, a decrease of $45.0 million. The decrease was largely due to the repositioning of investment securities resulting in a loss of $53.3 million, provision for loan losses of $6.5 million, offset by an increase in net interest income of $25.9 million, and decreases in provision for income taxes of $13.0 million.

Excluding the pre-tax expenses and CECL provisioning associated with our merger with NBC and the loss on the repositioning of the investment portfolio, pre-tax income for the period was $66.1 million. Using an assumed 21% tax rate, adjusted net income was $52.2 million, or $2.87 per diluted share.

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 September 30, 2025, compared with three months ended September 30, 2024: 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 September 30, 2025, and 2024. The yields and rates are calculated by dividing annualized income or annualized expense by the average daily balances of the associated assets or liabilities.

(1)

Average loan balances include non-accrual 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 un-rounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

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 September 30, 2025, and 2024.

Analysis of Changes in Net Interest Income

For the Three Months Ended September 30, 2025, and 2024

(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.

Interest income increased $16.1 million for the quarter ended September 30, 2025, as compared to the quarter ended September 30, 2024. A $15.7 million increase in interest due to increased volume of average interest earning assets, primarily attributable to the NBC merger, and a $418 thousand increase due to the rate/yield on interest earning assets. Realized rate/yield increases on loans was attributable to a 7 bp increase from non-accrual interest adjustment, a 18 bp increase from the accretion of merger purchase accounting adjustments and a 3 bp increase from the amortization of loan origination fees, partially offset by a 1 bp decrease in hedge accounting net settlements and by a 22 bp decrease in coupon rates. Decreases in coupon were driven by market interest rate reductions offset by continued production in a comparatively high interest rate market relative to near term history. The increase in interest income on the remaining components of interest earning assets was primarily due to increased volume from the Company's merger with NBC as well as the repositioning of $436.3 million in investments throughout the quarter.

The decrease in interest expense of $321 thousand was due to the deposit portfolio repricing downward in line with market interest rates and a decrease in volume and rate on the Company's borrowing lines, partially offset by an increase in volume in deposits primarily attributable to our merger with NBC.

During the quarter ended September 30, 2025, when compared to the quarter ended September 30, 2024, net interest margin increased 58 bp and net interest spread increased by 55 bp to 3.74% from 3.19%. Since the beginning of the third quarter 2024, the federal funds rate has dropped a total of 125 bp. This decline is the primary driver of the downward trend in the cost on interest bearing liabilities. The expansion in margin and spread is attributable to the shifting composition of interest earning assets, repositioning of a material portion of our investment portfolio as well as realized sensitivity in liability pricing following the rate movements.

Nine months ended September 30, 2025, compared with nine months ended September 30, 2024: 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 nine months ended September 30, 2025, and 2024. The yields and rates are calculated by dividing annualized income or annualized expense by the average daily balances of the associated assets or liabilities.

(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 un-rounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

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 nine month period ended September 30, 2025, and 2024.

Analysis of Changes in Net Interest Income

For the Nine Months Ended September 30, 2025, and 2024

Interest income on interest-earning assets increased $18.1 million for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. Of this increase, $19.7 million is attributable to increases in volume of interest earning assets, primarily from the merger with NBC offset by declining rate/yield.

There was a decrease in interest expense on interest-bearing liabilities of $7.8 million due to the deposit portfolio repricing to market interest rates as well as decreased utilization and cost of secured borrowing lines offset by an increase in volume in deposits primarily attributable to our merger with NBC.

When compared to the nine months ended September 30, 2024, net interest margin increased 46 bp during the nine months ended September 30, 2025, while net interest spread increased by 44 bp to 3.63% from 3.19%. From the beginning of the third quarter 2024 through the end of the third quarter 2025, the federal funds rate has dropped four times totaling 125 bp. This decline is the primary driver of the downward trend in both yield on interest earning assets and cost on interest bearing liabilities. The expansion in margin and spread is attributable to the shifting composition of interest earning assets as well as realized sensitivity in liability pricing following the rate movements.

Provision for Credit Losses

We maintain an allowance for credit losses for estimated losses in our loan portfolio. The allowance for credit losses is increased by a provision for credit losses, which is a charge to earnings, and subsequent recoveries of amounts previously charged-off, but is decreased by charge-offs when the collectability of a loan balance is unlikely. Management estimates the allowance balance required using past loan loss experience within the Company’s portfolio. This historical loss calculation is then modified to reflect quantitative economic circumstances based on evidenced economic conditions and regression formulas, which incorporate lag factors in identifying a sufficiently predictive adjusted-R square, as well as qualitative factors not inherently reflected in our historical loss or quantitative economic inputs. Included in our qualitative assessment is the consideration of prospective economic conditions over the next 12 months, considered the Company’s reasonable and supportable forecast period. As these factors change, the amount of the credit loss provision changes.

Three months ended September 30, 2025, compared with three months ended September 30, 2024: During the three months ended September 30, 2025, there was a provision for credit losses of $6.2 million compared to a provision for credit losses of $1.2 million for the three months ended September 30, 2024. The provision for the three months ended is primarily attributable to the establishment of reserves on non-PCD loans acquired in the NBC acquisition. The Company continues to estimate the allowance for credit losses with assumptions that anticipate slower prepayment rates and continued market disruption caused by the impact of U.S. trade and fiscal policy and the resulting impact on consumers and businesses. Net charge-offs for the three months ended September 30, 2025 and 2024, were $1.1 million and $1.6 million, respectively. For the three months ended September 30, 2025, gross charge-offs were $1.4 million, offset by gross recoveries of $330 thousand. In comparison, gross charge-offs were $1.8 million for the three months ended September 30, 2024, offset by gross recoveries of $197 thousand.

Nine months ended September 30, 2025, compared with nine months ended September 30, 2024: During the nine months ended September 30, 2025, there was a provision for credit losses of $9.0 million compared to a provision for credit losses of $2.4 million during the nine months ended September 30, 2024. The increase in the provision for the nine months ended is primarily attributable to the establishment of reserves on non-PCD loans acquired in the NBC acquisition as well loan growth within the legacy portfolio. Net charge-offs for the nine months ended September 30, 2025, were $1.8 million compared to net charge-offs of $3.5 million for the nine months ended September 30, 2024. For the nine months ended September 30, 2025, gross charge-offs were $3.7 million, offset by gross recoveries of $1.8 million. In comparison, gross charge-offs were $4.0 million for the nine months ended September 30, 2024, offset by gross recoveries of $564 thousand.

The primary sources of non-interest income are service charges and fees, debit card income, mortgage banking income, trust 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 September 30, 2025, compared with three months ended September 30, 2024: The following table provides a comparison of the major components of non-interest income for the three months ended September 30, 2025, and 2024.

For the Three Months Ended September 30,

Total non-interest income decreased $53.8 million during the three months ended September 30, 2025, as compared to the same period in 2024. The decrease is largely attributable to $53.4 million loss on the repositioning of our investment portfolio. Excluding the loss on repositioning as well as $831 thousand in gain on acquisition from the prior year, non-interest income increased $387 thousand, primarily from the addition of accounts from the NBC merger.

Nine months ended September 30, 2025, compared with nine months ended September 30, 2024: The following table provides a comparison of the major components of non-interest income for the nine months ended September 30, 2025, and 2024

For the Nine Months Ended September 30,

Total non-interest income decreased $55.6 million during the nine months ended September 30, 2025, as compared to the same period in 2024. The decrease is largely attributable to $53.3 million loss on the repositioning of investment securities. Excluding the loss on repositioning as well as $831 thousand in gain on acquisition from the prior year, non-interest income was effectively flat year-over-year.

During the nine months ended September 30, 2025, within the increase in value of bank owned life insurance the Bank realized a death benefit on an insured which, when coupled with repositioning of policies completed in May of 2024 drove the comparative increase in this line item year-over-year.

Recovery on zero-basis loans are non-recurring benefits realized by the Company upon resolution of a loan which was fully charged-off prior to being acquired by the Company. The benefit realized in the nine months ended September 30, 2024, did not repeat in 2025.

Three months ended September 30, 2025, compared with three months ended September 30, 2024: For the three months ended September 30, 2025, non-interest expense totaled $49.1 million, an increase of $18.8 million, when compared to the three months ended September 30, 2024. Changes in the various components of non-interest expense for the three months ended September 30, 2025, and 2024, are discussed in more detail in the following table.

For the Three Months Ended September 30,

Salaries and employee benefits: There was an increase in salaries and employee benefits of $4.3 million for the period ended September 30, 2025, as compared to the same period in 2024. The increase in employee salaries and wages was due to additional payroll costs as well as an increase in employee insurance expense, which is primarily driven by the increase in staff from the NBC merger. Additionally, incentive compensation and stock related compensation expense increased which is associated with the close of the NBC merger.

Other real estate owned: In 2024, there was a significant realized gain on the sale of other real estate owned that was not expected to and did not repeat again in 2025, driving the increase in other real estate owned expense noted above.

Other: Other non-interest expenses consists of subscriptions, memberships and dues, employee expenses, including travel, meals, entertainment and education, supplies, printing, insurance, account related losses, correspondent bank fees, customer program expenses, losses net of gains on the sale of fixed assets, losses net of gains on the sale of repossessed assets other than real estate, other operating expenses, such as settlement of claims, losses from limited partnerships entered into for tax credits and provision for unfunded commitments. The overall decrease is comprised of a number of insignificant changes within expense categories noted above.

Merger expenses: The increase is primarily due to the completion of the NBC merger and the preliminary work on the Frontier merger. The Frontier merger, which is expected to close in late 2025 or early 2026, is expected to be realized in the period it is closed.

Nine months ended September 30, 2025, compared with nine months ended September 30, 2024: For the nine months ended September 30, 2025, non-interest expense totaled $128.1 million, an increase of $21.8 million, when compared to the nine months ended September 30, 2024. Changes in the various components of non-interest expense for the nine months ended September 30, 2025, and 2024, are discussed in more detail in the following table.

For the Nine Months Ended September 30,

Salaries and employee benefits: There was an increase in salaries and employee benefits of $8.0 million for the period ended September 30, 2025, as compared to the same period in 2024. The increase is primarily due to increases in employee salaries, as well as an increases in incentive compensation, employee insurance expense and stock related compensation expense associated with the NBC merger.

Courier and postage: There was an increase in courier and postage expense of $465 thousand for the period ended September 30, 2025, as compared to the same period in 2024. The increase is primarily due to armored car/courier services.

Loss on Debt Extinguishment: During the nine months ending September 30, 2025, the Company executed an early redemption on the subordinated notes. The Company realized a loss of $1.4 million from the write off of debt issue costs from the debt extinguishment.

Other real estate owned: In 2024, there was a significant realized gain on the sale of other real estate owned that was not expected to and did not repeat again in 2025 driving the increase in expense noted above.

Other: Other non-interest expenses consists of subscriptions, memberships and dues, employee expenses, including travel, meals, entertainment and education, supplies, printing, insurance, account related losses, correspondent bank fees, customer program expenses, losses net of gains on the sale of fixed assets, losses net of gains on the sale of repossessed assets other than real estate, other operating expenses, such as settlement of claims, losses from limited partnerships entered into for tax credits and provision for unfunded commitments.

Merger expenses: The increase is primarily due to the completion of the NBC merger and the preliminary work on the Frontier merger. The expenses related to the Frontier merger, which is expected to close in late 2025 or early 2026, is expected to be realized in period it is closed.

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 goodwill impairment, merger expenses and loss on debt extinguishment, by the sum of net interest income and non-interest income, excluding net gains on sales of and settlement of securities and gain on acquisition. Generally, an increase in the efficiency ratio indicates that more resources are being utilized to generate the same volume of income, while a decrease would indicate a more efficient allocation of resources.

The efficiency ratio was 58.31% for the three months ended September 30, 2025, compared with 52.59% for the three months ended September 30, 2024. The decrease was primarily an increase in non-interest expense as a gain on sale of other real estate realized in the prior year period did not recur. Excluding the other real estate benefit in 2024, the efficiency ratio would have improved as increases in net and non-interest interest income, on a relative basis, outpaced increases in non-interest expenses, excluding merger related expenses. The increase in net interest income is largely due to in increase in volume from NBC merger and a decrease in interest expense on interest bearing liabilities due to the deposit portfolio repricing downward with the federal funds rate during the past twelve months.

The efficiency ratio was 61.25% for the nine months ended September 30, 2025, compared with 59.97% for the nine months ended September 30, 2024. Drivers of change are consistent with the three months ended above.

Income Taxes

In general, the Company records income tax expense each quarter based on its estimate of the full year’s effective tax rate which includes, in addition to statutory 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 and state 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 and changes in tax law.

During the tax year ended December 31, 2024, a Corporate Application for Tentative Refund was filed to carry back excess general business credits from 2023 to the 2020, 2021 and 2022 tax years resulting in a refund of $14.9 million which was received in the second quarter of 2025. Pursuant to Section 6405 of the Internal Revenue Code, refunds in excess of $5 million to a corporate taxpayer must be reviewed by the Joint Committee on Taxation (JCT). Accordingly, the IRS has referred the proposed refund to the JCT for review. While tax years ending 12/31/2020 and 12/31/2021 are closed for audit purposes, tax year ending 12/31/2022 remains open and, under request from the IRS, the statute of limitation has been extended to October 31, 2027.

On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act, which changes existing U.S. tax laws, including extending or making permanent certain provisions of the Tax Cuts and Jobs Act, repealing certain clean energy initiatives, in addition to other changes. The Company anticipates an insignificant impact to deferred tax assets and liabilities and to income taxes payable in the period of enactment. The Company continues to evaluate the impact the new legislation will have on the consolidated financial statements.

Three months ended September 30, 2025, compared with three months ended September 30 2024: The effective income tax rate for the three month period ended September 30, 2025, was 20.5% as compared to 16.7% for the three month period ended September 30, 2024. In the prior quarter, we reported pre-tax income and income tax expense resulting in a positive effective tax rate (indicating tax expense with pre-tax income). In the current quarter, we reported a pre-tax loss and income tax benefit associated with the loss on the sale of debt securities, also resulting in a positive effective tax rate (indicating tax benefit with pre-tax losses). The comparison of effective tax rates between the current and prior quarters is not meaningful due to the change from pre-tax income in the prior quarter to a pre-tax loss in the current quarter.

Nine months ended September 30, 2025, compared with nine months ended September 30, 2024: The effective income tax rate for the nine month period ended September 30, 2025, was 873.5% as compared to 21.2% for the nine month period ended September 30, 2024. The tax rate for the current period was based on an annual effective tax rate of 18% for the year prior to discrete items related to share-based compensation and interest income received related to federal carryback claims filed by the Company which reduced income tax expense. The comparison of effective tax rates between the current and prior periods is not meaningful due to the change from pre-tax income in the prior period to a pre-tax loss in the current period.