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.

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 ~~October 23, 2020,~~July 31, 2021, the registrant had ~~14,853,487~~14,362,526 shares of Class A common stock, $0.01 par value per share, outstanding.

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.

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 ~~10, 2020,~~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:

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.

	(Unaudited) September 30,			December 31,			(Unaudited) June 30,			December 31,
	2020			2019			2021			2020
ASSETS
Cash and due from banks	$	65,534		$	88,973		$	138,869		$	280,150
Federal funds sold		305			318			452			548
Cash and cash equivalents		65,839			89,291			139,321			280,698
Interest-bearing time deposits in other banks		499			2,498			—			249
Available-for-sale securities		798,576			142,067			1,041,613			871,827
Held-to-maturity securities, fair value of $0 and $783,911		—			769,059
Loans held for sale		9,053			5,933			6,183			12,394
Loans, net of allowance for loan losses of $34,087 and $12,232		2,691,626			2,544,420
Loans, net of allowance for credit losses of $51,834 and $33,709								2,763,227			2,557,987
Other real estate owned, net		8,727			8,293			10,861			11,733
Premises and equipment, net		86,087			84,478			90,876			89,412
Bank-owned life insurance		76,555			75,103			103,321			77,044
Federal Reserve Bank and Federal Home Loan Bank stock		32,545			31,137			18,454			16,415
Interest receivable		18,110			15,738			15,064			15,831
Goodwill		31,601			136,432			31,601			31,601
Core deposit intangibles, net		17,101			19,907			13,993			16,057
Other		29,252			25,222			33,702			32,108
Total assets	$	3,865,571		$	3,949,578		$	4,268,216		$	4,013,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits
Demand	$	693,967		$	481,298		$	992,565		$	791,639
Total non-interest-bearing deposits		693,967			481,298			992,565			791,639
Savings, NOW and money market		1,816,307			1,749,048			2,035,496			2,029,097
Time		623,344			833,170			659,494			626,854
Total interest-bearing deposits		2,439,651			2,582,218			2,694,990			2,655,951
Total deposits		3,133,618			3,063,516			3,687,555			3,447,590
Federal funds purchased and retail repurchase agreements		46,295			35,708			47,184			36,029
Federal Home Loan Bank advances		167,862			324,373			9,208			10,144
Bank stock loan		—			8,990
Subordinated debt		87,537			14,561			87,908			87,684
Contractual obligations		5,478			5,836			4,469			5,189
Interest payable and other liabilities		22,609			18,534			18,897			19,071
Total liabilities		3,463,399			3,471,518			3,855,221			3,605,707
Commitments and contingent liabilities, see Notes 11 and 12
Stockholders’ equity, see Note 7
Common stock		174			174			176			174
Additional paid-in capital		386,017			382,731			389,394			386,820
Retained earnings		38,299			125,757			68,625			50,787
Accumulated other comprehensive income (loss), net of tax		21,074			(3	)
Accumulated other comprehensive income, net of tax								13,450			19,781
Employee stock loans		(43	)		(77	)		—			(43	)
Treasury stock		(43,349	)		(30,522	)		(58,650	)		(49,870	)
Total stockholders’ equity		402,172			478,060			412,995			407,649
Total liabilities and stockholders’ equity	$	3,865,571		$	3,949,578		$	4,268,216		$	4,013,356

For the Three and ~~Nine~~Six Months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

	(Unaudited) Three Months Ended September 30,						(Unaudited) Nine Months Ended September 30,					(Unaudited) Three Months Ended June 30,					(Unaudited) Six Months Ended June 30,
	2020			2019			2020			2019		2021			2020		2021			2020
Interest and dividend income
Loans, including fees	$	32,278		$	38,051		$	99,281		$	112,611	$	33,810		$	32,627	$	64,811		$	67,003
Securities, taxable		3,476			4,673			12,113			14,724		3,523			4,017		7,322			8,637
Securities, nontaxable		923			1,045			2,769			3,143		717			880		1,441			1,846
Federal funds sold and other		405			780			1,409			2,037		268			409		556			1,004
Total interest and dividend income		37,082			44,549			115,572			132,515		38,318			37,933		74,130			78,490
Interest expense
Deposits		3,064			10,507			13,827			32,381		2,025			3,899		4,435			10,763
Federal funds purchased and retail repurchase agreements		25			50			80			116		26			24		48			55
Federal Home Loan Bank advances		471			1,957			2,198			5,103		80			552		145			1,727
Federal Reserve Bank discount window		—			—			6			—		—			6		—			6
Bank stock loan		—			198			415			507		—			306		—			415
Subordinated debt		1,415			311			1,953			955		1,557			255		3,113			538
Total interest expense		4,975			13,023			18,479			39,062		3,688			5,042		7,741			13,504
Net interest income		32,107			31,526			97,093			93,453		34,630			32,891		66,389			64,986
Provision for loan losses		815			679			23,255			17,299
Net interest income after provision for loan losses		31,292			30,847			73,838			76,154
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		1,706			2,268			5,097			6,431		2,169			1,365		3,765			3,391
Debit card income		2,491			2,205			6,735			6,129		2,679			2,201		5,029			4,244
Mortgage banking		877			820			2,298			1,699		848			831		1,783			1,421
Increase in value of bank-owned life insurance		489			507			1,452			1,494		676			481		1,277			963
Net gain (loss) from securities transactions		—			4			12			17
Net gain on acquisition													663			—		585			—
Net gain from securities transactions													—			4		17			12
Other		922			768			1,929			2,577		2,065			850		3,356			1,007
Total non-interest income		6,485			6,572			17,523			18,347		9,100			5,732		15,812			11,038
Non-interest expense
Salaries and employee benefits		13,877			13,039			40,076			40,204		12,769			12,695		25,491			26,199
Net occupancy and equipment		2,224			2,177			6,578			6,332		2,327			2,119		4,695			4,354
Data processing		2,817			2,673			8,243			7,436		3,474			2,763		6,137			5,426
Professional fees		877			991			3,187			3,375		999			943		2,072			2,310
Advertising and business development		598			806			1,697			2,174		799			403		1,481			1,099
Telecommunications		486			523			1,363			1,593		512			390		1,092			877
FDIC insurance		360			111			1,291			1,119		425			414		840			931
Courier and postage		366			352			1,103			1,020		327			353		696			737
Free nationwide ATM cost		439			459			1,186			1,240		513			327		985			747
Amortization of core deposit intangibles		1,030			784			2,806			2,348		1,030			974		2,064			1,776
Loan expense		107			165			628			608		181			287		419			521
Other real estate owned		133			(88	)		710			326		(468	)		269		(463	)		577
Merger expenses		—			—			—			915		460			—		612			—
Goodwill impairment		104,831			—			104,831			—
Other		2,690			2,231			6,831			6,099		2,458			2,000		4,566			4,141
Total non-interest expense		130,835			24,223			180,530			74,789		25,806			23,937		50,687			49,695
Income (loss) before income taxes		(93,058	)		13,196			(89,169	)		19,712
Provision (benefit) for income taxes		(2,653	)		2,790			(1,711	)		4,147
Net income (loss) and net income (loss) allocable to common stockholders	$	(90,405	)	$	10,406		$	(87,458	)	$	15,565
Basic earnings (loss) per share	$	(6.01	)	$	0.67		$	(5.75	)	$	0.99
Diluted earnings (loss) per share	$	(6.01	)	$	0.66		$	(5.75	)	$	0.98
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

For the Three and ~~Nine~~Six Months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

	(Unaudited) Three Months Ended September 30,						(Unaudited) Nine Months Ended September 30,						(Unaudited) Three Months Ended June 30,						(Unaudited) Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Net income (loss)	$	(90,405	)	$	10,406		$	(87,458	)	$	15,565
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		(1,843	)		952			2,321			5,240			1,911			(698	)		(8,458	)		4,164
Unrealized holding gain arising from the transfer of held-to-maturity securities to available-for-sale		24,848		—				24,848		—
Amortization of unrealized loss on held-to-maturity securities		620			209			988			714			—			191			—			368
Total other comprehensive income		23,625			1,161			28,157			5,954			1,911			(507	)		(8,458	)		4,532
Tax effect		(5,941	)		(293	)		(7,080	)		(1,510	)		(480	)		128			2,127			(1,139	)
Other comprehensive income, net of tax		17,684			868			21,077			4,444
Comprehensive income (loss)	$	(72,721	)	$	11,274		$	(66,381	)	$	20,009
Other comprehensive income (loss), net of tax														1,431			(379	)		(6,331	)		3,393
Comprehensive income													$	16,597		$	1,310		$	23,910		$	6,340

	Common Stock					Additional					Accumulated Other			Employee						Total			Common Stock					Additional				Accumulated Other			Employee						Total
	Shares Outstanding			Amount		Paid-In Capital		Retained Earnings			Comprehensive Income (Loss)			Stock Loans			Treasury Stock			Stockholders’ Equity			Shares Outstanding			Amount		Paid-In Capital		Retained Earnings		Comprehensive Income (Loss)			Stock Loans			Treasury Stock			Stockholders’ Equity
Balance at July 1, 2019		15,563,873		$	173	$	381,133	$	105,337		$	(1,291	)	$	(83	)	$	(26,863	)	$	458,406
Balance at April 1, 2020																								15,198,986		$	174	$	383,850	$	127,015	$	3,769		$	(43	)	$	(37,414	)	$	477,351
Net income		—			—		—		10,406			—			—			—			10,406			—			—		—		1,689		—			—			—			1,689
Other comprehensive income (loss), net of tax effects		—			—		—		—			868			—			—			868
Other comprehensive income, net of tax effects																								—			—		—		—		(379	)		—			—			(379	)
Stock-based compensation		—			—		617		—			—			—			—			617			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		450			1		—		—			—			—			—			1			1,362			—		—		—		—			—			—			—
Common stock issued under employee stock purchase plan		19,221			—		405		—			—			—			—			405
Repayment on employee stock loans		—			—		—		—			—			6			—			6
Treasury stock purchases		(143,210	)		—		—		—			—			—			(3,659	)		(3,659	)
Balance at September 30, 2019		15,440,334		$	174	$	382,155	$	115,743		$	(423	)	$	(77	)	$	(30,522	)	$	467,050
Balance at June 30, 2020																								15,218,301		$	174	$	384,955	$	128,704	$	3,390		$	(43	)	$	(37,414	)	$	479,766

Balance at July 1, 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		—			—		—		(90,405	)		—			—			—			(90,405	)		—			—		—		15,166		—			—			—			15,166
Other comprehensive income (loss), net of tax effects		—			—		—		—			17,684			—			—			17,684			—			—		—		—		1,431			—			—			1,431
Stock-based compensation		—			—		812		—			—			—			—			812			9,351			—		948		—		—			—			—			948
Common stock issued upon exercise of stock options		500			—		8		—			—			—			—			8			37,753			1		507		—		—			—			—			508
Common stock issued under stock-based incentive plan		380			—		—		—			—			—			—			—			25,159			—		—		—		—			—			—			—
Common stock issued under employee stock purchase plan		17,829			—		242		—			—			—			—			242
Treasury stock purchases		(383,523	)		—		—		—			—			—			(5,935	)		(5,935	)		(96,004	)		—		—		—		—			—			(2,873	)		(2,873	)
Balance at September 30, 2020		14,853,487		$	174	$	386,017	$	38,299		$	21,074		$	(43	)	$	(43,349	)	$	402,172
Balance at June 30, 2021																								14,360,172		$	176	$	389,394	$	68,625	$	13,450		$	—		$	(58,650	)	$	412,995

For the ~~Nine~~Six Months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

	Common Stock					Additional					Accumulated Other			Employee						Total			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, 2019		15,793,095		$	173	$	379,085	$	101,326		$	(4,867	)	$	(121	)	$	(19,655	)	$	455,941
Net income		—			—		—		15,565			—			—			—			15,565
Other comprehensive income (loss), net of tax effects		—			—		—		—			4,444			—			—			4,444
Stock-based compensation		9,104			—		2,349		—			—			—			—			2,349
Common stock issued upon exercise of stock options		17,502			—		316		—			—			—			—			316
Common stock issued under stock-based incentive plan		22,428			1		—		—			—			—			—			1
Common stock issued under employee stock purchase plan		19,221			—		405		—			—			—			—			405
Repayment on employee stock loans		—			—		—		—			—			44			—			44
Treasury stock purchases		(421,016	)		—		—		—			—			—			(10,867	)		(10,867	)
Cumulative effect of change in accounting principle from implementation of ASU 2017-08		—			—		—		(1,148	)		—			—			—			(1,148	)
Balance at September 30, 2019		15,440,334		$	174	$	382,155	$	115,743		$	(423	)	$	(77	)	$	(30,522	)	$	467,050
																							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			15,444,434		$	174	$	382,731		$	125,757		$	(3	)	$	(77	)	$	(30,522	)	$	478,060
Net income		—			—		—		(87,458	)		—			—			—			(87,458	)		—			—		—			2,947			—			—			—			2,947
Other comprehensive income (loss), net of tax effects		—			—		—		—			21,077			—			—			21,077			—			—		—			—			3,393			—			—			3,393
Stock-based compensation		17,703			—		2,670		—			—			—			—			2,670			17,703			—		1,858			—			—			—			—			1,858
Common stock issued upon exercise of stock options		1,150			—		20		—			—			—			—			20			650			—		12			—			—			—			—			12
Common stock issued under stock-based incentive plan		34,591			—		—		—			—			—			—			—			34,211			—		—			—			—			—			—			—
Common stock issued under employee stock purchase plan		34,593			—		596		—			—			—			—			596			16,764			—		354			—			—			—			—			354
Repayment on employee stock loans		—			—		—		—			—			34			—			34			—			—		—			—			—			34			—			34
Treasury stock purchases		(678,984	)		—		—		—			—			—			(12,827	)		(12,827	)		(295,461	)		—		—			—			—			—			(6,892	)		(6,892	)
Balance at September 30, 2020		14,853,487		$	174	$	386,017	$	38,299		$	21,074		$	(43	)	$	(43,349	)	$	402,172
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

~~See accompanying condensed notes to interim consolidated financial statements.~~

For the ~~Nine~~Six Months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020

	(Unaudited) September 30,						(Unaudited) June 30,
	2020			2019			2021			2020
Cash flows from operating activities
Net income	$	(87,458	)	$	15,565		$	30,241		$	2,947
Adjustments to reconcile net income to net cash from operating activities:
Stock-based compensation		2,670			2,349			1,660			1,858
Depreciation		2,780			2,637			2,024			1,837
Amortization of operating lease right-of-use asset		462			465			200			306
Amortization of cloud computing implementation costs		81			73			77			54
Provision for loan losses		23,255			17,299
Goodwill impairment		104,831			—
Net (accretion) amortization of purchase accounting adjustments		(1,627	)		(3,639	)
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		4,406			4,315			4,890			3,288
Amortization of intangibles		2,843			2,385			2,086			1,800
Deferred income taxes		(5,015	)		(383	)		905			318
Federal Home Loan Bank stock dividends		(585	)		(704	)		(22	)		(435	)
Loss (gain) on sales and valuation adjustments on other real estate owned		120			(143	)		(775	)		120
Change in unrealized loss (gain) on equity securities		(12	)		(17	)		(17	)		(12	)
Loss (gain) on disposal of premises and equipment		1			(10	)		(17	)	—
Loss (gain) on lease termination								(2	)	—
Loss (gain) on sale of foreclosed assets		280			11			(6	)		48
Loss (gain) on sales of loans		(1,895	)		(1,405	)		(1,515	)		(1,155	)
Originations of loans held for sale		(87,429	)		(71,483	)		(53,218	)		(55,131	)
Proceeds from the sale of loans held for sale		85,780			67,076			60,859			56,992
Increase in the value of bank-owned life insurance		(1,452	)		(1,494	)		(1,277	)		(963	)
Change in fair value of derivatives recognized in earnings		411			502			(245	)		488
Gain on acquisition								(585	)	—
Payments on operating lease payable		(544	)		(583	)		(246	)		(360	)
Net change in:
Interest receivable		(2,371	)		394			767			(3,860	)
Other assets		(5,729	)		(3,104	)		3,806			(5,688	)
Interest payable and other liabilities		2,627			760			(3,788	)		948
Net cash provided by (used in) operating activities		36,430			30,866			47,236			24,646
Cash flows from (to) investing activities
Purchases of available-for-sale securities		(91,495	)		—			(410,487	)		(57,868	)
Purchases of held-to-maturity securities		(2,754	)		(106,019	)		—			(2,754	)
Proceeds from sales, calls, pay-downs and maturities of available-for-sale securities		73,588			20,096			227,352			25,818
Proceeds from calls, pay-downs and maturities of held-to-maturity securities		156,963			86,565			—			107,423
Net change in interest-bearing time deposits in other banks		1,999			1,494			249			250
Net change in loans		(172,154	)		(26,499	)		(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	)		(56	)		—			(62	)
Purchase of premises and equipment		(6,388	)		(6,020	)		(3,494	)		(4,431	)
Proceeds from sale of premises and equipment		16			10			23			17
Proceeds from sale of foreclosed assets		1,991			312			123			219
Net redemption (purchase) of Federal Home Loan Bank and Federal Reserve Bank stock		(823	)		(1,792	)		(2,017	)		(260	)
Net redemption (purchase) of correspondent and miscellaneous other stock								(68	)	—
Proceeds from sale of other real estate owned		3,947			1,331			1,974			2,706
Net cash received from acquisition of MidFirst locations		—			85,360
Purchase of bank-owned life insurance								(25,000	)	—
Net cash provided by (used in) investing activities		(35,172	)		54,782			(430,235	)		(180,840	)
Cash flows from (to) financing activities
Net increase (decrease) in deposits		70,019			(115,208	)
Net change in federal funds purchased and retail repurchase agreements		10,587			(9,416	)
Net borrowings (payments) on Federal Home Loan Bank line of credit		(157,223	)		27,453
Proceeds from Federal Home Loan Bank term advances		253,000			—

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		(252,273	)		(2,240	)		(70,929	)		(1,240	)
Proceeds from Federal Reserve Bank discount window		62,000			—			1,000			62,000
Principal payments on Federal Reserve Bank discount window		(62,000	)		—			(1,000	)		(62,000	)
Proceeds from bank stock loan		38,354			7,208			—			38,354
Principal payments on bank stock loan		(47,344	)		(7,888	)		—			(47,344	)
Principal payments on employee stock loans		34			44			43			34
Proceeds from the exercise of employee stock options		20			317			675			12
Proceeds from employee stock purchase plan		596			405			241			354
Proceeds from subordinated notes		75,000			—			—			42,000
Debt issuance cost		(2,295	)		—			(16	)		(1,140	)
Purchase of treasury stock		(12,827	)		(10,867	)		(8,780	)		(6,892	)
Net change in contractual obligations		(358	)		(221	)		(720	)		(265	)
Net cash provided by (used in) financing activities		(24,710	)		(110,413	)		241,622			245,193
Net change in cash and cash equivalents		(23,452	)		(24,765	)		(141,377	)		88,999
Cash and cash equivalents, beginning of period		89,291			192,818			280,698			89,291
Ending cash and cash equivalents	$	65,839		$	168,053		$	139,321		$	178,290
Supplemental cash flow information:
Interest paid	$	19,730		$	37,536		$	8,157		$	14,547
Income taxes paid, net of refunds		2,208			1,786			6,920			330
Supplemental noncash disclosures:
Other real estate owned acquired in settlement of loans	$	2,456		$	906		$	705		$	1,845
Other real estate owned transferred from premise and equipment		1,982			—
Operating leases recognized		—			3,546
Total fair value of assets acquired in purchase of MidFirst locations		—			13,246
Total fair value of liabilities acquired in purchase of MidFirst locations		—			98,606
Other repossessed assets acquired in settlement of loans								67			2,035

The interim consolidated financial statements include the accounts of Equity Bancshares, Inc., its ~~wholly owned~~wholly-owned subsidiaries, EBAC, LLC and Equity Bank and Equity Bank’s ~~wholly owned~~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, ~~2019,~~2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March ~~10, 2020.~~9, 2021. Operating results for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020,~~2021, or any other period.

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.

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 ~~must~~could be impacted, to varying degrees, ~~curtailed~~ 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. Most notably, the CARES Act was signed into law at the end of March 2020 as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and medical providers. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on the Company’s operations.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. ~~While it~~It is not possible to know the full universe or extent ~~that~~of impact to the ~~impact of~~Company’s operations brought about from COVID-19 and resulting measures to curtail its ~~spread, will have on the Company’s operations, the Company is disclosing potentially material items of which it is aware.~~spread.

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.

As of September 30, 2020, all our capital ratios, and our subsidiary bank’s capital ratios, were in excess of regulatory requirements. While we are currently classified as well capitalized, an extended economic recession brought about by COVID-19 could adversely impact our reported and regulatory capital ratios by further credit losses. The Company relies on cash on hand as well as dividends from its subsidiary bank to service its debt. If the Company’s subsidiary bank’s capital deteriorates such that it is unable to pay dividends to the Company for an extended period of time, the Company may not be able to service its debt.

The Company maintains access to multiple sources of liquidity. Wholesale funding markets have remained open to us, but rates for short term funding have historically been volatile. If funding costs are elevated for an extended period of time, it could have an adverse effect on the Company’s net interest margin. If an extended recession caused large numbers of the Company’s deposit customers to withdraw their funds, the Company might become more reliant on volatile or more expensive sources of funding.

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.

At September 30, 2020, the Company performed a quantitative analysis to assess goodwill for impairment of Equity Bancshares, Inc., the sole reporting unit. Consideration was given to the on-going economic market disruption, the movement of the Company’s stock price in relation to other bank indexes and the length of time that the market value of the reporting unit has been below its book value as triggering events and completed a quantitative analysis to assess whether or not goodwill was impaired. This analysis determined that goodwill was impaired and subsequently the Company booked a non-cash impairment charge of $104,831 to goodwill on September 30, 2020.

The determination of the fair value of the reporting unit incorporates assumptions that marketplace participants would use in their estimates of fair value in a change in control transaction, as prescribed by ASC Topic 820. To arrive at a conclusion of fair value, we utilized both the income approach and the market approach and then applied weighting factors to each approach. Weighting factors represent our best business judgement of the weightings a market participant would utilize in arriving at fair value of the reporting unit. In performing the analysis, Company management made numerous assumptions with respect to industry performance, reporting unit business performance, economic and market conditions and various other matters, many of which require significant management judgement. Projections related to business unit performance over the next five years assumed an economic downturn over a 12-month time horizon subsequently returning to conservative positive growth rates in loan and deposits after that time period. The analysis performed and the assumptions that are incorporated into the analysis reflect the best currently available estimates and judgements as to the expected future financial performance of the reporting unit. At September 30, 2020, the Company had goodwill of $31,601 which could be at risk of further impairment with further declines in performance, stock price or market conditions for bank stocks.

As of September 30, 2020, all the Company’s bank locations were open to customers with social distancing measures in place, allowing full access for customer use. Customers are served by appointment, calling ahead, curbside and drive-through but offered full lobby access during normal hours. The Company does not anticipate incurring additional material cost related to its continued deployment of the preparedness plan and no material operational or internal control challenges or risks have been identified to date. The Company does not anticipate significant challenges to its ability to maintain its systems and controls in light of the measures the Company has taken to prevent the spread of COVID-19. The Company has not experienced any material resource constraints through the implementation of its business continuity plans.

In keeping with regulatory guidance to work with borrowers during this unprecedented situation and as outlined in the CARES Act, the Company has worked with customers affected by COVID-19 and offered short-term assistance in accordance with regulatory guidelines. Commercial borrowers needing assistance have been offered either a 90-day principal and interest deferral or a 180-day principal only deferral. Commercial borrowers that originally requested a 90-day deferral can request an additional 90-day deferral by providing their previous year financial information, current year interim financial information, projections for the balance of the calendar year and information related to their cash reserves to show a need for the additional 90-day deferral. Consumers needing assistance have been offered a 90-day principal and interest deferral with an option to request an additional 90-day deferral. At the end of the deferral period, the interest will be capitalized and the loan re-amortized generally causing a minimal increase to payments for most consumers. As of September 30, 2020, the Company had 68 remaining deferrals on outstanding loan balances of $41,228, with interest deferred of $306. In accordance with interagency guidance issued in March 2020, these short-term deferrals are not automatically considered troubled debt restructurings, are not reflected in past due loan balances and have not been reported as a classified loan solely due to a deferral. These deferred loans are subject to ongoing monitoring and will be downgraded or placed on nonaccrual if a noted weakness exists.

~~The following table lists loans by category that have been deferred under the payment deferral program at September 30, 2020.~~

With the passage of the Paycheck Protection Program (“PPP”), administered by the Small Business Administration (“SBA”), the Company actively participated in assisting its customers with applications for resources through the program. PPP loans originated prior to June 5, 2020, have a ~~two-year~~ ~~term and originated on or after June 5, 2020, have a~~ ~~five-year~~ term, unless the lender and borrower agree differently. All PPP loans earn interest at 1.0%. As of September 30, 2020, there were 3,221 loans with an outstanding balance of $367,844 that were originated under the PPP program. It is the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. Should those circumstances change, the Company could be required to establish additional allowance for loan loss through additional provision for loan loss expense charged to earnings.

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 ~~loan~~credit losses and record additional provision for ~~loan~~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 ~~$285,943~~$296,658 in hospitality and ~~$65,088~~$37,723 in aircraft ~~manufacturing.~~manufacturing at June 30, 2021.

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.

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.

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.

In June 2016, ~~FASB~~the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments – Credit Losses, which ~~will change~~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 ~~is anticipated to~~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. ~~The~~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 ~~has~~ 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 ~~at September 30,~~through December 31, 2020. ~~When~~Further implementation relief for this standard was provided on December 27, 2020, by section 540 of the ~~temporary relief expires~~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 ~~of this accounting guidance is expected to be applied retroactively back to~~any further and has adopted effective January 1, 2020. The Company completed the process of developing credit models and model implementation during the fourth quarter of 2019 and is in the final stages of implementing the internal controls, accounting, financial reporting and governance processes to comply with the new guidance.2021. The adoption of CECL ~~is expected to result~~resulted in an increase to our total allowance for credit losses ~~(ACL)~~(“ACL”) on loans held for investment ~~and will require~~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 ~~allowance for credit losses.~~ACL of $10,438, an increase in deferred tax asset of $4,167 and a decrease in retained earnings of $12,403. The ~~expected~~ increase in the ACL is largely attributable to ~~the longer duration~~moving to a life of the real estate portfolios. The ultimate impact to the Company’s financial condition and results of operations of the ASU, at both adoption and each subsequent reporting period, is highly dependent on credit quality, macroeconomic forecasts and conditions, the composition of our loan ~~portfolio and other management judgements.~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other~~, which has simplified the subsequent measurement of goodwill. Goodwill and other intangibles must be assessed for impairment annually. If an entity’s assessment determines that the fair value of an entity is less than its carrying amount, including goodwill, previously, the measurement of goodwill impairment required that the entity’s identifiable net assets be valued following procedures similar to determining the fair value of assets acquired and liabilities assumed in a business combination. Under ASU 2017-04, goodwill impairment is measured to the extent that the carrying amount of an entity exceeds its fair value. The amendments in this update are effective for the Company’s annual goodwill impairment tests beginning in 2020. The amendments are applied on a prospective basisallowance methodology and the ~~impact~~transition of certain purchase discounts from an adjustment to amortized cost into the accounting guidance is highly dependent on changes in financial markets and future events. The Company will monitor indicators of goodwill impairment on a quarterly basis and will record impairment when it is determined to have occurred.

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820) - Changes to the Disclosure Requirements for Fair Value Measurement~~. ASU 2018-13 modifies the disclosure requirements on fair value measurements by requiring that Level 3 fair value disclosures include the range and weighted average of significant unobservable inputs used to develop those fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 was effective for the Company on January 1, 2020, and did not have a material impact on the Company’s financial statement disclosures.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 ~~(e.g., six months)~~ 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 ~~is expected to~~and CARES Act provisions have had a material impact on the Company’s financial ~~statements; however, this impact cannot be quantified at this time.~~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 ~~October 2020,~~January 2021, the FASB issued ASU ~~2020-08,~~2021-01, ~~Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs~~Reference Rate Reform (Topic 848). ASU ~~2020-08 clarifies~~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, ~~should reevaluate whether~~apply to derivative instruments that use an interest rate for managing, discounting or contract price alignment that is modified as a ~~callable debt security~~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 ~~within~~in the ~~scope~~process of evaluating the guidance, of premium amortization of purchased callable debt securities, at each reporting date. If there is no remaining premium or if there are no further call dates the Company shall reset the effective yield using the payment terms of the debt security. ASU 2020-08 is effective for fiscal years and ~~interim periods within those fiscal years, beginning after December 15, 2020 and early application is not permitted. The guidance is not expected to have a material impact~~its effect on the Company’s financial ~~statements.~~condition, results of operations and cash flows has not yet been determined.

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			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Allowance for Credit Losses		Fair Value
September 30, 2020
June 30, 2021
Available-for-sale securities
U.S. Government-sponsored entities	$	995	$	34	$	—		$	1,029	$	50,231	$	203	$	(72	)	$	—	$	50,362
U.S. Treasury securities											11,641		108		—			—		11,749
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		581,265		23,605		—			604,870		661,938		14,837		(2,281	)		—		674,494
Private label residential mortgage-backed securities		21,165		—		(81	)		21,084		136,671		4		(229	)		—		136,446
Corporate		44,508		514		(158	)		44,864		52,514		1,480		—			—		53,994
Small Business Administration loan pools		1,227		49		—			1,276		11,037		38		(63	)		—		11,012
State and political subdivisions		121,262		4,245		(54	)		125,453		99,613		3,943		—			—		103,556
	$	770,422	$	28,447	$	(293	)	$	798,576	$	1,023,645	$	20,613	$	(2,645	)	$	—	$	1,041,613
December 31, 2019
Available-for-sale securities
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities	$	141,082	$	1,261	$	(276	)	$	142,067
	$	141,082	$	1,261	$	(276	)	$	142,067

~~The amortized cost and fair value of held-to-maturity securities and the related gross unrecognized gains and losses are listed in the following table.~~16

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2019
Held-to-maturity securities
December 31, 2020
Available-for-sale securities
U.S. Government-sponsored entities	$	1,991	$	23	$	(1	)	$	2,013	$	996	$	27	$	—		$	1,023
U.S. Treasury securities											4,024		1		—			4,025
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		593,236		11,272		(536	)		603,972		630,485		21,049		(109	)		651,425
Private label residential mortgage-backed securities											44,302		5		(129	)		44,178
Corporate		22,992		503		—			23,495		52,503		1,153		(6	)		53,650
Small Business Administration loan pools		1,478		12		—			1,490		1,226		44		—			1,270
State and political subdivisions		149,362		3,604		(25	)		152,941		111,865		4,391		—			116,256
	$	769,059	$	15,414	$	(562	)	$	783,911	$	845,401	$	26,670	$	(244	)	$	871,827

The tables above present unrecognized gains and losses on held-to-maturity securities since date of designation. During the third quarter of 2020, all held-to-maturity securities were moved to available-for-sale to better manage the Company’s assets and liabilities and to facilitate opportunities to take advantage of changes in the yield curve or other market factors.

The fair value and amortized cost of debt securities at ~~September~~June 30, ~~2020,~~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				Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Within one year	$	8,244	$	8,323	$	6,621	$	6,671
One to five years		27,681		28,504		41,939		42,433
Five to ten years		64,849		66,478		134,428		137,390
After ten years		88,383		90,401		42,048		44,178
Mortgage-backed securities		581,265		604,870		798,609		810,941
Total debt securities	$	770,422	$	798,576	$	1,023,645	$	1,041,613

The carrying value of securities pledged as collateral, to secure public deposits and for other purposes, was approximately ~~$717,770~~$742,793 at ~~September~~June 30, ~~2020,~~2021, and ~~$780,038~~$713,001 at December 31, ~~2019.~~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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

	Less Than 12 Months					12 Months or More					Total					Less Than 12 Months					12 Months or More				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
September 30, 2020
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	$	18,515	$	(81	)	$	—	$	—		$	18,515	$	(81	)		90,016		(229	)		—		—		90,016		(229	)
Corporate		11,795		(158	)		—		—			11,795		(158	)
State and political subdivisions		3,702		(30	)		530		(24	)		4,232		(54	)
Small Business Administration loan pools																	9,711		(63	)		—		—		9,711		(63	)
Total temporarily impaired securities	$	34,012	$	(269	)	$	530	$	(24	)	$	34,542	$	(293	)	$	344,166	$	(2,645	)	$	—	$	—	$	344,166	$	(2,645	)
December 31, 2019
December 31, 2020
Available-for-sale securities
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities	$	2,017	$	(3	)	$	32,466	$	(273	)	$	34,483	$	(276	)	$	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	$	2,017	$	(3	)	$	32,466	$	(273	)	$	34,483	$	(276	)	$	61,045	$	(244	)	$	—	$	—	$	61,045	$	(244	)

The tables above present unrealized losses on held-to-maturity securities since the date of purchase, independent of the impact associated with changes in cost basis upon transfer from the available-for-sale designation to the held-to-maturity designation. As of ~~September~~June 30, ~~2020,~~2021, the Company held 3850 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 0 ~~proceeds from~~ sales of available-for-sale securities during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 or ~~2019.~~2020.

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
Commercial real estate	$	1,188,329		$	1,178,427		$	1,261,214		$	1,188,696
Commercial and industrial		857,244			571,647			732,126			734,495
Residential real estate		402,242			503,439			503,110			381,958
Agricultural real estate		127,349			141,868			129,020			133,693
Agricultural								97,912			94,322
Consumer		67,465			68,378			91,679			58,532
Agricultural		83,084			92,893
Total loans		2,725,713			2,556,652			2,815,061			2,591,696
Allowance for loan losses		(34,087	)		(12,232	)
Allowance for credit losses								(51,834	)		(33,709	)
Net loans	$	2,691,626		$	2,544,420		$	2,763,227		$	2,557,987

Included in the commercial and industrial loan balances at ~~September~~June 30, 2021 and December 31, 2020, are ~~$376,040~~$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 ~~first nine months of 2020,~~quarter ended June 30, 2021, the Company purchased 1 pool of residential real estate loans totaling ~~$752.~~$78,533. During the first six months of 2021, the Company purchased 3 pools of residential real estate loans totaling $167,983. As of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, residential real estate loans include ~~$96,917~~$244,112 and ~~$144,554~~$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 ~~$5,945~~$7,407 with related loans of ~~$402,250~~$293,355 at ~~September~~June 30, ~~2020, and $8,287 with related loans of $624,747 at~~2021. At December 31, ~~2019.~~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 ~~$674~~$444 at ~~September~~June 30, ~~2020,~~2021, and ~~$815~~$597 at December 31, ~~2019.~~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 ~~loan~~credit losses by class for the three-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

September 30, 2020	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Consumer			Agricultural			Total
Allowance for loan losses:
June 30, 2021																						Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for credit losses:
Beginning balance	$	9,467		$	10,168		$	5,315		$	975		$	7,343		$	810		$	34,078		$	15,118		$	19,965		$	11,511		$	1,900		$	4,349		$	2,682		$	55,525
Provision for loan losses		(218	)		1,361			(591	)		468			(158	)		(47	)		815
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		(308	)		(3	)		(153	)		(167	)		(244	)		—			(875	)		—			(54	)		(3	)		(490	)		(1	)		(165	)		(713	)
Recoveries		1			3			22			5			33			5			69			—			47			4			18			1			76			146
Total ending allowance balance	$	8,942		$	11,529		$	4,593		$	1,281		$	6,974		$	768		$	34,087		$	15,225		$	18,690		$	9,808		$	847		$	4,695		$	2,569		$	51,834

September 30, 2019	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Consumer			Agricultural			Total
June 30, 2020																						Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for loan losses:
Beginning balance	$	4,712		$	7,948		$	2,908		$	525		$	1,344		$	340		$	17,777		$	5,223		$	4,979		$	4,128		$	456		$	592		$	6,537		$	21,915
Provision for loan losses		396			49			(324	)		131			241			186			679			4,095			5,435			1,318			526			219			907			12,500
Loans charged-off		(506	)		(18	)		(355	)		(9	)		(313	)		(5	)		(1,206	)		(51	)		(255	)		(134	)		(7	)		(1	)		(175	)		(623	)
Recoveries		47			17			450			38			73			—			625			200			9			3			—			—			74			286
Total ending allowance balance	$	4,649		$	7,996		$	2,679		$	685		$	1,345		$	521		$	17,875		$	9,467		$	10,168		$	5,315		$	975		$	810		$	7,343		$	34,078

The following tables present the activity in the allowance for ~~loan~~credit losses by class for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

September 30, 2020

Commercial
Real Estate

Commercial
and
Industrial

Residential
Real
Estate

Agricultural
Real
Estate

Consumer

Agricultural

Total

Allowance for loan losses:

Beginning balance

$
3,919

$
3,061

$
2,676

$
608

$
1,422

$
546

$
12,232

Provision for loan losses

5,189

8,711

2,203

859

6,076

217

23,255

Loans charged-off

(367
)

(259
)

(312
)

(191
)

(697
)

(1
)

(1,827
)
Recoveries

201

16

26

5

173

6

427

Total ending allowance balance

$
8,942

$
11,529

$
4,593

$
1,281

$
6,974

$
768

$
34,087

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

September 30, 2019	Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Consumer			Agricultural			Total
June 30, 2020																						Commercial Real Estate			Commercial and Industrial			Residential Real Estate			Agricultural Real Estate			Agricultural			Consumer			Total
Allowance for loan losses:
Beginning balance	$	4,662		$	2,707		$	2,320		$	391		$	1,070		$	304		$	11,454		$	3,919		$	3,061		$	2,676		$	608		$	546		$	1,422		$	12,232
Provision for loan losses		981			13,979			805			299			973			262			17,299			5,407			7,350			2,794			391			264			6,234			22,440
Loans charged-off		(1,114	)		(8,756	)		(934	)		(43	)		(994	)		(47	)		(11,888	)		(59	)		(284	)		(159	)		(24	)		(1	)		(453	)		(980	)
Recoveries		120			66			488			38			296			2			1,010			200			41			4			—			1			140			386
Total ending allowance balance	$	4,649		$	7,996		$	2,679		$	685		$	1,345		$	521		$	17,875		$	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 ~~loan~~credit losses by portfolio and class based on ~~impairment~~ method to determine allowance for credit loss as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

September 30, 2020	Commercial Real Estate		Commercial and Industrial		Residential Real Estate		Agricultural Real Estate		Consumer		Agricultural		Total
Allowance for loan losses:
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	$	910	$	4,639	$	536	$	776	$	70	$	159	$	7,090	$	3,807	$	8,777	$	659	$	512	$	4,487	$	58	$	18,300
Collectively evaluated for impairment		7,600		5,571		3,930		149		6,904		491		24,645		11,418		9,913		9,149		335		208		2,511		33,534
Purchased credit impaired loans		432		1,319		127		356		—		118		2,352
Total	$	8,942	$	11,529	$	4,593	$	1,281	$	6,974	$	768	$	34,087	$	15,225	$	18,690	$	9,808	$	847	$	4,695	$	2,569	$	51,834
Loan Balance:
Individually evaluated for impairment	$	5,017	$	28,434	$	6,378	$	3,111	$	259	$	480	$	43,679	$	8,042	$	29,510	$	2,647	$	6,535	$	9,843	$	231	$	56,808
Collectively evaluated for impairment		1,176,817		824,265		393,129		120,346		67,186		80,512		2,662,255		1,253,172		702,616		500,463		122,485		88,069		91,448		2,758,253
Purchased credit impaired loans		6,495		4,545		2,735		3,892		20		2,092		19,779
Total	$	1,188,329	$	857,244	$	402,242	$	127,349	$	67,465	$	83,084	$	2,725,713	$	1,261,214	$	732,126	$	503,110	$	129,020	$	97,912	$	91,679	$	2,815,061

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

December 31, 2019

Commercial
Real Estate

Commercial
and
Industrial

Residential
Real
Estate

Agricultural
Real
Estate

Consumer

Agricultural

Total

Allowance for loan losses:

Individually evaluated for impairment

$
281

$
199

$
303

$
56

$
39

$
57

$
935

Collectively evaluated for impairment

3,581

2,848

2,352

459

1,383

394

11,017

Purchased credit impaired loans

57

14

21

93

—

95

280

Total

$
3,919

$
3,061

$
2,676

$
608

$
1,422

$
546

$
12,232

Loan Balance:

Individually evaluated for impairment

$
4,375

$
16,335

$
7,358

$
584

$
381

$
518

$
29,551

Collectively evaluated for impairment

1,166,106

550,201

493,309

135,776

67,972

90,347

2,503,711

Purchased credit impaired loans

7,946

5,111

2,772

5,508

25

2,028

23,390

Total

$
1,178,427

$
571,647

$
503,439

$
141,868

$
68,378

$
92,893

$
2,556,652

	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 ~~September 30, 2020, and~~ December 31, ~~2019.~~2020. The recorded investment in loans excludes accrued interest receivable due to immateriality.

	September 30, 2020						December 31, 2019						December 31, 2020
	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Commercial real estate	$	—	$	—	$	—	$	2,166	$	2,150	$	—	$	6,279	$	1,683	$	—
Commercial and industrial		19,970		13,857		—		20,152		14,832		—		2,087		643		—
Residential real estate		4,506		4,235		—		4,395		4,324		—		270		180		—
Agricultural real estate		—		—		—		1,610		1,533		—		3,408		1,090		—
Agricultural														11,326		4,492		—
Consumer		—		—		—		—		—		—		—		—		—
Agricultural		—		—		—		—		—		—
Subtotal		24,476		18,092		—		28,323		22,839		—		23,370		8,088		—
With an allowance recorded:
Commercial real estate		8,006		6,452		1,342		3,469		2,749		338		7,134		5,899		2,540
Commercial and industrial		18,913		18,130		5,958		1,845		1,640		213		29,245		22,814		6,471
Residential real estate		3,346		2,990		663		3,395		3,244		324		3,023		2,775		610
Agricultural real estate		7,247		5,812		1,132		1,142		1,015		149		3,474		3,021		638
Agricultural														1,330		820		172
Consumer		281		259		70		430		381		39		294		272		68
Agricultural		1,497		1,010		277		1,619		1,359		152
Subtotal		39,290		34,653		9,442		11,900		10,388		1,215		44,500		35,601		10,499
Total	$	63,766	$	52,745	$	9,442	$	40,223	$	33,227	$	1,215	$	67,870	$	43,689	$	10,499

The ~~tables~~table below ~~present~~presents average recorded investment and interest income related to ~~impaired~~nonaccrual loans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~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								As of and for the three months ended
	September 30, 2020				September 30, 2019				June 30, 2021				June 30, 2020
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	18	$	35	$	3,327	$	3	$	—	$	2	$	37	$	1
Commercial and industrial		13,857		—		808		—		—		—		14,113		—
Residential real estate		4,262		14		7,800		19		11		—		4,318		—
Agricultural real estate		—		—		1,750		—		3,210		83		365		—
Agricultural										2,066		33		—		—
Consumer		—		—		15		—		—		1		—		—
Agricultural		—		—		161		—
Subtotal		18,137		49		13,861		22		5,287		119		18,833		1
With an allowance recorded:
Commercial real estate		6,324		16		7,032		—		8,010		3		6,734		19
Commercial and industrial		15,483		190		21,066		9		29,034		11		9,129		172
Residential real estate		3,586		2		3,891		20		2,752		2		4,030		2
Agricultural real estate		5,356		28		1,296		2		3,787		—		3,655		6
Agricultural										8,033		10		1,618		—
Consumer		271		3		728		4		253		1		317		—
Agricultural		1,435		1		1,128		—
Subtotal		32,455		240		35,141		35		51,869		27		25,483		199
Total	$	50,592	$	289	$	49,002	$	57	$	57,156	$	146	$	44,316	$	200

The following tables present the aging of the recorded investment in past due loans as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, by portfolio and class of loans.

December 31, 2019	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
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	$	1,191	$	218	$	—	$	6,913	$	1,170,105	$	1,178,427	$	154	$	—	$	—	$	8,042	$	1,253,018	$	1,261,214
Commercial and industrial		74		11		—		16,906		554,656		571,647		533		33		—		29,510		702,050		732,126
Residential real estate		831		1,008		—		8,013		493,587		503,439		500		184		—		2,647		499,779		503,110
Agricultural real estate		59		78		—		4,807		136,924		141,868		439		—		—		6,535		122,046		129,020
Agricultural														30		40		—		9,843		87,999		97,912
Consumer		402		138		—		381		67,457		68,378		144		13		45		231		91,246		91,679
Agricultural		10		14		—		1,359		91,510		92,893
Total	$	2,567	$	1,467	$	—	$	38,379	$	2,514,239	$	2,556,652	$	1,800	$	270	$	45	$	56,808	$	2,756,138	$	2,815,061

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 ~~as of September 30, 2020, and~~at December 31, ~~2019.~~

December 31, 2019	Unclassified		Classified		Total
December 31, 2020							Unclassified		Classified		Total
Commercial real estate	$	1,167,101	$	11,326	$	1,178,427	$	1,171,961	$	16,735	$	1,188,696
Commercial and industrial		539,877		31,770		571,647		674,392		60,103		734,495
Residential real estate		495,418		8,021		503,439		378,868		3,090		381,958
Agricultural real estate		132,065		9,803		141,868		125,425		8,268		133,693
Agricultural								86,629		7,693		94,322
Consumer		67,997		381		68,378		58,253		279		58,532
Agricultural		88,607		4,286		92,893
Total	$	2,491,065	$	65,587	$	2,556,652	$	2,495,528	$	96,168	$	2,591,696

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 ~~September 30, 2020, and~~ December 31, ~~2019.~~2020.

The accretable yield associated with these loans was ~~$2,756 and $3,127~~$2,630 as of ~~September 30, 2020, and~~ December 31, ~~2019. The~~

~~interest income recognized on these loans for the three-month periods ended September 30, 2020, and 2019, was $402 and $1,479.~~2020. The interest income recognized on these loans for the ~~nine-month~~three and six-month periods ended ~~September~~June 30, 2020, was $345 and ~~2019, was $1,263 and $2,011.~~$861. For the three and ~~nine-month~~six-month periods ended ~~September~~June 30, 2020, there was a provision for loan losses of ~~$54~~$1,350 and ~~$2,072~~$2,018 recorded for these loans. ~~For the three and nine-month periods ended September 30, 2019, there was a provision for loan losses of $28 and $191 recorded for these loans.~~

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 ~~Company had troubled debt restructurings with an amortized cost of $15,045 and $15,508 as of September~~following table summarizes the Company’s TDRs by accrual status at June 30, ~~2020,~~2021, and December 31, ~~2019. The Company had allocated $367 of allowance for these loans at September~~2020.

At June 30, ~~2020. At December 31, 2019, there was 0 allowance for these loans. At September 30, 2020,~~2021, and December 31, ~~2019,~~2020, there were 0no commitments to lend additional amounts on these loans.

There were 0 loan modifications considered to be troubled debt restructurings that occurred during the three or ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 or ~~2019.~~2020.

There were 0 troubled debt restructurings within the twelve months preceding June 30, 2021. NaN restructured loans that were modified within the twelve months preceding ~~September~~June 30, 2020, have subsequently had a payment default. ~~There were 0 troubled debt restructurings within the twelve months preceding September 30, 2019.~~ Default is determined at 90 or more days past due, charge-off or foreclosure.

As of ~~September~~June 30, 2021, and December 31, 2020, we had 6336 and 28 deferrals of either the full loan payment or the principal component of the loan payment on outstanding loan balances of ~~$40,232~~$68,355 and $60,880 in connection with the COVID-19 relief provided by the CARES Act. These deferrals were ~~no more than 180 days in duration and were~~ not considered troubled debt restructurings based on ~~interagency guidance issued~~the CARES Act, CAA or regulatory guidance.

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

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

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, NaN 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.

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.

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.

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 ~~September~~June 30, ~~2020,~~2021, the portfolio of interest rate swaps had a weighted average maturity of ~~6.5~~5.8 years, a weighted average pay rate of 5.19% and a weighted average rate received of ~~3.22%~~3.14%. At December 31, ~~2019,~~2020, the portfolio of interest rate swaps had a weighted average maturity of ~~7.3~~6.3 years, a weighted average pay rate of 5.19% and a weighted average rate received of ~~4.78%~~3.21%.

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 ~~September~~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 ~~8.1~~7.9 years, weighted average pay rate of ~~4.14% and a weighted average rate received of 4.14%. At December 31, 2019, this portfolio of interest rate swaps had a weighted average maturity of 8.8 years, weighted average pay rate of 4.92%~~4.34% and weighted average rate received of ~~4.92%~~4.34%.

In 2009, the Company purchased an interest rate cap derivative to assist with interest-rate risk management. This was not designated as a hedging instrument but rather as a stand-alone derivative. During 2019, the interest rate cap derivative matured.

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

	September 30, 2020							December 31, 2019							June 30, 2021							December 31, 2020
	Notional Amount		Derivative Assets		Derivative Liabilities			Notional Amount		Derivative Assets		Derivative Liabilities			Notional Amount		Derivative Assets		Derivative Liabilities			Notional Amount		Derivative Assets		Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	$	5,640	$	—	$	561		$	5,797	$	30	$	177		$	5,474	$	—	$	326		$	5,585	$	—	$	497
Total derivatives designated as hedging relationships		5,640		—		561			5,797		30		177			5,474		—		326			5,585		—		497
Derivatives not designated as hedging instruments:
Interest rate swaps		120,015		7,937		8,738			114,571		3,505		3,899			117,760		5,213		5,616			119,341		7,172		7,820
Interest rate caps/floors		—		—		—			—		—		—
Total derivatives not designated as hedging instruments		120,015		7,937		8,738			114,571		3,505		3,899			117,760		5,213		5,616			119,341		7,172		7,820
Total	$	125,655		7,937		9,299		$	120,368		3,535		4,076		$	123,234		5,213		5,942		$	124,926		7,172		8,317
Cash collateral				—		(9,401	)				—		(4,186	)				—		(6,110	)				—		(8,440	)
Netting adjustments				102		102					182		182					239		239					123		123
Net amount presented in Balance Sheet			$	8,039	$	—				$	3,717	$	72				$	5,452	$	71				$	7,295	$	—

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

	September 30, 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		Carrying Amount		Hedging Fair Value Adjustment		Fair Value Adjustments on Discontinued Hedges
Commercial real estate loans	$	5,640	$	555	$	—	$	5,474	$	320	$	—	$	5,583	$	491	$	—
Total	$	5,640	$	555	$	—	$	5,474	$	320	$	—	$	5,583	$	491	$	—

The Company reports hedging derivative ~~gains/~~gains (losses) as adjustments to loan interest income along with the related net interest settlements and the derivative ~~gains/~~gains (losses) and net interest settlements for economic derivatives are reported in other income. For the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019,~~2020, the Company recorded net ~~gains/~~gains (losses) on derivatives and hedging activities.

	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020			2019			2021			2020		2021		2020
Derivatives designated as hedging instruments:
Interest rate swaps	$	0	$	0		$	0		$	0		$	0		$	0	$	0	$	0
Total net gain (loss) related to fair value hedges		0		0			0			0			0			0		0		0
Derivatives not designated as hedging instruments:
Economic hedges:
Interest rate swaps		77		(180	)		(407	)		(501	)		(105	)		8		245		(484	)
Interest rate caps/floors		—		—			—			(1	)
Total net gains (losses) related to derivatives not designated as hedging instruments		77		(180	)		(407	)		(502	)		(105	)		8		245		(484	)
Net gains (losses) on derivatives and hedging activities	$	77	$	(180	)	$	(407	)	$	(502	)	$	(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 ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

	September 30, 2019									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		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	$	307	$	(307	)	$	0	$	2	$	33	$	(33	)	$	0	$	(28	)
Total	$	307	$	(307	)	$	0	$	2	$	33	$	(33	)	$	0	$	(28	)

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 ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

	September 30, 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			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	$	(409	)	$	409	$	0	$	(61	)	$	(171	)	$	171	$	0	$	(56	)
Total	$	(409	)	$	409	$	0	$	(61	)	$	(171	)	$	171	$	0	$	(56	)

	September 30, 2019									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		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	$	(489	)	$	489	$	0	$	21	$	(436	)	$	436	$	0	$	(33	)
Total	$	(489	)	$	489	$	0	$	21	$	(436	)	$	436	$	0	$	(33	)

Right-of-use asset and lease obligations by type of property for the periods ended ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, are listed below.

	September 30, 2020									June 30, 2021
Operating Leases	Right-of-Use Asset		Lease Liability		Weighted Average Lease Term in Years		Weighted Average Discount Rate			Right-of-Use Asset		Lease Liability		Weighted Average Lease Term in Years		Weighted Average Discount Rate
Land and building leases	$	3,691	$	3,655		16.6		2.98	%	$	3,331	$	3,317		17.0		2.99	%
Total operating leases	$	3,691	$	3,655		16.6		2.98	%	$	3,331	$	3,317		17.0		2.99	%

	December 31, 2019									December 31, 2020
Operating Leases	Right-of-Use Asset		Lease Liability		Weighted Average Lease Term in Years		Weighted Average Discount Rate			Right-of-Use Asset		Lease Liability		Weighted Average Lease Term in Years		Weighted Average Discount Rate
Land and building leases	$	4,153	$	4,112		16.0		2.95	%	$	3,540	$	3,524		16.9		2.99	%
Total operating leases	$	4,153	$	4,112		16.0		2.95	%	$	3,540	$	3,524		16.9		2.99	%

Operating lease costs for the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019,~~2020, are listed below.

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Operating lease cost	$	184	$	185	$	549	$	540	$	126	$	183	$	251	$	365
Short-term lease cost		—		—		—		—		—		—		—		—
Variable lease cost		3		12		22		35		3		8		13		19
Total operating lease cost	$	187	$	197	$	571	$	575	$	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 ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020.~~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	September 30, 2020			June 30, 2021
Due in one year or less	$	492		$	459
Due after one year through two years		504			468
Due after two years through three years		434			276
Due after three years through four years		240			212
Due after four years through five years		216			213
Thereafter		2,886			2,725
Total undiscounted cash flows		4,772			4,353
Discount on cash flows		(1,117	)		(1,036	)
Total operating lease liability	$	3,655		$	3,317

Federal funds purchased and retail repurchase agreements as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, are listed below.

September 30,

2020

December 31,

2019

June 30,

2021

December 31,

2020

Federal funds purchased

Retail repurchase agreements

46,295

35,708

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 ~~$51,087~~$47,668 and ~~$40,412~~$47,113 at ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020. The agreements are on a day-to-day basis and can be terminated on demand.

	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
Year-to-date average daily balance during the period	$	44,548		$	42,459		$	43,904		$	45,041
Maximum month-end balance year-to-date	$	53,543		$	45,575		$	47,184		$	53,543
Weighted average interest rate at period-end		0.21	%		0.40	%		0.22	%		0.22	%

Federal Home Loan Bank advances as of ~~September~~June 30, ~~2020,~~2021, are listed below.

	September 30, 2020		Weighted Average Rate			Weighted Average Term in Years		June 30, 2021		Weighted Average Rate			Weighted Average Term in Years
Federal Home Loan Bank line of credit advances	$	154,000		0.33	%	—		$	—		—		—
Federal Home Loan Bank fixed-rate term advances		13,821		2.19	%		1.9		9,179		2.79	%		2.0
Total principal outstanding		167,821							9,179
Merger purchase accounting adjustment		41							29
Total Federal Home Loan Bank advances	$	167,862						$	9,208

Federal Home Loan Bank advances as of December 31, ~~2019,~~2020, are listed below.

The advances, Mortgage Partnership Finance credit enhancement obligations and letters of credit were collateralized by certain qualifying loans totaling ~~$785,177~~$822,009 and ~~$811,394~~$763,506 at ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020. Based on this collateral and the Company’s holdings of Federal Home Loan Bank stock, the Company was eligible to borrow an additional ~~$568,848~~$797,072 and ~~$448,278~~$661,490 at ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

At ~~September~~June 30, ~~2020,~~2021, to support the ~~$275,635~~$250,295 borrowing capacity from the Federal Reserve Bank, the Company has pledged loans with an outstanding balance of ~~$282,617~~$263,144 and securities with a fair value of ~~$66,695.~~$50,025. NaN borrowings were secured from this facility at periods ended ~~September~~June 30, ~~2020,~~2021 or ~~2019.~~2020.

~~On March 13, 2017, the~~The Company entered into an agreement with an unaffiliated financial institution that provided for a maximum borrowing facility of ~~$30,000,~~$40,000, secured by the Company’s stock in Equity Bank. The ~~borrowing facility was amended on March 11, 2019, to provide a maximum borrowing facility of $40,000 and extend the maturity to May 15, 2020. The~~ loan was ~~extended to August 15, 2020, and subsequently~~ 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.

~~On September 30, 2020, there was~~There were 0 outstanding principal ~~balance~~balances on the bank stock ~~loan.~~

~~Bank stock~~ loan ~~advances as of~~at June 30, 2021, or December 31, ~~2019, are listed below.~~

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. ~~For the nine months ended September 30, 2020, the lender has granted the Company a waiver with reference to the return on assets ratio covenant contained within our loan contract.~~ The Company ~~was~~believes it is in compliance with ~~all other~~the terms of the borrowing ~~facility.~~facility and has not been otherwise notified of noncompliance.

Subordinated debt as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, are listed below.

	September 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Subordinated debentures	$	14,793	$	14,561	$	15,031	$	14,872
Subordinated notes		72,744		—		72,877		72,812
Total	$	87,537	$	14,561	$	87,908	$	87,684

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, are listed below.

	September 30, 2020			Weighted Average Rate			Weighted Average Term in Years		June 30, 2021			Weighted Average Rate			Weighted Average Term in Years
CTII subordinated debentures	$	10,310			2.24	%		14.5	$	10,310			2.18	%		13.8
CTIII subordinated debentures		5,155			2.14	%		16.7		5,155			2.01	%		16.0
CFSTI subordinated debentures		5,155			3.48	%		12.2		5,155			3.40	%		11.5
Total contractual balance		20,620								20,620
Fair market value adjustments		(5,827	)							(5,589	)
Total subordinated debentures	$	14,793							$	15,031

	December 31, 2019			Weighted Average Rate			Weighted Average Term in Years		December 31, 2020			Weighted Average Rate			Weighted Average Term in Years
CTII subordinated debentures	$	10,310			3.99	%	15.3		$	10,310			2.24	%	14.3
CTIII subordinated debentures		5,155			3.78	%		17.5		5,155			2.11	%		16.5
CFSTI subordinated debentures		5,155			5.20	%		13.0		5,155			3.50	%		12.0
Total contractual balance		20,620								20,620
Fair market value adjustments		(6,059	)							(5,748	)
Total subordinated debentures	$	14,561							$	14,872

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.

	September 30, 2020			Weighted Average Rate			Weighted Average Term in Years		December 31, 2020			Weighted Average Rate			Weighted Average Term in Years
Subordinated notes	$	75,000			7.00	%		9.8	$	75,000			7.00	%		9.5
Total principal outstanding		75,000								75,000
Debt issuance cost		(2,256	)							(2,188	)
Total subordinated notes	$	72,744							$	72,812

Future principal repayments of the ~~September~~June 30, ~~2020,~~2021, outstanding balances are as follows.

	Retail Repurchase Agreements		FHLB Advances		Subordinated Debentures		Subordinated Notes		Total		Retail Repurchase Agreements		FHLB Advances		Subordinated Debentures		Subordinated Notes		Total
Due in one year or less	$	46,295	$	159,357	$	—	$	—	$	205,652	$	47,184	$	2,357	$	—	$	—	$	49,541
Due after one year through two years		—		2,357		—		—		2,357		—		2,357		—		—		2,357
Due after two years through three years		—		2,357		—		—		2,357		—		2,107		—		—		2,107
Due after three years through four years		—		2,107		—		—		2,107		—		1,857		—		—		1,857
Due after four years through five years		—		1,643		—		—		1,643		—		501		—		—		501
Thereafter		—		—		20,620		75,000		95,620		—		—		20,620		75,000		95,620
Total	$	46,295	$	167,821	$	20,620	$	75,000	$	309,736	$	47,184	$	9,179	$	20,620	$	75,000	$	151,983

The Company’s articles of incorporation provide for the issuance of 10,000,000 shares of preferred stock. At ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, there was 0 preferred stock outstanding.

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, ~~and were~~ held in treasury or were outstanding at ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
Class A common stock – issued		17,224,530			17,136,493			17,373,462			17,224,830
Class A common stock – held in treasury		(2,371,043	)		(1,692,059	)		(3,013,290	)		(2,684,274	)
Class A common stock – outstanding		14,853,487			15,444,434			14,360,172			14,540,556
Class B common stock – issued		234,903			234,903			234,903			234,903
Class B common stock – held in treasury		(234,903	)		(234,903	)		(234,903	)		(234,903	)
Class B common stock – outstanding		0			0			0			0

~~On January 27,~~In 2019, the Company’s Board of Directors adopted the Equity Bancshares, Inc. 2019 Employee Stock Purchase Plan (“ESPP”) ~~and reserved 500,000 shares of common stock for issuance. The ESPP was approved by the Company’s stockholders on April 24, 2019.~~. The ESPP enables eligible employees to purchase the Company’s common stock at a price per share equal to 85% of the lower of the fair market value of the common stock at the beginning or end of each offering period. 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.~~program during the reporting period.

Offering Period	Shares Purchased		Cost Per Share		Compensation Expense		Shares Purchased		Cost Per Share		Compensation Expense
February 15, 2019 to August 14, 2019		19,221	$	21.07	$	72
August 15, 2019 to February 14, 2020		16,764		21.11		63		16,764	$	21.11	$	63
February 15, 2020 to August 14, 2020		17,829		13.61		43		17,829		13.61		43
August 15, 2020 to February 14, 2021								17,621		13.68		42

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 ~~third quarter of~~year ended December 31, 2020, the Company repurchased a total of ~~383,523~~313,231 shares of the Company’s outstanding common stock at ~~a weighted~~an average price paid of ~~$15.48~~$20.82 per share. ~~Since~~During the ~~inception~~three and six-months ended June 30, 2021, the Company repurchased a total of 73,070 and 306,082 shares of the ~~repurchase program, the total authorized amount of 1,100,000 shares have been repurchased~~Company’s outstanding common stock at ~~a weighted~~an average price paid of ~~$21.54.~~$28.94 and $26.20 per share. At June 30, 2021, there are 180,687 shares remaining available for repurchase under the program.

At ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, accumulated other comprehensive income ~~(loss)~~ consisted of (i) the after-tax effect of unrealized gains ~~(losses)~~ 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 ~~(loss)~~ as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, are listed below.

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 ~~September~~June 30, ~~2020,~~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 ~~September~~June 30, ~~2020,~~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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~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					Actual					Minimum Required for Capital Adequacy Under Basel III					To Be Well Capitalized Under Prompt Corrective Provisions
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2020
June 30, 2021
Total capital to risk weighted assets
Equity Bancshares, Inc.	$	454,222		17.35	%	$	274,873		10.50	%	$	N/A	N/A			$	478,757		16.74	%	$	300,338		10.50	%	$	N/A	N/A
Equity Bank		402,785		15.41	%		274,446		10.50	%		261,377		10.00	%		446,154		15.62	%		299,919		10.50	%		285,637		10.00	%
Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		348,738		13.32	%		222,516		8.50	%	N/A		N/A				369,915		12.93	%		243,131		8.50	%	N/A		N/A
Equity Bank		370,095		14.16	%		222,171		8.50	%		209,102		8.00	%		410,238		14.36	%		242,791		8.50	%		228,509		8.00	%
Common equity Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		333,945		12.76	%		183,249		7.00	%	N/A		N/A				354,884		12.41	%		200,225		7.00	%	N/A		N/A
Equity Bank		370,095		14.16	%		182,964		7.00	%		169,895		6.50	%		410,238		14.36	%		199,946		7.00	%		185,664		6.50	%
Tier 1 leverage to average assets
Equity Bancshares, Inc.		348,738		8.76	%		159,167		4.00	%	N/A		N/A				369,915		8.88	%		166,628		4.00	%	N/A		N/A
Equity Bank		370,095		9.31	%		158,967		4.00	%		198,709		5.00	%		410,238		9.86	%		166,450		4.00	%		208,062		5.00	%
December 31, 2019
December 31, 2020
Total capital to risk weighted assets
Equity Bancshares, Inc.	$	352,853		12.59	%	$	294,341		10.50	%	$	N/A	N/A			$	462,865		17.35	%	$	280,072		10.50	%	$	N/A	N/A
Equity Bank		348,951		12.47	%		293,917		10.50	%		279,921		10.00	%		418,992		15.73	%		279,646		10.50	%		266,329		10.00	%
Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		340,621		12.15	%		238,276		8.50	%	N/A		N/A				356,707		13.37	%		226,725		8.50	%	N/A		N/A
Equity Bank		336,719		12.03	%		237,933		8.50	%		223,937		8.00	%		385,696		14.48	%		226,380		8.50	%		213,064		8.00	%
Common equity Tier 1 capital to risk weighted assets
Equity Bancshares, Inc.		326,060		11.63	%		196,227		7.00	%	N/A		N/A				341,835		12.82	%		186,714		7.00	%	N/A		N/A
Equity Bank		336,719		12.03	%		195,945		7.00	%		181,949		6.50	%		385,696		14.48	%		186,431		7.00	%		173,114		6.50	%
Tier 1 leverage to average assets
Equity Bancshares, Inc.		340,621		9.02	%		151,072		4.00	%	N/A		N/A				356,707		9.30	%		153,490		4.00	%	N/A		N/A
Equity Bank		336,719		8.92	%		150,943		4.00	%		188,679		5.00	%		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.

The following table presents earnings ~~(loss)~~ per share for the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

	Three months ended					Nine months ended					Three months ended				Six months ended
	September 30, 2020			September 30, 2019		September 30, 2020			September 30, 2019		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Basic:
Net income (loss) allocable to common stockholders	$	(90,405	)	$	10,406	$	(87,458	)	$	15,565	$	15,166	$	1,689	$	30,241	$	2,947
Weighted average common shares outstanding		15,040,386			15,513,969		15,210,856			15,677,972		14,355,310		15,209,388		14,405,370		15,297,028
Weighted average vested restricted stock units		21			73		1,045			1,584		1,648		95		4,958		1,562
Weighted average shares		15,040,407			15,514,042		15,211,901			15,679,556		14,356,958		15,209,483		14,410,328		15,298,590
Basic earnings (loss) per common share	$	(6.01	)	$	0.67	$	(5.75	)	$	0.99	$	1.06	$	0.11	$	2.10	$	0.19
Diluted:
Net income (loss) allocable to common stockholders	$	(90,405	)	$	10,406	$	(87,458	)	$	15,565	$	15,166	$	1,689	$	30,241	$	2,947
Weighted average common shares outstanding for:
Basic earnings per common share		15,040,407			15,514,042		15,211,901			15,679,556		14,356,958		15,209,483		14,410,328		15,298,590
Dilutive effects of the assumed exercise of stock options		—			178,285		—			201,024		207,322		69,802		188,083		118,999
Dilutive effects of the assumed vesting of restricted stock units		—			15,711		—			16,025		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		15,040,407			15,708,038		15,211,901			15,896,605		14,674,838		15,304,009		14,704,240		15,449,517
Diluted earnings (loss) per common share	$	(6.01	)	$	0.66	$	(5.75	)	$	0.98	$	1.03	$	0.11	$	2.06	$	0.19

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

	Three months ended				Nine months ended				Three months ended				Six months ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Stock options		483,181		347,528		408,300		315,522		301,709		439,060		302,165		346,574
Restricted stock units		226,139		141,693		181,344		2,197		7,575		201,790		8,799		149,124
Total antidilutive shares		709,320		489,221		589,644		317,719		309,284		640,850		310,964		495,698

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.

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.

	September 30, 2020							June 30, 2021
	(Level 1)			(Level 2)		(Level 3)		(Level 1)			(Level 2)		(Level 3)
Assets:
Available-for-sale securities:
U.S. Government-sponsored entities	$	—		$	1,029	$	—	$	—		$	50,362	$	—
U.S. Treasury securities									—			11,749		—
Mortgage backed securities
Government-sponsored residential mortgage backed securities		—			604,870		—		—			674,494		—
Private label residential mortgage backed securities		—			21,084		—		—			136,446		—
Corporate		—			44,864		—		—			53,994		—
Small Business Administration loan pools		—			1,276		—		—			11,012		—
State and political subdivisions		—			125,453		—		—			103,556		—
Derivative assets:
Derivative assets (included in other assets)		—			7,937		—		—			5,213		—
Cash collateral held by counterparty and netting adjustments		102			—		—		239			—		—
Total derivative assets		102			7,937		—		239			5,213		—
Other assets:
Equity securities with readily determinable fair value		501			—		—		591			—		—
Total other assets		501			—		—		591			—		—
Total assets	$	603		$	806,513	$	—	$	830		$	1,046,826	$	—
Liabilities:
Derivative liabilities:
Derivative liabilities (included in other liabilities)	$	—		$	9,299	$	—	$	—		$	5,942	$	—
Cash collateral held by counterparty and netting adjustments		(9,299	)		—		—		(5,871	)		—		—
Total derivative liabilities		(9,299	)		9,299		—		(5,871	)		5,942		—
Total liabilities	$	(9,299	)	$	9,299	$	—	$	(5,871	)	$	5,942	$	—

	December 31, 2019							December 31, 2020
	(Level 1)			(Level 2)		(Level 3)		(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 redisential mortgage backed securities	$	—		$	142,067	$	—
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)		—			3,535		—		—			7,172		—
Cash collateral held by counterparty and netting adjustments		182			—		—		123			—		—
Total derivative assets		182			3,535		—		123			7,172		—
Other assets:
Equity securities with readily determinable fair value		489			—		—		506			—		—
Total other assets		489			—		—		506			—		—
Total assets	$	671		$	145,602	$	—	$	629		$	878,999	$	—
Liabilities:
Derivative liabilities:
Derivative liabilities (included in other liabilities)	$	—		$	4,076	$	—	$	—		$	8,317	$	—
Cash collateral held by counterparty		(4,004	)		—		—		(8,317	)		—		—
Total derivative liabilities		(4,004	)		4,076		—		(8,317	)		8,317		—
Total liabilities	$	(4,004	)	$	4,076	$	—	$	(8,317	)	$	8,317	$	—

There were 0 material transfers between levels during the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, or the year ended December 31, ~~2019.~~2020. The Company’s policy is to recognize transfers into or out of a level as of the end of a reporting period.

Certain assets are measured at fair value on a non-recurring basis when there is evidence of impairment. The fair value of ~~impaired~~individually evaluated securities is determined as discussed previously for available-for-sale securities. The fair values of ~~impaired~~individually evaluated loans with specific allocations of the allowance for ~~loan~~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.

	September 30, 2020						June 30, 2021
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Individually evaluated loans:
Commercial real estate	$	—	$	—	$	5,110	$	—	$	—	$	4,235
Commercial and industrial		5,193		—		6,979		—		—		20,733
Residential real estate		—		—		2,327		—		—		1,988
Agricultural real estate		—		—		4,680		—		—		1,720
Other		—		—		922		—		—		3,777
Other real estate owned:
Commercial real estate		—		—		4,956		—		—		3,049
Residential real estate		—		—		671		—		—		649

	December 31, 2019						December 31, 2020
	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Impaired loans:
Individually evaluated loans:
Commercial real estate	$	—	$	—	$	2,411	$	—	$	—	$	3,359
Commercial and industrial		—		—		15,688		—		—		16,343
Residential real estate		—		—		2,920		—		—		2,165
Agricultural real estate		—		—		866		—		—		2,383
Other		—		—		1,549		—		—		852
Other real estate owned:
Commercial real estate		—		—		1,268		—		—		3,882
Residential real estate		—		—		42		—		—		469

The Company did 0t record any liabilities for which the fair value was measured on a non-recurring basis at ~~September~~June 30, ~~2020,~~2021, or at December 31, ~~2019.~~2020.

Valuations of ~~impaired~~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.

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

	September 30, 2020													June 30, 2021
	Carrying Amount			Estimated Fair Value			Level 1			Level 2		Level 3		Carrying Amount			Estimated Fair Value			(Level 1)			(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	65,839		$	65,839		$	65,839		$	—	$	—	$	139,321		$	139,321		$	139,321		$	—	$	—
Interest-bearing time deposits in other banks		499			499			—			499		—
Available-for-sale securities		798,576			798,576			—			798,576		—		1,041,613			1,041,613			—			1,041,613		—
Loans held for sale		9,053			9,053			—			9,053		—		6,183			6,183			—			6,183		—
Loans, net of allowance for loan losses		2,691,626			2,572,807			—			—		2,572,807
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		32,545		N/A			N/A			N/A		N/A			18,454			18,454			—			18,454		—
Interest receivable		18,110			18,110			—			18,110		—		15,064			15,064			—			15,064		—
Derivative assets		7,937			7,937			—			7,937		—		5,213			5,213			—			5,213		—
Cash collateral held by derivative counterparty and netting adjustments		102			102			102			—		—		239			239			239			—		—
Total derivative assets		8,039			8,039			102			7,937		—		5,452			5,452			239			5,213		—
Equity securities with readily determinable fair value		501			501			501			—		—		591			591			591			—		—
Total assets	$	3,624,788		$	3,473,424		$	66,442		$	834,175	$	2,572,807	$	3,989,905		$	3,963,462		$	140,151		$	1,086,527	$	2,736,784
Financial liabilities:
Deposits	$	3,133,618		$	3,138,015		$	—		$	3,138,015	$	—	$	3,687,555		$	3,689,814		$	—		$	3,689,814	$	—
Federal funds purchased and retail repurchase agreements		46,295			46,295			—			46,295		—		47,184			47,184			—			47,184		—
Federal Home Loan Bank advances		167,862			168,400			—			168,400		—		9,208			9,547			—			9,547		—
Subordinated debt		87,537			87,537			—			87,537		—
Subordinated debentures															15,031			15,031			—			15,031		—
Subordinated notes															72,877			81,127			—			81,127		—
Contractual obligations		5,478			5,478			—			5,478		—		4,469			4,469			—			4,469		—
Interest payable		2,894			2,894			—			2,894		—		573			573			—			573		—
Derivative liabilities		9,299			9,299			—			9,299		—		5,942			5,942			—			5,942		—
Cash collateral held by derivative counterparty and netting adjustments		(9,299	)		(9,299	)		(9,299	)		—		—		(5,871	)		(5,871	)		(5,871	)		—		—
Total derivative liabilities		—			—			(9,299	)		9,299		—		71			71			(5,871	)		5,942		—
Total liabilities	$	3,443,684		$	3,448,619		$	(9,299	)	$	3,457,918	$	—	$	3,836,968		$	3,847,816		$	(5,871	)	$	3,853,687	$	—

	December 31, 2019													December 31, 2020
	Carrying Amount			Estimated Fair Value			Level 1			Level 2		Level 3		Carrying Amount			Estimated Fair Value			(Level 1)			(Level 2)		(Level 3)
Financial assets:
Cash and cash equivalents	$	89,291		$	89,291		$	89,291		$	—	$	—	$	280,698		$	280,698		$	280,698		$	—	$	—
Interest-bearing time deposits in other banks		2,498			2,498			—			2,498		—		249			249			—			249		—
Available-for-sale securities		142,067			142,067			—			142,067		—		871,827			871,827			—			871,827		—
Held-to-maturity securities		769,059			783,911			—			783,911		—
Loans held for sale		5,933			5,933			—			5,933		—		12,394			12,394			—			12,394		—
Loans, net of allowance for loan losses		2,544,420			2,538,209			—			—		2,538,209
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		31,137		N/A			N/A			N/A		N/A			16,415			16,415			—			16,415		—
Interest receivable		15,738			15,738			—			15,738		—		15,831			15,831			—			15,831		—
Derivative assets		3,535			3,535			—			3,535		—		7,172			7,172			—			7,172		—
Cash collateral held by derivative counterparty and netting adjustments		182			182			182			—		—		123			123			123			—		—
Total derivative assets		3,717			3,717			182			3,535		—		7,295			7,295			123			7,172		—
Equity securities with readily determinable fair value		489			489			489			—		—		506			506			506			—		—
Total assets	$	3,604,349		$	3,581,853		$	89,962		$	953,682	$	2,538,209	$	3,763,202		$	3,635,540		$	281,327		$	923,888	$	2,430,325
Financial liabilities:
Deposits	$	3,063,516		$	3,070,305		$	—		$	3,070,305	$	—	$	3,447,590		$	3,451,366		$	—		$	3,451,366	$	—
Federal funds purchased and retail repurchase agreements		35,708			35,708			—			35,708		—		36,029			36,029			—			36,029		—
Federal Home Loan Bank advances		324,373			324,373			—			324,373		—		10,144			10,656			—			10,656		—
Bank stock loan		8,990			8,990			—			8,990		—
Subordinated debt		14,561			14,561			—			14,561		—
Subordinated debentures															14,872			14,872			—			14,872		—
Subordinated notes															72,812			80,448			—			80,448		—
Contractual obligations		5,836			5,836			—			5,836		—		5,189			5,189			—			5,189		—
Interest payable		4,454			4,454			—			4,454		—		1,231			1,231			—			1,231		—
Derivative liabilities		4,076			4,076			—			4,076		—		8,317			8,317			—			8,317		—
Cash collateral held by derivative counterparty and netting adjustments		(4,004	)		(4,004	)		(4,004	)		—		—		(8,317	)		(8,317	)		(8,317	)		—		—
Total derivative liabilities		72			72			(4,004	)		4,076		—		—			—			(8,317	)		8,317		—
Total liabilities	$	3,457,510		$	3,464,299		$	(4,004	)	$	3,468,303	$	—	$	3,587,867		$	3,599,791		$	(8,317	)	$	3,608,108	$	—

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 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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, were as follows.

	September 30, 2020				December 31, 2019				June 30, 2021				December 31, 2020
	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Commitments to make loans	$	50,686	$	93,720	$	41,916	$	141,685	$	48,077	$	184,249	$	50,123	$	129,860
Mortgage loans in the process of origination		15,272		2,767		9,200		2,473		10,483		6,839		13,826		1,713
Unused lines of credit		86,836		168,516		95,866		150,749		96,290		215,178		120,720		226,731

The fixed rate loan commitments have interest rates ranging from ~~2.40%~~2.33% to ~~7.51%~~6.58% and maturities ranging from 1 month to ~~121~~180 months.

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, were as follows.

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 ~~following~~ 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 ~~February 3, 2015,~~ lawsuit filed against it by CitiMortgage, Inc. (“Citi”). The lawsuit involves an alleged breach of contract related to loan repurchase obligations and damages of $2,700 plus pre-judgment and post-judgment interest. In ~~January 2018~~, judgment was entered by the court dismissing Citi’s claims with regard to six loans and holding Equity Bank liable with regard to six loans. A loss contingency of $477 was recorded at December 31, 2017,on November 5, 2020, in connection with this case. Subsequently, Citi appealed the court’s decision. On November 6, 2019, the Eighth Circuit Court of Appeals issued a decision affirming the trial court’s findings dismissing Citi’s claims with regard to six loans and holding Equity Bank liable with regard to six loans. Citi unsuccessfully sought en banc review of the portion of the Court’s ruling in Equity Bank’s favor. As a result of the Eighth Circuit’s ruling, Equity Bank will be required to satisfy the total judgment of $1,474, but shall be entitled to a reassignment of loans in which there is existing collateral. At the time of the January 2018 judgment, Citi held four loans with collateral having a total balance of $1,129; however, at this time, the Company has not yet received actual transfer of the loans or been required to pay the judgment and does not have access to up to date loan information, such as, loan balance, loan status or collateral value to reassess the loss contingency that was recorded at December 31, 2017.

Except for the above-mentioned lawsuit, there are no other outstanding claims for potential repurchase or indemnification demands regarding mortgage loans originated by Equity Bank and sold to investors. However, the Company believes there is possible risk it may face similar demands based on comparable demands loan aggregators are facing from their investors, including Government Sponsored Entities such as Freddie Mac and Fannie Mae, and or settlement agreements loan aggregators have entered into with those investors. The amount of potential loss and outcome of such possible litigation, if it were commenced, is uncertain and the Company would vigorously contest any claims.

~~On May 13, 2019, a purported stockholder of the Company filed a putative securities class action lawsuit in~~Missouri federal court in the Southern District of New York against the Company and certain of its executive officers. On August 16, 2019, the court appointed lead plaintiffs and on October 15, 2019, the plaintiffs filed an amended complaint 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 ~~putative~~ class of persons who purchased Company securities between April 20, 2018, and April 23, 2019. Plaintiffs allege that the Company made materially misleading statements about the Company’s financial results, business, operations and prospects startingaction. The Bank was served on April 20, 2018, that these statements caused the Company’s securities to be overvalued and that the “truth” came out on January 24, 2019, when the Company disclosed that a credit relationship was downgraded and further on April 22, 2019, when the Company disclosed a $14,500 provision for loan loss against that credit relationship. On December 6, 2019, theFebruary 2, 2021. The Company filed a motion to dismiss ~~all~~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 ~~lawsuit. On October 14, 2020, the court issued a ruling in favor of the~~Amended Complaint on June 26, 2021. The Company ~~finding~~believes that the ~~case had no~~lawsuit is without merit and ~~dismissing all claims with prejudice. The plaintiffs have 30 days~~it intends to ~~appeal~~vigorously defend against the ~~adverse ruling.~~claim now asserted. At this time, the Company is ~~confident~~unable to reasonably estimate the outcome ~~will be resolved in favor~~ of ~~the Company.~~this litigation.

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 ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~

		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
		2020		2019		2020		2019			2021			2020		2021			2020
Non-interest income
Service charges and fees		$	1,706	$	2,268	$	5,097	$	6,431		$	2,169		$	1,365	$	3,765		$	3,391
Debit card income			2,491		2,205		6,735		6,129			2,679			2,201		5,029			4,244
Mortgage banking^(a)			877		820		2,298		1,699			848			831		1,783			1,421
Increase in bank-owned life insurance^(a)			489		507		1,452		1,494			676			481		1,277			963
Net gain (loss) on acquisition^(a)												663			—		585			—
Net gain (loss) from securities transactions^(a)			—		4		12		17			—			4		17			12
Other
Investment referral income			163		165		461		489			194			133		317			299
Trust income			128		61		283		181			336			83		496			154
Insurance sales commissions			42		61		71		106			46			11		106			29
Recovery on zero-basis purchased loans^(a)			10		28		116		106			19			92		53			106
Income from equity method investments^(a)			3		10		3		23
Income (loss) from equity method investments^(a)												(56	)		5		(111	)		—
Other non-interest income related to loans and deposits			539		440		756		1,659			1,481			345		2,448			217
Other non-interest income not related to loans and deposits^(a)			37		3		239		13			45			181		47			202
Total other non-interest income			922		768		1,929		2,577			2,065			850		3,356			1,007
Total		$	6,485	$	6,572	$	17,523	$	18,347		$	9,100		$	5,732	$	15,812		$	11,038
^(a) Not within the scope of ASC 606.	^(a) Not within the scope of ASC 606.									^(a) Not within the scope of ASC 606.

On October 22, 2020, the Federal Reserve Bank of Kansas City advised the Company that it had no objection to the Company’s authorization of its repurchase of up to 800,000 shares of the Company’s Class A Voting Common Stock, par value $0.01 per share, from time to time, beginning October 30, 2020, and concluding October 29, 2021. This follows the completion of a previously authorized 2019 repurchase program in which the Company repurchased 1,100,000 shares at a total cost of $23,695, or an average of $21.54 per share. The Company may repurchase shares in privately negotiated transactions, in the open market, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 promulgated by the Securities and Exchange Commission, or otherwise in a manner that complies with applicable federal securities laws. The repurchase program does not obligate the Company to acquire a specific dollar amount or number of shares and it may be extended, modified or discontinued at any time without notice.

At the close of business on October 23, 2020, ~~Equity Bank~~the Company acquired the assets and assumed the deposit liabilities of Almena State Bank (“~~ASB”~~Almena”), ~~with locations~~based in ~~Almena and~~ Norton, Kansas, pursuant to a Purchase and Assumption Agreement facilitated by the Federal Deposit Insurance ~~Corporation. Information necessary~~Corporation (“FDIC”). Acquisition costs related to ~~recognize~~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 17 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 remains incomplete. At September 30, 2020, ASB reported total~~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 ~~$65,733, which includes total loans~~three bank locations in St. Joseph, Missouri, from Security Bank of ~~$49,855 and securities~~Kansas City, a subsidiary of ~~$7,412. Total deposit liabilities reported were $64,941.~~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 ~~10, 2020,~~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:

We are a bank holding company headquartered in Wichita, Kansas. Our ~~wholly owned~~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 4951 full-service banking sites located in Arkansas, Kansas, Missouri and Oklahoma. As of ~~September~~June 30, ~~2020,~~2021, we had consolidated total assets of ~~$3.87~~$4.27 billion, total loans held for investment, ~~of $2.69 billion,~~ net of ~~allowances,~~allowance, of $2.76 billion, total deposits of ~~$3.13~~$3.69 billion and total stockholders’ equity of ~~$402.2~~$413.0 million. ~~Due~~During the three-month period ended June 30, 2021, the Company had net income of $15.2 million as compared to ~~a goodwill impairment charge~~net income of ~~$104.8 million during the third quarter of 2020, there was net loss of $90.4 million and $87.5~~$1.7 million for the ~~three and nine-month periods~~three-month period ended ~~September~~June 30, 2020. During the ~~three and nine-month~~six-month periods ended ~~September~~June 30, ~~2019,~~2021 and 2020, net income was ~~$10.4~~$30.2 million and ~~$15.6~~$2.9 million.

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

	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			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	$	37,082		$	37,933		$	40,557		$	42,984		$	44,549		$	38,318		$	35,812		$	39,989		$	37,082		$	37,933
Interest expense		4,975			5,042			8,462			10,579			13,023			3,688			4,053			4,430			4,975			5,042
Net interest income		32,107			32,891			32,095			32,405			31,526			34,630			31,759			35,559			32,107			32,891
Provision for loan losses		815			12,500			9,940			1,055			679
Provision (reversal) for credit losses																	(1,657	)		(5,756	)		1,000			815			12,500
Net gain (loss) from securities transactions		—			4			8			(3	)		4			—			17			(1	)		—			4
Other non-interest income		6,485			5,728			5,298			6,644			6,568			9,100			6,695			8,501			6,485			5,728
Merger expenses																	460			152			299			—			—
Goodwill impairment		104,831			—			—			—			—			—			—			—			104,831			—
Other non-interest expense		26,004			23,937			25,758			24,846			24,223			25,346			24,729			28,161			26,004			23,937
Income (loss) before income taxes		(93,058	)		2,186			1,703			13,145			13,196			19,581			19,346			14,599			(93,058	)		2,186
Provision for income taxes		(2,653	)		497			445			3,131			2,790			4,415			4,271			2,111			(2,653	)		497
Net income (loss)		(90,405	)		1,689			1,258			10,014			10,406			15,166			15,075			12,488			(90,405	)		1,689
Net income (loss) allocable to common stockholders		(90,405	)		1,689			1,258			10,014			10,406			15,166			15,075			12,488			(90,405	)		1,689
Basic earnings (loss) per share	$	(6.01	)	$	0.11		$	0.08		$	0.65		$	0.67		$	1.06		$	1.04		$	0.85		$	(6.01	)	$	0.11
Diluted earnings (loss)per share	$	(6.01	)	$	0.11		$	0.08		$	0.64		$	0.66		$	1.03		$	1.02		$	0.84		$	(6.01	)	$	0.11
Balance Sheet Data (at period end)
Cash and cash equivalents	$	65,839		$	178,290		$	142,252		$	89,291		$	168,053		$	139,321		$	136,688		$	280,698		$	65,839		$	178,290
Available-for-sale securities		798,576			177,228			187,812			142,067			152,680			1,041,613			998,100			871,827			798,576			177,228
Held-to-maturity securities		—			662,522			721,992			769,059			764,163			—			—			—			—			662,522
Loans held for sale		9,053			4,802			6,494			5,933			8,784			6,183			8,609			12,394			9,053			4,802
Gross loans held for investment		2,725,713			2,806,334			2,507,123			2,556,652			2,600,924			2,815,061			2,795,740			2,591,696			2,725,713			2,806,334
Allowance for loan losses		34,087			34,078			21,915			12,232			17,875
Loans held for investment, net of allowance for loan losses		2,691,626			2,772,256			2,485,208			2,544,420			2,583,049
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		48,702			154,563			155,537			156,339			157,159			45,594			46,624			47,658			48,702			154,563
Other intangible assets, net		1,142			1,154			1,167			1,179			1,191			1,109			1,119			1,130			1,142			1,154
Total assets		3,865,571			4,205,269			3,943,832			3,949,578			4,074,663			4,268,216			4,196,184			4,013,356			3,865,571			4,205,269
Total deposits		3,133,618			3,247,267			2,960,397			3,063,516			3,106,929			3,687,555			3,634,530			3,447,590			3,133,618			3,247,267
Borrowings		301,694			452,032			481,371			383,632			480,000			144,300			138,053			133,857			301,694			452,032
Total liabilities		3,463,399			3,725,503			3,466,481			3,471,518			3,607,613			3,855,221			3,798,369			3,605,707			3,463,399			3,725,503
Total stockholders’ equity		402,172			479,766			477,351			478,060			467,050			412,995			397,815			407,649			402,172			479,766
Tangible common equity*		352,328			324,049			320,647			320,542			308,700			366,292			350,072			358,861			352,328			324,049
Performance ratios
Return on average assets (ROAA) annualized		(8.90	)%		0.16	%		0.13	%		1.01	%		1.02	%		1.44	%		1.48	%		1.27	%		(8.90	)%		0.16	%
Return on average equity (ROAE) annualized		(74.45	)%		1.40	%		1.05	%		8.39	%		8.91	%		15.06	%		15.45	%		12.13	%		(74.45	)%		1.40	%
Return on average tangible common equity (ROATCE) annualized*		(108.31	)%		3.03	%		2.35	%		13.42	%		14.38	%		17.98	%		18.57	%		14.93	%		(108.31	)%		3.03	%
Yield on loans annualized		4.65	%		4.68	%		5.47	%		5.67	%		5.70	%		4.75	%		4.59	%		5.23	%		4.65	%		4.68	%
Cost of interest-bearing deposits annualized		0.50	%		0.63	%		1.09	%		1.32	%		1.56	%		0.31	%		0.36	%		0.43	%		0.50	%		0.63	%
Net interest margin annualized		3.47	%		3.49	%		3.67	%		3.61	%		3.42	%		3.50	%		3.31	%		3.88	%		3.47	%		3.49	%
Efficiency ratio*		67.38	%		61.98	%		68.88	%		63.63	%		63.59	%		58.85	%		64.18	%		67.19	%		67.38	%		61.98	%
Non-interest income / average assets annualized		0.64	%		0.55	%		0.55	%		0.67	%		0.65	%		0.86	%		0.66	%		0.86	%		0.64	%		0.55	%
Non-interest expense / average assets annualized		12.88	%		2.31	%		2.66	%		2.51	%		2.38	%		2.45	%		2.44	%		2.90	%		12.88	%		2.31	%
Capital Ratios
Tier 1 Leverage Ratio		8.76	%		8.52	%		9.02	%		9.02	%		8.49	%		8.88	%		8.73	%		9.30	%		8.76	%		8.52	%
Common Equity Tier 1 Capital Ratio		12.76	%		12.02	%		11.67	%		11.63	%		11.08	%
Tier 1 Risk Based Capital Ratio		13.32	%		12.57	%		12.20	%		12.15	%		11.59	%

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		17.35	%		15.33	%		13.00	%		12.59	%		12.21	%		16.74	%		17.02	%		17.35	%		17.35	%		15.33	%
Equity / Assets		10.40	%		11.41	%		12.10	%		12.10	%		11.46	%		9.68	%		9.48	%		10.16	%		10.40	%		11.41	%
Tangible common equity to tangible assets*		9.23	%		8.00	%		8.47	%		8.45	%		7.88	%		8.68	%		8.44	%		9.05	%		9.23	%		8.00	%
Book value per share	$	27.08		$	31.53		$	31.41		$	30.95		$	30.25		$	28.76		$	27.66		$	28.04		$	27.08		$	31.53
Tangible common book value per share*	$	23.72		$	21.29		$	21.10		$	20.75		$	19.99		$	25.51		$	24.34		$	24.68		$	23.72		$	21.29
Tangible common book value per diluted share*	$	23.57		$	21.13		$	20.96		$	20.39		$	19.73		$	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.

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, ~~2019,~~2020, audited financial statements included in our Annual Report on Form 10-K filed with the SEC on March ~~10, 2020. There~~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 ~~been no material~~not had any changes in our critical accounting ~~policies since that time. We believe that of our significant accounting policies, the following may involve a higher degree of judgment and complexity.~~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.

~~Loans and allowance~~Allowance for ~~loan losses:~~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 ~~losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against~~portfolio. Determining the allowance when management believes the collectability of a loan balance is unlikely. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. A loan review process, independent of the loan approval process, is utilized by management to verify loans are being made and administered in accordance with company policy, to review loan risk grades and potential losses, to verify that potential problem loans are receiving adequate and timely corrective measures to avoid or reduce losses and to assist in the verification of the adequacy of the loan loss reserve. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged off.

~~The allowance consists of specific and general components. The specific component relates to loans that are individually classified as impaired. If a loan is impaired, a portion~~appropriateness of the allowance is ~~allocated so~~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 ~~loan is reported net at the present~~asset might be impaired. An impairment loss must be recognized for any excess of carrying value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the sale of the collateral. Troubled debt restructurings are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a troubled debt restructuring is considered to be a collateral dependent loan, the loan is reported, net, atover the fair value of the ~~collateral. For troubled debt restructurings that subsequently default,~~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 ~~determine~~operate. These laws are complex and subject to different interpretations by the ~~amount~~taxpayer and the relevant government taxing authorities. We review income tax expense and the carrying value of ~~reserve~~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 ~~accordance~~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 ~~accounting policy for the allowance for loan losses.~~tax authority upon examination or audit.

A loan is considered impaired when, based on current information and events, it is probable that we will be unable to collect all contractual principal and interest due according to the terms of the loan agreement. All loans are individually evaluated for impairment. Impaired loans are measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or on the value of the underlying collateral if the loan is collateral dependent. We evaluate the collectability of both principal and interest when assessing the need for a loss accrual.

~~Factors considered by~~Although management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed.

The general component of the allowance for loan losses covers non-impaired loans and is based on historical loss experience adjusted for current factors. The historical loss experience is determined by portfolio and class and is based on the actual loss history experienced by us. This actual loss experience is then adjusted by comparing current conditions to the conditions that existed during the loss history. We consider the changes related to (i) lending policies, (ii) economic conditions, (iii) nature and volume of the loan portfolio and class, (iv) lending staff, (v) volume and severity of past due, non-accrual and risk graded loans, (vi) loan review system, (vii) value of underlying collateral for collateral dependent loans, (viii) concentration levels and (ix) effects of other external factors.

~~Goodwill Impairment~~: Goodwill is assessed at least annually for impairment and any such impairment is recognized and expensed in the period identified. We have selected December 31 as the date to perform our annual goodwill impairment test;

however, if during the year we become aware of quantitative or qualitative data that suggest goodwill impairment may have occurred, we will test on an interim basis as well. At September 30, 2020, the Company considered the on-going economic market disruption, the movement of the Company’s stock price in relation to other bank indexes and the length of timebelieves that the ~~market value of the reporting unit has been below its book value as triggering events~~judgements and ~~has completed a quantitative analysis~~estimates used are reasonable, actual results could differ and we may be exposed to ~~assess whether~~losses or ~~not goodwill was impaired. This analysis determined~~gains that goodwill was impaired and subsequently the Company booked a non-cash impairment charge of $104.8 million for goodwill impairment. At September 30, 2020, we had goodwill of $31.6 million, representing approximately 8% of equity.

~~Fair Value~~: Fair values of assets and liabilities are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, collateral values and other factors, especially in the absence of broad markets for particular assets and liabilities. Changes in assumptions or in market conditions could ~~materially affect the estimates.~~be material.

The Company has been, and may continue to be, impacted by the COVID-19 ~~pandemic has caused economic and social disruption on an unprecedented scale. While some industries~~pandemic. In recent months, vaccination rates have been ~~impacted more severely than others, all businesses~~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 ~~impacted~~enacted to ~~some degree. This disruption has resulted in the shuttering of~~provide economic relief to individuals and businesses, ~~across the country, significant job loss, and aggressive measures by federal, state and local government.~~

~~Congress, the President, and the Federal Reserve have taken several actions designed to cushion the economic fallout. Most notably,~~including the Coronavirus Aid, Relief and Economic Security Act (“~~CARES”~~CARES Act”), which established the Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”), and the American Rescue Plan Act ~~was signed into law at the end~~ of 2021, enacted in March 2020, as a $2 trillion legislative package. The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to significantly impacted industry sectors. The package also includes extensive emergency funding for hospitals and medical providers. In addition to the general impact of COVID-19, certain provisions of the CARES Act as well as other recent legislative and regulatory relief efforts are expected to have a material impact on our operations. While it is not possible to know the full universe or extent of these impacts as of the date of this filing, we are disclosing potentially material items of which we are aware.2021.

Pertaining to our September 30, 2020, financial condition and results of operations, COVID-19 had a material impact on our allowance for loan losses. While we have not yet experienced any charge-offs related to COVID-19, our allowance for loan losses calculation and resulting provision for loan losses are significantly impacted by changes in economic conditions. Given that economic scenarios have become less certain sinceAs the pandemic ~~was declared~~evolves, we continue to evaluate protocols and processes in ~~early March, we believe~~place to execute our need for additional allowance for loan losses has increased significantly. Refer to our discussion of the allowance for loan losses in Note 1 and Note 3 of our unaudited financial statements as well as further discussion later in this section. Should economic conditions worsen, we could experience further increases in our required allowance for loan losses and record additional provision for loan losses expense. The execution of the payment deferral program discussed in the following commentary improved our ratio of past due loans to total loans. It is possible that our asset quality measures could worsen at future measurement periods if the effects of COVID-19 are prolonged.

Our interest and fee income could be reduced due to COVID-19. In keeping with guidance from regulators, we are 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, we are unable to project the materiality of such an impact but recognize the breadth of the economic impact may affect our borrowers’ ability to repay in future periods.

As of September 30, 2020, all our capital ratios and our subsidiary bank’s capital ratios were in excess of all regulatory requirements. While we are currently classified as well capitalized, an extended economic recession brought about by COVID-19 could adversely impact our reported and regulatory capital ratios by further credit losses. We rely on cash on hand as well as dividends from our subsidiary bank to service our debt. If our subsidiary bank capital deteriorates such that it is unable to pay dividends to us for an extended period of time, we may not be able to service our debt.

We maintain access to multiple sources of liquidity. Wholesale funding markets have remained open to us, but rates for short term funding may be volatile. If funding costs are elevated for an extended period, it could have an adverse effect on our net interest margin. If an extended recession caused large numbers of our deposit customers to withdraw their funds, we might become more reliant on volatile or more expensive sources of funding.

Currently, we do not expect COVID-19 to affect our ability to account timely for the assets on our 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, we do not anticipate significant changes in methodology used to determine the fair value of assets measured in accordance with GAAP.~~

~~In early March 2020,~~plans while promoting the ~~Company successfully deployed a modified working strategy, including emphasis on social distancing~~health and ~~remote work as necessary to emphasize the~~ safety of our ~~teams~~employees and ~~continuity of~~continuing to support our ~~business processes. The Company~~customers and its leaders provided timely communication to team members and customers, implemented protocols for team member safety and initiated strategies for monitoring and responding to local COVID-19 impacts – including customer relief efforts. The Company’s preparedness efforts, coupled with quick and decisive plan implementation, resulted in minimal impacts to operations as a result of COVID-19. Prior technology planning resulted in the successful deployment of a portion of our operational team to a remote environment, while the remainder of the team continued to work on location in a workspace emphasizing social distancing. To achieve implementation of our working strategy, during the first quarter of 2020, we incurred a minimal amount of technology spending to provide additional laptops to team members who required them to work remotely. In early May 2020, all the Company’s bank locations were open to customers with social distancing measures in place. The Company continues to serve customers curbside and drive-through but offers full lobby access during normal hours. No material operational or internal control challenges or riskscommunities.

We have been identified to date. We continue to anticipate and respond to any future COVID-19 interruptions or developments. As of September 30, 2020, we do not anticipate significant challenges to our ability to maintain our systems and controls considering the measures we have taken to prevent the spread of COVID-19. The Company does not currently face any material resource constraint through the implementation of our business continuity plans.

In keeping with regulatory guidance to work with borrowers during this unprecedented situation, the Company executed a payment deferral program for our commercial lending clients that were adversely affected by the pandemic. Depending on the demonstrated need of the client, the Company originally deferred either the full loan payment or the principal component of the loan payment for 90 or 180 days. Loans originally deferred for 90 days may, dependent on specific qualifications, be approved for an additional 90-day deferral. As of September 30, 2020, the Company has 63 loans, totaling $40.2 million, that have been granted a payment deferral, and remain on deferral, as part of our COVID-19 response. In accordance with interagency guidance issuedactive participant in March 2020, these short-term deferrals are not automatically considered troubled debt restructurings, are not reflected in past due loan balances and have been reported as a classified loan solely due to a deferral. These deferred loans are subject to ongoing monitoring and will be downgraded or placed on nonaccrual if a noted weakness exists.

~~With the passage~~all phases of the PPP, administered by the SBA, ~~the Company is actively participating in assisting~~and have helped many of our customers ~~with applications for resources~~obtain loans through the program. PPP loans ~~generally~~ have a ~~two-year~~two or five-year term and earn interest at 1.0%. As of ~~September~~June 30, ~~2020, we have 3,221~~2021, the Company has 2,751 loans, with an outstanding balance of ~~$367.8~~$271.5 million that were originated under this program. It is ~~our~~the Company’s understanding that loans funded through the PPP program are fully guaranteed by the U.S. government. ~~Should those circumstances change, we could be required to establish additional allowance for loan losses through additional provision for loan expense charged to earnings.~~

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 ~~$190 thousand~~$14.2 million outstanding under the MSL Program for the period ended ~~September~~June 30, ~~2020.~~2021.

While all industries have and will continue to experience adverse impacts as a result of COVID-19, we had exposures (on balance sheet loans and commitments to lend) in the following loan categories we considered to be most at-risk of a significant impact as of September 30, 2020.

The Company’s exposure to the hospitality sector at September 30, 2020, approximated $285.9 million, or 12.1%, of total loans excluding PPP loans. As of September 30, 2020, none of these loans were actively participating in a deferral program.

The top 20 loans within this portfolio comprise $223.1 million, or 78.0%, of the total exposure. These loans are geographically diversified and well secured. The borrowers are well known to the Bank 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 Company’s exposure to the aircraft manufacturing category at September 30, 2020, approximated $65.1 million, or 2.8%, of total loans excluding PPP loans. As of September 30, 2020, 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.

We have worked with customers directly affected by COVID-19. We are prepared to offer short-term assistance in accordance with regulator guidelines. As a result of the current economic environment caused by the COVID-19 virus, we are 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 loan losses and associated provision for loan losses as of and for the period ended September 30, 2020.

The Company is committed to assisting our customers and communities in this time of need. The Company is serving customers curbside and drive-through but offers full lobby access during normal hours. We have introduced temporary changes to help with the financial hardship caused by COVID-19 for both our customers and non-customers.

The Company continues to monitor the safety of our staff through health stations at each work location. Staffing is adequate to address the requests for time off by any of our employees who are impacted by health or childcare issues.

We generate ~~most~~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 ~~February 8, 2019,~~October 23, 2020, we completed our acquisition of the assets and assumption of the deposits and certain other liabilities for two branches in ~~Guymon, Oklahoma~~Almena and ~~one branch in Cordell, Oklahoma from MidFirst Bank of Oklahoma City, Oklahoma~~Norton, Kansas (“~~MidFirst~~Almena acquisition”), pursuant to a Purchase and Assumption Agreement facilitated by the Federal Deposit Insurance Corporation (“FDIC”). Results of operations from our ~~MidFirst~~Almena acquisition were included in our financial results beginning ~~February 9, 2019.~~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 ~~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 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.

Three months ended ~~September~~June 30, ~~2020,~~2021, compared with three months ended ~~September~~June 30, ~~2019:~~2020: Net ~~loss~~income and net ~~loss~~income allocable to common stockholders for the three months ended ~~September~~June 30, ~~2020,~~2021, was ~~$90.4~~$15.2 million as compared to ~~net income of $10.4~~$1.7 million for the three months ended ~~September~~June 30, ~~2019, a decrease~~2020, an increase of ~~$100.8~~$13.5 million. During the three-month period ended ~~September~~June 30, 2020, an increase in non-interest expense of $106.6 million, primarily due to a $104.8 million charge to goodwill impairment, and a decrease in non-interest income of $87 thousand were partially offset by2021, a decrease in provision for credit losses of $14.2 million, an increase in non-interest income ~~taxes~~ of ~~$5.4~~$3.4 million and an increase in net interest income of ~~$581 thousand and an~~$1.7 million were partially offset by a $3.9 million increase in provision for ~~loan losses of $136 thousand~~income taxes and a $1.9 million increase in non-interest expense when compared with the three months ended ~~September~~June 30, ~~2019.~~2020. The changes in the components of net income are discussed in more detail in the following “Results of Operations” sections.

~~Nine~~Six months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~nine~~six months ended ~~September~~June 30, ~~2019:~~2020: Net ~~loss~~income and net ~~loss~~income allocable to common stockholders for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, was ~~$87.5~~$30.2 million as compared to ~~net income of $15.6~~$2.9 million for the ~~nine~~six months ended ~~September 30, 2019, a decrease of $103.0 million. During the nine-month period ended September~~June 30, 2020, an increase ~~in non-interest expense~~ of $105.7 million, primarily due to a $104.8 million charge to goodwill impairment, an increase in provision for loan losses of $6.0 million and a decrease in non-interest income of $824 thousand were partially offset by$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 ~~taxes~~ of ~~$5.9~~$4.8 million and an increase in net interest income of ~~$3.6~~$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 ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. The changes in the components of net income are discussed in more detail in the following “Results of Operations” sections.

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~~June 30, ~~2020,~~2021, compared with three months ended ~~September~~June 30, ~~2019~~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 ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~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.

	For the Three Months Ended September 30,														For the Three Months Ended June 30,
	2020							2019							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⁾			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	$	848,096	$	8,400		3.94	%	$	562,399	$	8,845		6.24	%	$	826,647	$	11,729		5.69	%	$	868,302	$	8,378		3.88	%
Commercial real estate		979,775		12,886		5.23	%		1,012,393		14,678		5.75	%		991,033		11,433		4.63	%		934,186		12,192		5.25	%
Real estate construction		214,775		2,233		4.14	%		211,235		3,191		6.00	%		253,947		2,352		3.71	%		253,672		2,837		4.50	%
Residential real estate		429,965		4,734		4.38	%		561,423		6,402		4.52	%		465,525		4,642		4.00	%		467,246		4,854		4.18	%
Agricultural real estate		131,725		1,718		5.19	%		140,693		2,115		5.96	%		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		69,485		1,104		6.32	%		71,688		1,441		7.97	%		89,680		943		4.22	%		65,096		1,145		7.07	%
Agricultural		84,859		1,205		5.65	%		86,623		1,379		6.32	%
Total loans		2,758,680		32,280		4.65	%		2,646,454		38,051		5.70	%		2,853,145		33,810		4.75	%		2,806,865		32,627		4.68	%
Taxable securities		683,630		3,475		2.02	%		782,994		4,673		2.37	%		887,983		3,523		1.59	%		753,332		4,017		2.14	%
Nontaxable securities		118,895		922		3.09	%		143,845		1,045		2.88	%		99,003		717		2.90	%		123,976		880		2.86	%
Federal funds sold and other		117,963		404		1.36	%		84,677		780		3.66	%		124,502		268		0.86	%		102,456		409		1.61	%
Total interest-earning assets		3,679,168		37,081		4.01	%		3,657,970		44,549		4.83	%		3,964,633		38,318		3.88	%		3,786,629		37,933		4.03	%
Non-interest-earning assets:
Other real estate owned, net		7,332							5,795							10,466							6,091
Premises and equipment, net		87,344							84,797							90,720							85,793
Bank-owned life insurance		76,235							74,266							102,877							75,754
Goodwill, core deposit and other intangibles, net		154,049							158,760							47,334							156,194
Other non-interest-earning assets		37,060							49,018							15,409							48,875
Total assets	$	4,041,188						$	4,030,606						$	4,231,439						$	4,159,336
Interest-bearing liabilities:
Interest-bearing demand deposits	$	827,190		500		0.24	%	$	674,681		2,012		1.18	%	$	1,004,030		523		0.21	%	$	757,233		493		0.26	%
Savings and money market		957,701		374		0.16	%		1,032,778		3,377		1.30	%		1,064,289		372		0.14	%		997,047		430		0.17	%
Savings, NOW and money market		1,784,891		874		0.19	%		1,707,459		5,389		1.25	%		2,068,319		895		0.17	%		1,754,280		923		0.21	%
Certificates of deposit		645,516		2,189		1.35	%		965,548		5,118		2.10	%		587,733		1,130		0.77	%		732,907		2,976		1.63	%
Total interest-bearing deposits		2,430,407		3,063		0.50	%		2,673,007		10,507		1.56	%		2,656,052		2,025		0.31	%		2,487,187		3,899		0.63	%
FHLB term and line of credit advances		248,437		471		0.75	%		320,528		1,957		2.42	%		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	%		14,770		198		5.32	%		—		—		0.00	%		39,347		306		3.13	%
Subordinated debt		79,947		1,415		7.04	%		14,437		311		8.52	%		87,841		1,557		7.11	%		15,117		255		6.80	%
Other borrowings		48,774		25		0.20	%		40,827		50		0.48	%		46,161		26		0.22	%		49,577		24		0.19	%
Total interest-bearing liabilities		2,807,565		4,974		0.70	%		3,063,569		13,023		1.69	%		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		715,403							479,778							968,898							770,444
Non-interest-bearing liabilities		35,132							24,007							30,792							33,373
Stockholders’ equity		483,088							463,252							404,039							483,605
Total liabilities and stockholders’ equity	$	4,041,188						$	4,030,606						$	4,231,439						$	4,159,336
Net interest income			$	32,107						$	31,526						$	34,630						$	32,891
Interest rate spread						3.31	%						3.14	%						3.36	%						3.32	%
Net interest margin⁽²⁾						3.47	%						3.42	%						3.50	%						3.49	%
Total cost of deposits, including non-interest bearing deposits	$	3,145,810	$	3,063		0.39	%	$	3,152,785	$	10,507		1.32	%	$	3,624,950	$	2,025		0.22	%	$	3,257,631	$	3,899		0.48	%
Average interest-earning assets to interest-bearing liabilities						131.04	%						119.40	%

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~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

	Increase (Decrease) Due to:						Total Increase /			Increase (Decrease) Due to:						Total Increase /
(Dollars in thousands)	Volume⁽¹⁾			Yield/Rate⁽¹⁾			(Decrease)			Volume⁽¹⁾			Yield/Rate⁽¹⁾			(Decrease)
Interest-earning assets:
Loans
Commercial and industrial	$	3,531		$	(3,976	)	$	(445	)	$	(419	)	$	3,770		$	3,351
Commercial real estate		(462	)		(1,330	)		(1,792	)		712			(1,471	)		(759	)
Real estate construction		53			(1,011	)		(958	)		3			(488	)		(485	)
Residential real estate		(1,454	)		(214	)		(1,668	)		(18	)		(194	)		(212	)
Agricultural real estate		(129	)		(268	)		(397	)		20			(288	)		(268	)
Agricultural											89			(331	)		(242	)
Consumer		(43	)		(294	)		(337	)		348			(550	)		(202	)
Agricultural		(28	)		(146	)		(174	)
Total loans		1,468			(7,239	)		(5,771	)		735			448			1,183
Taxable securities		(552	)		(646	)		(1,198	)		642			(1,136	)		(494	)
Nontaxable securities		(190	)		67			(123	)		(180	)		17			(163	)
Federal funds sold and other		233			(609	)		(376	)		75			(216	)		(141	)
Total interest-earning assets	$	959		$	(8,427	)	$	(7,468	)	$	1,272		$	(887	)	$	385
Interest-bearing liabilities:
Savings, NOW and money market	$	146		$	(4,661	)	$	(4,515	)	$	169		$	(197	)	$	(28	)
Certificates of deposit		(1,404	)		(1,525	)		(2,929	)		(505	)		(1,341	)		(1,846	)
Total interest-bearing deposits		(1,258	)		(6,186	)		(7,444	)		(336	)		(1,538	)		(1,874	)
FHLB term and line of credit advances		(366	)		(1,120	)		(1,486	)		(497	)		25			(472	)
Federal Reserve Bank discount window											(6	)		—			(6	)
Bank stock loan		(198	)		—			(198	)		(306	)		—			(306	)
Subordinated debt		1,168			(64	)		1,104			1,289			13			1,302
Other borrowings		8			(33	)		(25	)		(2	)		4			2
Total interest-bearing liabilities		(646	)		(7,403	)		(8,049	)		142			(1,496	)		(1,354	)
Net Interest Income	$	1,605		$	(1,024	)	$	581		$	1,130		$	609		$	1,739

~~The decrease in loan interest income, including loan fees, was driven by a 105 basis point decrease in yield on the loan portfolio from 5.70% for~~As compared to the three months ended ~~September~~June 30, ~~2019,~~2020, the Company experienced increased volume of $46.3 million, contributing to ~~4.65%~~the growth in loan interest income. The comparative yield on these assets increased by 7 basis points to 4.75% for the ~~three months~~quarter ended ~~September~~June 30, ~~2020, which was~~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 ~~an increase in average loan volume. This decrease in yield is largely due to the 1.0% SBA PPP loans added to the portfolio during 2020. The impact to net~~a reduced interest ~~income from loan fees for the three months ended September 30, 2020, was $2.5 million, compared to $1.3 million for the three months ended September 30, 2019.~~rate environment impacting current period originations and repricing of variable rate assets.

The reduction in expense on interest-bearing deposits was due to a ~~106~~32 basis point decrease in cost on these deposits from ~~1.56%~~0.63% for the three months ended ~~September~~June 30, ~~2019,~~2020, to ~~0.50%~~0.31% for the three months ended ~~September~~June 30, ~~2020.~~2021. Average borrowings from the FHLB decreased by ~~$72.1~~$233.1 million from an average balance of ~~$320.5~~$270.8 million for the three months ended ~~September~~June 30, ~~2019,~~2020, to an average balance of ~~$248.4~~$37.7 million for the three months ended ~~September~~June 30, ~~2020. FHLB borrowings average rate decreased 167 basis points from 2.42% for the three months ended September 30, 2019, to 0.75% for the three months ended September 30, 2020.~~2021. The bank stock loan did not carry an outstanding balance during the ~~third~~second quarter of ~~2020~~2021 and therefore ~~there was~~ no interest expense was recorded on our bank stock loan for the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to ~~$198~~$306 thousand for the same time period in ~~2019. Total cost of~~2020. Costs associated with interest-bearing liabilities decreased 99 19

basis points in the quarter as compared to ~~0.70%~~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 ~~three~~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 ~~September~~June 30, ~~2020, from 1.69% for the three~~2021, compared with six months ended ~~September~~June 30, ~~2019.~~

~~The increase in net interest margin is largely due to an increase in non-interest-bearing deposits and a further reduction in cost of interest-bearing liabilities.~~

~~Nine months ended September 30,~~ 2020 ~~compared with nine months ended September 30, 2019~~: 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~~six months ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~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.

	For the Nine Months Ended September 30,														For the Six Months Ended June 30,
	2020							2019							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⁾			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	$	757,773	$	26,789		4.72	%	$	566,658	$	28,221		6.66	%	$	814,895	$	20,962		5.19	%	$	712,115	$	16,258		4.59	%
Commercial real estate		942,478		36,533		5.18	%		1,035,634		41,401		5.34	%		981,482		22,873		4.70	%		923,625		25,134		5.47	%
Real estate construction		245,167		8,644		4.71	%		204,642		10,449		6.83	%		254,807		4,531		3.59	%		260,530		6,413		4.95	%
Residential real estate		464,340		14,528		4.18	%		518,110		18,192		4.69	%		430,123		9,093		4.26	%		481,716		10,156		4.24	%
Agricultural real estate		133,302		5,574		5.59	%		138,861		6,105		5.88	%		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		67,255		3,461		6.87	%		70,529		4,060		7.70	%		83,083		1,906		4.63	%		66,128		2,420		7.36	%
Agricultural		86,873		3,752		5.77	%		86,463		4,183		6.47	%
Total loans		2,697,188		99,281		4.92	%		2,620,897		112,611		5.74	%		2,795,352		64,811		4.68	%		2,666,104		67,003		5.05	%
Taxable securities		737,009		12,113		2.20	%		780,813		14,724		2.52	%		863,801		7,322		1.71	%		763,992		8,637		2.27	%
Nontaxable securities		125,352		2,769		2.95	%		142,735		3,143		2.94	%		103,529		1,441		2.81	%		128,616		1,846		2.89	%
Federal funds sold and other		102,202		1,409		1.84	%		84,045		2,037		3.24	%		165,408		556		0.68	%		94,234		1,004		2.14	%
Total interest-earning assets		3,661,751		115,572		4.22	%		3,628,490		132,515		4.88	%		3,928,090		74,130		3.81	%		3,652,946		78,490		4.32	%
Non-interest-earning assets:
Other real estate owned, net		7,054							6,079							10,792							6,913
Premises and equipment, net		85,862							83,151							90,266							85,113
Bank-owned life insurance		75,755							73,772							94,405							75,512
Goodwill, core deposit and other intangibles, net		155,774							158,551							47,852							156,646
Other non-interest-earning assets		43,422							44,583							16,432							46,639
Total assets	$	4,029,618						$	3,994,626						$	4,187,837						$	4,023,769
Interest-bearing liabilities:
Interest-bearing demand deposits	$	764,477		2,618		0.46	%	$	695,807		6,515		1.25	%	$	1,016,621		1,104		0.22	%	$	732,775		2,117		0.58	%
Savings and money market		990,282		2,305		0.31	%		1,009,805		10,399		1.38	%		1,057,037		761		0.15	%		1,006,752		1,931		0.39	%
Savings, NOW and money market		1,754,759		4,923		0.37	%		1,705,612		16,914		1.33	%		2,073,658		1,865		0.18	%		1,739,527		4,048		0.47	%
Certificates of deposit		728,083		8,904		1.63	%		997,270		15,467		2.07	%		599,353		2,570		0.86	%		769,820		6,715		1.75	%
Total interest-bearing deposits		2,482,842		13,827		0.74	%		2,702,882		32,381		1.60	%		2,673,011		4,435		0.33	%		2,509,347		10,763		0.86	%
FHLB term and line of credit advances		271,548		2,198		1.08	%		266,118		5,103		2.56	%		23,911		145		1.22	%		283,231		1,727		1.23	%
Federal Reserve Bank discount window		3,288		6		0.24	%		—		—		0.00	%		5		—		0.25	%		4,951		6		0.25	%
Bank stock loan		16,111		415		3.44	%		12,518		507		5.42	%		—		—		0.00	%		24,255		415		3.44	%
Subordinated debt		36,712		1,953		7.11	%		14,364		955		8.89	%		87,778		3,113		7.15	%		14,856		538		7.28	%
Other borrowings		44,754		80		0.24	%		43,162		116		0.36	%		43,904		48		0.22	%		42,722		55		0.26	%
Total interest-bearing liabilities		2,855,255		18,479		0.86	%		3,039,044		39,062		1.72	%		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		658,714							474,217							928,407							630,058
Non-interest-bearing liabilities		32,562							21,329							30,959							31,263
Stockholders’ equity		483,087							460,036							399,862							483,086
Total liabilities and stockholders’ equity	$	4,029,618						$	3,994,626						$	4,187,837						$	4,023,769
Net interest income			$	97,093						$	93,453						$	66,389						$	64,986
Interest rate spread						3.36	%						3.16	%						3.26	%						3.38	%
Net interest margin⁽²⁾						3.54	%						3.44	%						3.41	%						3.58	%
Total cost of deposits, including non-interest bearing deposits	$	3,141,556	$	13,827		0.59	%	$	3,177,099	$	32,381		1.36	%	$	3,601,418	$	4,435		0.25	%	$	3,139,405	$	10,763		0.69	%
Average interest-earning assets to interest-bearing liabilities						128.25	%						119.40	%

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~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

For the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020,~~2021 and ~~2019~~2020

	Increase (Decrease) Due to:						Total Increase /			Increase (Decrease) Due to:						Total Increase /
(Dollars in thousands)	Volume(1)			Yield/Rate(1)			(Decrease)			Volume(1)			Yield/Rate(1)			(Decrease)
Interest-earning assets:
Loans
Commercial and industrial	$	8,033		$	(9,465	)	$	(1,432	)	$	2,505		$	2,199		$	4,704
Commercial real estate		(3,640	)		(1,228	)		(4,868	)		1,506			(3,767	)		(2,261	)
Real estate construction		1,819			(3,624	)		(1,805	)		(138	)		(1,744	)		(1,882	)
Residential real estate		(1,788	)		(1,876	)		(3,664	)		(1,092	)		29			(1,063	)
Agricultural real estate		(239	)		(292	)		(531	)		67			(729	)		(662	)
Agricultural											185			(699	)		(514	)
Consumer		(182	)		(417	)		(599	)		526			(1,040	)		(514	)
Agricultural		20			(451	)		(431	)
Total loans		4,023			(17,353	)		(13,330	)		3,559			(5,751	)		(2,192	)
Taxable securities		(794	)		(1,817	)		(2,611	)		1,032			(2,347	)		(1,315	)
Nontaxable securities		(384	)		10			(374	)		(350	)		(55	)		(405	)
Federal funds sold and other		377			(1,005	)		(628	)		486			(934	)		(448	)
Total interest-earning assets	$	3,222		$	(20,165	)	$	(16,943	)	$	4,727		$	(9,087	)	$	(4,360	)
Interest-bearing liabilities:
Savings, NOW and money market	$	391		$	(12,382	)	$	(11,991	)	$	716		$	(2,899	)	$	(2,183	)
Certificates of deposit		(3,680	)		(2,883	)		(6,563	)		(1,258	)		(2,887	)		(4,145	)
Total interest-bearing deposits		(3,289	)		(15,265	)		(18,554	)		(542	)		(5,786	)		(6,328	)
FHLB term and line of credit advances		102			(3,007	)		(2,905	)		(1,572	)		(10	)		(1,582	)
Federal Reserve Bank discount window		6			—			6			(6	)		—			(6	)
Bank stock loan		122			(214	)		(92	)		(415	)		—			(415	)
Subordinated debt		1,223			(225	)		998			2,586			(11	)		2,575
Other borrowings		4			(40	)		(36	)		1			(8	)		(7	)
Total interest-bearing liabilities		(1,832	)		(18,751	)		(20,583	)		52			(5,815	)		(5,763	)
Net Interest Income	$	5,054		$	(1,414	)	$	3,640		$	4,675		$	(3,272	)	$	1,403

The decrease in loan interest income, including loan fees, was driven by a 8237 basis point decrease in yield on the loan portfolio from ~~5.74%~~5.05% for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, to ~~4.92%~~4.68% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, which was partially offset by an increase in average loan volume. ~~This decrease~~The Company, during a turbulent and competitive time in ~~yield is largely due~~the cycle, experienced average loan growth of $129.2 million as compared to the ~~1.0%~~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 ~~loans added to the portfolio during 2020. The impact to net~~borrowers, driving a comparative increase in fee income of $6.8 million. These drivers of increasing interest income ~~from~~were partially offset by a comparatively low interest rate environment impacting both originations and repricing of loan ~~fees for the nine months ended September 30, 2020, was $5.2 million, compared to $3.3 million for the nine months ended September 30, 2019.~~assets.

The ~~decrease~~reduction in ~~cost of~~expense on interest-bearing deposits was ~~created by~~due to a 8653 basis point decrease in cost on these deposits ~~and~~from 0.86% for the six months ended June 30, 2020, to ~~a lesser extent~~0.33% for the ~~decreased volume of these deposits.~~six months ended June 30, 2021. Average borrowings from the FHLB ~~increased~~decreased by ~~$5.4~~$259.3 million from an average balance of ~~$266.1~~$283.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, to an average balance of ~~$271.5~~$23.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2020.~~2021. The ~~negative effect of this increase in average FHLB borrowings was more than offset by a decrease in~~bank stock loan did not carry an outstanding balance during the first six

~~average rate~~months of ~~148 basis points from 2.56% for the nine months ended September 30, 2019, to 1.08% for the nine months ended September 30, 2020. Interest~~2021 and therefore there was no interest expense on our bank stock loan for the ~~nine~~six months ended ~~September~~June 30, ~~2020, was $415 thousand~~2021, as compared to ~~$507~~$415 thousand for the same time period in ~~2019.~~2020. Total cost of interest-bearing liabilities decreased 8639 basis points ~~to 0.86%~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2020, from 1.72% for~~2021, as compared to the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~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 ~~increase~~decrease in net interest margin is ~~primarily~~largely due to ~~an increase in loans coupled with~~yields on interest-earning assets decreasing at a faster rate than costs of interest-bearing liabilities. The rate decrease in ~~total interest-bearing deposits.~~interest-earning assets can be primarily attributed to a decreasing interest rate environment.

~~We maintain~~The Company adopted the FASB ASU 326 effective January 1, 2021, which requires the estimation of an allowance for ~~loan~~credit losses ~~for probable incurred credit losses.~~in accordance with the CECL methodology. The allowance for ~~loan~~credit losses is increased by a provision for ~~loan~~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 ~~past loan~~historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the ~~nature and volume~~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, ~~information about specific borrower situations~~industry and ~~estimated collateral values, discounted cash flows, economic conditions~~peer bank loan quality indications and other pertinent factors, including regulatory ~~guidance,~~recommendations, as described in “Part I – Item 2 – Financial Condition – Allowance for ~~Loan~~Credit Losses.” As these factors change, the amount of the ~~loan~~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 ~~September~~June 30, ~~2020,~~2021, compared with three months ended ~~September~~June 30, ~~2019~~2020: The reversal of provision for ~~loan~~credit losses for the three months ended ~~September~~June 30, ~~2020,~~2021, was ~~$815 thousand~~$1.7 million compared with ~~$679 thousand~~a provision for loan losses of $12.5 million for the three months ended ~~September~~June 30, ~~2019.~~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 ~~September~~June 30, ~~2020,~~2021, were ~~$806~~$567 thousand compared to net charge-offs of ~~$581~~$337 thousand for the three months ended ~~September~~June 30, ~~2019.~~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 ~~September~~June 30, ~~2020,~~2021, gross charge-offs were ~~$874~~$713 thousand offset by gross recoveries of ~~$68~~$146 thousand. In comparison, gross charge-offs were ~~$1.2 million~~$623 thousand for the three months ended ~~September~~June 30, ~~2019,~~2020, offset by gross recoveries of ~~$625~~$286 thousand.

~~Nine~~Six months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~nine~~six months ended ~~September~~June 30, ~~2019~~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 ~~for the nine months ended September 30, 2020, was $23.3 million compared with $17.3~~of $22.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~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 ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, were ~~$1.4 million~~$632 thousand compared to net charge-offs of ~~$10.9 million~~$594 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2019. The provision~~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 ~~loan losses during~~comparative purposes, net charge-offs for the ~~nine~~period would have been $142 thousand. For the six months ended ~~September~~June 30, 2020, was largely the result of increases in qualitative loss factors brought on by the projected economic impact of COVID-19. As part of the process to adjust qualitative factors in response to COVID-19, we considered the loss rates we experienced during the last economic downturn, the level of loan deferrals in the loan portfolio and industries we considered at risk to determine the necessary level of probable incurred loss. Included in the first nine months of 2019 was a $14.5 million provision against one credit relationship that was determined to be an isolated incident that was unique within our portfolio. For the nine months ended September 30, 2020,2021, gross charge-offs were ~~$1.8~~$1.0 million offset by gross recoveries of ~~$427~~$372 thousand. In comparison, gross charge-offs were ~~$11.9 million~~$980 thousand for the ~~nine~~six months ended ~~September~~June 30, ~~2019, of which $11.7 million was directly related to the above-mentioned credit relationship,~~2020, offset by gross recoveries of ~~$1.0 million.~~$386 thousand.

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 ~~September~~June 30, ~~2020,~~2021, compared with three months ended ~~September~~June 30, ~~2019~~2020: The following table provides a comparison of the major components of non-interest income for the three months ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

					2020 vs. 2019											2021 vs. 2020
(Dollars in thousands)	2020		2019		Change			%			2021			2020		Change			%
Service charges and fees	$	1,706	$	2,268	$	(562	)		(24.8	)%	$	2,169		$	1,365	$	804			58.9	%
Debit card income		2,491		2,205		286			13.0	%		2,679			2,201		478			21.7	%
Mortgage banking		877		820		57			7.0	%		848			831		17			2.0	%
Increase in value of bank-owned life insurance		489		507		(18	)		(3.6	)%		676			481		195			40.5	%
Other
Investment referral income		163		165		(2	)		(1.2	)%		194			133		61			45.9	%
Trust income		128		61		67			109.8	%		336			83		253			304.8	%
Insurance sales commissions		42		61		(19	)		(31.1	)%		46			11		35			318.2	%
Recovery on zero-basis purchased loans		10		28		(18	)		(64.3	)%		19			92		(73	)		(79.3	)%
Income from equity method investments		3		10		(7	)		(70.0	)%
Income (loss) from equity method investments												(56	)		5		(61	)		(1220.0	)%
Other non-interest income		576		443		133			30.0	%		1,526			526		1,000			190.1	%
Total other		922		768		154			20.1	%		2,065			850		1,215			142.9	%
Subtotal		6,485		6,568		(83	)		(1.3	)%		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	)%		—			4		(4	)		(100.0	)%
Total non-interest income	$	6,485	$	6,572	$	(87	)		(1.3	)%	$	9,100		$	5,732	$	3,368			58.8	%

~~Service charges and fees decreased $562 thousand~~Other non-interest income increased $1.0 million during the three months ended ~~September~~June 30, ~~2020,~~2021, as compared to the same time period ~~during 2019, mostly due~~in 2020, primarily from a $917 thousand valuation adjustment related to ~~a decline~~Almena. When comparing the three months ended June 30, 2021, to the same three month period in ~~non-sufficient funds charges. The decrease~~2020, the balance of the increase in non-interest income came principally from increases of $804 thousand in service charges and fees, ~~was partially offset by increases~~$663 thousand in gain on acquisition related to Almena, $478 thousand in debit card income, $253 thousand in trust income and ~~other non-interest income. Other~~$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 ~~increased $133 thousand, or 30.0%, during~~was 20.8% for quarter ended June 30, 2021, as compared to 14.8% in the ~~three~~comparable quarter last year.

Six months ended ~~September~~June 30, ~~2020, primarily from derivative mark-to-market valuation changes.~~

~~Nine~~2021, compared with six months ended ~~September~~June 30, 2020 ~~compared with nine months ended September 30, 2019~~: The following table provides a comparison of the major components of non-interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021 and ~~2019.~~2020.

					2020 vs. 2019											2021 vs. 2020
(Dollars in thousands)	2020		2019		Change			%			2021			2020		Change			%
Service charges and fees	$	5,097	$	6,431	$	(1,334	)		(20.7	)%	$	3,765		$	3,391	$	374			11.0	%
Debit card income		6,735		6,129		606			9.9	%		5,029			4,244		785			18.5	%
Mortgage banking		2,298		1,699		599			35.3	%		1,783			1,421		362			25.5	%
Increase in value of bank-owned life insurance		1,452		1,494		(42	)		(2.8	)%		1,277			963		314			32.6	%
Other
Investment referral income		461		489		(28	)		(5.7	)%		317			299		18			6.0	%
Trust income		283		181		102			56.4	%		496			154		342			222.1	%
Insurance sales commissions		71		106		(35	)		(33.0	)%		106			29		77			265.5	%
Recovery on zero-basis purchased loans		116		106		10			9.4	%		53			106		(53	)		(50.0	)%
Income from equity method investments		3		23		(20	)		(87.0	)%		(111	)		—		(111	)		100.0	%
Other non-interest income		995		1,672		(677	)		(40.5	)%		2,495			419		2,076			495.5	%
Total other		1,929		2,577		(648	)		(25.1	)%		3,356			1,007		2,349			233.3	%
Subtotal		17,511		18,330		(819	)		(4.5	)%		15,210			11,026		4,184			37.9	%
Net gain (loss) on acquisition												585			—		585			100.0	%
Net gain (loss) from securities transactions		12		17		(5	)		(29.4	)%		17			12		5			41.7	%
Total non-interest income	$	17,523	$	18,347	$	(824	)		(4.5	)%	$	15,812		$	11,038	$	4,774			43.3	%

~~Service charges and fees decreased $1.3~~Other non-interest income increased $2.1 million during the ~~nine~~six months ended ~~September~~June 30, 2020, versus the same time period during 2019, mainly due to decreases in non-sufficient fund charges, which was in part related to government programs linked to COVID-19. Other non-interest income decreased $677 thousand, or 40.5%, during the nine months ended September 30, 2020,

primarily from derivative mark-to-market valuation changes. Debit card income was $6.7 million for the nine months ended September 30, 2020, an increase of $606 thousand, or 9.9%, from $6.1 million for the nine months ended September 30, 2019. Mortgage banking increased $599 thousand during the nine months ended September 30, 2020,2021, as compared to the same time period ~~during 2019, mainly due~~in 2020, primarily from a valuation adjustment related to ~~origination volume.~~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.

Three months ended ~~September~~June 30, ~~2020,~~2021, compared with three months ended ~~September~~June 30, ~~2019~~2020: For the three months ended ~~September~~June 30, ~~2020,~~2021, non-interest expense totaled ~~$130.8~~$25.8 million, an increase of ~~$106.6~~$1.9 million, ~~due~~when compared to ~~the goodwill impairment of $104.8 million. Non-interest expense adjusted for goodwill impairment increased $1.8 million, or 7.4%, compared with~~ the three months ended ~~September~~June 30, ~~2019.~~2020. Changes in the various components of non-interest expense for the three months ended ~~September~~June 30, ~~2020,~~2021 and ~~2019~~2020, are discussed in more detail in the following table.

						2020 vs. 2019											2021 vs. 2020
(Dollars in thousands)	2020		2019			Change			%			2021			2020		Change			%
Salaries and employee benefits	$	13,877	$	13,039		$	838			6.4	%	$	12,769		$	12,695	$	74			0.6	%
Net occupancy and equipment		2,224		2,177			47			2.2	%		2,327			2,119		208			9.8	%
Data processing		2,817		2,673			144			5.4	%		3,474			2,763		711			25.7	%
Professional fees		877		991			(114	)		(11.5	)%		999			943		56			5.9	%
Advertising and business development		598		806			(208	)		(25.8	)%		799			403		396			98.3	%
Telecommunications		486		523			(37	)		(7.1	)%		512			390		122			31.3	%
FDIC insurance		360		111			249			224.3	%		425			414		11			2.7	%
Courier and postage		366		352			14			4.0	%		327			353		(26	)		(7.4	)%
Free nationwide ATM cost		439		459			(20	)		(4.4	)%		513			327		186			56.9	%
Amortization of core deposit intangible		1,030		784			246			31.4	%		1,030			974		56			5.7	%
Loan expense		107		165			(58	)		(35.2	)%		181			287		(106	)		(36.9	)%
Other real estate owned		133		(88	)		221			(251.1	)%		(468	)		269		(737	)		(274.0	)%
Other		2,690		2,231			459			20.6	%		2,458			2,000		458			22.9	%
Subtotal		26,004		24,223			1,781			7.4	%		25,346			23,937		1,409			5.9	%
Goodwill impairment		104,831		—			104,831			100.0	%
Merger expenses													460			—		460			100.0	%
Total non-interest expense	$	130,835	$	24,223		$	106,612			440.1	%	$	25,806		$	23,937	$	1,869			7.8	%

~~Salaries and employee benefits~~Data processing: ~~There was a $838~~Data processing costs increased $711 thousand ~~increase in salaries and employee benefits~~ for the ~~current quarter,~~period ended June 30, 2021, as compared to the same ~~quarter~~time period in ~~the prior year. This variance largely~~2020. The increase was ~~due~~primarily related to increases in ~~restricted stock unit expenses, employee incentives and increases in retirement plan expenses.~~

~~Net occupancy and equipment: Net occupancy and equipment includes expenses~~expense related to ~~the use of premises~~higher debit card transactions and ~~equipment, such as depreciation, operating leases, repairs and maintenance, insurance, property taxes and utilities and is net of incidental rental income of excess facilities.~~

~~Data processing: The increase in data processing is mainly attributable to expenses related to the new online banking system installed in 2019.~~

~~Professional fees: The variance of $114 thousand, or 11.5%, is principally due to a $123 thousand reduction in attorney fees.~~

~~Advertising and business development~~: Advertising and business development includes media advertising, community sponsorships, customer appreciation expenses and other forms of advertising. The decrease in advertising and business development is primarily because of a reduction in sponsorships and customer appreciation events because of COVID-19.software licensing expense.

Other real estate owned: Other real estate owned includes ~~other real estate~~operating expenses, ~~including~~ provision for unrealized losses, ~~and~~initial valuation gains on acquisition, gains or losses on ~~the~~ sales ~~of other real estate owned~~ and other ~~repossessed property.~~operating income. For the three months ended ~~September~~June 30, ~~2020,~~2021, there was $321 thousand in other real estate owned expense, partially offset by a net $188 thousand gain from the sale of other repossessed assets. For the three months ended September 30, 2019, there was $192 thousand gain on the sale of other real estate owned and $8$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 ~~$112~~$257 thousand in ~~other real estate owned expense.~~

~~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. For the three months ended September 30, 2020, employee expenses were $589 thousand, insurance expense was $258 thousand and correspondent bank fees were $193 thousand. For the three months ended September 30, 2019, employee expenses, including travel, meals, entertainment and education, were $802 thousand, insurance expense was $247 thousand and correspondent bank fees were $79 thousand.

~~Merger expenses: There were no merger expenses for the three-month periods ended September 30, 2020, and 2019.~~

~~Nine months ended September 30, 2020, compared with nine months ended September 30, 2019~~: For the nine months ended September 30, 2020, non-interest expense totaled $180.5 million, an increase of $105.7 million, largely due to a goodwill impairment of $104.8 million. Non-interest expense before goodwill impairment was $75.7 million, or a 2.5% increase, compared with $73.9 million for the nine months ended September 30, 2019. Changes in the various components of non-interest expense for the nine months ended September 30, 2020, and 2019 are discussed in more detail in the following table.

~~Salaries and employee benefits~~: There was a $128 thousand decrease in salaries and employee benefits for the nine months ended September 30, 2020, as compared to the nine months ended September 30, 2019. This variance largely was due to the deferral of loan origination costs, including salaries and benefits, associated with originating SBA PPP loans, partially offset by increases in incentives and restricted stock unit expense.

~~Net occupancy and equipment~~: Net occupancy and equipment includes expenses related to the use of premises and equipment, such as depreciation, operating leases, repairs and maintenance, insurance, property taxes and utilities and is net of incidental rental income of excess facilities. The majority of the increase is due to increases in maintenance and repairs to furniture and equipment, real estate taxes, depreciation and personal property taxes, partially offset by a decrease in maintenance and repairs to buildings.

~~Data processing: The increase in data processing expense was due to higher debit card volumes, particularly during the first quarter of 2020, and costs related to the online banking system, which was new in 2019.~~

~~Professional fees~~: The decrease is mainly attributable to reductions in consulting and advisory fees of $272 thousand, attorney fees of $173 thousand and regulatory assessment costs of $34 thousand, partially offset by a $291 thousand increase in accounting fees.

~~Advertising and business development~~: Advertising and business development includes media advertising, community sponsorships, customer appreciation expenses and other forms of advertising. Sponsorships and customer appreciation events were greatly restricted during the second and third quarters of 2020 causing a reduction in expenses.

~~Other real estate owned:~~ Other real estate owned includes other real estate expenses, including provision for unrealized losses and gains or losses on the sales of other real estate owned and other repossessed property. For the nine months ended SeptemberJune 30, 2020, there was ~~$791~~$334 thousand in ~~other real estate owned expense and a $120 thousand loss from sale of other real estate owned,~~operating expenses, partially offset by ~~$201~~$57 thousand of ~~gain from the sale~~net gains on sales and $8 thousand of other repossessed assets. For the nine months ended September 30, 2019, there was $632 thousand in other real estate owned expense, partially offset by $291 thousand gain on the sale of other real estate owned and $15 thousand of otheroperating 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 ~~nine~~six months ended ~~September~~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.

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 ~~were $1.9 million, insurance expense was $766 thousand and correspondent bank fees were $510 thousand. For the nine months ended September 30, 2019, employee expenses, including~~(including travel, meals, entertainment and ~~education, were $2.1 million,~~education), supplies, printing, insurance, ~~expense was $687 thousand and~~account-related losses, correspondent bank fees, ~~were $400 thousand.~~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.

~~Merger expenses: There were no merger expenses for the nine months ended September 30, 2020. Merger expenses were $915 thousand for the nine months ended September 30, 2019.~~

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 ~~67.4%~~58.9% for the three months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~63.6%~~62.0% for the three months ended ~~September~~June 30, ~~2019.~~2020. The ~~increase~~decrease was primarily due to ~~an increase~~increases in non-interest ~~expense~~income and ~~a decrease in non-interest~~net interest income, partially offset by an increase in ~~net interest income, as discussed in “Results of Operations – Net Interest Income and Net Interest Margin Analysis.”~~non-interest expense.

The efficiency ratio was ~~66.1%~~61.4% for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~66.1%~~65.4% for the ~~nine~~six months ended ~~September~~June 30, ~~2019. Additional discussion can be found~~2020. The decrease was primarily due to increases in ~~“Results~~non-interest income and net interest income, partially offset by an increase in non-interest expense.

The provision for income taxes is influenced by the amount of ~~Operations – Net Interest Income~~pre-tax income (loss), the amount of tax-exempt income, the amount of non-deductible expenses and ~~Net Interest Margin Analysis.”~~available tax credits.

~~Income~~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 ~~has been provided~~each quarter based on ~~an estimated annual~~its estimate as to the full year’s effective tax ~~rate,~~ which includes, in addition to statutory tax rates, ~~takes into consideration~~ estimated amounts for tax-exempt interest income, non-taxable life insurance income, ~~and~~ non-deductible ~~expenses in proportion to anticipated annual income before income taxes, as well as~~executive compensation, valuation allowance on deferred assets, other non-deductible expense and federal income tax credits anticipated to be available in ~~each~~proportion to anticipated annual ~~period. Tax~~income before income taxes. Certain items, however, are given discrete period treatment and the tax effects ~~of the goodwill impairment were separately reflected on a discrete basis~~for such items are therefore reported in the ~~current period.~~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.

~~Three~~Six months ended ~~September~~June 30, ~~2020,~~2021, compared with ~~three~~six months ended ~~September~~June 30, ~~2019~~2020: The effective income tax ~~benefit of $2.7 million recorded~~rate for the ~~three-month~~six-month period ended ~~September~~June 30, ~~2020 reflects~~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 ~~at an~~reflect, in addition to statutory rates, estimated ~~annual effective~~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 ~~rate of 22.5% on third-quarter~~credits to be available in proportion to anticipated annual income before ~~taxes~~income taxes. Certain items, however, are given discrete period treatment and ~~total goodwill impairment net~~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 ~~a deferred income~~ tax benefit ~~of $5.3 million associated with~~attributable to the portion of the goodwill impairment which will continue to be amortized for tax purposes. The income tax expense of $2.8 million recorded for the three-month period ended September 30, 2019 was recorded at and estimated annual effective tax rate of 21.1%.

~~Nine months ended September 30, 2020, compared with nine months ended September 30, 2019~~: The income tax benefit of $1.7 million recorded for the nine months ended September 30, 2020 reflects income tax expense provided at an estimated annual effective tax rate of 22.5% on income before taxes and total goodwill impairment net of a deferred income tax benefit of $5.3 million associated with the portion of the goodwill impairment which will continue to be amortized for tax purposes. Additional tax expense associated with the settlement in stock of restricted stock units and the exercise of options. The exercise of stock options recorded in the nine months ended September 2020 was $70 thousand. Income tax expense of $4.1 million recorded for the nine months ended September 30, 2019 was recorded at an estimated annual effective tax rate of 21.1% less tax benefits of $14 thousand associated withand the settlement of restricted stock units ~~and the exercise of stock options.~~

The consolidated financial statements and related notes included elsewhere in this Quarterly Report have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the ~~relative value~~first six months of ~~money over time due to inflation or recession.~~

~~Unlike many industrial companies, substantially all our assets and liabilities are monetary~~2020 resulted in ~~nature. As a result, interest rates have a more significant impact on our performance than the effects~~$67 thousand of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, other operating expenses reflect general levels of inflation.additional tax expense.

Total assets ~~decreased $84.0~~increased $254.9 million from December 31, ~~2019,~~2020, to ~~$3.87~~$4.27 billion at ~~September~~June 30, ~~2020.~~2021. This variance was primarily due to ~~a decrease~~increases of ~~$112.6~~$205.2 million in loans, net of allowance for credit losses, and $169.8 million in total securities, ~~and a $104.8 million goodwill impairment charge taken in the third quarter,~~ partially offset by ~~an increase~~a decrease of ~~$147.2~~$141.4 million in ~~net loans held for investment.~~cash and cash equivalents. Our total liabilities ~~decreased $8.1~~increased $249.5 million to ~~$3.46~~$3.86 billion at ~~September~~June 30, ~~2020.~~2021. The change in total liabilities came primarily from ~~a decrease in FHLB loan advances of $156.5 million, largely offset by an increase in subordinated debt of $73.0 million and~~ an increase in total deposits of ~~$70.1~~$240.0 million. Total stockholders’ equity ~~decreased $75.9~~increased $5.3 million from ~~$478.1~~$407.6 million at December 31, ~~2019,~~2020, to ~~$402.2~~$413.0 million at ~~September~~June 30, ~~2020.~~2021.

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

Loans are our largest category of earning assets and typically provide higher yields than other types of earning assets. At September 30, 2020, our gross loans held for investment totaled $2.73 billion, an increase of $169.1 million, or 6.6%, compared with December 31, 2019. The overall increase in loan volume consisted of $285.6 million from commercial and industrial and $54.4 million from commercial real estate, partially offset by decreases of $101.2 million from residential real estate, $44.5 million from real estate construction, $14.5 million from agricultural real estate, $9.8 million from agricultural and $913 thousand from consumer. We also had loans classified as held-for-sale totaling $9.1 million at September 30, 2020, as compared to $5.9 million at December 31, 2019.

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 ~~September~~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,~~held for sale, were ~~87.3% of deposits and 70.7% of total assets. At December 31, 2019, gross total loans, including loans held-for-sale, were 83.6%~~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.

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

~~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.~~

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, Consumer and other~~estate: : Agricultural real estate loans are loans ~~related to~~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 ~~September~~June 30, ~~2020,~~2021, are summarized in the following table.

	As of September 30, 2020								As of June 30, 2021
	One year or less		After one year through five years		After five years		Total		One year or less		After one year through five years		After five years		Total
	(Dollars in thousands)								(Dollars in thousands)
Commercial and industrial	$	193,560	$	592,208	$	71,476	$	857,244	$	194,029	$	451,177	$	86,920	$	732,126
Real Estate:
Commercial real estate		162,782		578,458		259,918		1,001,158		131,834		597,695		289,749		1,019,278
Real estate construction		81,183		38,344		67,644		187,171		63,093		103,568		75,275		241,936
Residential real estate		5,584		10,292		386,366		402,242		4,844		9,479		488,787		503,110
Agricultural real estate		47,154		56,296		23,899		127,349		49,070		56,677		23,273		129,020
Total real estate		296,703		683,390		737,827		1,717,920		248,841		767,419		877,084		1,893,344
Agricultural										64,148		25,656		8,108		97,912
Consumer		21,913		38,739		6,813		67,465		48,389		34,812		8,478		91,679
Agricultural		57,173		23,474		2,437		83,084
Total	$	569,349	$	1,337,811	$	818,553	$	2,725,713	$	555,407	$	1,279,064	$	980,590	$	2,815,061
Loans with a predetermined fixed interest rate		255,801		1,000,180		284,289		1,540,270	$	292,582	$	888,497	$	412,589	$	1,593,668
Loans with an adjustable/floating interest rate		313,548		337,631		534,264		1,185,443		262,825		390,567		568,001		1,221,393
Total	$	569,349	$	1,337,811	$	818,553	$	2,725,713	$	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, ~~2019,~~2020, are summarized in the following table.

	As of December 31, 2019								As of December 31, 2020
	One year or less		After one year through five years		After five years		Total		One year or less		After one year through five years		After five years		Total
	(Dollars in thousands)								(Dollars in thousands)
Commercial and industrial	$	218,717	$	224,356	$	128,574	$	571,647	$	157,313	$	487,729	$	89,453	$	734,495
Real Estate:
Commercial real estate		147,977		498,013		300,770		946,760		144,627		569,366		272,295		986,288
Real estate construction		64,528		114,606		52,533		231,667		75,659		76,295		50,454		202,408
Residential real estate		7,357		11,885		484,197		503,439		5,048		9,848		367,062		381,958
Agricultural real estate		56,064		52,324		33,480		141,868		50,527		56,514		26,652		133,693
Total real estate		275,926		676,828		870,980		1,823,734		275,861		712,023		716,463		1,704,347
Agricultural										62,804		25,911		5,607		94,322
Consumer		16,268		43,844		8,266		68,378		13,804		37,599		7,129		58,532
Agricultural		73,487		17,786		1,620		92,893
Total	$	584,398	$	962,814	$	1,009,440	$	2,556,652	$	509,782	$	1,263,262	$	818,652	$	2,591,696
Loans with a predetermined fixed interest rate		281,991		589,383		326,629		1,198,003	$	261,736	$	896,899	$	291,649	$	1,450,284
Loans with an adjustable/floating interest rate		302,407		373,431		682,811		1,358,649		248,046		366,363		527,003		1,141,412
Total	$	584,398	$	962,814	$	1,009,440	$	2,556,652	$	509,782	$	1,263,262	$	818,652	$	2,591,696

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. ~~We use the following definitions for risk ratings.~~

~~Pass: Loans classified as pass include all loans that do not fall under one of the three following categories. These loans are considered unclassified.~~

~~SpecialMention~~: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of our credit position at some future date. These loans are considered classified.

~~Substandard~~: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or by 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.

~~The risk category of loans by class of loans is as follows as of September 30, 2020.~~

~~The risk category of loans by class of loans is as follows as of December 31, 2019.~~

At September 30, 2020, loans considered unclassified increased to 97.5% of total loans, up from 97.4% of total loans at December 31, 2019. Classified loans were $67.2 million at September 30, 2020, an increase of $1.6 million, or 2.4%, from $65.6 million at December 31, 2019. As part of our COVID-19 response we have granted payment deferrals to our customers affected by the pandemic and if these loans do not return to normal payments after the deferral period the loans would be at risk of being downgraded in future periods. For additional information, see “~~Lending operations and accommodations~~“NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES” in the Condensed Notes to ~~borrowers” earlier in this section.~~Interim Consolidated Financial Statements.

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

	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
	(Dollars in thousands)						(Dollars in thousands)
Nonaccrual loans	$	52,745		$	38,379		$	56,808		$	43,689
Accruing loans 90 or more days past due		248			—			45			143
Restructured loans-accruing		—			—			—			—
OREO acquired through foreclosure, net		6,745			8,293			9,826			10,698
OREO transferred from property and equipment for real estate no longer used in operations		1,982			—
Other repossessed assets		—			236			15			67
Total nonperforming assets	$	61,720		$	46,908		$	66,694		$	54,597
Ratios:
Nonperforming assets to total assets		1.60	%		1.19	%		1.56	%		1.36	%
Nonperforming assets to total loans plus OREO		2.26	%		1.83	%		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. ~~Nonaccrual~~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 ~~loan~~credit losses. ~~See the~~

~~“Critical Accounting Policies –~~ ~~Impaired Loans~~ ~~and~~ ~~Allowance for Loan Losses” sections for information regarding the review of loans for determining impairment and the allowance for loan losses.~~

The nonperforming loans at ~~September~~June 30, ~~2020,~~2021, consisted of ~~205~~222 separate credits and 150 separate borrowers. We had ~~nine~~fourteen non-performing loan relationships, totaling ~~$41.3~~$40.2 million, with an outstanding balance in excess of $1.0 million as of ~~September~~June 30, ~~2020.~~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 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 ~~September~~June 30, ~~2020,~~2021, the Company had ~~$14.7~~$36.8 million in potential problem loans which were not included in either non-accrual or 90 days past due categories, compared to ~~$27.2~~$52.3 million at December 31, ~~2019.~~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 ~~loan~~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 ~~LOAN~~CREDIT LOSSES” in the Condensed Notes to Interim Consolidated Financial Statements.

Please see “Critical Accounting Policies – Allowance for ~~Loan~~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.

Analysis of allowance for ~~loan~~credit losses: At ~~September~~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 ~~$34.1~~$33.7 million, or ~~1.25% of total loans. At December 31, 2019, the allowance for loan losses aggregated $12.2 million, or 0.48%~~1.30% of total loans.

The allowance for ~~loan~~credit losses on loans ~~collectively evaluated for impairment~~measured on a collective basis totaled ~~$24.6~~$33.5 million, or ~~0.93%~~1.22% of the ~~$2.66~~$2.76 billion in loans ~~collectively evaluated for impairment~~measured on a collective basis at ~~September~~June 30, ~~2020,~~2021, compared to an allowance for ~~loan~~credit losses of ~~$11.0~~$23.2 million, or ~~0.44%~~0.92% of the ~~$2.50~~$2.54 billion in loans ~~collectively evaluated for impairment~~measured on a collective basis at December 31, ~~2019.~~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 ~~increases~~increase in the allowance for ~~loan~~credit losses ~~as a percentage of total loans~~ and of loans ~~collectively evaluated for impairment~~measured on a collective basis principally reflect ~~management’s evaluation~~the adoption of current environmental conditions and changes in the composition and quality of our loan portfolio. Also considered by management in evaluating the allowance for loan losses are applied loss factors which are based in part on historical loss experience from the last major economic downturn. Allowance for loan losses related to consumer loans increased substantially due to the portfolios higher historical realized loss rates.CECL.

The following table presents, as of and for the periods indicated, an analysis of the allowance for ~~loan~~credit losses and other related data.

	As of and for the Three Months Ended September 30,						As of and for the Nine Months Ended September 30,						As of and for the Three Months Ended June 30,						As of and for the Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
	(Dollars in thousands)						(Dollars in thousands)						(Dollars in thousands)						(Dollars in thousands)
Average loans outstanding	$	2,758,680		$	2,646,454		$	2,697,188		$	2,620,897		$	2,853,145		$	2,806,865		$	2,795,352		$	2,666,104
Gross loans outstanding at end of period⁽¹⁾	$	2,725,713		$	2,600,924		$	2,725,713		$	2,600,924		$	2,815,061		$	2,806,334		$	2,815,061		$	2,806,334
Allowance for loan losses at beginning of the period	$	34,078		$	17,777		$	12,232		$	11,454
Provision for loan losses		815			679			23,255			17,299
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		(3	)		(18	)		(259	)		(8,756	)		(54	)		(255	)		(61	)		(284	)
Real estate:
Commercial real estate		(115	)		(506	)		(174	)		(1,114	)		—			(51	)		(53	)		(59	)
Real estate construction		(193	)		—			(193	)		—			—			—			—			—
Residential real estate		(153	)		(355	)		(312	)		(934	)		(3	)		(134	)		(12	)		(159	)
Agricultural real estate		(167	)		(9	)		(191	)		(43	)		(490	)		(7	)		(502	)		(24	)
Agricultural														(1	)		(1	)		(1	)		(1	)
Consumer		(243	)		(313	)		(697	)		(994	)		(165	)		(175	)		(375	)		(453	)
Agricultural		—			(5	)		(1	)		(47	)
Total charge-offs		(874	)		(1,206	)		(1,827	)		(11,888	)		(713	)		(623	)		(1,004	)		(980	)
Recoveries:
Commercial and industrial		3			17			16			66			47			9			70			41
Real estate:
Commercial real estate		1			47			7			96			—			6			127			6
Real estate construction		—			—			194			24			—			194			—			194
Residential real estate		22			450			26			488			4			3			5			4
Agricultural real estate		5			38			5			38			18			—			18			—
Agricultural														1			—			4			1
Consumer		32			73			173			296			76			74			148			140
Agricultural		5			—			6			2
Total recoveries		68			625			427			1,010			146			286			372			386
Net recoveries (charge-offs)		(806	)		(581	)		(1,400	)		(10,878	)		(567	)		(337	)		(632	)		(594	)
Allowance for loan losses at end of the period	$	34,087		$	17,875		$	34,087		$	17,875
Allowance for credit losses at end of the period													$	51,834		$	34,078		$	51,834		$	34,078
Ratio of allowance to period-end loans		1.25	%		0.69	%		1.25	%		0.69	%		1.84	%		1.21	%		1.84	%		1.21	%
Annualized ratio of net charge-offs (recoveries) to average loans		0.12	%		0.09	%		0.07	%		0.55	%		0.08	%		0.05	%		0.05	%		0.04	%

The following table shows the allocation of the allowance for ~~loan~~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.

	September 30, 2020					December 31, 2019					June 30, 2021					December 31, 2020
	Amount		% of Total Allowance			Amount		% of Total Allowance			Amount		% of Total Allowance			Amount		% of Total Allowance
	(Dollars in thousands)										(Dollars in thousands)
Balance of allowance for loan losses applicable to:
Balance of allowance for credit losses applicable to:
Commercial and industrial	$	11,529		33.8	%	$	3,061		25.0	%	$	18,690		36.0	%	$	12,456		37.0	%
Real estate:
Commercial real estate		8,898		26.1	%		2,704		22.1	%		13,776		26.6	%		8,776		26.0	%
Real estate construction		44		0.1	%		1,215		9.9	%		1,449		2.8	%		236		0.7	%
Residential real estate		4,593		13.5	%		2,676		21.9	%		9,808		18.9	%		4,559		13.5	%
Agricultural real estate		1,281		3.8	%		608		5.0	%		847		1.6	%		904		2.7	%
Agricultural												4,695		9.1	%		758		2.2	%
Consumer		6,974		20.5	%		1,422		11.6	%		2,569		5.0	%		6,020		17.9	%
Agricultural		768		2.2	%		546		4.5	%
Total allowance for loan losses	$	34,087		100.0	%	$	12,232		100.0	%
Total allowance for credit losses											$	51,834		100.0	%	$	33,709		100.0	%

Management believes that the allowance for ~~loan~~credit losses at ~~September~~June 30, ~~2020,~~2021, was adequate to cover ~~probable incurred~~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 ~~September~~June 30, 2020. While COVID-19 began impacting many borrowers in the first nine months of 2020, such loans may not meet the threshold of impaired until future periods as borrowers may not have sufficient levels of liquidity, operating performance and guarantor support to perform in accordance with the terms of their loans in periods beyond September 30, 2020, and the resulting future losses would be recorded in the period incurred. For loans modified that do not meet the definition of trouble debt restructurings, those loans may subsequently default, and such future losses would be recorded when the loss is incurred.2021.

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 ~~September~~June 30, ~~2020,~~2021, the carrying amount of investment securities totaled ~~$798.6 million, a decrease~~$1.04 billion, an increase of ~~$112.6~~$169.8 million compared with December 31, ~~2019.~~2020. At ~~September~~June 30, ~~2020,~~2021, securities represented ~~20.7%~~24.4% of total assets compared with ~~23.1%~~21.7% at December 31, ~~2019.~~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.

	September 30, 2020				December 31, 2019				June 30, 2021				December 31, 2020
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)								(Dollars in thousands)
U.S. Government-sponsored entities	$	995	$	1,029	$	—	$	—	$	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		581,265		604,870		141,082		142,067		661,938		674,494		630,485		651,425
Private label residential mortgage-backed securities		21,165		21,084		—		—		136,671		136,446		44,302		44,178
Corporate		44,508		44,864		—		—		52,514		53,994		52,503		53,650
Small Business Administration loan pools		1,227		1,276		—		—		11,037		11,012		1,226		1,270
State and political subdivisions		121,262		125,453		—		—		99,613		103,556		111,865		116,256
Total available-for-sale securities	$	770,422	$	798,576	$	141,082	$	142,067	$	1,023,645	$	1,041,613	$	845,401	$	871,827

~~The following table summarizes the amortized cost and fair value by classification of held-to-maturity securities as of the dates shown.~~69

At ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~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 ~~adjusted cost~~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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~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 and held-to-maturity securities are shown at cost, adjusted for the amortization of premiums and the accretion of discounts.~~value.

	September 30, 2020																									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					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			Carrying Value		Yield			Carrying Value		Yield			Carrying Value		Yield			Carrying Value		Yield			Carrying Value		Yield
	(Dollars in thousands)																									(Dollars in thousands)
Available-for-sale securities:
U.S. Government-sponsored entities	$	—	—%			$	1,029		2.78	%	$	—	—%			$	—	—%			$	1,029		2.78	%	$	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		14		5.49	%		1,657		3.16	%		64,228		2.87	%		538,971		2.45	%		604,870		2.50	%		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		—	—%				—	—%				—	—%				21,084		(0.48	)%		21,084		(0.48	)%		—	—%				—	—%				—	—%				136,446		1.40	%		136,446		1.40	%
Corporate		5,107		2.17	%		—	—%				35,763		4.35	%		3,994		4.25	%		44,864		4.10	%		—	—%				—	—%				53,994		4.18	%		—	—%				53,994		4.18	%
Small Business Administration loan pools		—	—%				—	—%				—	—%				1,276		2.38	%		1,276		2.38	%		—	—%				—	—%				9,878		0.77	%		1,134		2.39	%		11,012		0.94	%
State and political subdivisions(1)		3,216		2.57	%		27,475		2.50	%		30,715		2.87	%		64,047		3.16	%		125,453		2.93	%
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		8,337		2.33	%		30,161		2.54	%		130,706		3.28	%		629,372		2.44	%		798,576		2.58	%		6,682		2.05	%		89,476		1.72	%		296,963		2.20	%		648,492		1.93	%		1,041,613		1.99	%
Total debt securities	$	8,337		2.33	%	$	30,161		2.54	%	$	130,706		3.28	%	$	629,372		2.44	%	$	798,576		2.58	%	$	6,682		2.05	%	$	89,476		1.72	%	$	296,963		2.20	%	$	648,492		1.93	%	$	1,041,613		1.99	%

	December 31, 2019																									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					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			Carrying Value		Yield			Carrying Value		Yield			Carrying Value		Yield			Carrying Value		Yield			Carrying Value		Yield
	(Dollars in thousands)																									(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	$	—	—%			$	4		3.50	%	$	39		2.50	%	$	142,024		2.56	%	$	142,067		2.56	%		5		5.77	%		2,093		3.26	%		101,352		2.12	%		547,975		2.10	%		651,425		2.10	%
Total available-for-sale securities		—	—%				4		3.50	%		39		2.50	%		142,024		2.56	%		142,067		2.56	%
Held-to-maturity securities:
U.S. government- sponsored entities		999		1.65	%		992		2.78	%		—	—%				—	—%				1,991		2.21	%
Mortgage-backed securities
Government-sponsored residential mortgage-backed securities		—	—%				2,826		2.81	%		71,317		2.96	%		519,093		2.81	%		593,236		2.83	%
Private label residential mortgage-backed securities																											—		—	%		—		—	%		—		—	%		44,178		0.23	%		44,178		0.23	%
Corporate		—	—%				5,095		2.74	%		17,897		4.94	%		—	—%				22,992		4.45	%		5,050		2.17	%		—		—	%		48,600		4.25	%		—		—	%		53,650		4.05	%
Small Business Administration loan pools		—	—%				—	—%				—	—%				1,478		2.73	%		1,478		2.73	%		—		—	%		—		—	%		—		—	%		1,270		2.38	%		1,270		2.38	%
State and political subdivisions⁽¹⁾		16,421		0.83	%		29,082		2.78	%		33,320		2.91	%		70,539		3.15	%		149,362		2.77	%		3,765		2.41	%		26,679		2.45	%		24,212		2.93	%		61,600		3.17	%		116,256		2.93	%
Total held-to-maturity securities		17,420		0.88	%		37,995		2.77	%		122,534		3.24	%		591,110		2.85	%		769,059		2.87	%
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	$	17,420		0.88	%	$	37,999		2.77	%	$	122,573		3.24	%	$	733,134		2.80	%	$	911,126		2.82	%	$	12,845		1.61	%	$	29,795		2.52	%	$	174,164		2.83	%	$	655,023		2.07	%	$	871,827		2.23	%

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019, 89.1%~~2020, 69.4% and ~~89.9%~~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 ~~2.2~~3.9 years and ~~4.2~~2.5 years and a modified duration of ~~2.2~~3.7 years and ~~3.8~~2.5 years. At ~~September~~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 ~~0.7~~2.7 years and 2.2 years and a modified duration of ~~0.7~~2.6 years and 2.1 years. ~~There were no private label residential mortgage-backed securities held by us at December 31, 2019.~~

If the current economic environment brought about by the COVID-19 pandemic continues for an extended period, it could adversely impact the ability of state and political subdivisions to repay their current debt obligations when due. As part of the Company’s review of potential risk caused by the COVID-19 pandemic we have reviewed the types and amount of bonds that will mature over the next 12 months. At September 30, 2020, we had total general obligation bonds of $84.7 million with $2.0 million maturing in the next 12 months and total revenue bonds of $34.4 million with $571 thousand maturing in the next 12 months.

At ~~September~~June 30, ~~2020,~~2021, we performed an interim ~~quantitative~~qualitative analysis and ~~determined from this analysis~~concluded there were not any indications that goodwill was impaired and subsequently booked a $104.8 million non-cash charge for goodwill impairment. For more information on our September 30, 2020, interim analysis, see “Critical Accounting Policies” and “NOTE 1 – BASIS OF PRESENTATION.”

On January 31, 2020, the Company submitted a notice of proposed branch closing with the Federal Reserve for three locations. At their December meeting, the Board of Directors voted to close these branches and to move the loans, deposits and property that would not be sold with the building to other branches that will remain open in the markets of the branches being closed. The three locations were subsequently closed on May 1, 2020. At the present time, the Company does not have an active program in place to locate a buyer, these properties are not listed with a realtor and they are not being actively marketed. These properties were moved to other real estate owned during the third quarter.impaired.

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

	September 30, 2020					December 31, 2019					June 30, 2021					December 31, 2020
	Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total			Amount		Percent of Total
	(Dollars in thousands)										(Dollars in thousands)
Non-interest-bearing demand	$	693,967		22.1	%	$	481,298		15.7	%	$	992,565		26.9	%	$	791,639		22.9	%
Interest-bearing demand		870,398		27.8	%		703,048		23.0	%		989,043		26.8	%		1,016,424		29.5	%
Savings and money market		945,909		30.2	%		1,046,000		34.1	%		1,046,453		28.4	%		1,012,673		29.4	%
Time		623,344		19.9	%		833,170		27.2	%		659,494		17.9	%		626,854		18.2	%
Total deposits	$	3,133,618		100.0	%	$	3,063,516		100.0	%	$	3,687,555		100.0	%	$	3,447,590		100.0	%

Total deposits at ~~September~~June 30, ~~2020,~~2021, were ~~$3.13~~$3.69 billion, an increase of ~~$70.1~~$240.0 million, or ~~2.3%~~7.0%, compared to total deposits of ~~$3.06~~$3.45 billion at December 31, ~~2019.~~2020.

Included in interest-bearing demand deposits are brokered deposit balances of $150.9 million at September 30, 2020, and $43.8 million at December 31, 2019. Also included in savings and money market deposits are brokered deposit balances of $5.9 million as of September 30, 2020, and $20.0 million as of December 31, 2019. These balances represent customer funds placedEquity Bank participates in the Insured Cash Sweep (“ICS”) service that allows ~~Equity Bank~~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. Brokered certificates of deposit as of September 30, 2020, were $10.1 million and $9.5 million at December 31, 2019. Of these balances, $10.1 million at September 30, 2020, and $9.5 million at December 31, 2019, were reciprocal customer funds placedThe bank also participates in the Certificate of Deposit Account Registry Service (“CDARS”) program. CDARS allows ~~Equity Bank~~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.

The following table provides information on the maturity distribution of time deposits of $100 thousand or more as of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019.~~2020.

	September 30, 2020		December 31, 2019		Change			%			June 30, 2021		December 31, 2020		Change			%
	(Dollars in thousands)										(Dollars in thousands)
3 months or less	$	91,694	$	132,148	$	(40,454	)		(30.6	)%	$	123,741	$	93,025	$	30,716			33.0	%
Over 3 through 6 months		76,351		110,714		(34,363	)		(31.0	)%		66,353		70,737		(4,384	)		(6.2	)%
Over 6 through 12 months		117,391		163,802		(46,411	)		(28.3	)%		162,659		120,006		42,653			35.5	%
Over 12 months		98,177		133,337		(35,160	)		(26.4	)%		70,108		100,877		(30,769	)		(30.5	)%
Total Time Deposits	$	383,613	$	540,001	$	(156,388	)		(29.0	)%	$	422,861	$	384,645	$	38,216			9.9	%

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 ~~debentures.~~debt. For additional information see “NOTE 6 – BORROWINGS” in the Condensed Notes to Interim Consolidated Financial Statements for additional information.

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

During the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2020,~~2021 and ~~2019,~~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 ~~$2.70~~$2.80 billion for the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, an increase of ~~3.4%~~3.7% over the December 31, ~~2019,~~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 ~~2.8~~4.0 years and a modified duration of ~~2.6~~3.7 years at ~~September~~June 30, ~~2020.~~2021.

Cash and cash equivalents were ~~$65.8~~$139.3 million at ~~September~~June 30, ~~2020,~~2021, a decrease of ~~$23.5~~$141.4 million from the ~~$89.3~~$280.7 million cash and cash equivalents at December 31, ~~2019.~~2020. The decrease in cash and cash equivalents is driven primarily by ~~$35.2~~$430.2 million net cash used in investing activities, ~~and $24.7 million net cash used in financing activities,~~ partially offset by ~~$36.4~~$241.6 provided by financing activities and $47.2 million provided by operating activities. Cash and cash equivalents at January 1, ~~2020,~~2021, plus liquidity provided by operating activities, pay downs, sales and maturities of investment securities and FHLB borrowings during the first ~~nine~~six months of ~~2020~~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.

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 ~~September~~June 30, ~~2020,~~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.

	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		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)										(Dollars in thousands)
Standby and performance letters of credit	$	5,721	$	400	$	210	$	—	$	6,331	$	10,383	$	350	$	188	$	—	$	10,921
Commitments to extend credit		266,895		43,581		20,699		86,622		417,797		308,628		50,503		126,032		75,953		561,116
Total	$	272,616	$	43,981	$	20,909	$	86,622	$	424,128	$	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 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~~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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~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 ~~September~~June 30, ~~2020,~~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.

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										For the three months ended
	September 30, 2020		June 30, 2020		March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2021		March 31, 2021		December 31, 2020		September 30, 2020		June 30, 2020
	(Dollars in thousands, except per share data)										(Dollars in thousands, except per share data)
Total stockholders’ equity	$	402,172	$	479,766	$	477,351	$	478,060	$	467,050	$	412,995	$	397,815	$	407,649	$	402,172	$	479,766
Less: goodwill		31,601		136,432		136,432		136,432		136,432		31,601		31,601		31,601		31,601		136,432
Less: core deposit intangibles, net		17,101		18,131		19,105		19,907		20,727		13,993		15,023		16,057		17,101		18,131
Less: mortgage servicing asset, net		1		2		4		5		7		—		—		—		1		2
Less: naming rights, net		1,141		1,152		1,163		1,174		1,184		1,109		1,119		1,130		1,141		1,152
Tangible common equity	$	352,328	$	324,049	$	320,647	$	320,542	$	308,700	$	366,292	$	350,072	$	358,861	$	352,328	$	324,049
Common shares issued at period end		14,853,487		15,218,301		15,198,986		15,444,434		15,440,334		14,360,172		14,383,913		14,540,556		14,853,487		15,218,301
Diluted common shares outstanding at period end		14,945,282		15,334,144		15,297,319		15,719,810		15,647,456		14,664,603		14,668,287		14,756,378		14,853,487		15,334,144
Book value per common share	$	27.08	$	31.53	$	31.41	$	30.95	$	30.25	$	28.76	$	27.66	$	28.04	$	27.08	$	31.53
Tangible book value per common share	$	23.72	$	21.29	$	21.10	$	20.75	$	19.99	$	25.51	$	24.34	$	24.68	$	23.72	$	21.29
Tangible book value per diluted common share	$	23.57	$	21.13	$	20.96	$	20.39	$	19.73	$	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															For the three months ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in thousands)															(Dollars in thousands)
Total stockholders’ equity	$	402,172		$	479,766		$	477,351		$	478,060		$	467,050		$	412,995		$	397,815		$	407,649		$	402,172		$	479,766
Less: goodwill		31,601			136,432			136,432			136,432			136,432			31,601			31,601			31,601			31,601			136,432
Less: core deposit intangibles, net		17,101			18,131			19,105			19,907			20,727			13,993			15,023			16,057			17,101			18,131
Less: mortgage servicing asset, net		1			2			4			5			7			—			—			—			1			2
Less: naming rights, net		1,141			1,152			1,163			1,174			1,184			1,109			1,119			1,130			1,141			1,152
Tangible common equity	$	352,328		$	324,049		$	320,647		$	320,542		$	308,700		$	366,292		$	350,072		$	358,861		$	352,328		$	324,049
Total assets	$	3,865,571		$	4,205,269		$	3,943,832		$	3,949,578		$	4,074,663		$	4,268,216		$	4,196,184		$	4,013,356		$	3,865,571		$	4,205,269
Less: goodwill		31,601			136,432			136,432			136,432			136,432			31,601			31,601			31,601			31,601			136,432
Less: core deposit intangibles, net		17,101			18,131			19,105			19,907			20,727			13,993			15,023			16,057			17,101			18,131
Less: mortgage servicing asset, net		1			2			4			5			7			—			—			—			1			2
Less: naming rights, net		1,141			1,152			1,163			1,174			1,184			1,109			1,119			1,130			1,141			1,152
Tangible assets	$	3,815,727		$	4,049,552		$	3,787,128		$	3,792,060		$	3,916,313		$	4,221,513		$	4,148,441		$	3,964,568		$	3,815,727		$	4,049,552
Equity to assets		10.40	%		11.41	%		12.10	%		12.10	%		11.46	%		9.68	%		9.48	%		10.16	%		10.40	%		11.41	%
Tangible common equity to tangible assets		9.23	%		8.00	%		8.47	%		8.45	%		7.88	%		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															For the three months ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in thousands)															(Dollars in thousands)
Total average stockholders’ equity	$	483,088		$	483,605		$	482,567		$	473,562		$	463,252		$	404,039		$	395,638		$	409,572		$	483,088		$	483,605
Less: average intangible assets		154,049			156,194			157,097			157,993			158,760			47,334			48,376			54,547			154,049			156,194
Average tangible common equity	$	329,039		$	327,411		$	325,470		$	315,569		$	304,492		$	356,705		$	347,262		$	355,025		$	329,039		$	327,411
Net income allocable to common stockholders	$	(90,405	)	$	1,689		$	1,258		$	10,014		$	10,406
Net income (loss) allocable to common stockholders																$	15,166		$	15,075		$	12,488		$	(90,405	)	$	1,689
Goodwill impairment		104,831			—			—			—			—			—			—			—			104,831			—
Amortization of intangible assets		1,043			986			814			833			797			1,041			1,045			1,055			1,043			986
Less: tax effect		5,539			207			171			175			167			219			219			222			5,539			207
Adjusted net income allocable to common stockholders	$	9,930		$	2,468		$	1,901		$	10,672		$	11,036		$	15,988		$	15,901		$	13,321		$	9,930		$	2,468
Return on total average stockholders’ equity (ROAE) annualized		(74.45	)%		1.40	%		1.05	%		8.39	%		8.91	%		15.06	%		15.45	%		12.13	%		(74.45	)%		1.40	%
Return on average tangible common equity (ROATCE) annualized		12.01	%		3.03	%		2.35	%		13.42	%		14.38	%		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															For the three months ended
	September 30, 2020			June 30, 2020			March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020			June 30, 2020
	(Dollars in thousands)															(Dollars in thousands)
Non-interest expense	$	130,835		$	23,937		$	25,758		$	24,846		$	24,223		$	25,806		$	24,881		$	28,460		$	130,835		$	23,937
Less: goodwill impairment		104,831			—			—			—			—			—			—			—			104,831			—
Non-interest expense, excluding goodwill impairment	$	26,004		$	23,937		$	25,758		$	24,846		$	24,223
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	$	32,107		$	32,891		$	32,095		$	32,405		$	31,526		$	34,630		$	31,759		$	35,559		$	32,107		$	32,891
Non-interest income	$	6,485		$	5,732		$	5,306		$	6,641		$	6,572		$	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		—			4			8			(3	)		4			—			17			(1	)		—			4
Non-interest income, excluding net gain (loss) from securities transactions	$	6,485		$	5,728		$	5,298		$	6,644		$	6,568
Net interest income plus non-interest income, excluding net gain (loss) from securities transactions	$	38,592		$	38,619		$	37,393		$	39,049		$	38,094
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		339.02	%		61.98	%		68.87	%		63.63	%		63.58	%		59.01	%		64.67	%		64.60	%		339.02	%		61.98	%
Efficiency Ratio		67.38	%		61.98	%		68.88	%		63.63	%		63.59	%		58.85	%		64.18	%		67.19	%		67.38	%		61.98	%

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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~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; ~~the variable rate Federal Home Loan Bank~~ 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~~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 ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~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 ~~September~~June 30, ~~2020,~~2021, non-interest-bearing deposits were approximately ~~$694.0~~$200.9 million or ~~44.2%~~25.4% higher than that deposit type at December 31, ~~2019.~~2020. Substantially all investments and approximately ~~56.5%~~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.

	Impact on Net Interest Income						Impact on Net Interest Income
Change in prevailing interest rates	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
+300 basis points		(8.1	)%		(12.3	)%		(5.3	)%		(1.2	)%
+200 basis points		(4.6	)%		(7.6	)%		(2.7	)%		0.4	%
+100 basis points		(1.8	)%		(3.5	)%		(1.1	)%		1.0	%
0 basis points		—			—			—			—
-100 basis points		(1.0	)%		1.9	%		(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						Impact on Economic Value of Equity
Change in prevailing interest rates	September 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
+300 basis points		8.8	%		(7.6	)%		2.2	%		12.8	%
+200 basis points		11.2	%		(3.0	)%		6.1	%		14.4	%
+100 basis points		7.6	%		(0.6	)%		4.3	%		9.2	%
0 basis points		—			—			—			—
-100 basis points		(20.4	)%		(4.4	)%		(19.1	)%		(21.2	)%

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.

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.

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.

~~In addition to~~There have been no material changes in the ~~other information contained in this Quarterly Report on Form 10-Q, the following risk factor represents material updates and additions to the~~Company’s risk factors previously disclosed in our Annual Report on Form ~~10- K for the fiscal year ended December 31, 2019, as~~10-K filed with the Securities and Exchange Commission. Additional risks not presently known to us, or that we currently deem immaterial, may also adversely affect our business, financial condition or results of operations. Further, to the extent that any of the information contained in this Quarterly ReportSEC on Form 10-Q constitutes forward-looking statements, the risk factor set forth below also is a cautionary statement identifying important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of us.

~~In December 2019, a novel coronavirus (COVID-19) was reported in China, and, in~~ March 2020, the World Health Organization declared it a pandemic. On March 12, 2020, the President of the United States declared the COVID-19 outbreak in the United States a national emergency. The COVID-19 pandemic has caused significant economic dislocation in the United States as many state and local governments have ordered non-essential businesses to close and residents to shelter in place at home. This has resulted in an unprecedented slow-down in economic activity and a related increase in unemployment. Since the COVID-19 outbreak, more than 22 million people have filed claims for unemployment and stock markets have declined in value, in particular, bank stocks have significantly declined in value. In response to the COVID-19 outbreak, the Federal Reserve Board has reduced the benchmark fed funds rate to a target range of 0% to 0.25% and the yields on 10 and 30-year treasury notes have declined to historic lows. Various state governments and federal agencies are requiring lenders to provide forbearance and other relief to borrowers (e.g., waiving late payment and other fees). The federal banking agencies have encouraged financial institutions to prudently work with affected borrowers and recently passed legislation has provided relief from reporting loan classifications due to modifications related to the COVID-19 outbreak. Certain industries have been particularly hard hit, including the travel and hospitality industry, the restaurant industry and the retail industry. Finally, the spread of the coronavirus has caused us to modify our business practices, including employee travel, work locations and cancellation of physical participation in meetings, events and conferences. We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners.

Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the full impact of the COVID-19 outbreak on our business. The extent of such impact will depend on future developments, which are highly uncertain, including when the coronavirus can be controlled and abated and when and how the economy may be reopened.9, 2021.

~~On April 18, 2019,~~In September of 2020, the Company’s Board of Directors authorized the repurchase of up to ~~1,100,000~~800,000 shares of the Company’s outstanding common stock, from time to time, beginning ~~April 29, 2019,~~October 30, 2020, and concluding October ~~30, 2020.~~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 ~~third~~second quarter of ~~2020.~~2021.

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.


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)

Part I	Financial Information	5
Item 1.	Financial Statements	5
	Consolidated Balance Sheets	5
	Consolidated Statements of ~~Operations~~Income	6
	Consolidated Statements of Comprehensive Income ~~(Loss)~~	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	4348
	Overview	4348
	Critical Accounting Policies	4550
	Results of Operations	4851
	Financial Condition	5963
	Liquidity and Capital Resources	7072
	Non-GAAP Financial Measures	7274
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7577
Item 4.	Controls and Procedures	7779
Part II	Other Information	7880
Item 1.	Legal Proceedings	7880
Item 1A.	Risk Factors	7880
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7880
Item 3.	Defaults Upon Senior Securities	7980
Item 4.	Mine Safety Disclosures	7980
Item 5.	Other Information	7980
Item 6.	Exhibits	7980

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

	September 30, 2020			December 31, 2019
Contractually required principal payments	$	25,497		$	29,895
Discount		(5,718	)		(6,505	)
Recorded investment	$	19,779		$	23,390

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


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

	September 30, 2020
Commercial real estate	$	4,965
Commercial and industrial		25,746
Residential real estate		9,752
Agricultural real estate		643
Consumer		122
Total loans	$	41,228

	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

	As of and for the nine months ended
	September 30, 2020				September 30, 2019
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
Commercial real estate	$	556	$	36	$	7,427	$	82
Commercial and industrial		14,229		23		2,064		5
Residential real estate		4,299		14		4,161		50
Agricultural real estate		566		5		1,804		—
Consumer		—		—		31		—
Agricultural		—		—		300		—
Subtotal		19,650		78		15,787		137
With an allowance recorded:
Commercial real estate		5,667		35		7,140		74
Commercial and industrial		9,507		362		18,528		12
Residential real estate		3,573		5		6,965		28
Agricultural real estate		3,534		34		907		2
Consumer		318		3		772		9
Agricultural		1,401		1		663		2
Subtotal		24,000		440		34,975		127
Total	$	43,650	$	518	$	50,762	$	264

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

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

	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

	Available-for- Sale Securities			Held-to- Maturity Securities			Accumulated Other Comprehensive Income (Loss)
September 30, 2020
Net unrealized or unamortized gains (losses)	$	28,154		$	—		$	28,154
Tax effect		(7,080	)		—			(7,080	)
	$	21,074		$	—		$	21,074
December 31, 2019
Net unrealized or unamortized gains (losses)	$	985		$	(988	)	$	(3	)
Tax effect		(248	)		248			—
	$	737		$	(740	)	$	(3	)

	Fair Value		Valuation Technique	Unobservable Input	Range (weighted average) or Multiple of Earnings
September 30, 2020
Impaired real estate loans	$	20,018	Sales Comparison Approach	Adjustments for differences between comparable sales with additional 15.00% stress	6% - 26% (16%)
Impaired other real estate owned	$	5,627	Sales Comparison Approach	Adjustments for differences between comparable sales with additional 13.29% stress	8% - 45% (26%)
December 31, 2019
Impaired real estate loans	$	9,173	Sales Comparison Approach	Adjustments for differences between comparable sales	3% - 12% (8%)
Impaired other loans	$	14,261	Multiple of Earnings	Multiples of earnings for comparable entities	4.5X - 5.5X (5X)
Impaired other real estate owned	$	1,310	Sales Comparison Approach	Adjustments for differences between comparable sales	10% - 55% (32%)

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Repurchase Plan		Maximum Number of Shares That May Yet Be Purchased Under the Plan
July 1, 2020 through July 31, 2020		38,489	$	14.20		38,489		345,034
August 1, 2020 through August 31, 2020		278,202	$	15.44		278,202		66,832
September 1, 2020 through September 30, 2020		66,832	$	16.37		66,832		—
Total		383,523	$	15.48		383,523		—

Exhibit No.		Description
~~4.1~~		Indenture, dated as of June 29, 2020, by and between Equity Bancshares, Inc. and UMB Bank, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2, 2020).
~~4.2~~		Form of 7.00% Fixed-to-Floating Rate Subordinated Note due 2030 (included in Exhibit 4.1) (incorporated by reference to Exhibit 4.2 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2, 2020).
~~10.1~~		Form of Subordinated Note Purchase Agreement, dated as of June 29, 2020, by and among Equity Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.1 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2, 2020).
~~10.2~~		Form of Registration Rights Agreement, dated as of June 29, 2020, by and among Equity Bancshares, Inc. and the several purchasers thereto (incorporated by reference to Exhibit 10.2 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2, 2020).
~~10.3~~		The Fourth Amendment to Loan and Security Agreement and Promissory Notes Modification Agreement, dated June 29, 2020, by and among Equity Bancshares, Inc. as Borrower and ServisFirst Bank, as Lender (incorporated by reference to Exhibit 10.3 to Equity Bancshares, Inc.’s Current Report on Form 8-K, filed with the SEC on July 2, 2020).
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).

	Equity Bancshares, Inc.

~~October 29, 2020~~August 5, 2021	By:	/s/ Brad S. Elliott
Date		Brad S. Elliott
		Chairman and Chief Executive Officer

~~October 29, 2020~~August 5, 2021	By:	/s/ Eric R. Newell
Date		Eric R. Newell
		Executive Vice President and Chief Financial Officer