EQBK - Earnings call transcript Q1 2019

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Operator

Good day, ladies and gentlemen, and welcome to the 2019 Q1 earnings conference call for Equity Bancshares, Inc. At this time, all participants are in a listen-only mode.

Following management's prepared remarks, we will host a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this conference call maybe recorded for replay purposes. It is now my pleasure to hand the conference over to Mr. Relations. Investors Willis, Jacob begin. may you Sir,

Jacob Willis

Good morning, presentation and our Bancshares for of thank conference call, you results. and XXXX discussion first joining which our Equity quarter and will presentation include

quarter download Executive Chairman today results slides me Brad Equity Chief Equity accompany is Kossover are Officer, download Bancshares' Banc of President Vice Joining our at Credit for investor.equitybank.com. and to Executive Officer, and President available Craig Vice Equity discussion Elliott; CEO, to and Greg The and Presentation Financial clicking Mayo. our Bancshares' by are and first and available tab the accompanies presentation call Presentation PDF. the Chief

You at may today's for the call icon investor.equitybank.com. also posted click event

that two If Please we differ. automatically today's you and are important this including may on within call viewing statements. results note will actual note make slides advance. call From slide our regarding please information may forward-looking not statements time-to-time, forward-looking player, webcast

further for Elliott. Following the like Brad it to presentation, and that, over With joining to we you time turn I'd will questions for us. all discussion. allow Thank

Brad Elliott

you Mayo, Thank Officer also XXXX quarter I'll joining results Bancshares' today. first first moment. discussing joining call. Credit Greg morning. Good and the earnings be a in XXXX our our for Chief Craig Equity quarter us is

provision profitability through performance In XX release, licenses this years portfolio profits. increasing and companies. borrower, on walk specialized as the during As provision they with in will well their approximately of against their a taken a company know of of several performed had our noted They with March and and a entered XXXX, for significant course we this companies operating XXXX. a who a and credit financial we it our the two with that X-K for with sold of bought the Greg we have revenues you of of strong credit relationship franchisor as as relationship banking in underperforming well impact earnings will relationship ultimately a operating loss. borrower We this without performance be discussing XX, the is at grew credit and substantial ownership.

financed also borrow Unfortunately, would generate assets and injections, recent and the continue was with but company institutions on had were on manage terminal name extent in continued events? they company as We through to on you recognition. underperforming to they good begin with profitable guarantees second debt take new a anticipated as adequately that of personal franchisor please We secured value. the substantially to and them concepts deteriorate. the remained relationship Craig, based cross funds from the the personal We and service ability profitable to assets. purchase us could for collateralization comfortable the they turn personal with the structure Equity the the capital of pledged overall financial other earlier

Craig Mayo

or to to borrowers. from time our quarter businesses the for smaller amounts balance committed to the purchase they previous were fourth flow off approximate in company these companies their $X it for the execute borrowers us intent XXXX, of companies. larger of complete Under the on personal declined. the The to both loans the to In obligations which premise least sufficient million and million were are credits collateralized the credits and pay to and funds advance the asked the $XX.X secured for guarantees at All which of Equity letters the on was larger for to came There by two the cross quarters. we cash sale of had company. company

but the loan a positive we positive Banc's indications acceptable were XX, both a companies, the not cash non-accrual Chapter for one the bidder In debt We filed flow. these in Equity this Bankruptcy XX bankruptcy January current. December company a overall quarter. In company smaller stocking one in bidder adequate. We cash the time. for without provided the of presumed borrowers of with As XXXX place strictly impairment for loans of time horse relationship flow from other a the was first the amount because for quarter smaller credit, in of therefore and us, March We including the above. the institutions. stocking December for late to to The no on was recent used did the using an larger at was the values and obligations warranted for valuation that not the the impairment or credits had December credits, in late first most auctioned on an of in points analysis that an the calculation prepared the XXXX the mentioned to that range LOI early at show data and was did also specific and available because horse XX, for was determining loss XXXX

various did less an a substantially but than the and not For close, amount bidder early first found the was reasons April for in bidder second bidder.

unlikely most the although a in second As belief bankruptcy. of to from would not that performed part valuations. in will our the Greg? EBITDA performance experience sell company the This was the our in multiples And has believe recent due trailing not of of future level the in but than at previous closed lower complete in used we of the level our profitable periods larger weeks. and to XX is next early be part sales given indicated EBITDA transaction previous may the in that periods we shows received the this it April company. today, bidder In current few operating analysis the in the

Greg Kossover

for provision new two need a for other the utilizing the larger lower and total these assets the analysis the Given circumstances number change pledged occurring lower early EBITDA million bid credits performed the by was applying $XX.X and specific estimated April company multiple Brad? a This the in in the lower smaller borrowers. and impairment the company. on determines analysis on

Brad Elliott

As I this own our CEO of decisions. company, credit

in of Unfortunately, did success enough. businesses, early circumstances funds discontinue Our borrowers a us to credit not advancing we history bank. with their team on extended and changed their long and these as based

Fortunately other an type isolated its industry or and credit this to type of related our portfolio. not collateral is any in is

Our net point charge-offs for this the first X the of charge basis approximately without from quarter were or than less interest relationship. $XXX,XXX

the portfolio take first We our these through quarter will will at and Greg the take questions call. of our credits rest on us of the performance. overall end

Greg Kossover

We per interest a share Thanks, of share legal our EPS of with digital provision per Adding diluted share. to $X.XX. share. initiate core new new $X.XX expense back leaves per to per platform EPS. reconciliation earnings to of in credits. merger share convert of a expenses approximately expenses of back per above about begin a one-time $X.XX share back Brad. is loss Adding mentioned earnings and with Stated performance share. write-off online earnings leaves $X.XX share to banking and is platform This specific EPS takes associated approximately per loss We and $X.XX the per our for core incurred the debit $X.XX to and per approximately card credit $X.XX

recover the $X.XX The miss from loan per per per $X.XX and EPS had in about from amortization consensus share the locations. also miscellaneous based share early non-interest of explained of origination mortgage I'd extending recap fees the per further to on-boarding new which support than of of about other share margin on $X.XX by $X.XX like compared balance we the quarter for We of about on $X.XX platforms our to from leaving origination the per XXXX, share expense activities bond share. in the accounting in in overhead and net misses Street expected, interest and estimated mostly street loans our for also per share, $X.XX MidFirst share of banking attributable interest at pipeline is about the to new believe quarter. income slower expense, reconciled will about slower premium accelerated non-interest we pronouncement interest to to $X.XX of $X.XX for the per

relationship origination of $XXX,XXX back hurt X.XX%. was about adding plus X.XX% credit of margin $XXX,XXX from leave margin Our [ph] lighter problem would stated of our identified fees about a

bond line with left expectations. normalized have historical Finally would exactly Street amortization in X.XX%, us at premium

we As are than for originations. slower loan others quarters before, some stated have

slower was but our quarter than first expected remains Our pipeline strong.

of We are not teams. or expectations relaxing our our the reducing underwriting standards

expect solid the back quarters in get growth growth. few We on next to our loan plan for

XX/XX to continue be strong, coupons improving loan Our X from points basis another quarter. the

X% three competitive location of the about continue especially We public merger from our environment deposits not including million rate in deposit in MidFirst in nearly annualized at in of February. funds. an core The QX, remains area grow growth rate the to $XXX

million deposits core million The This only of of the advances more home over converts managing at borrowed on loan into hard loan $XX.X of our with work to other to $XXX,XXX by bond balance Federal quarter-over-quarter. reduce but continue our average us accounted over the bank in origination lost The interest $XX.X being of fees from in the discussed premium million, year in previously $XXX,XXX amortization. interest credit, were items $XX.X against million, difference $XXX,XXX a customers. funds desire grow $XXX cost control borrowings $XX.X gives is over up of also cost net approximately consensus in ago. bank reduced money. our Overall funds for million balance our and bank not earnings the We and primarily

below quarter mortgage on about of million than by three expenses income and on to expense expectations. $XX.X will $XXX,XXX was the $XXX,XXX MidFirst about in Income consensus the platform are lower million and in last legal fees taxes the anticipated. modestly XX% above line over accounted non-interest generally were of weather primarily lower for expense consensus was recover about we in the slow XXXX. $XXX,XXX noted Indications the of banking this with million fees $X.X without was earlier on, quarter previously attributed merger for locations in cost first at Non-interest related. which quarter and believe call, expenses the of principally we bringing Moving $X.X quarters the

our on remains for Our continue teams overall achieve balance to press healthy to goals our sheet and XXXX.

relationship the this and credit single with is continues from deposits funding earlier said borrowed we other away shift As quality to of improving core credit our to money. exception

announced remains million Our or capital read to our a buyback shares. we of and outstanding the $X.X you have have about of X% up healthy of as shares, may

this to Federal the is next XX months Bank. subject next month, no the Reserve from objection beginning Over

As we last converted for fall. customer entire locations converted previously and digital MidFirst also new a to platform on closed as our three QX. in base They the Oklahoma, mentioned our teams announced merger known

interested addition entertain in continue geography. In possibilities merger our we banks with to

responsibly enhance income future. the in part We platform, Our new should trust to way and working our and additional this Bank revenue typical quarter Equity wealth understand team of At we have. entertain time be and soon and always not stream I be card bank's to shareholder this management for non-interest value services will entire our protect the a the will questions. we is

Operator

our question Thank KBW. you. Instructions] Michael Perito with will And come from [Operator first

is now line Your open.

Michael Perito

good Thanks Hey, taking morning questions. guys. my for

Brad Elliott

Good morning Michael.

Michael Perito

start had to I credit I on - side. want the

where So that on you to expect a or little I can next you us see and just over the color can kind as bit the to quarter of guess expect two side what plays more out? give go on we financial this

Brad Elliott

answer Yeah, to the should on and over I'll it the how turn it I'll on closes Greg question go for it where financials.

will bankruptcy we currently - we company liquidated got think there this Michael month. that currently in one So be

not two. hopefully next profitable was quarter will the in or company the be liquidating other that first. We company marketed the We

flowing process. cash we getting on The liquidated - focus been on on primary well updates listed now energies is second focus currently sales they their our that our or And actually two that their selling. we energies first and we've is and sale. moving But residence. two the They and those be They've company to it company for all - able that have one three the have company quite got that. homes didn't vacations so through marketed second will three getting

we So them contract under timeframe. within hopefully we'll sold that get reasonable this quarter and get those

Greg Kossover

impact in three potential really financial the Michael, And areas. is

one cost on in The loans these first the is opportunity aggregate.

from is interest about of lack quarterly $XXX,XXX. Our non-accrual

we care put we resolution can take So assets back those faster work. the of sooner the the to

is with the second the of The issue. direct in cost dealing

legal we And now it. I that because possibility be of then of possibility, will will think a on against course these we one points put amount continue the is plan with of the had. lot goes although in this don't appropriately and the the expense place. think provision we mark given We think that small administrative the the mirror a is that of in to But have put view rear there third happen, the we continued data assets.

not do that we that more we remains will believe possibility. have provision So but a continue to

Michael Perito

that. Can we on spend minute a

way total $XX.X think relationship, against this you it? the right million $XX about to is that million So provided

Greg Kossover

commercial $XX $XX is as relationship relationships well. total credits. The on million over a little personal There's million on roughly

Michael Perito

to So $XX closer it's million all in?

Greg Kossover

Correct.

Michael Perito

$XX that million allowance a $XX.X now right against has million it? And just

Greg Kossover

and primary taken we'll think The are this don't this resolution we have from talk Correct. residents to about where we in future well quarters secured, have Michael replace, a to standpoint.

Michael Perito

expectation will relate the point three a relationship? be you companies and if provision at it trying exit guys no the price acquired both to around to recent further So that there whatever market that activity, total should this be you or charge-off are properties

Greg Kossover

correct. That's

Michael Perito

larger relationships your Okay. of And some this how sheet? does million overall borrowing the that $XX rate amongst on balance

Greg Kossover

Well.

the individual aggregate current. we these an relationship. mean at these when are credits So family - look But in separate do aren't mean we standpoint risk is single don't of credit we credits that currently one residences from I aggregated. them I

One of pass credits make it currently not non-accrual a is to enough loan. due these a

I the with from So And them collateralize is a along residents. operating to the relationships personal personal them residences, aggregate their the we primary These two separate separate that. cross ago now companies. got we were would residences, year those reason individual

aggregated So that them together at point. we

Michael Perito

are Actually compare? all-in how the books the differently, does $XX value maybe your what question million asking commercial and mean I today largest the on relationships

Greg Kossover

would have. largest That be relationship the we

Michael Perito

does be go there's where average to go XX the terms us or on I would any $XX just there and in several range, to color sense, Okay, after does give XX the from helpful? on I that plus top a five, mean mean it in of million to it

Greg Kossover

million. so company don't less than We Yeah had XX, the XX, large million $XX against relationships loan had it. $XX.X over have

Michael Perito

Okay.

Greg Kossover

million. relationship that $XX do We several are

limit. our is lending I $XX legal limit hold limit. so think our lending internal That's we're of million and our XX% legal about

Michael Perito

color? stuff and that or the any million [ph] little detail more both food And you correct. bit company business $XX.X service you million franchise in versus the these $X [indiscernible] can broader both of companies a more quick you sure were want price to give there? us can - Is give maybe type I'm

Brad Elliott

business in And not the were the business. Sure business they franchisee the is entertainment and of in is in bakery of one them franchisor the one business. them

Michael Perito

on the balance Okay, or what can exposure the - is lending and what whether remind franchisee sheet? total franchise you it's on franchisor today us the your

Brad Elliott

aside currently these have We don't of relationships any franchisor two.

Michael Perito

just total lending? Okay, and franchise - just broader franchise

Greg Kossover

six, lending Total different seven, in one, concepts ten, two, four, $XX eight, nine, we XX five, franchisee three, million. have

Michael Perito

mean what more if again last you the and in ROA. back you then right get of just thank me, some can one on Okay, guys. thinking Is curious XXX even I be And NIM that I appreciate It you I part little as that 'XX here accounting terms of look dynamic and a were simply down done about the last go stepped three Is about growth? move quarters it doing as guys managing and expenses, little the are quarter just that in just post direction. early color. guys you forward normalizing there you purchase kind from have you tax we for reform, about first obviously if provision you I'm a disappointing and we a think over if efficiency the guys run-off? in the can forward? we as one a normalized had moving was of kind mean how side of that

Brad Elliott

that's question, Michael. Yeah, great a

today those Home typically very does any have rate were back control number is Loan balance money the We on debt influence dollars of rates than that can and a customers where What point borrowed that we're dictated. to $XXX potential a first to it and which Home has $XXX puts $XXX Federal a our reduced converted impactful that time Loan million done in ago million cross before whatever to thing given two. that a Federal we million sell, us paying from high Bank about to we that from sheet to get Bank think is right number one less we paying standpoint. at It year in The be we've I other now.

we So and a on moving as both big that's a opportunity funds big down change public for think road deposits. and retail us the about

developed to that we wealth in platform the The begun sources XX been in management hard at has we talked from second about days. thing done past have not look trust is the have revenue last XXXX the generation before. that we did We've in that in

trust have selling very quarter. place talented second the in talented support We very management begin staff wealth people and in to and

that growing income. So expectations of we and platform non-interest have increasing

we've that question has no there's that down. M&A thing other it's The - no slowed Michael, done, activity

we that we've begun team the X M&A. we been public take - make bank will taken the So have say that can on the since perhaps in now to the run might better. and in resources years we've built focused that we and last have went last it more And at look how in house, have the Brad

So we're improvement and large and categories action. and categories all different includes different putting for looking those revenue parts at things all and pieces small. And expense all it into

increased to margin the can. ROA way that get done the And controlling that loan to last we've backup customers six substantially parts quarters. of at the we so And is coupon continue work our in the from loan hard side, we our we've on

the reduce non-interest We continue apart and costs at expense. to non-interest ways our funding to look and tear

Michael Perito

all color it. for Thank I guys. appreciate All right, the great. you

Brad Elliott

Thanks, Michael.

Operator

from will with line Thank McEvoy of you. [Operator Instructions] And Terry question your Stephens. the next come

Your line now open. is

Terry McEvoy

morning. Good

Brad Elliott

Good morning, Terry.

Terry McEvoy

curious made we case, been and these for some loan. that until at just months one smaller on the X said from guess loans I'm reports the the was if about I of this relationship hadn't didn't commercial guessing January, payment hear it's a in press it why today? one looking I'm Just publications of

Brad Elliott

That's have mean, who the were December all facts. that by loans did - not was XX, I article attorney you're the information. - think I of the loans that any - an we as provide were doesn't referencing written of an current does None who of not Terry.

Terry McEvoy

for clearing million. or included portfolio Thanks $XX included in be And in that been the in that Would up. the that these you and concepts credits portfolio, XX two the had past? franchise the

Brad Elliott

or don't We are because that and they portfolio them They franchise a not - in include a did franchisor any not they're stores. any own concept. operate

So differently And franchisee a And is our a they're franchisor operating franchisee. is that and business lot than aggregation. how not franchisor operated. a dictating in operates included business a has

And And so And dragged separate. situation smaller company well, as of is it's always the the large they're this cash rather company in down. has cash flowing rather completely relationship debt flowed actually the actually well. that the

Terry McEvoy

improving? If we it and the could appear were stable that relationship took I underlying to this would the a put on maybe some put in rest wonder box, that it just if credit of behind the data total trends just confirm you portfolio that.

Brad Elliott

want to Craig, take that you question?

Craig Mayo

did We slightly improved this assets the We of nonaccruals were out NPAs major the better, all did and relationship pulled the metrics a and Sure. quarter. better X/XX were in that. credit numbers and better, XX/XX classified our a Delinquency were was numbers better. comparison exactly little and first

the is continued there So portfolio. improvement underlying in

Terry McEvoy

one amortization, that And what built going three months thoughts then it I your then maybe think your that And bond ago, could premium for into you. unexpected for are you guess, prepared Greg, question if not forward thank through running in was you now the confirm through Great, sounded margin? that. on don't the like margin remarks? additional your ran forecast, last callable Thanks and That dynamics. I you. just

Greg Kossover

time, talking and the that normalized and Yes, bond taper is of for expect XXX gives, new between XXX with think and to credit on is particular in comment, probably basis XXXX talking And you guidance off of premium margin we that first resolved us over are I the on opportunity not normalized about, I'm but leaves about. that credit somewhere this that amortization correct But margin. a XXX. cost until then we're the on the a

Terry McEvoy

Okay, thank you.

Greg Kossover

you. Thank

Operator

next question with our from come D.A. Thank will Jeff Rulis you. Davison. And

open. Your line is now

Jeffrey Rulis

and you run rate, XX.X look and Expense on this legal assume I there's about we these but could platform bound a coming maybe of investments some and talked legal expense quarters? what tail morning. of kind you like could kind of could that Good guess you that other front, in range quarter, the other think some where non-interest

Greg Kossover

Yeah, constant likely guidance platform to We've of what in made of be we we administrative that the you would for expect between and $XX.X I in we million fairly for $XX.X said expense the non-interest bet give QX. And investment and QX depending be the Jeff. tail four. given some somewhere costs that upon credit, number would today, million this know that

Jeffrey Rulis

and through so Okay, hope little this of million year. of we down to the a from step anywhere the a over from carry balance kind quarter that

Greg Kossover

Correct.

Jeffrey Rulis

And slower on the you've had expected then year, long growth outlook mentioned started you growth? than put out XXXX a full off the for number year the full year you have there but

Greg Kossover

between We We that anticipate get recently I in XX%. and know don't or have full range. But somewhere guidance still not can X% year that XX%. to be back always fully to X% I the out we'll for think X% put today X% between a there number growth.

Jeffrey Rulis

to to a would level, I maybe XXXX suppose that a million we assume? revert averages the reasonable then - guess quarter And back be on provisioning that about - I the is

Greg Kossover

I that Jeff, correct. is we're think, That forecasting X.X actually

Jeffrey Rulis

early. And any and marks then too the think possibilities conservative would back I hope these to a a the that moving guess, credit. businesses, a question But on do maybe recoveries? some maybe just you there guess based here, for little also of I for potential a out guess you recoveries possible hazard are you

Greg Kossover

to reasonable, could point this look think able point a of we marked agreement an we not them, with the at time, in this clear have it better we think not that we is get on we - fast would If not do both this our we for time. than as we relationships If relationship enough in that in this sell as we as - to have think in sell out we more and them can did, are on and liquidate we we this. banker would So more it s what we Jeff appropriately fashion We had sold to appropriately. a substantially so an the use it, close seller have or buyer December, was that, at that. close do marked. to But investment

we And can them reasonably and against at how so to market than look that do there's this if the better to the get loss this potential reserved it. company, to we currently have

Jeffrey Rulis

Okay. is borrower is the credits to million, their And then correct, total just the estate? last with I relationship real their $XX personal that just clarify one have credit is business and this that both

Brad Elliott

it's Right houses individual it's actually - the separate separate guarantors actually as there's separate individual well. and borrowers and not and actually - on

actually one the the of it's not and So loans there multiple owners multiple business residences. owner was individuals single business, on of to their

Jeffrey Rulis

non-accrual. what's that million XX I'm to trying was piece I currently placed what $X out that So business the - on the guess break you what that the the is the parse that still… is - Could is is just million out, occurring

Brad Elliott

it's the No, accruing, of businesses none personal are our residences.

Jeffrey Rulis

that's piece on the non-accrual. residences, Personal not

Brad Elliott

Correct.

Jeffrey Rulis

Okay, thank you.

Operator

Sandler our line Andrew of O'Neill. will Liesch Thank question the from you. come And next with

is line now Your open.

Andrew Liesch

Hey guys.

this, X%, and buyback I this was a and I any of right of the questions. just pro X.X% a it you covered I with how a most below active at to ratio on seems there's back how did stock, would than larger be mean now the arrive is number do TC on curious intend and forma X.X expected maybe share you X% basis you bit like million buyback. little would fill of have You've just my Still bring buying it's capital,

Greg Kossover

that buybacks working way acceptable before stock the to had in credit had this Andrew, And issue, X% so buyback, are resonance. been for we we stock range. the by a X% our think Yeah, ranges on

So be separate and are they and clear. each from distinct other really to

example, we forma right without we we show a for the analysis and performance normal on that end the pro we that perform XX and our the would stock X% when basis. at month at be buyback stock standalone at XX a X.XX% by earnings, little over of an period So on the look repurchase, months the at on

at when does earnings of on retained accumulation look So it not you earnings, put a stress with from time it of capital. over the period

Andrew Liesch

you. Got And you your and provide and done next And there? prepare capital what levels for expectations in you affect provisioning, have that for guys what then, preliminary year? how coming right can now, CECL would

Greg Kossover

so up point well, diligently in on And to up at to ready modeling the working still that. But phase. this internal come and guidance phase, Yeah, we're we've, modeling its we're we are to give prepared the impact. getting modeling on more to our wrap there'll we're not finish be

Andrew Liesch

Okay. my question. covers Thanks that

Brad Elliott

Thank you, Andrew.

Operator

further this Thank you. time. questions And I'm showing no at

back closing over I now hand Jacob for the So remarks. Willis conference to will any comments or

Jacob Willis

great Thank you for joining a day. our Have Equity Bancshares first quarter call. of XXXX earnings

Operator

does This have program you Ladies disconnect wonderful we participation conclude our on may your and conference. all and a for everybody gentlemen, today's day. thank

Equity Bancshares (EQBK) 23 Apr 192019 Q1 Earnings call transcript