EQBK - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Equity Bancshares' Third Quarter 2019 Earnings Call. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Mr. Chris Navratil. Please go ahead, sir.

Chris Navratil

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

me General Officer, Greg CEO, and Equity Chairman Executive Joining Vice President Reber. Kossover; Equity President Executive Equity and Vice Financial Elliott; Brett Bancshares' and Chief and Bancshares' are today Counsel, Brad Bancshares'

the are download at for presentation The Presentations via tab. available slides to accompany PDF by our clicking call investor.equitybank.com

investor.equitybank.com for may the to also at click call You view icon player. today's Event webcast posted the

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Please note make From forward-looking important actual regarding may time today's within forward-looking vary. call and Slide statements. X including statements results we to time, may information

questions for you and further presentation, the Following discussion. joining for all we will time us. Thank allow

I'd like Elliott. it over turn to to With Brad that,

Brad Elliott

Good quarter you Greg and third Brett the XXXX today Equity our Reber. earnings our Chief morning. Bancshares' by for joined Officer; Financial Counsel, Kossover, I'm Thank joining General call.

pleased am consecutive quarter earnings XXXX. second has our to per quarter marks normalized This $X.XX I operations. the Bancshares third for of share of in announce Equity reported

We deeper will all into of performance do in moments. few dive our a aspects a

to take to teams find want place ways to the teams a to thank first performance our Without shareholder and continue mergers and operating deliver XXXX. in to I we have of to wanted for the challenge all in efforts value. in their minute initiatives put occurring, organically we improve

quarter quarter representing non-interest dollars income $X.X improvement. We quarterly in we am XX% million. report started in item from pleased have each line for the with income I growth four possibility three of at non-interest of and through looked growth XXXX XXXX of to

management to the a non-interest that direction We in services income in trust platform provide will coming wealth and under McGregor quarters. the have full to continue growth suite also provide of a Gaylyn of developed

initiatives. our two been it sacrificing our To assets exist reached And decreased We lowest in quarters. expenses consecutive areas opportunities to five where has ratio average in have also efficiency quality quarters. has non-interest pushed expense in hard core without has that the our [ph] now to reduce X.XX%, end,

occurred card initiatives, and on the and which These excellent platform, our in focusing the we new been from purchasing new include Wealth commercial Management specialty initiatives, division which already finance of have while which building Trust teams went exciting seen services credit several and course, cards out first results cards; have the discussed. have results; new digital and quarter live

three structure repurchase an our loose repurchased and in of risk repurchase and XXX,XXX so underwriting our Many in a on of our shares the merger have to as well essentially stage $XX.XX. years. the of represents have credit far of also shares, EQBK commented of continued a recently we this shareholders our at earn-back total the at We is average have calculated pricing price of terms of industry below cycle. This

outside that of irrational are has growth to primarily our markets underwrite to price players this been than continue in loan standards is and accept. net years previous Our because and year smaller we willing

we the this environment. with have originations pleased am I new had in

quarter-over-quarter. cannot metrics We have nearly pleased have received structures to loans which payoffs steady from have putting also the terms credits and our credit a been that new at offset pace we with I on continued accept. improve am

you assets from discussed would on we franchisor the quarters? of credit and the first the remaining status everyone the Brett, update in second

Brett Reber

Brad. Thanks

credit entertainment at the relationship of As other deal May was the unprofitable piece business. the bankruptcy of in and We auction sold of relationship resolving effort the the quarter, in we court. franchise second great the spent commercial in through discussed a pizza-related towards

company's from with be closely expedite bankruptcy XXXX. and of plan to was exit November quarter reorganization XX, during effective on past October that company's will the the week, past worked this this XX, approved report the borrower have and We can

for new the including existing We agreed company bankruptcy the fourth operation of loan expectation for operations, remain the on the delay, store have of create sales, resolution. reorganized confident We of expense will and that company, a that quarter the XXXX. terms and allow overall resume will new outside franchise scheduled in enhance reduce payments positive

personal and residence on believe financed this homes listed two also the home the for is a during We sale. due pay-off sell two for market-based value. vacation principles quarter a of reasonable by vacation We a course received the at personal residence businesses. these homes We will in owned the

Brad Elliott

Brett. Thanks

As back of was a companies. then their specialized that stated under-performing and companies profits. performed sold in of We profitability with had strong portfolio who borrower and with substantial banking ultimately this significant for first years, revenues quarter on a goes relationship relationship two a borrower call, several this they well and the to XXXX, for increasing

am performance significant business executive matter for and full credit this responsibility worked return pleased of credit to that an remaining and team legal and our bankruptcy this normal has with to I get our This out was took for us. result and unusual teams operation.

loss remains updated two concluded impairment our third quarter, the we analysis the from You business then the that quarter that time. the of and earnings at in first have adequate homes in call current loan April for impairment for the a loss provision an first analysis bakery this $XX.X of million. for of the taken vacation of our may payoff after loan resolution provision and After the called quarter recall

We positive also movements in the third experienced our area. asset in other special quarter Greg?

Greg Kossover

Thank you, Brad.

without ratio XX.XX% the the Non-accrual loans and previously credit million mentioned. portfolio credit XX.X% million franchisor changes without $XX declined includes XX% to and the to from $XX.X quarter-over-quarter in Key in assets improvement credit. classified to XX.X% franchisor our

assets and franchisor credit. Non-performing assets declined percent basis as of a without points the XX X.XX% to

in the of charge-offs been basis the franchisor loans, Bank Excluding below year-to-date net only XXXX. the average X points the resolution is $XXX,XXX, have for credit, of which rate

Brad Elliott

improvement. our quality credit with pleased I'm Overall,

is you lead rest purchase please? performance, will Greg, quarter the at through the at our points, third us Our ALLL basis and is now of reserves X.XX%. XX total including discounts

Greg Kossover

the to We for approximately begin of per in per our EPS. in the share diluted $X.XX per share had $X.XX core back Stated the earnings We earnings quarter. is earnings performance reconciliation no share quarterly premium There insurance FDIC $X.XX per expenses rebate share. share. in the $X.XX adjusted merger were at earnings leaves and which EPS share diluted our per from per help was quarter consensus

at Net interest X.XX% consensus quarter-to-quarter flat margin was of estimates X.XX%. against

quarter Fed. with of in was rates lowered on Home rates Fed the liability our course advantage for twice us Loan take deposit proactive As Bank to the reducing lowered Federal it and We our sensitivity. were of offerings in advantageous the in conjunction rates

seven X.XX% our points and deposits of to were funds of down eight improved basis cost cost basis points Our to X.XX%.

checking the X% increased non-interest-bearing balances average during as well. Our over quarter

and at now X.XX%. Yield were loans basis down on points stands four

new Our and during is the quarter us quarter for went right typical help at which yield during on are accretable for accounted X.XX% of points loans somewhat about now. basis the XX

and quarter at quarter nonaccrual X.XX% bond light amortization in of during Average the the the The the compared for and down $XXX,XXX. points. asset X.XX% to was loans relationship impact quarter to premium and was the Securities quality five impact rise million were of about remaining were continue is of $X large second yields with about loss loan loan stable need in basis loans yield. seven basis provision points our

Brad Elliott

income. noninterest like would discuss Brad to

in improving over income noninterest stated million quarter been working increase and of we’ve million. X.X progress with on the of estimates quarter a against As at top the made $X.X we consensus second we call an X% of

initiatives areas activities, key we of service of and Some mortgage debit the also grow improved to and and is from products in about I'm income our banking customers. this our of our but services the for card noninterest income. lumpiness excited of charges suite really

Greg Kossover

The expense in XX.X of our million for another XX.X against We down have consensus expenses occupancy the and been one quarter-over-quarter. FDIC Non-interest and just fees and tailwinds on have benefits, non-interest also was were about XXXX. areas were There no in major the improved salaries million professional quarter. expense of all would merger adjusted of initiatives consensus. estimates

income rate year-to-date is effective XX.X%. tax Our

Brad Elliott

these difference. the each is on of bank stepped and area up initiatives proud remain big and has the but of difficult, of equity a I all Working some bank each teams. made of associate

Greg Kossover

since to but responsible earlier. obviously also XXXX $XX sheet. Moving been XX, balance has million discussed the than like, Loan we'd about Brad as slower growth December

Brad Elliott

continue also areas poised been We've pipeline Yes, and to hard and strong business teams preparing core bank. customers. to our and all teams earn are we our pushing our planning and our the remains improve the of oriented XXXX business relationship of believe grow

the Annual Retreat by Board very August have and are to at in being impactful We these on specific initiatives XXXX. first track teams quarter our identified initiatives

Greg Kossover

million $XX million Average stock. were our down from repurchase slightly non-interest and the about Loan about of about Bank increased QX advances $X quarter deposits slightly million, increased in bearing stock up bank were checking treasury million. the $XX our Home Federal $X Average loan reflecting and

to tangible XX points. Our capital XX leverage from X.XX% ratios common up basis points QX tangible is our X.XX% from QX, as ratio and basis assets September XX are up

Brad Elliott

mistake to and pleased control the special quarter. a irrational is assets expense. spend no continue competitive teams EPS rate and and this I'm our able income difficult in efforts grow noninterest with non-interest were to the rate often of We reduce make third continued the And too grow environment. environment on to

we same our hole. my we started base. have and and commitment we greater discipline bank Directors, our for shareholders as well, have do to shareholder want shareholders rabbit executives the continue and down that with will we We'll go families not price Our our since same our we the underwrite for that the the as

and value of phases of all we'll your We appreciate to loyalty in working cycles. shareholders the support the hard our maximize banking and continue

At questions. this time, we'll entertain

Operator

from first Instructions] D. with [Operator Davidson. A. Rulis Our Jeff comes question

Your line open. is

Jeffery Rulis

growth budgeting. normalized. Thanks. guess and of but about for I are outlook your XXXX; your looking quarter, and XXXX? levels sort growth I on XXXX with provisioning provisioning both net runoff You loan us level, of provisioning guess backdrop, an this give you idea for loan Could you in that with you had What talked

Greg Kossover

we in growth point, XXXX. we're in agnostic X% to think this budgeting budgeting loan and be X% yet, of would $X.X Loan get in process $X not still process. I growth with between at that still million can this our provisioning, would course be to XXXX million the CECL but somewhere And done

Jeffery Rulis

thoughts the this as on work but of a and good or with [multiple your expenses, the a clean then you've watching work I credit employees speakers]? you mentioned is this to ratcheting down rate done on the on got you pretty that And here and base guess growth continue costs, quarter, kind you've FDIC number

Greg Kossover

non-interest would maybe QX Yes, slightly quarter. good the higher $XX.X for for base a It's back to adjusted there $XX.X certainly and I X% be a out I outlook as FDIC will The it call the stabilize in as and costs. build million employee XXXX much think initiatives XXXX, – to think team well. count, for don't we'll expense million inflation continue but probably in with a change X% small, we to in FTE

Operator

comes Sandler And our with question from Neill. O' Liesch next Andrew

line open. Your is

Andrew Liesch

some more your forward – to you markets? you the puts there suspect comments Just seeing around balance with nature and some pricing are be can the looking forward, benefits provide sensitive any the could but sheet deposit liability takes sort of what of and of in margins, the going on some competition

Brad Elliott

need so, are you when aggressive the Yes we're pricers having the would still to is. out being local with four the when local, a leader tell be in cost the marketplace and we've that - lower is spread to - amongst funds lowers still on we stance Fed pricing lower taken deposit I lower there states, XX compared of where so market are very on irrational. the or that locations deposit to an

should deposits. that movement that we're Andrew, in stay for overpaying we've not that an a in seen tell very area being going down leader you lowering deposits where and making environment we I sure so, that in focused And to and on we’re would be

deposit outlook that we're to Fed is lower if interest for to continues going continue the to to have rates, rates. So, lower

Andrew Liesch

in why are you, bit that, helpful. here with on the third is more your more capital be trading not stock? aggressive that the tangible building. with in buy little a a buyback, own around stock than not tougher little would but bit slowed quarter imagine Thank with your bit that's rather And activity the I a here, like What little of on your the then why it M&A and looks stock just thoughts XXX

Brad Elliott

not the it comfortably place sense stay got we're base. below makes that our comfortably we've Andrew, buy, quarter a million but below we're and market out so Yes, shares There to that in it, to is when we in in five-quarter have number, second when five-quarter a there we don't we're think XXXX, when that X.X shareholder number buying for beginning complete we're that repurchased. be plan of a we below allows like to number,

much We're like three back for less and would very be math viewing this merger, similar we than to earn a with years. our to

do that market below always so, triggers not to it's the And really buy and enter when we that back shares number.

Operator

question Instructions] from [Operator Stephens. McEvoy next comes And our with Terry

Your is line open.

Terry McEvoy

that expect just that impact was the level occur the - cost feel the going forward? in here, and provision did million just you bankruptcy, you here; like borrower the of want came pizza-related I to that And that some quarter, that entertainment provision. additional clarity the loan the again, loss fourth did not first with $XX.X right in or out if so, quarter no

Brad Elliott

Brett of first businesses as those provision. to, did stalled homes, combination and provision. basically to require have the one vacation the a quarter, require is that able Terry, out that any Yes more in million also assets that We’ve of move three not May we franchise been alluded in correct. didn't the $XX.X more

directly. with we’re we’re So and left really that we provisioned other franchisor with we business, the left think have --

Terry McEvoy

there the to the – see. sticking an was maybe million, activity decline portfolio Could you just and loans in quarter then asset quality, And about over with nonaccrual $X then franchise talk third on update nice the overall? in which the

Brad Elliott

better changes Yeah, assets of have bankruptcy, Terry paying we through liquidating or we those some are so some either of the loans nonaccrual good through and we that in some some had actual upgraded had loans the Ag because are farmers liquidation quarter. through they either just we down those had performing been question in assets loans or liquidating those. reorganization,

customers been some for that a had on while. we've also working We

also have those well. those And receiving we've – on been as been paydowns

nice a to improvement that. that’s So

to we improve think see area. improvement things to that more see in as continue we’re that I quarter to this some going

we’ve think that going in trends classified customers quarter We new customers that are home. assets a some have got good a are also I we've improving or are seeing area to find that as going this in quarter some in had to

Terry McEvoy

excellent was And could services, think think and just what – platform you I last can build -- one, do comment. think wonder I that showing results. forward? that the expand digital just And Brad you mentioned one maybe you contribute that card I out then it the on cards if of going

Brad Elliott

– platform really the customer of QX two part Yeah to so pull-through on roll that is We we digital so out question been has went first first is product. the one in quarter good. The this that year.

on think I retention is customers improve. the also going to rate our

And so, that how through offerings to how we're expand market also looking and to at platform.

upgraded Banc think last we Equity customer I at have in experience So really year. the

to accounts to also things improvement the for And had our is ability product platform online, about continue other Opening moving customers about a grow was we're to so, It we're provide loans huge that. to which more and excited that over meet customers being so more digitally. able where the exciting and we that excited the us online, very interact commercial than them very opening with prior. where branches just the very product market

question is business the demand The pent card lot have next for slowly a out. We're in and that going service of to rolling we move that. cautiously up

– the to in this And testing phase quarter of cards. going so rollout that's we’re the actually are in

issuing we income next be Terry we’re from wouldn’t to them that. half on see more time much be second a the to continue say grow going – on going to and year to that. the But growing profitability budget would year interchange going it's in anything So that would segment so next of be I for

Operator

with from Perito Michael KBW. comes And our next question

open. line Your is

Michael Perito

X% a you just but preliminary loan I comments you little nice preliminary a XXXX? bit seem know by follow be in the think production the up Could it year-to-date a driver qualitative, prepared loan seems relative rebound X% more give for of XXXX the to on – strong to some the growth in XXXX outlook color wanted to and of growth given to kind is what like what fairly guys in I us would in more you number of remarks. conservative qualitative,

Brad Elliott

So good numbers one philosophy. the really doing buried job are of our banks a that equity catching on of the is actually in markets kind team just to wasn't in we teams a reset what's

that we longer. with underwriting our like had that of so followed us work we fitting some for weren’t from we any And intentional what that. that and runoff And standards don't customers intentionally some some customers ran that the off, of loan officers the the in left of

second in been has rebuilt team the mostly I say would of end rebuilt it’s quarter. That and

so, a start them period really And they've loans. for month to it producing takes – got nine

And instead of subtract. team being see we able that so, to add

a they’re we’ve And so, pipeline really good got processes got and them have really really they experienced good bankers. with

very we’re aspect about the excited that's so And that thing. biggest

that see there's longer. of bottom the the don’t we As bucket a in any hole

having So, top. to bottom much put to top outstripping just the from water we’re the not keep the at so

payoffs job to And working the help I the Missouri, has Jasmine’s group programs so teams intentional being us. Western calling that calling great across in done loans. from slowdown his in on grow able our to and is efforts been entire have We’ve got a phase. then just And think going

guys are community some down Arkansas or other markets doing rural of in as to so markets same add really the the well are And helping the thing.

we in growth seeing of the had those shrinkage we’re saw past. so, markets in some And

it's growth bit positive whole loan hits about not XXXX So and the what growth. here in footprint. that's there constant just to across helps us It’s be steady

Michael Perito

high the I scenario decline to does rates Because guys could about cautious continue could on continue thoughts you underwriting to also any to I you presumably Do that then And side it more If harder have if guess figure. pretty make come you’re to – on that? payoffs be model. that mean rates your rate down. be continue though, things get competitively in through general that

Brad Elliott

I that at point inverted yield curve is inverted. to continue If rates some come think down already

may longer-term much that already as next stuff did So, affected us it this year year. it have us affect so, rates maybe doesn’t and as

that’s mean is the of side little kind I So our our and funding outlook coming down. bit is other

I still quality to want customers. relationship on banking we able customers versus transactional a call that we’re think relationship so good as those to attract And a continue

Michael Perito

quarter. kind you this just of lastly the near then outlook just obviously margin similar And but benefited topic, on guys on term

ability If protect you think little return be more necessarily? to forward a that your or you will – a not margin bit more growth to do loan stature positive challenged moving

Brad Elliott

fantastic a is it’s Michael necessarily. question I not the answer and think

First of on to great a a great margin. to advances gives down all average even Federal essentially doing deposits a still little The which improve we’re deposit pay job quarter flat some opportunity though bit. continuing loan job continue to home down are this teams us the and doing were bank

loans Secondly, we’ll next alter if help which if sheet we to margin. loans the able a bit little hurt we be growing balance success not should continue between the have securities of margin and

Operator

from we a with Rulis follow-up Jeff Davison. have And D.A.

open. is line Your

Jeffrey Rulis

I get my relationship credit discussed. we large the around just wanted to hands

personal is and sale pursuing business – I TDR. there as in are estate guess reorganized. hit So is the with terms expected I or and you an the there exit terms items – real those adjusted bank guess effectively or pizza it guess payment business the extended the stay a I has is And of to been what has been

trying get items? update on Just an to those

Brett Reber

maturity seeking of a agreement I borrower loan or are and has this towards Brett are think year us of they the the – refinancing of is next company. And sale a end short moving new the and

Brad Elliott

There point out bankruptcy. value, is be bringing there other there now in so, liabilities and bankruptcy everybody is bankruptcy creditor is of to and it would able what's tainted easy we’re see been Jeff only cleanest in no not the out no for the of it other be we’re to bankruptcy the losses. So it’s be

So way bankruptcy, for option, all it. to best the value achieve is which most instead discuss in of selling we an it the

loan could it operations that get bankruptcy And so go we it. agreement so have controls sale hard we of and us bankruptcy types really let emerge craft normal in - from the back and same Brett a a could worked transactional gave to they that, you normal to out then of

in of the for of we think maximize the goal this not value we but So out of equity be to it bankruptcy, this credit is can long-term.

Jeffrey Rulis

how it's some inbound how reorganized since initial in the interest And – that's business? - selling is long is And been that been – me on again place. remind there

Brad Elliott

yet. process. It been just But bankruptcy waiting has started entertaining throughout been just last then has get there the active folks marketing do week, been have for so more interest fact that the of of approved – it's the process - effective kind and bankruptcy was they in borrowers – plan not technically this, let's out yeah

So a we have seen some third-party. interest from

Greg Kossover

directly directly to we Yeah, third-party customer us. had in interest the to and

Jeffrey Rulis

and Okay then. one last just

interest So been this put in point - performing you place a or to the it's that is this fair it plan point sense somewhat at at providing in that as say? it's is

Greg Kossover

That going payments fair plan. the resume to the part they're the by to year reorganization as will end interest be of of say

Operator

today's concludes you this gentlemen, and Ladies you. participating. for conference call. Thank Thank

a You have day. disconnect. Everyone may now great

Equity Bancshares (EQBK) 22 Oct 192019 Q3 Earnings call transcript