EQBK - Earnings call transcript Q4 2019

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Operator

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

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

Chris Navratil

Good morning, and thank you for joining Equity Bancshares' conference call, which will include discussion and presentation of our fourth quarter 2019 results.

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

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

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

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

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

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

Brad Elliott

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

pleased I for Equity per earnings reported has in $XX am in share and quarter to diluted announce XXXX million fourth $X.XX the Bancshares of earnings.

the finished net which will year with also We expansion shortly. elaborate interest we on margin strong

proud an I’m Equity fortitude since year XXXX more when in inception. hard what did work a year interesting accomplished for easier they entire and with as is our in this with to Bank It year it than any for and tailwind, the past but our was hard character team XXXX working of shows our teams headwind.

many up platform to and helped back a acquisition closed As our Bank digital key mid-first We year, wealth We put development the several personal leaders new trust our I look attracted and introduced division. of in and management others. on we the customers. for Equity our bank

now We health full of business, diligently lowest aircraft offer I'm cards. assets proud at it our X.XX%. It on of quarters, purchase income four ratio we end credit card the and care average since lines credit public. worked to expense to our is of adjusted non-interest financing to and including services, any became non-interest a year initiatives non-interest expense the report and added commercial line has We past and of been and

is quarter huge Our quarter quarter fourth here This non-interest income higher of is XXXX the of every Greg? in for fourth XXXX. at compared XXXX the to operating a XX% in the Bank. accomplishment Equity teams grew and

Greg Kossover

We were also environment our rate net sensitivity overall March and to to liability spring, went X.XX% falling cost able interest same quickly react in of pleased XX, funds for from in X.XX%. and that to were our from XX rising with has like felt margin. interest basis take improvement what to and minute. XX advantage the We deposits to reduced have a points basis of timeframe XXXX points our our cost of Last decreased

net a an led Margin growth improvement adjusted in funds cost to X This our continue of of has point margin deposits in the bearing X.XX% improvement an focus on will basis to area QX quarter-over-quarter and is non-interest we NIM. from upcoming of quarters. interest adjusted

the focus assets for increased course credit a for one-off assets in our be and the Craig our credit This their the hard as during of to out acquired disposition continue Though are we discussed. this have the will ratio classified running slightly improvement. the year, work respectable too through us OREO to XXXX. processes. and very XX.X% have assets we worked XX.X% also a about special previously group We I Mayo

repurchased. no EQBK price price such shares there to was stock and shares repurchase the Our above point were quarter fourth in as our

is our place, buyback appropriate. However, expect Brad? execute when to we stock still on and in program it

Brad Elliott

classified our itself. including provision more the with important assets results previously difficult quarter stated. becomes in capital the than of to headwinds in followed XXXX, We regulatory for outstanding balance the our events loss With what first oftentimes event XXXX as loan and a is reduction

There a and has producing Wichita history the Max in delay aircraft to of Boeing its has plenty recertification. industry. of the been long aviation press the and XXX given parts for

diversified update manufacturers aviation OEMs companies and will believe significant good are please for manage give working our their built on. us been pizza many have many we different can times. the airplane credit at such, They've As tough this Brett, they we've environment and managing different and and sub for you issues. models, without an on

Brett Reber

bankruptcy quarter progress The company the returned make pizza to on and normal prior came sold in to to The of year also two continue fourth business credit. pizza new end. We franchises out operations. the --

had we it the asset fourth then quarter. value. a this the asset, impairment for After quarter, analysis being we fourth the and against asset that the Regarding the amount valuation at a reasonable carried in specific charge is believe allowance of by down updating

In principles the personal and carrying payments returned addition, the to loan remaining homes sale. of the for loan one regular company to is on market has the this

these working very have also some on been been XXXX focusing on the goals. exciting have we While results, teams

of to One push our for down eight accountability goals results to more regions. is these

to we cost We Branch as they financial services possible. in and markets effective of our we footprint, we overall a attractive most better perform part well manner look individually the will will have of to in an deliver company. this be want very to as our optimization bankers diverse regional goal believe talents our a as leaders, utilize and XXXX, and both and their

to non-interest cost A fund. second bearing and our of grow goal is reduce deposit to continue

on and commercial in continue and retail in worked teams deposits can hard grow these expect this to XXXX to XXXX. we Our

XXXX, growth financial highlights Greg, operation. and also to management trust us our credit our card wealth and take through We expect the the please in in new the quarter. expand of program services continue early

Greg Kossover

performance back and than share. per approximately $XXX,XXX $X.XX reconciliation about pay-off accretion our to of quarterly per normal approximately core earnings Stated higher of accounting per earnings loan share $XXX,XXX We EPS. diluted for begin purchase for and earnings fees with quarter early is the account $X.XX share of

professional of about $X.XX a place EPS to and in Other expense in fees third share. reduced and related elevated put a in about the of benefits $XXX,XXX payroll assets about account approximately for $X.XX reserve quarter or disclosed matter accounting a special net and on also was per share. combination of bonus basis $XXX,XXX reconciliation were per There XX-Q accruals our

Income true-up, taxes the $X.XX $X.XX at as EPS $X.XX beat which hurt higher were our adjustments review quarter for concluded per annual share share. about a our representing slightly by EPS share. and These per of consensus we leave core per

Brad Elliott

in It result the teams related of is our nice discussed our non-interest of the items is our earnings, Adjusted core especially expense. just it to from This, non-interest is initiatives. of income Greg a for when operating consensus it and be focus bank. believe to listed, margin, I we've previous earnings the exceed XXXX

Greg Kossover

loans first As quarter, fees unpack statement. we let's but was were the at about expectations loan Starting our on elevated about than yield with the margin, accretable income XXX,XXX expected. look more

of this, were loan X.XX%. yields higher there $XXX,XXX prepayments. were addition, about Adjusted for In

loans following with on basis expectations. points forecasts down about yields Securities, and coupon Average essentially movements. in interest was XX line rate and our quarter-over-quarter were balances

said XX is of decreased we from in to quarter the earlier, down to story quarter-over-quarter cost the our X.XX%. declined cost funds which As change real basis our points and total the points third XX of basis deposits,

the noted the for quarter normalized loan is NIM. million several more quarter provision. stated for point margin at from was to in X basis adjusted adjusted level third of a X.XX% losses $X,XXX,XXX be earlier, Provision net returning interest for improvement Overall, items and muted a X.XX% at would the quarter quarters

$X.X through acquired normalized components was The for and charged than for quarter as older assets into moved the down were our better OREO. consensus. million also non-interest Several income process million, $X.X line were loans they check the and charges elevated income commission in with of special expectation. Non-interest slightly

and million elevated accruals, of were on to expense, higher as million. primarily bonus third OREO professional due salaries $XX.XX stated to million of higher accounting expense losses $XX.X bit consensus and down party assets the Non-interest $XX.X as OREO to a due against were quarter due sales. was reduction as and fees benefits was and a Adjusted in for for adjusted modestly work slightly some special

reported our discussed to quarter we addressed. expenses adjusted an normal expectations. which reconciliation third XX-Q account We have in were as issue Miscellaneous our earlier

We remaining now accounts and was have reconciliation new current able to developed any are that items. account team a resolving reconciling get the

parties. quarter in in was expense from after entered we exposure immaterial much of reconciling allowance Our Any an the the were for and not provided the for many potential and fourth these adequate it. third about collection made process on $XXX,XXX items for the the of adjustments quarter third estimate of have of we items

includes tax income XX.X% year-to-date end true-up. rate effective and typical a Brad? is Our year

Brad Elliott

balance loans, start As we XXXX. essentially begin were sheet, review a flat of which we during the with

quality feel of growth Although for year XXXX portfolio, about been putting have was on. production our a good new we the the I overall not loan

is where stakeholders. do I calls, in previous on for wise long are said our term a cycle believe have growth stage the at I As not we aggressive

are yield environment irrational competition received large about that some million, from In to inverted curve. because addition, today and bottom. still of the XXXX poised next also has of and competitors out growth will amount irrationality, few simply the at marked We begun a standing we competitive year competitors we the saw behaviour in quarters. pipeline pay-offs deliver and with the believe I $XXX strong the very level of our follow the a year to not those during we where to loan our

Greg Kossover

continued we most to used down Home significant in were stock sheet, and in with line balances, expectations when form we balance can appropriate. assets. changes were have EQBK there slightly down our Deposit pay were in expensive Continuing no other lower advances which Bank down Federal stock primarily $XX on in the our bank securities Loan our XXXX which of repurchase balances was be balances deposits. SEDAR’s from million XXXX and to

Brad Elliott

year. XX at December X from our our share finished XXXX. tangible ratio the with earlier to both Our XX.XX%, capital over is year highest ratio ratios from X.XX% $XX.XX level assets year tangible and Tier leverage in backed We of The $XX.XX X% one per up value at X.XX% the is since common ago. up risk book are tangible significantly

Greg Kossover

guidance there we record quarter initial will the the capital in first we CECL providing not be on CECL be XXXX. Although an of today, will as adjustment impact

For three we phase regulatory in. year purposes, the advantage of take will

in and disclose be additional We filed have our Form been be actively to XX-K March. testing ready our modelling we'll information in to

Brad Elliott

We for outside meeting completed and in I'm results day as all in Equity and It away City breakout looking XXth day year or year's of much year forward for the the Monday for is for to our associate bank see initiatives Annual is Equity current any where Kansas sessions week, it employee vision always a every operated goals Bank. the everyone and is Bank of more of speakers bank the on our and the XXXX. leadership Equity we to favorite objectives area motivational hear of this you for have exciting than future meets XXXX and to from year everyone and about last our new come Bank. with bank my for it

several have to inbound to my is We for months calls occur on see opinion our received look possibilities new make excited will to the potential continue It also will that at and deals consolidation the we'll continue play I'm out. past mergers, stakeholders. sense and how few

to Thanks forward with entertain look for all your we questions. will time, At support in excitement. this XXXX I and XXXX

Operator

Stephens. Instructions] you.[Operator from comes question first Terry Thank with McEvoy Our

Your is open. line

Terry McEvoy

Good morning guys, you? how are

Brad Elliott

Good Terry. morning,

Terry McEvoy

I guess just start.

wondering and markets the stress in the non-performing on your assets thoughts as the been the maybe good AeroSystems in quarter. as first headlines, you your some comment that's since I the restaurant well really could made on especially portfolio. Spirit health there just updated was given progress economic reducing of the the You've franchise if

Brad Elliott

I obviously which they we'll to like customers Terry, our and this through companies. take XXX their it envisaging a of are good chunk Max to them. place it all we with constant it's not plans a be the material. it's be going able with in have break looks contact but have not in their to volume, really manage So mean,

service having we see the see portfolio we issues coverage them basis. be debt ratios standpoint any operating going of an from related don't So don't that directly of to that or this to any there's stress in going in negative

around is a standpoint, issue, community, that our hope So fly has impact The it an is and our with a issue. plane not town structure from twelve community if to will it's this it that which triple technology on eventually sustains through another months.

able to it So the in fairly and again. that air back the when should in back quickly, get it be production the air in they'll gets generate

shut are to signs working so of it up All that they're that -- can down. everything making as ramp the they are on that going especially stays sure this they back they intact

that that's on subject. So specific

We restaurant QSR very it receive real that also some and companies regularly now. all operating operating refinanced We with restaurants well, financing. we ones in and associated stress rate have. XXXX, have well. the took have estate pay-offs seem today which them some of that the portfolio to We Second currently look at see QSR our question was lending. But in of got on in did other our them don't out seem had don't places. and any to in be to we They're stress fixed blocks we that them any

are -- Custard. the the most concentration We John's, Papa Frozen in of lies Freddy's

so buckets that that And really have. those concentration we are two the

restaurant those well. really to seem so doors doing And be

Terry McEvoy

some XQ Thanks. And The then moving Greg. for margin had you, a question parts.

at give margin well us thoughts least margin what got the on that? maybe sense think you've the of and core XXXX, first loan a to of fees couple then through for year, are you and what if quarter, reported full as just a quarters accretion As the your first

Greg Kossover

Projecting QX The XXX QX margin quarter had nice still XXX over looks a in pipeline healthy. maybe range. fees, flat to very Yes. that in we QX. softer fee in little a QX, And

are XXXX up as that move dramatic. and we little a NIM bit, flat QX, we NIM, not all I QX forecasting said, So, through think to

Terry McEvoy

in the Just one new just And making banking. I slide you're I the like technology. digital last question. investments talking about know XX, slide,

Just XXXX technology in overall thoughts you growth franchise? grow that and the on your continue as in invest expenses

Greg Kossover

again, Ask the Terry, question sorry. I'm

Terry McEvoy

showing technology for presentation? here ongoing outlook XXXX that the expense investments The the in given you're in

Greg Kossover

has a investment been, been We've obviously made in was chunk it actually bit for expenditures capital in because of the XXXX. already lot a Yes. budget through platform Its our that less been a simply little We've XXXX than XXXX. developed. big of

see but think to percentages, going expenditures I bit, a with not not small big be capital up spike technology. you're associated either or So, Will a in little very dramatically. expense

Brad Elliott

on Terry, those slide list that implemented already are things XX, that So are all our company. in

Terry McEvoy

guys. Thanks Okay.

Greg Kossover

Terry. you, Thank

Operator

Thank you.

Piper comes Sandler. Andrew from with Liesch question next Our

Your line is now open.

Andrew Liesch

Good morning, guys.

Greg Kossover

Andrew. morning, Good

Andrew Liesch

from Couple Brad. your comments, of prepared follow-up

up pause? You'd inbound been you some Like, in mentioned pricing? it what's getting some deals? that credit? from given targets. have you these some on have these hang What maybe seen the you've deals prospective some calls Is it Is been

Brad Elliott

more XXXX of not eventually. interested easier they're market presentation and think are aren't to the pricing out going are private Well, changed from I has some they sold out you make don't points so today, that But that late to as the to and early are their know move companies And forward to data I what think to come I for figuring XXXX, Board Directors. bought. and think with for is that waiting banks not something conversation them to have. how

think things company will think so next Andrew months, their moves forward. than sentiment, go guys going the going a that over that there it's my in an say, I strategy. have complicated next want don't move the timeline are I And to and over that I there through CECL private just XX be I'm shop. more by this CECL might to opportunities these I we're just fact that on implementation now to there find driven think months as do -- I is the implementation exit today XX to some be

Andrew Liesch

you. Got

consolidation? goal Okay. branch good optimization your really help, entail? have a Is presence? That's then mentioned to to you Are places expand can of color. want there that of does expanding some on part you further? What be XXXX. you that good Can how where about just in earlier more And it

Greg Kossover

realign but been to regions. their the continue what organization, regions, in is for Andrew, duties, that eight down to accountability right our not working the as that really now emphasizing profitability to push such responsibility us on have and means we've Yes. for different

as talented we that by organization. we've the in We authority utilizing amount have make as want very correct most our sure to grown in And people and responsibility. of brought talent amount we're them the and giving we organizations of correct well that

Executive and their our on bankers, advantage XXXX working half to and Salmans, independently, in accountability new Patrick skilled pretty that. not working, of as we regions Huber and keeping a own of worked our take Resource system to and want they're develop very second but because have the Brad And Human hard Julie of

Andrew Liesch

curdle Okay. on questions. my That's very helpful. That other you

Greg Kossover

Andrew. you, Thank

Operator

Thank comes next with Jeff Instructions] you. D.A. [Operator Our question Davidson. Rulis from

is Your open. line now

Jeff Rulis

morning. Good guys. Hey,

Greg Kossover

Hi, Jeff.

Jeff Rulis

guess outlook Looking things, down side modestly outlook? kind up involved at look find activity, the to some you flat but the of all the things like But year. XXXX what's sort growth as of growth XX Brad, on you not loans trying loan frame obviously, at growth and net you good credits. mentioned, your payoff working factors feeling through and if footing had think I to And with chasing about just we look of about

Brad Elliott

So, is budgeted what growth I for. think mid single-digit we loan

And and there so with talked Jeff, this about and our for, quality stands a I group Anderson specific high people. Greg you down Mike would Tulsa before, with that we've has we took and tell team hired leadership Bezanson's planning really and our in

team have really Their now. strong. turned the we in really we one I a think teams over solid now in which Tulsa our say, we have of there I'd really, XX pipelines are best months. down experienced last totally

loan was really we're them so we about to large And last That growth for that a year. see -- be of what group. negative we And look a group growth loan negative out this large excited year. positive

want the lower the curve, of tied we And the to loan strictly internal in that is basis. so, could that a that for offer alone an going had thing bucket. the were plus didn't bottom probably a just long-term lot And of yield rate payoffs is giving offer on them mostly fixed million to to other help $XXX or loans inverted we

to out were what swap even And want being they there. with compete didn't with products, the so we offered

that of driven to most will irrationality and I has I seized that yield curve. so, tell you by the seem And think

I And opportunity we really so, growing at and with good the payoffs teams not have I think coming retooled, of substantially. us been a having those think loan

a last Our did solid community really job. markets year

I to well. metro do a better year our think they're think much job a do and poised job this this poised I to market are as better even year

have And about group teams ever and I operating all combination so good feel really best on-the-ground we had. we've of our the that, the

been sales we've on working process a so, training. lot training And and

those XXXX. I those initiatives through this to really things, think so, are And show going in

Jeff Rulis

wanted I Greg, Thanks Brad. margin. follow-up on And to

sure make Just to we an got apples-to-apples.

you XXX those relative XXX so, you the on in are levels could quarter reported, adjusted. reported, comment got What If a maybe first expectation?

Greg Kossover

levels be first would were The relative as quarter Yes. adjusted. quarter in the the they in same the as fourth

So we early number our and that would well. out in accretable QX. the $XXX,XXX out of they which expect QX XXX,XXX prepayment tailwind as be should normalize fees in loan expect we've yield, after adjusted also to fees backing would backed of same And as

Jeff Rulis

Okay.

in So, XXX the on help range the -- to XXX in come XXX hangs just XXX, the would me that and level?

Greg Kossover

just normal The the to we if a run XXX. XXX Yes. exist. won't quarter, XXX XXX, be It will

Jeff Rulis

Got.

Okay.

Just core converges attracted. already into

And think. follow-up the last one, the then question the just on expense Helpful. Okay. I

X.X% about talk you the already. investments XXXX you've that So in think I growth

talk got growth I My know the lower if a spend about the is is XXXX, XXXX? say points you any You don't specifics you'd but issue. that late in on in a QX rate to accounting number comfortable kind that rate of on guess growth

Greg Kossover

Yes.

going on believe looking apples-to-apples. guidance some the trying we're are we to of expense as XXXX. is not QX. where least fourth we provision XXXX I'm keep you stand We to We CECL same. the adjusted, this at projected and margin at guys about are here that for were think being quarter today, and on give happy into I relative we below growth to X.X% overall at

incurred old experienced method the what loss less than in we under slightly provision would be QX. So

be non-interest will expense simply up of quarter. less probably Our then little in seasonality, our And because QX will the in softer quarter. income a being a QX non-interest go first

expense. FDIC in salaries adjustments to are quarter normal, plus that non-interest return likely first we We to didn't have the premiums also our will in the QX, which increase will have

XX.X, non-interest call XX.X% in of $X.X to QX clearly. non-interest somewhere rate, be first is income an million quarter So I'm million from somewhere which the and between tax expense increase in Effective $X.X XX.X somewhere to and for the in around range.

so, of in QX great And and from not very we're proud our come cents We're to from forecast health we it. had likely an in operational down seasonality. standpoint few and QX a quarter just a

Jeff Rulis

stuff, Good right. All Greg.

and details source that or on the you that out you you us, something all I in at level of up XX, mean expense at of decline north on would of X.X% balance then holding certainly you'd guess, but side if are below rate growth us gave year? the You're XXXX looking for QX off the step there. for

Greg Kossover

is That correct.

Jeff Rulis

Thanks. Okay. That's it for me.

Operator

Thank you.

from comes Michael question next KBW. Perito with Our

now is open. line Your

Michael Schiavone

Mike Good morning. stepping Schiavone Perito. for Michael in This is

Brad Elliott

Good morning, Michael.

Michael Schiavone

Good in think and earnings that what guys for XXXX are through morning. to we walking as factoring exit items forecast? then And Do core XQ? view XXXX should mind try run we any you about our us your rate use into of it

Brad Elliott

components You bet, We a The -- and of diluted down walked that loan we for in $X.XX. because non-interest $X.XX are expense. We had were adjustments EPS in stated we QX. to yield higher share. $X.XX Michael. that series through accretable and of higher, reduced fees were Quickly of fully was

reconciliations, QX and taxes on $X.XX. that So higher in reserve $X.XX a we slightly hurt so put that earnings by helped were also earnings a penny. our But $X.XX account about

down $X.XX the the quickly, because same EPS And just calling diluted seasonality. and non-interest about bit we're going -- we're are a QX lower stated $X.XX. QX for core in adjusted fully calling same for to again to see we're little So income just in of NIM

But step to typical because non-interest expense in in quarter adjustments. first quarter fourth we QX up will of

in if have normalized run And $X.XX. potential of that $X.XX somewhere for us of rest cents so, would a we're to that $X.XX on between in and stated we a EPS $X.XX QX, in of the somewhere few And rate give we're in although, projected at below high basis calling the XXXX, the QX. $X.XX

Michael Schiavone

for fee and any like can initiative or you anything that for for you mentioned And about detail. Thanks XXXX? other like expectations QX, that great. talk but then Okay, wealth fess,

Brad Elliott

Yes.

really be end implemented the state XXXX. good breakeven a They management and of pipeline have trust wealth division. year a forecasting that that the would we've we're in of and group So by the

And hopefully continuing so, that to to assets them new they onto platform. generating specifically the we we revenue lot expenses, aren't although are those group initiatives, year. book this a on of adding they're expense haven't out broken as And

So, all invested, technologies there been to have so, the great people doing job that. invested. The and bases so with and customer grow been a they're continuing we're

technology we've We also services current have invested in XXXX. in that the

had credit And card on the so we side. already a division. It was retail very small

we've what commercial grow so, retail we but to want And on the focusing don't really said is side, we're side. the

corporate cards And tie purchasing so, and our really credit customers. cards to C&I

we this do ticking so, year. that will start And in think

not you initiative. we Although we had improvement in quarter-over-quarter have that area. out broken the have see deposit specifically can But

sales. from point that's of through treasury Some

debit point initiatives other Some of that had card spend. from on through we

to And we'll those so been work make try hard sure XXXX XXXX. in working things all in those our have to teams continue to increase with increase, and to

Michael Schiavone

And But you. hit you your you guys talk priorities XXXX? a a capital for about I bit. Thank just Great. M&A can little whole know on as

Greg Kossover

XXXX, we're a capital of pretty question actually. ratios are healthy. and how That's very great proud ended frankly all our

now at we're its at each We'll capital look best But since to the with react and are capital right think been for proper thing, all board, went it’s now. what's the organization. right I our and so, looking of a see transaction accordingly. at options individually at, And we're and public. And available looking same utilization really we shareholders

Brad Elliott

it's utilization as capital as pricing focus effective deployment a buyback, on we'll standpoint. stock still long from And a strategy as

Michael Schiavone

taking questions. Great. Thanks my for

Brad Elliott

Thank you.

Operator

at Thank Thank for you. participating. showing call. I'm conference gentlemen, any further Ladies this you time. this questions not concludes and today's

disconnect. You may now

Equity Bancshares (EQBK) 24 Jan 202019 Q4 Earnings call transcript