Earnings call transcript Q1 2023

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Operator

Good day and thank you for standing by. Welcome to the Q1 2023 Equity Bancshares Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.

hand over to today, your like Navratil. Chris now the to conference speaker I'd

begin. may You

Navratil Chris

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

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

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

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

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

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

Brad Elliott

I'll call took first quarter. the events start the system Chris. addressing today's during that banking by the in place Thanks,

of of present the Equity and the First that issues and never liquidation caused third The foremost, been story. two banks the stronger. equity a Bancshares are failure has voluntary in not

The us industry with across deposit diversified base, geography. and provide we serve, a granular communities

have do We HTM have risk taken extension further and chasing leveraging AFS not in portfolio will believe see not we we meaningful curve. the our not yield along or portfolio. outsized We through

are fact, In margin. increase we the This portfolio net into in loan off book. interest the reinvesting cash flows an probably delivers

advantage take to downturn. through any opportunities positioned of well is Equity economic potential

in choice balances, operating non-performing community an to smaller We'll low We in ratios, the our asset and be for have regulatory our of excellent capital banks footprint. goal continue expertise partner M&A.

asset. in our invest our continue important most will to Equity people,

customer through the priority shared to and technology service innovation use to Equity. high exceptional will streamline service activities. Evaluating at touch the experience We remains highest dedication previously

Midwest a financial to community entrepreneurs. are bank expertise We like-minded offering

CFO, I'll financial Chief our you and President, Creech; our Eric Newell; Officer, have let our results. Craig Eric today Anderson. Credit John me talk with I through

Eric Newell

to quarter reconcile $XX.X EPS express linked earnings this million income or $X.XX remove benefit. core million night, million. was to good up BOLI Non-interest share. earnings to share Thank quarter, Non-interest income we per million $X.XX one-time core morning. $X.X $XX.X $XXX,XXX decreased calculate GAAP and reported diluted Last We quarter. of you, per be $X.X of to that Brad, linked $XXX,XXX diluted

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

seen While realized not in markets, have we are economy expect and softening in broader concern XXXX, economic in quality declining our not have last in any portfolio. we specific trends importantly, the or more our trends there we seen

have our uncertainty, to represents aside specific the and aside March improvement this At for XXX had reserves, previously release points. basis qualitative set is While reserves for of ACL set we to credits. loans coverage modest in continue asset XX, quality we

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

John Creech

Thanks Eric.

dollar credit amount at improved all assets less $X.X including days see X.XX% to lowest ending same loans the of categories, over XXXX, categories million, the $X.X and balances performance Loans due since of end past XXXX. in the balances over most improved at million, XX assets. greater shown than half continue while were XX% the The are the non-accrual loans of total period. We OREO. are non-pass Non-performing quarter

strength to lending with and of bank operate bank's and favor intentional Equity credit decision loan making The a is quality. from policy secured very repayment. uncorrelated of sources position

profitable of good the chatter remain manner. a sheet conservative underwrite We we are like continue careful and in prepared broader to our customers our with with very same terms care to always take recessionary grow and customers the We balance of mindful have. and safe, Brad? strong

Brad Elliott

our ask growth goals, led then have those and Officer services focus rates and help deposit products provide trained to sales opportunities and work better with local our expertise we achieve teams and financial drive questions our it approaches this impact higher on in the We financial to effort to would to customer, anticipated and our Deposit our transaction the teams We've we deposits. diligently communities. with uncover has Chief XXXX, in new Starting our leadership. understand of offer. goals more Jonathan Roop, on

running. realign carrying an as Officer. operations been worked to to streamline open has experience deal as Eric He We've position and Chief recently of Duchnowski lead great operations our the Services a added staff. We hit brings and area the Dan ground the

without and and and continue deposit channel a for [ph]. is services footprint will how to effectively our having success that strategy, digital more income in dedicated having drive Charlton our recently accessing turn fine-tune We with our hired responsible growth digital to believe expand leader interact better customers to which drive expand our continually products president. driving will and to fee in strategy and a our physical our channel loan, Charlton area. digital branches. and We're

decisions are local with for their service regional customers leaders make proud shared to centralized of the We allowing committed and support to teams. decision our making,

leads Western and Brad the quarter, the expanded Southwest, and Central Western with CEOs. Oklahoma. take markets, individuals our as the Daniel During on Josh current leads Mark and realigned metro regional region. Wichita, responsibilities Missouri, our along Parman leadership City, Kansas three regional Southeast to we Kansas Means Ozark Northern Kansas, and leads regions Tulsa.

Each customers the responsible own Mark, these our P&L for respective fee growth service income, their driving ensure Eric? regional communities. the team with the As receive executive and are best-in-class Brad deposits, rest in to and CEOs, partner areas. for Josh loan, of

Eric Newell

$XXX our annualized. the originations the in X.XX%. in were coupon was in annualized. of Most or CRE. We growth estate a was of Loan X.X% and originated million Loan growth C&I $XX.X with weighted and loans average commercial quarter Brad. in of the portfolios Thanks real million quarter X.X% commercial

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

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

higher source at high million is core March that and franchise. our bank We stability other but a our overall bank continue source, deposit XX, entity deposits, are to as which cost liquidity Public deposit beta of our a higher beta provides also relatively portfolios. has $XXX than represent than a to deposit use direct

income million from quarter. totalled in the in $XX.X interest down Net quarter $XX linked first million the

Following FHLB on the early took events million the we during debt. took place bolster in In took that balance bank we liquidity further space increasing to sheet $XXX March, steps on of borrowings. quarter, position, the our the

and deposits signature weekend morning. on in saw looked deposits Monday it their our outflows Over SVB heard reduction of We the discernible after customers deposit in what XX% borrowed no be week, wanting XXX and Equity from a of non-collateralized failures, to at bank to that at top customers, all looked move more we Banc. fact and would our

as Once liquidity of favorable program was program Reserves' to term that we to our Federal to source is funding bank announced FHLB. a understood a and portion we more enhanced the of its funding terms, move it opted the compared

remained to first quarter. XX.X% loan These cash notable increased the deposit the Our we we linked in NIM X.XX% versus quarter. $XXX at while for actions ratio reported as quarter million flat X.XX% a effect on had

top increase increase from in you basis Turning six the points first the earning to the on net an assets, in the the deck, purchase quarter of points by see accounting benefited benefited yields Page slide down from quarter, can in of expectation in on interest on offset change the cost XX basis income, which and the going interest-bearing linked We of four liabilities. forward. composition

sale $XXX,XXX. the excluding benefit income branch and $XXX,XXX card quarter of linked fees Non-interest and linked the by was while driven charges BOLI primarily Service income when up million gain were the a $X.X slight of quarter, on $X.X down fourth quarter, stable. million debit remained one-time

see banking pressure We continue mortgage to income. on

offset increased $X.X in advertising development. and partnership the quarter include data X.X% quarter, linked million compared in business our $X.X meaningful tax the by quarter. decreases in to processing first benefits totaled amortization and Other fourth credit expenses million Salaries and

Our outlook XXXX. rates. forecasts changes, future our an of the updated slide effects includes though includes include lagging do of still rate deposit We not view

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

XX% tax was differs quarter, for approved, an forecast, investments of XX%, XXXX We're Our reflects rate. but meant credit still that internally annual rate for on. the which to forecasting slightly which tax not tax we closed rate from our two represent is effective effective been have have an

Craig, our efforts? talk more lending want do you to about

Craig Anderson

have Banc to more want on landscape. pull you the opportunity of for landscape. many of lending. us I give lending as power. seen Thanks, the lending gives window peers pull We've back an our a to peers Equity on many on our it color relative is We've pricing This Eric. seen

with handles previously quarter. Eric originating over the successful As been nine in we've loans and last mentioned, eight

We more the granularity at $XXX down quarter, we by have break million. probability. added it now some our last In our process. to mentioned pipeline pipeline We stood

at or stands that Our approved XX% higher probability underwritten, further along $XXX funding in million. the deals and are This pipeline fully represents process.

to which million, probability $XXX which opportunity is $XXX XX% at on probability, Our submitted our underwriting pipeline, our we million. loans XX% and stands place

management wealth team and been booking business. new have trust Our

wealth fee new Jones realized quarter, growth robust Brad? team. led assets which our team XXXX if experienced has growth Andrew John trust XX, a business management. to from Musgrave developed income December drive the and under periodic and During XX% The of compared by pipeline, when will

Brad Elliott

proud will all in opportunistic grow increases our of selective core bedrock work which underwriting, organization execution build while stakeholders. our strategy, in execute the the believe quarter. effectively on first are am M&A. banks built. earnings all The I communities continue and to did bankers value to are through mission exceptional through our our on of our for our of operating the I prudent looking the leverage increasing franchise and Equity

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

Operator

[Operator at Jeff comes instructions] Our question D.A. first from Davidson. Rulis

is line open. Your

Jeff Rulis

morning. Good Thanks.

a get margin to little into wanted the Just bit.

you've mentioned, of that excluded the excuse assigned me, QX. guiding perhaps the weighing to of sort impacting you've on basis you that's was the got your report, outlook? what the margin reported and Could point -- that excess that margin liquidity excess you'd in X.XX% As some liquidity

Eric Newell

is Eric. continue balance excess Jeff, X% If think to were our hold X% to so to cash. liquidity this sheet, on we

to XX NIM, not does dollars. maybe We XX%, NII expect but impact there points importantly, that to impact be about basis XX% on

Jeff Rulis

Got it.

the more you I the expectation but can off that is actual to if reported guess see, margin Just on that the I that wean to you NIM guess, year, idea margin. the or guess, you shall and fair focus course matches cash over assume? I trying that, closely of we number in balance, the Is

Eric Newell

continually continually concern regulators, will not seeing We're that's of depository apart cash behavior position something having and our assess. anything seeing our what constituents we'll industry believe, with I from conversations customer the relative the perspective. assess we're we in including to that from

but liquidity, a little excess think -- how liquidity our us excess for reducing sheet. it's soon be and to could a I prediction the make balance come we point, liquidity that would on that from So too up when

Jeff Rulis

And on of Okay. in number Got Makes you have the the sense. buyback, the do it. shares quarter? just repurchased

Brad Elliott

Yes.

look we'll make go and we're we'll about us on end we Eric? answer Jeff, the sure everyone we the question make questions that sure that for question call. by Let and up, that of with How that while other answer

Jeff Rulis

of And release million. in first the guess amount the that I the solely was was just quarter? That that -- stated in you’ve $X.X

Brad Elliott

a -- the amount would in me to in be dollar it again, the I'll but you deck, Let quarter, the that get number for quarter.

Jeff Rulis

end what one that And year calendar year? the of the -- I just missed QX last the was think one loan repeat of the I Okay. for Craig, Could pipeline. versus end at the end maybe you of for

Craig Anderson

different the that, Yes XX%, was said currently over we'll which and million our confident book fund we and categories we've very, million assigned at it's million. Jeff. $XXX what and XX/XX/XX, very probability was $XXX is three $XXX pipeline to we that actually At feel running

which and XX% is our just a rating, million. is pipeline, Our XX% of $XXX probability then kind $XXX assigned opportunity million we

Jeff Rulis

Perfect.

step I will back. you, Okay. Thank

Craig Anderson

Jeff, I have number. your

in the of we dollar in quarter. quarter. XXX,XXX repurchase the that cost that first was represents that total So in deck amount And shares the repurchase the amount the

Jeff Rulis

Thanks. it. Got

Operator

Liesch Our comes from question Piper Andrew Sandler. next at

is open. line Your

Andrew Liesch

guide. Just talk on want to margin the

but liquidity, to the guess, behind sheet are be balance funding what maybe on a quite costs it's pretty building stable bit of are looks that like little higher. there's I moving from sounds It a here. going remixing, excluding So asset bit like that? drivers

guide? and that So what on margin puts the of some are takes

Craig Anderson

at asset starting to quarter, X.XX% of so the Yeah, that side, the with we to the yield expect book loan continue X/XX for increase. on

the in there a go loan on X.XX%. originations quarter, was at seeing eight Looking and weighted to committees coupon loans approval our the spread through nine the with them, We're prime. handles oftentimes

going that's the just new that loan be XX% to of is the with adjustable. on loan So originations even we occurring the a expect portfolio, Also, benefit. book

rates. not that some higher So interest there's readjusted loans to still have

should comments, not that that reinvesting his loan the into Brad mentioned in in cash benefit furthermore, and the as flows reinvesting portfolio. be prepared So We're a investment we're portfolio.

loan portfolio it it's than yields X.X%, So, probably the actually, lower call that have, now.

a obviously significant pretty increase flows. by there's reinvesting So those cash

side, the asset from opportunity for more -- the I think a from So upward there's momentum. lot

we previously we're is expectation beta XX% our ourselves on showing now, cumulative mentioned, at around for the As Right XX%. current side deposit XX%. cycle to

will So we do on of be deposit managing transaction our total cost in side, focus the expect the that growing help accounts and further but the there some on deposit pressure will also adding portfolio.

where on put that's kind So we on them. all that together, of stability you when land that

Andrew Liesch

guess, going growth I here guide what's growth You I like this maybe deposit mentioned the should mix these the we guess, as and be now stable deposit emphasis in at mix deposit but the Is look of well. holding, transaction quarter going year of it throughout looks some the CDs, Yet there? accounts, the CDs? growth in more then, look growth just And on forward? you. to how Got at trends

Craig Anderson

retail to on a in did product that's you're have That's we that in our continue and that we're emphasizing, were a deposits quarter flat, believe growth. don't I actually, meaningful going see growth Yeah. there, believe and seeing the brokered some not in I what you're to CDs. while

So see fall the back CDs second you'll probably potentially actually in quarter.

the channel curve emphasizing direct curve marketing. rate money upward in we've funding and because ideal we not necessarily in been CDs. that for been channel, on But It's loping risk terms Bank, markets of our the most just rate bank of Brilliant focusing have managing on money and interest

Andrew Liesch

questions. for Thanks the step it. I'll back Got Okay. taking

Operator

question comes next Our [indiscernible]. from

Your is line open.

Unidentified Analyst

the think number. it is and guys, quite the you up as repricing to the the X.X that side. just the to years. securities and much the How on Hey margin on The do didn't on back portfolio securities good morning. I asset duration up question, I follow Wanted in relates opportunities have? catch portfolio,

gave it, do here you that's in few much If next quarters? the how maturing you have

Craig Anderson

that around the ramps flows you're it cash million portfolio estimate year and $XXX getting a off then of this We up.

excess in liquidity a portfolio, XXXX, investing So when we investment into using we the of lot were structure. were

and prepayment -- So were what at that we extension were is risk. against we risk trying do to point protect

and get off the a flows you when back it So at cash look XXXX. forecast of lot of the portfolio, XXXX in we

Unidentified Analyst

we that a graph that last Did we published produce on quarter?

Craig Anderson

Brad. I'm not sure

Unidentified Analyst

No, wanted about higher going become of that's of digital you terms fund year bank next much, sheet over -- expect that that helpful. to or obviously core And bank that's be balance strategy then how two? the ask of to the channel. the do to that -- a to big wanted to in or How cost,

Craig Anderson

see real balance is of we a the cost. in we it -- our So, value a huge portion that strategy sheet don't high price don't from funding

grow it. we strategy with to continue are do We that how working on

do current expand so do we just in high deposits market So digital that not a our the checking base? do we we we're how money on the continue base how around but do deposits, to account or nationally, on locations it attracting continue platform, how that cost to a on mark

So funds. ability gives we it's it really but the what to working, now the is long that and really term us have it lower strategy, that's launched

raise our raise having deposits in just entire some to to need So deposits branch. we can the that raise pricing all one across if instead we of footprint,

last it down really and and deposits does keeps over nine -- it's the our can on our worked in deposits it and and pricing. the time those it so we any bring million, in what raised, betas million And then months $XX is well. deposits. We affect deposit From didn't we branch other needed went and of $XX other deposits to out time, really

betas And down so term. it's really helping our us keep long

So it's designed to for what, you tool it it's a lever have really or and well of that. look just one kind toolkit doing that's as really one and in working at

Unidentified Analyst

Okay.

strategy So core growth. more hoc of and ad

helpful. So

Craig Anderson

portfolio. ability a -- growth. of your it's down It's strategy not Yeah, your not to on really entire it's betas core keep the

Unidentified Analyst

optimism little the in maybe more and of make but doesn't then on on Any on moving guidance Any so the were growth, thoughts guys lower some average wanted, that makes the on, And that? thoughts I a a the fairly language environment get particularly range. to just potentially lastly lot optimism the that sedate. the sounded maybe your of loan I quite square up people end sense. understand around, back, you that's Yeah, you pulling some customers pipeline the are guidance is loan but the with optimistic like body and to around it, on of sure

Eric Newell

focused on excited credit and the loan ratio, we've how this definitely we're at same, left the the -- are us see well. that's at deposit ratios. and more deposit because, credit credit and to higher banks and ability but by higher higher gives With out different as quarter quality way, opportunities pricing reasons to the choose higher aren't other our we Yeah, because pick plays to getting guidance have XX% they as for

So we're up deals and to getting at well. pricing chance number And the of quality. gone higher the has better as deals pick

through of quarter, guidance long-term have and adjusted, viewpoint needs whether end line. to way So pull Is of that think saying better on Craig? fair be at I to we can it's, a the a these we'll things that, finish the this

Craig Anderson

is. Yes, it

Unidentified Analyst

Okay. That's Thanks all for helpful. the color.

Operator

from KBW. DelMonte Damon with Our question comes next

line Your is open.

Damon DelMonte

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

loan up Just there the on topic of to growth. follow kind last with that, the

loans bit underlying little loan estate, that projects mentioned commercial seeing loans involved or what you are kind on or had handle of X% the just guys X% collateral what, are of the of kind would be in some like the of that? Could about that real like C&I, what some a in with those You committee types talk them.

Craig Anderson

regional Yes, also just Those mentioned, this fact Brad real that industrial community seen and is are estate. that the quarter approach, and or our seen liquidity in opportunities our we're also aggressive opportunities commercial due and to sales primarily high to we're year very first and calls last for starting on probably in. the credits. the commercial it's it's territories, in as biggest kind been And back Craig. two based And the of that's getting of off we've And and we've quality crunch, pay us. the the categories what fact a so, to making activity over competitors, at seeing are in due some pull our we've lot our

Damon DelMonte

the those that are those are competitors regional in And pulling kind are small the larger of back community banks? or banks, market,

Craig Anderson

I and category. from customer we've more from competition and in is hearing bulk the say would seen of base our regional what we're the what bank our

Damon DelMonte

it. Got

been Okay. quarters the That's And Brilliant what and of that helpful. the then the big with that? last trends Thanks. is how size have to regards Bank, currently couple for

Eric Newell

now. but less Eric? million the found us million were Damon, pricing $XXX -- I over trend little one the to it's at It's funding a frankly alternative in $XXX has steady would of And a a space we down was the point, and direct for been much say It direct cheaper. sources was intentional. irrational that that's than space, in the banking down. And funding

Damon DelMonte

Got you're you it. a online market primarily money product, product And on that's market focusing, money said

Eric Newell

Yeah.

Damon DelMonte

have that rate book? have on the you happen current do And to

Eric Newell

get I you. can for it I can, yeah,

Damon DelMonte

expense anything front, get And efficiencies Okay. you that you the where are considering internally structure? some could there guys you any is lastly, in opportunities just maybe the or expense then and overall on see guess I

Craig Anderson

a it's constantly There's to delivery Damon, leverage. provide machine and us technology that than efficiently. providing deliver using teller or being place of delivering interactive our way optimize side, loans ways or service more in through for to customer the into an service for more we're Yeah, several to to through projects a that product operating our evaluating quickly use positive allows maybe business cheaper small on going whether able somebody to the technology expense branch a a products or underwriting and

will finding positive our then really improve So down efficiency expense drive from and on it there. ratio operating I the comes revenue to leverage side, think then which would

Damon DelMonte

Got it.

that very much. Okay. I'll Thank all you I had.

Craig Anderson

Just is a follow-up that of on we're showing cost X.X%. Damon's question. current portfolio The

Damon DelMonte

you. Great. Thank

Operator

McEvoy next comes Terry Our with from question Stephens.

Your is line open.

Terry McEvoy

May, and Could for Maybe up next neutral And for Good just relates DDA margin you balances good, Thanks. follow a is maybe question just the margin rate your bad, a for margin outlook? it you. NII? talk as outlook another everyone. to and hike the morning, Eric, if non-interest we your trajectory that about in for get bearing accounts month

Eric Newell

Oh, we in would say benefit funds lot in that's If there. fed increase us. rates a small get May, net I there's to a

there expectation transaction be there. remainder our on of do relation to to bearing in the of terms a the to XXXX accounts, margin non-interest for In we accounts, continue small decline expect

look probably, actually have at total at it commercial, looked so perspective, at accounts the you we from if our well, perspective. looked oh, year-over-year, and consumer and I bearing We it commercial decline from at non-interest analysed, a a there looked I

it was total an average account. the decline, $XXX was within million of of commercial, the decline balance XX% of that decline and So

So they're excess funds. -- the programs tells business from spending liquidity COVID, spending is those to that excess what government down from us down that likely and support in had

that decline. XX% that So of

identified of a decline the XX% consumer consumer, we've in was And which accounts the that average down in a decline balances. remainder, was or then spend

else of But those just our analysis even balances average XXXX were excess the were in like in so XXX% in industry, -- to little spent when on see funds I and average we we transaction we're, pre-COVID. maintained our accounts to think where budget, everyone we do starting So a reverting XXXX, balances XXXX. and be exploded the back in bit

So, it call XX/XX/XXXX.

budgeted how that, -- Terry. we how So that's we

that third So a was forgetting. there think question, was I'm I but I don't, helpful. hopefully

Terry McEvoy

there Yeah, was there. -- no. two There was only

M&A does Brad, is to the Thank tell has been both. crystal standpoint, what from how and positioned activity bank Equity a industry your activity equity's you year. them you What think bank question a got accelerate? M&A should does Eric. -- for what benefit ball opportunistic do You quiet you, this been you, here

Craig Anderson

well. we're I So positioned think

a we year. the up M&A think the relationship I have we've with think and to actually three sheet. is regulators. in this think the I've good a been actually ratios second got last We've half weeks, balance got conversations I good going Terry good the that and having pick I of

today. the picking several a that three prior and conversations had think conversations were are in complete last than We've I up they weeks, that. they're tone to different

I our the think as do equity, on tangible them that both bank know, have And that. in to you think banks we've got marketplace holding company. pressure common and at regulators start examinations, X% putting I I they'll think fix as

lot except there's find to fix or that And, not a of ways capital partner. merger raise a to

accelerate. And brings the about those think look in M&A what as six space. to opportunities, the that whole years benefactor And, I'm I next I we will excited think so the in at months those thing. we're think two I

Terry McEvoy

Have Great. Thanks a everyone. good day.

Operator

And questions I'm not showing at any further time. this

this conclude also today's presentation. So does

You a day. may disconnect have wonderful and now

Equity Bancshares (EQBK) 19 Apr 232023 Q1 Earnings call transcript