Earnings call transcript Q4 2022

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Operator

Good day and thank you for standing by. And welcome to the Fourth Quarter 2022 Equity Bancshares, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

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

Chris Navratil

are thank which And fourth joining Bancshares the our Equity XXXX at for Good by investor.equitybank.com include you discussion call, clicking call accompany to will Presentation deck. our via and conference PDF results. download morning. presentation slides for available presentation quarter of

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

this note advance. viewing are call that will you webcast please on If player, automatically slides not our

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

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

it that, Chairman to our Brad With turn and like I'd over Elliot. to CEO,

Brad Elliott

call, Bancshares. for interest and John Eric Craig Thank you, Chris. Chief me Good With Newell; morning. President, Officer, Welcome today thank earnings COO, in your and are Equity to Anderson; Credit the quarter on call our Kossover; CFO, Greg you Creech. fourth

by I celebrating want two to accomplishments. start

for income net record million. XXXX $XX.X company First, was a totaling

Second, million. rates, had was strength of Both year customers XXX of we we A showcase success rising our of from our increases achievements totaling one Federal serving and in employees. $XXX.X revenue our franchise, the the talented of ago, show but group points a no expectations interest record had forecasting our basis Reserve.

our could incremental mobilized the for better. year, sales a refine results environment in Our for The inevitable I and themselves. higher XXXX raising for maintaining last than and XXXX environment this keeping were to find yields do team’s year by quarter prepare deposits. ways approach to loan in points rate of to short. anticipating speak work XXX rising the Loan basis we teams our challenging pricing this fourth

confident customers We took am on that XXXX. their up performance contribute serve the to to efficiencies better success. our operational I this for focus better that sets in and better products with services us to opportunity

by uncertainty. economic our asking on customers not a team varying our and to lot our philosophy on uncertainty, there our focused forward, growth. But relationships with of is for being the control dwelling loan customers, rather Looking achieve underwriting prudent capital is deeper can with than business, we their from prospective what

of work by I'm of the in Journal category the $XX Bank Business honor XXXX. of the also for year the based Newsweek's We Kansas survey employee Wichita Best in proud the billion data. on in were row a third as places for recognized to best one under

financial Eric let through talk you I'll our results.

Eric Newell

we income, million net Thank diluted or fourth you, $XXX,XXX in $X.X share. the million $X.X $XX.X was the gain linked per quarter. branch night, reported Brad. income Last sale of And quarter $X.XX down morning. Noninterest good excluding million, the on

costs merger million. increased quarter linked less expenses to Noninterest $XX.X

calculate diluted We be per $X.XX EPS share. to core

quarter and earnings to earnings GAAP expenses on sale of $XXX,XXX. of gain this core $XX,XXX reconcile To branch merger removed

we Page X new solar a of show On of the to tax investor program. visual added impact deck, our the

into entered placed For of we tax the net tax service. of is the $XXX,XXX the income. cost in timing versus in we project the benefit investment when expense determined the by to total provision this The is partnership added year, and when

noninterest noise. we the line using which credit for structures method tax moves to accounting tax amortization currently the expense removes this and Importantly, and expect investments proportional credit and tax to adopt expense the

for the we service the effect adversely XXXX into had the delayed, as would year. we invested a not That we of had originally impacting December, placed in full in of a which be being May provision tax in is learned XXXX fourth the tax forecasted. year calendar the in Late quarter, of that credit true-up

service early be project this to placed expect into in We XXXX.

a of $XXX,XXX. loss through credit includes income release net for GAAP Our provision

are that seen asset not broader our softening decline have expect portfolio. our the and trends any of quality importantly, specific more economy economic in concern in XXXX, have we we trends in While not markets in we in seen

reserves set had quality resolved have previously team our for this specific assets to asset set our loans the to aside uncertainty, and longer the we XX The of in continue we aside credits are While December modest for coverage qualitative that improvement reserves no is on release have balance special sheet. and ACL represents fully X.XX%. credits our

let through for us the here John? John stop I'll a quarter. quality moment for talk asset and

John Creech

Special from due for of the quarter million million. $X the quarter performance the million were was quarter. at $X over million the $X.X $XX the end. across to mention Credit Special strong, categories. mention year $X XX Eric. declined improvement again seeing improved at loans Thanks, for Delinquencies lower, at quarter all beginning past loans million days ending

Nonaccrual loans total quarter at $X.X loans. X.XX% declined finishing the million, of

proud together in nonaccrual XX. a loans decade. level most were acquired The reduce our Brett of for acquisitions. Reber, of I'm $XX excluding declined our General [indiscernible] December branches, majority million via $XX.X million to Counsel, on and to bank $XXX,XXX, to OREO our lowest working assets Nonperforming

Net the charge-offs quarter $XXX,XXX. for were

expect continue normal Rising have produced credit rates levels same losses uncertainty portfolio relatively is not card not levels. a consumer employment and economic inflation The and liquidity consumer returned time, has be yet new the At one a concern. in yet and that to to downturn. would historically

overdrafts rates to of overdraft-related charge-offs. have relatively We continue and low

to secondary Most At largest the at or year-end. two good sources quarter, of were repayment. homebuilders only strong markets liquidity were our Unemployment have of to rates loans than continue the $XX our X% of homebuilders in end less million.

with have for XXXX. drier Cattle and The war pushed concern green prices commodity farmers. upward Declining in for a providing outlook are a favorable is producers. Ukraine for a conditions prices floor

loan providing lodging properties. is sector. good has well is X.X% portfolio About of pandemic. office Travel following the tailwind resurgence Our and our a for hotel commercial income-producing performed the portfolio

never been example, went office for with remained rest debt All remote into yields. to office to newer the the issues throughout in values less a commercial hybrid have getting all the of IPRE pandemic. and as Equity Midwest than loans have comfortable employees The financed or country. appears loan employees the the Bank, environment

XXXX, from $XXX increased while $XXX year-end of Texas X% has high to declined fiscal from to at Since regulatory ratio million and capital a our XX% year-end million.

the same increased nonaccrual XXX%. has by $XX low to million covers of $XX period, loans ACL During from million our and a

Our with been strategy. vigilant our loan credit on remain have bankers we successful pricing and the front,

While the Midwest anticipate prepared remains strong, we conditions. economy and difficult are more for

I'll turn production. a for Craig it to over discussion on

Craig Anderson

and quarter, X.X% was estate million Thanks, the John. excluding and X.XX% real growth the portfolios $XX.X annualized. commercial in annualized. in Loan growth sales branch was or commercial PPP Loan

higher result of adjustable XX% of successfully at We as continue a interest higher our to yields rates, we nearly portfolio originate having rates. seeing loans are and loan

in loan portfolio XX deposits interest-bearing XXX points basis yield XX to the quarter, X.XX%. Cost points increased basis increased to the fourth the the quarter. During points of basis in

as And pipeline we terms caution exercise at and John Our said, $XXX in stands conditions on new reasonable loans. million continue to and today. renewal

gain quarterly branch during income was held drove mortgage million the of of environment quarter-over-quarter Noninterest production fourth excluding quarter, the in benefit when on well $X.X noninterest decline. exception the Service as sale to $X.X previous down of mortgage declining relatively quarter the as the the of $XXX,XXX. realized banking while the consistent million of income revenue with acquisitions

in and divisions noninterest our are positive and income XXXX. wealth We further Eric? trust health in savings contribution expect positive management momentum and seeing to

Eric Newell

fourth totaled $XX $XX.X Net quarter. from the increasing linked million interest million in the income quarter, in

increasing interest quarter net interest X.XX%. five the basis from benefit environment, to continue with points linked to rate margin rising We

deck, but the of by income, X you increase the Page which yield the from basis interest-bearing to the the We of the see cost in benefited one offset on points our change an Turning above forward. up quarter, fourth can XX linked earning going net of liabilities. increase quarter purchase slide point composition benefited from interest in expectation in the assets, in accounting basis

sales and expenses. linked from and quarter job Salaries and benefits, the will included our to incrementally customers. to vacancy advertising improve categories rates, expense attributable other X.X% benefits quarter Noninterest service increasing our which lower salaries third increased and

mainly the to from expenses direct platform. our Advertising banking increased attributed quarter, third

As quarter partnership bank deposit totaling expenses deposit compared helping a third our to our in credit needs to our our million quarter. $X.X our is keep lower million tax reminder, channels. in amortization strategy nondirect in include $X.X betas while the Other the fourth direct designed meet

rate view include for Our includes XXXX. future We an outlook updated hikes. slide do not

still higher emphasis on deposit to deposit accounts. an will drive includes noninterest-bearing lagging effects Our be of relationships impact rates forecast of the rates. Moderating the

billion which is portfolio, portfolio X.XX%, yield taxed cash a basis spread. Before about XX successful of flows has portfolio basis which point weighted a the loan flows below loan current of into $X average in origination cash a deployment our of XXXX, well points with as the investment XXX of as yields,

reduction deposits seasonality and In to due the customers' portfolios and fourth declined commercial in from municipal our noninterest-bearing further liquidity. excess quarter, expected

effect the focus to acquiring funding. sales for would have and As have deposits of which Brad efforts our new teams increasing mentioned, on total relationships, building noninterest-bearing renewed

to be because a qualitative mainly a optimistic to average is loans. This losses points consensus, of coverage reserve recognized of existing provision XX current economic the level Our lack for our and build to forecasted than uncertainty. previous is recognizing more loans, the basis view

of positive customers, improved allow incrementally Though and expense introduce on acquisition. working expenses in XXXX through leverage improved anticipate products better support of cost our through and products operating potentially underway a customer that advertising are experience higher will revenue in level technology will result been for services includes we've that to for Opportunities reduce and the acquisition deposit expect XXXX efforts We our reduce efforts. we services to that efficiencies.

Brad?

Brad Elliott

be of are in fourth good credit with their Checking Developing discussing with the Our customers. having a would We time year exceptional at top high interest discussions will Bank services XXXX. clients in continue. core met and current rate a quarter beginning focused growth on and and Equity relationships account of low origination the for remains good Those that with employees them. this broadening in mind. it's and upstream whether of banking environment, as well, banks relationships several a prospective partner options merger high-quality liquidity

excited for sets us the for and XXXX. are Our performance through success We future. we in up XXXX

with your take And happy that, questions. we're to

Operator

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

You may proceed.

Jeff Rulis

all. mid-single are you sort on in digit bit side, the kind I growth loan of Thanks. softball, Question Good a a XXXX. of morning, to guess pointing of guys

in in in of just ability constraints and on loan you're mean you it what to would of your interested how there; – coming own risk seeing, characterize be is for points side growth the there? interested But it's of the Just mix of year appetite growth. demand kind I the for you're kind looking the bet a bit fund and that pressure I that

Brad Elliott

Yes.

think an sense sure interest I we're – to rate there, trying to on a that out make of loan things just So make that balancing there's so from put we're opportunities lot Jeff. ability standpoint. the And

haven't we or our underwriting. We credit to stretched need don't haven't –

of And so there's lots opportunities there. out

You a lot faster. can grow

interest a a keep is, The for we that we because rate type of keep can loan and think we question continue that to viewpoint sheet might rates have balance we get that want growth rising. our that

locking the we in in near reprice on aren't so that be to asset side going And term. now can't a rates very

And fit there, that's our to that so we But the not the being prudent from issue. lots standpoint just are interest same rate us in moderate on there's that make of the can to lending sense, that sure we and for things do. out want originate we're bucket opportunities

Eric Newell

this is Eric. Jeff,

On loan to forecasting because to in seem slide growth, balance. X% the period-to-period, might so It softer year-end X%. year-end that's the average a forecast around little we're

Jeff Rulis

to maybe while how trying have figure average to full the – the the do quarter for Eric; Thanks you, compares the you Eric. average? got margin, And that on what out month December? helpful. of That's Just I

Eric Newell

for added of then betas can in But and XX% broke and a for deposits the front XX% the which you us X month due of That's and deposit beta can me. where a you of the deposits, beta for just says QX cumulative our don't and not the down little we loans. probably than And in Slide I would that cost just deposits, of beta actually in disclosure interest-bearing. on see I is say see deck. December we December quarter the December, in yield to December. that's it total a components average to newer a had have softer of cumulative experienced we

Jeff Rulis

little you. it's at of kind a range-bound a Got for looking and Yes. downside little margin guess the outlook then in the I QX, full on lower. maybe too, the bit, to year,

it. I appreciate So

color get circle your just last other wanted up of is partnerships for discussions back relative picked commentary up? out bit. the let's a one Brad, a coming banks on guess a I more with Thanks. of that banks. to Maybe Trying sense Just little to to there? weeds say, interested to the one, in having partner more

Brad Elliott

Yes.

a been it's we're quiet I I – think fairly period. think

And so days the the days. they XX were – the XXX been prior XX conversations in more we've than had the requests or in have have last been prevalent

conversations picking up. would say are I those So actually

I because picks always think their bit this get year-end year done. little of people time steam up the a numbers

And together market. to so they their packets come to get

be So interesting I it to an I us, there. because some opportunities spring think be going think, will for there's

And deal, so things, do what I how we do AOCI. we can and skin want ways got and some do to we we've that with that creative think, those

we're having start ready conversations. those so to And

Jeff Rulis

Okay. Thank Appreciate it. you.

Operator

Thank questions. for you, moment one

Our next Liesch Sandler. question comes with from Andrew Piper

You may proceed.

Andrew Liesch

guys. it Or where has guide hikes with It should point the deposit with pretty a built Good gotten XX on not hike. beta guess, bias neutral that morning. seems repricing I into basis the case? I of still wanted now? be to Hey just Is side, the but upward point touch the it margin there's on, there? rate having still the even an rate to some any like the of

Eric Newell

I basis zero probably on of XX points expansion with looking X say NIM. and would we're movement basis points between

Andrew Liesch

All you're helpful. couple That's it. think bit for look it's mortgage Got last is stronger? in at the you a Then quarters, obviously, market off to for outlook? If of right. been that that under the a here quarters. good item place where pressure line few Or I front, a has maybe the been little do XXXX your build on

Eric Newell

full that, looked – is XXXX. Andrew, our We you actual, to what the XXXX did, that's and Yes. use expectation pretty for of half year – second if close we annualize we we at

Andrew Liesch

you. Got

Let's No, that have. covers answered. has think all questions the been Everything I I see. else

thanks. So

Operator

one you, moment for questions. Thank

Our next with KBW. from question DelMonte comes Damon

proceed. You may

Damon DelMonte

good today? Hey morning it guys. How's going

Eric Newell

Damon. Good,

Damon DelMonte

Good.

color healthy, are wondering And thoughts in the of So kind that remarks, was the and on just your a $X.XX. that and credit pretty quick around question outlook. is kind commentary through the next on prepared reserve, what provided to I of how the quarters? the Great what just a maintaining that kind loan we and triangulate as into would we look kind of as go over XXXX expect we for of can level and charge-offs out you net provision loss few think use

Eric Newell

to talk can it John about bring I and environment, financials. let the I'll back

John Creech

call you it's credit standpoint, kind The from markets, to what know X% have headwinds our us we environment still. the look a the difficult on for quality unemployment But two because largest of like. as characterize said

the in working, look does. are have office in and those commercial, the doesn't rest you the people If degree IPR, Midwest at and the the to that of it headwinds office country

what low, good. They're You how remain look monitoring at we're and dues compliance; seeing bases; we're with past The it remain low. the borrowing base look at compliance almost low. the in our base borrowing is we overdrafts portfolio abnormally and borrowing

the the larger expectation is hear I from particularly lot of compliance other borrowing the see our calls, I a Our listen is of liquidity. and have levels our level strong not banks muted. at loan got And with compliance kind continuing of what covenant of favorable strong. to waivers. to liquidity when providing monitoring, Borrower bases. economy earnings We're remains We've we're and look borrowers that

seems a had sort of So credit it the for odd see of trend from cost the last that standpoint, year. continuance we've the we

Eric Newell

seeing of in So I put a us lower current the in coming taking coverage an loans that that budgeting quantitative basis I that seeing flowing But are we economic certainly have and still based Damon, could average you view, and from we're our the lack qualitative our of to all that listen think from aspects when today you uncertainty. look into point points over ACL the what that what perspective, John when the on current see environment showing at account year on for ACL together the provisioning. we quality loss XX we're than portfolio, our could But based really and through our change credit that on of model. in

Damon DelMonte

Got it.

question of related to because here, helpful. just this which that's the the a Okay, solar rate kind quarter to regards timing the that the technical tax impact of credit. – with regard color. And I appreciate on but with then

end anticipate bigger guidance? just to in range is of So like because get Or the your in first embedded XX% that XX% overall quarter a should benefit? low you the we the

Eric Newell

forecast. embedded in overall the That's

Damon DelMonte

it. Got

Okay, had that you now. That's all very right. all I much. Thank for

Operator

questions. one Thank for you, moment

Our McEvoy Stephens. next question with comes from Terry

You may proceed.

Terry McEvoy

everyone. morning Good

Eric Newell

Good morning.

Brad Elliott

Good morning, Terry.

Terry McEvoy

if were about the using I margin do talked deposit a And are would the in was hikes, is guess outlook? we've guess of you assumption? that couple deposit my that industry betas talked betas impact below the year, last get you and the your about. playbook I beta we how that question rate what

Eric Newell

for of that if alter now, know XX% budgeting would continue we'll we assumption that beta monitor point, our hikes liability every I in that Right committee using and terminal our month, at is a in talk about don't this that. rate asset to XXXX. continued we're something

Terry McEvoy

as you using maybe digital the could bank as overall funding discuss And Thanks. an a follow-up, tool? maybe how you're

Eric Newell

Yes.

in deposits markets reduces do versus and So customers channel are a our channel and the where rate, we repricing it it direct a conversations bank, our us is vehicle with to our and the cannibalization also that for that in Digital us is raise there. on deposits Bank deposits, core raising brilliant rate, efforts but of bank market deposits focus potential of have helps our

Terry McEvoy

XX; talked as does at How you the buyback X% Okay. on Maybe additional about further the target play at management about or it was capital think one come year. activity? last of one end the slide, that it X.X%, was into TCE

Eric Newell

had operating and into the meet and we for year. management in We gain was environment. In most the What wanting a upcoming to I the quarters, back buy but us take to we're shares, our did our expectation the each we think XXXX. of time and more current certainty buyback some – and not due we in seeing economic pace earlier board quarter we on the at some talk account view that about recent that

I earnings. us is you'll now constrained market beginning right of back in see the have factor Now think the retained – that we in our the that, year, and here we're

we a So we certain within are and it, to want that higher XX% that. not to sure make payout than call XX% percentage,

Brad Elliott

differently, look TCE, AOCI. TCE, look at but minus Terry; said we we So at

to the So to or we is the very come it's analysis know are AOCI back going back when always our by going we we're come mostly to comfortable XXXX. come And going back. that doing end of almost

look restraining going factor that's that, in minus us a for we back not to at and So be so it buying shares.

Terry McEvoy

for all questions appreciate prepared Understood. Thanks Okay. and taking my Thank the remarks. details the in you.

Operator

you. I'm participating. concludes for showing not today's conference questions time. And Thank any call. you at further Thank this This

You now may disconnect.

Equity Bancshares (EQBK) 26 Jan 232022 Q4 Earnings call transcript