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, Nebraska and Oklahoma, as well as developments affecting the consumer, commercial and real estate sectors within these markets.

Net Income

Three months ended March 31, 2026, compared with three months ended March 31, 2025: Net income allocable to common stockholders for the three months ended March 31, 2026, was $17.0 million, or $0.80 diluted earnings per share as compared to $15.0 million, or $0.85 diluted earnings per share for the three months ended March 31, 2025, an increase of $1.9 million. The increase was primarily due to an increase in interest and dividend income of $33.3 million, partially offset by increases in non-interest expense of $15.9 million, interest expense of $10.0 million, provision for loan losses of $3.2 million and in the provision for taxes of $1.5 million.

Excluding the pre-tax merger and acquisition expenses of $5.7 million and provisioning of $6.1 million, realized in closing our transaction with Frontier, pre-tax income was $34.4 million for the quarter. Tax effected at 23%, adjusted net income was $26.3 million, or $1.23 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 March 31, 2026, compared with three months ended March 31, 2025: 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 March 31, 2026, and 2025. 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 March 31, 2026, and 2025.

Analysis of Changes in Net Interest Income

(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 $33.3 million for the quarter ended March 31, 2026, as compared to the quarter ended March 31, 2025. $28.5 million of the increase was due to increased volume of average interest earning assets, primarily attributable to the our mergers with Frontier and NBC. The average rate/yield on securities increased by 113 bps while the average yield/rate on loans decreased 35 bps, resulting in the overall yield/rate on interest-earning assets remaining unchanged compared to the same period in the prior year.

The increase in interest expense of $10.0 million was due to an increase in deposit interest expense of $11.1 million due to an increase in volume in deposits primarily attributable to our mergers with Frontier and NBC. As expected, cost of interest-bearing deposits increased 7 bps as market interest rate reductions were offset by a comparatively higher cost deposit portfolio contributed by Frontier.

During the quarter ended March 31, 2026 when compared to the quarter ended March 31, 2025, net interest margin increased 6 bp and net interest spread increased by 8 bp to 3.71% from 3.63%. The comparative expansion was driven by earning asset dynamics resulting in a consistent yield year over year coupled with market interest rate declines driving a reduction in overall cost of funds.

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 March 31, 2026, compared with three months ended March 31, 2025: During the three months ended March 31, 2026, there was a provision for credit losses of $6.0 million compared to a provision for credit losses of $2.7 million for the three months ended March 31, 2025. The provision for the three months ended is primarily attributable to the establishment of reserves on purchased seasoned loans acquired in the Frontier 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 March 31, 2026 and 2025, were $1.4 million and $165 thousand, respectively. For the three months ended March 31, 2026, gross charge-offs were $2.1 million, offset by gross recoveries of $701 thousand. In comparison, gross charge-offs were $1.1 million for the three months ended March 31, 2025, offset by gross recoveries of $974 thousand.

Non-Interest Income

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 March 31, 2026, compared with three months ended March 31, 2025: The following table provides a comparison of the major components of non-interest income for the three months ended March 31, 2026, and 2025.

Non-Interest Income

For the Three Months Ended March 31,

Total non-interest income decreased $843 thousand during the three months ended March 31, 2026, as compared to the same period in 2025. The decrease is due to a death benefit that was realized during the three months ended March 31, 2025, that did not recur in the current quarter causing a decrease in bank owned life insurance of $2.2 million, partially offset by increases in debit card income of $613 thousand and service charges and fees of $429 thousand driven by additional customers gained through our mergers with NBC and Frontier.

Non-Interest Expense

Three months ended March 31, 2026, compared with three months ended March 31, 2025: For the three months ended March 31, 2026, non-interest expense totaled $55.0 million, an increase of $15.9 million, when compared to the three months ended March 31, 2025. Changes in the various components of non-interest expense for the three months ended March 31, 2026, and 2025, are discussed in more detail in the following table.

Non-Interest Expense

For the Three Months Ended March 31,

Salaries and employee benefits: There was an increase in salaries and employee benefits of $6.3 million for the period ended March 31, 2026, as compared to the same period in 2025. 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 and Frontier mergers.

Merger expenses: There was an increase in merger expenses of $5.7 million for the period ended March 31, 2026, as compared to the same period in 2025. This increase is primarily due to the completion of the Frontier merger in the first quarter of 2026.

Net occupancy and equipment: There was an increase in net occupancy and equipment of $1.1 million for the period ended March 31, 2026, as compared to the same period in 2025. The increase was primarily related to Frontier lease amortization, rent and depreciation.

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 increase is comprised of a number of insignificant changes within expense categories noted above.

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 56.68% for the three months ended March 31, 2026, compared with 62.43% for the three months ended March 31, 2025. The positive trend was driven by increasing net interest income partially offset by increased non-interest expense, both primarily attributable to our mergers with NBC and Frontier.

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 and remains under review as of March 31, 2026. 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. While the company is still evaluating the tax provisions effective in 2026, it does not expect them to have a material effect on the company’s financial statements.

Three months ended March 31, 2026, compared with three months ended March 31 2025: The effective income tax rate for the three month period ended March 31, 2026, was 23.7% as compared to 20.2% for the three month period ended March 31, 2025. The increase in the effective tax rate for the quarter ended March 31, 2026, was primarily driven by a quarter over quarter increase in pre-tax income which diluted the relative impact of permanent tax benefits, a detriment in the current quarter related to the remeasurement of deferred state tax assets at a lower state tax rate, and proceeds from bank-owned life insurance policies received in the comparative quarter of 2025 that did not recur in the current quarter.