EQBK - Earnings call 3 2023 | Equity Bancshares, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Q3 2023 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, Brian Katzfey, Director of Investor Relations.

Brian Katzfey

morning. Good joining Equity for earnings third today call. us you Bancshares for quarter Thank

let that investor.equitybank.com remind being we materials. me Before begin, you earnings and is via our recorded available today's webcast with at along release presentation and is call

statements, those contains subject are discussed. other forward-looking uncertainties results to to cause that could Today's actual risks, differ and which presentation certain factors materially from

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

call the over our that, I'd turn With to CEO, and Elliott. to Brad like Chairman

Brad Elliott

morning, your as and Good quality take interest Equity continue we Bancshares. earnings, quarter and our results, consensus shareholder dividend credit through in a to to emphasize today XX% in continued thank you improvement beating including increase for We're in return. you third quarterly excited our

company's the our Credit into you many records who joining I'm for alignment years President, company his capable tenure more provide Their operators promotions company bank job details, Chris seamless with been proven introduce as the Sems. during for pleased assuring Slupkowski. of CFO, speakers, our my years transition Chief get our we leadership Officer, us of and with Before today track roles. Krzysztof fellow is Each Navratil, X in responsibilities, our has . Also senior with while than core Rick a values. has the have over and met our to CFO

the third at Let's quarter. back look

our as this both organic including right for liquidity in M&A challenging in opportunities, deposits strength, and environment of sheet a loss as available stability believe opportunities. excited growth and we has environment. are with balance Our provide and robust is We loans about and operating high to well prospects levels capital, loan continued reserves dynamic

begins engaged and our with teams to base, value drives excellent creation. for shareholders. focus on employee customers outcomes which an continue The Our value

fourth look into build commercial continue during additional the and and outcomes the to quarter teams positive and quarter to Our retail XXXX. momentum deliver

Our new teams undesirable encouraged to this successfully commercial and several credits find credit quarter. banking partners

outside current our portfolio down and as in potential flagged of just others of and any We're being proactive cycle. get tolerances. classified equity's customers ahead working to with Some coming

in in community We let our of Capital benefit deployed I'll have financial for times. bank's through we believe all differentiator people, tangible of abundance challenging our an to is you potentially a Chris all be forms results. the talk stakeholders.

Chris Navratil

was linked Last in diluted as Thank we share per improved reported $XX.X quarter, income or $X.XX quarter. compared you, from night, net the net of share million $X.XX interest X.XX% while million per up to $X.X interest income margin second Brad. Net diluted X.XX%. to

income, was not QX margin on quarter-over-quarter, reversals positive We primarily included due later for compensation in up repositioning more call. were loss QX Noninterest will fee that in $XX.X increase onetime were revenue. Noninterest X% a discuss repeat. in to service quarter. of detail expenses totaling dynamics trends $XXX,XXX adjusted to this investment incentive linked in a expected million The in higher

can reference included the of you which . earnings of for our million $X.X GAAP loss a to net the calculation. understand income Our deck, attribution the provision shows inputs, credit

hold to challenges. for reserve continue We potential economic

quarter. here our date, asset of let to coverage is for ACL XX to any have markets. operating and specific I'll September X.XX%. talk through However, concerns Krzysztof in not our we stop loans a seen quality for the moment

Krzysztof Slupkowski

Chris. Thanks,

or total X.X% regulatory continued quarter, trend classified to of As total the or charge-offs XX banking area an XX office a concern of when basis of the million is $XX.X its annualized we points. lowest ongoing ] started [ total million end With the quarter closing loans company. the of asset year-to-date level Nonowner-occupied average the bank below (sic) $XX.X Nonaccrual quality loans positively. of capital, third of since points loans for percentage basis Net loans. at industry. as remained

reduced and million Equity loan million totaled of represents the was and portfolio portfolio total $XX this X.X% $XX quarter. by just Bank's

office Our our average quarter our loan to reposition institution the reducing another with size was financial within further $X.X million. during able risk to We exposure portfolio. were largest successfully

balances Nonowner-occupied CRE total the and quarter CRE at construction ended capital. bank of XXX%

compared As exposure is limited. our industry, the to

disciplined the our reserves We our and to have navigate concerns future. capital stress portfolio income any points in position and nature exposures diverse, in with us arise from basis that on tested We without geography, top when at relationship combined rates is believe current based both repayment underwriting, XXX our loss well challenges may today's which streams.

Chris Navratil

in declined period loans End Krzysztof. Thanks, the quarter. of

million management As the during credit to realized appetite, in with exposures, compared of longer the quarter the quarter in in originations to second of coupon within coupon third X.XX% third coupon were Loan of a average no million $XXX which weighted our XXXX. to with worked a exit $XXX risk with borrowers a X.XX% average with contributed weighted contraction. weighted X.XX% of of which quarter, million the average $XXX the Brad totaled quarter mentioned, and a number our

interest in to originate the continue successfully to expanding rate yields contributing We on environment, current loans interest-earning assets.

of third on points increased XX periodic portfolio quarter, loan yield to the X.XX%, accounting improvement. and accounted increases X basis fee basis for During the accretion the purchase points the the

the in increase in cash liabilities. X.XX% earning maintained as balance sheet remained liability totaled interest-bearing interest on contribution $XX.X repricing quarter-over-quarter of liquidity to second the our flat. quarter. in $XXX points basis deposits quarter, in driven increased the quarter peak of to dislocation the to enhanced the QX to noninterest-bearing relatively from Equity interest-bearing took from quarter, by to the actions we of respond the million quarter to excess market million in XXXX. Net and $X.X million the yields $XXX mix appreciation compared XX of quarter, average million XX velocity from The third asset cost deposits income of first second increased points the to Cost interest-bearing of while continues of in in basis slow up

Reserve's at continue million We the Federal funding program. term to have $XXX bank outstanding

currently excess effect the borrowing, earning for on spread that of reducing by current calculated have reducing does a margin the has points are of positive effect liquidity the though it X that quarter. basis margin. We We the

benefits the stock vested and repeat. Marketing in increased are from restricted Salaries to to continue forfeiture to QX, and expenses expected advertising in attract was elevated quarter $XXX,XXX not which deposits. to due

the rate the Our quarter outlook still for deposit as of the slide of view as though forecast fourth preliminary includes repricing not and forecast XXXX. in our our include changes do both includes our lagging We loan effects well portfolios. future

average basis Our provision be to points loans. Rick? is forecasted XX approximately to

Richard Sems

are forward as we all accomplish we to moving pleased Thanks, our positioned to Chris. emphasize what quarter with I we am and creation continue in accomplished value this that markets.

municipality our During the million. operating note, deposit declined $XX of outflows non-brokered this accounts was not trend quarter, seasonal of relationship. Important by to due $XXX loss approximately base to in attributable to our million

typically down replenished the are quarter third revenues accounts by spin collection tax the quarter. operating in and in the fourth These of

the of these markets Excluding was believe while the continue seasonal the serve. outflows products retail of maintaining customer remain have our choice develop to that we quarter suite funding deposit grow as we and in team relationships during deposit to the pricing banker and up teams discipline. We

we the balances yields were and sheet, but bank. headwinds. our On as loans of loan QX to by Overall level of pace as in dollar production ROEs the a same improved the hampered side balance in the originated continued payoff consistent at asset QX,

deteriorating million million $XX we or approximately to loans chase sold million and loan, lower chose Although $XX loans tied criticized yielding $XX to were not were were projects.

by region, Levi led Ryan Tulsa led Morris Western Of and Getz by note, strong. been Kansas our region, our have

Parman, Mark back end As motivated and into regional the we look Daniel, of Means from the to growing Brad in quarter, our fourth the CEOs, year. our Josh felt early led QX, to markets and lows teams are build by our pipelines

quarter, of probability $XXX As the stood million, probability while pipeline $XXX our XX% the at of end was million. our XX%

in people strategy, we the while have look discipline, customer-centric our forward as return the drive execution assisting organic growth We forward. team proper achieving the in I move place to tools capital. on to and

are insurance terms primarily meaningful in impact income capacity credit up service lines. Finally, with service by Each periods. revenue was lines in infancies driven their in contributors wealth and to management our the of have management, revenue of to business quarter-over-quarter, card, future treasury these along and statement be

Brad Elliott

Rick. Thanks,

capitalized. is well company Our

quality best asset the been. metrics they've are ever Our

base. left the that all structure we and a solid, is next sheet we off-site equity have years. about so very our and over deposit conducted board And optimistic balance We granular meeting what year Our this next X over quarter. more meeting the accomplish strategic can

driving accomplish Julie and with few region. the Huber over technology positioned Laird company. are a lot leaders, next years. the the the can products Charlton we we have We I fabric with And of in our believe a and best of into products team that great are great

remain quarters. value controlling assessing and front M&A the the on approach that in disciplined momentum continue to our several while and to see to line. will over emphasizing opportunities, next to continue time We expect earn-back see Equity dilution these

that, take questions. happy With we're to your

Operator

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

Terence McEvoy

XXXX. earlier it certain would bit you Is certain Good do a that little in There call? to stand the there CRE, expect growth helpful. Maybe that be are you. you credits as everyone. strategically Can of part on A And discuss push Brad, question loan opportunities that, you a just morning, more mentioned continue out? for markets to C&I? out specific

Brad Elliott

Yes.

So XXXX loan growth.

the last Terry, focused. months. couple teams meetings I we've think of strategic are really our some over had

are markets focused on And do so of think our grow how very loans. I all they

We've Western some City that markets I momentum leaders worked good markets, going and our think in those. getting has Kansas hard focused Wichita, that our Tulsa on really Tulsa, on always the but Western also of also moving Missouri got Kansas direction, are team are that. which

This customers. time we're would I to really say great just on. for a Equity Bank is laser-focused attract So

balanced organization. been think I very we've a

So and I really we've area. and never C&I come CRE, focused small think in one on will business been it lending,

categories. So come those think aspects of I in will it all

have out, make X this up, quarter we already the have -- out. pushing will paid a off that we've we pushing are that at putting to pops on we credit tools credits that don't the actually move. But time. of credit to this that's we are use move We are other if we On pressure lot got something

Terence McEvoy

are Could in And And then margin? what of just for Chris. XXXX? talk are follow-up the initial for impacted liquidity, for That's XXXX assumptions about today? deck the you outlook. thoughts making type a your maybe excess you slide which What the has the

Chris Navratil

Yes.

that funding for we're that of [indiscernible] the first on the with was quarter commensurate program initial we end position. next quarter, excess The situation. matures that now of So have bank on first of books borrowing put year the liquidity a and at basically the looking normalization it outlook, in more of term

that that on today won't the arbitrage away. same point, horizon that that At have sheet exists of think keep We balance So need that the same time go matures. to as liquidity. to when will

other So that that earning back year. think Any asset pending go material is classes, predominantly into a loans target stream that arising, normalization is depicted in to cash. the is of expectation next . we'll repositioning concerns I earnings the more to advantageous outlook cash

Operator

Our with next Rulis from question D.A. comes Jeff Davidson.

Jeff Rulis

of kind commentary. M&A your on Brad,

that some late focus I Just given within figure you great at earn of to tangible period. seen be stay just . world, seen see? I look back numbers. are guess that interested pretty some earn-back deals tangible we opportunities on pretty and in great given some there as you'd in a to is watermark deals, would And on nationally, you therefore, we've the dilution obviously, guess book marks the like we've where sizable book large

Brad Elliott

very would as well. consistent probably under. X of been that south We've years Yes. we're I on And say and

the so that for Bank earn So years shareholders because period take that going we've just risk and longer of for earn-back we periods. value Equity investors we it things that got just to much think We tangible us. back be to not X-year be stretched what -- take it's for because period the good within changed that in book to it's than the can't to still X

Jeff Rulis

you about How you guys Yes. I the little of that. acquiring that guess, do some kind out of But bit the another backdrop, square credits and that credit signal would buying that seem And given under actively managing someone bank to you of going of wariness. be that comfortability a credit backdrop? talk with and you pushed

Brad Elliott

Yes.

looking we're credit. institutions I good the have think at

credit, We cleaning currently a that We credit, bought bank We just 'XX. aren't mark need we an do. that's that mind a looking at to strategy if somebody although in bank don't anything of We a part in else's that. has appropriate on put the we up bad 'XX. bought

knock cycle, missed and during We've We never some banks which of a bought wood. that the ever seen. credit we've 'XX in the 'XX, on were mark credit worst cycles

And and so Julie we us. with those ability marks who's feel still underwriting Huber, who very done confident of all in the and is is person all our underwriting that

been going she's and And been has that so war about through process. very seasoned through this

Jeff Rulis

guess, just one. speaking, Maybe sense landing credits a not and generally credit kind you And for if it. are competitor just broad-brush last of pushed that you Got out on who specifics, cases? where that a those of know, those that any some I taking there is in is borrowers but

Brad Elliott

on Yes. financial that nonpublic taking the stated credits statement. aren't say. in They're are the institutions, worth those net on But banks . their I the that's of They're on. underwriting sophisticated just what smaller as personal leaning more is community borrower would a

on they're that the The may And little not so there most have flowing. personal they guarantee may relying than not more be so factor financial there project in and the is project. accurate cash a and that statement truck

have to believe back. and . personal that, personal so pay really continue at And look that to have you guarantee in guarantee to that that

Operator

from next with Sandler. [Operator Instructions] Our question Liesch Andrew Piper comes

You line may your unmute proceed. is you're Andrew, on mute. if please open,

Andrew Liesch

about to you a be had So in little accretion to the bit the year. just the touch wanted here I into going points have X guide. margin next higher-than-expected basis would quarter. know I this of expected higher base

be that that So using that end for low XXXX, ] on some quarter point XXXX this have would near in term. more. what you would expected the saw But headwind quarter I even or based or even [ be fourth of as the just off the even jumping we a into at might

Are that room the to X.XX%, something me to out out that is suggest there. out high might you there's margin the run at that top end? It seeing at there seems going maybe more to just

Chris Navratil

unknown of Yes, is repricing it's just capacity move there's liability repricing liability other based understand NIM. long asset out of be kind Andrew, going conservatism of asset as the on I'd how where We sheet. too to deposits real pretty via into to opportunistic being an the reprice forward where might we'll of going our the based that just and and the on side as and some to that, much bond portfolio balance say on to to some unknowns uncertainty some on to top is we and how number continue But well the in drive as there's the just our cycle means. level side extend built

the we'll We're liabilities to will forecast a that figure. with what's at very to you optimistic, point, realize driving that the uncertainty on appreciation are lot asset side continue but the drive in continue just up, the marketplace, this and

Andrew Liesch

it. last ratio the then gears has now and All in to Got And been just helpful. reserve quarters. allowance the really That's for shifting just the few provision mid-XXXs right.

out -- kind Tulsa be of forecasting Just outstanding in just should guys ] here? those kind mean, think I an that environment, any level major credit or [ of shift that you the the we modeling

Chris Navratil

Yes.

don't basis post loans. a of levels of XXX-ish points, we and We in challenging been has a of environment would points loans. XXX have which for this average total of where a continue running know that to any to a of that environment. basis XX economic while, number to in CECL XXX constraint think think I We've about kind continuation economic operating led provisioning normalized that out CECL I

less it's historical based But to than points XXX loss on experience basis date.

with basis to keeping some stand was of uncertainty, points itself going around that the sense. that resolve realized, it we credit via to still turmoil you're But economic make exists, as the provision it XXX to if So continues provisioning. level work to losses of and be release today

Operator

DelMonte with KBW. Damon next comes Our question from

Damon Del Monte

on 'XX. back look positioning circle as into of to half How you margin should wanted the of the would the rates balance sheet outlook the in cut the to we the year? characterize start back Just Fed

Chris Navratil

Yes.

as And a the we're variable working asset-sensitive, we to Fed portfolio. we're on a of still in the asset period-over-period. be liability and bit liability downward majority today, stance relates both in see So to forward. -- deposit our which it continually trend is rate sensitivity, But what to continue as little move our changing is assessing the manage book risk we NIM you'll

challenge [ So cycle the capacity rate into market a the does we reduction becomes just to dynamic reprice go very behave fact quickly. how The as from ].

the and pricing. competition continue NIM But is near down, term. the is rate detrimental in irrational asset variable So to drop the deposit majority aggressive, if liability which see to of to book very is rates if up, go to even guide Fed the of our we're begins going some sensitivity,

overall have do on we market depending reprice quickly, it dynamic. capacity just So to

Damon Del Monte

And some helpful. to outlook that seems if of looks then you the guys basically for what are the you it minimal gives you 'XX forecast that confidence that to can X expenses, kind inflationary a of minimal backdrop of are very light the first very What add kind respect 'XX. It level Got and 'XX, in it. growth the you take of 'XX. quarters continue with for at quarter your we over keep That's the with. of growth, things doing? to like deal the fourth Or

Chris Navratil

Yes.

that and vendors. of rationalize replacing a So the hard adding vendor we're on extent working to into we're folks some legacy number vendors our mix, things to

that not are some additive there's cost. built noninterest just from next incrementally perspective. things it's won't year And expense a So that repeat into baseline

tax talked go expense, So the about investments that next past, line we've in to year. going part have as that's above of that reflected historically noninterest solar made we've the materially been away

noninterest. of expense about we're next year, this pulled essentially above million in moves the That into and expense year tax line. out $X total modeling be So will

there I there be just in mitigate And strategic cost that line. then being contracts, to million of incremental we hold where still as solar have will of dollars. cost line additional some when we tax because bit pull basis dollars that on and about opportunity some tax. NIE out solar think saves that's a the a on So expansion well normalized Those some the NIE $X can you

Damon Del Monte

tax the rate effective tax are solar out as of what's higher noninterest probably those dollars expense And the driving coming well?

Chris Navratil

Yes, that's right.

Damon Del Monte

And you partner that X X How in odds that a up months? optimistic of of happening on the the kind you handicap future. some Okay. lastly, imply deals you kind Brad, be call, then next just signing will the the would guys in M&A, to of

Brad Elliott

percentage, I'm a -- pretty handicap but handicap as you giving would strong. I not it I'd

Operator

with comes question Stephens. Terry next Our from . McEvoy

Terence McEvoy

follow-up. you And about the ratio, TCE specifically using are which the better one your you around of X.XX%. buyback. AOCI the think question asking some When Just to deployment X.XX%, understand comments, the capital or excluding the I'm

Chris Navratil

answer and can Truthfully, can in. then first Yes. I jump Brad

we numbers. Terry. very both at look think I We're both numbers, of aware

it As being assess trying we're the figures M&A, be how we repurchase, both example, be security and of understanding it those best of repositioning, it capital activity, utilization capital, about a think to right? be for our of cognizant

into both as to Brad, So we that? potential we're those and a add today assessing ratios of want usage did you we're future, different that capital thinking number of on. to leverage the about are meaningful

Brad Elliott

exactly think Chris capital the then those said, odds form I best we of look would what of for shareholders. cognizant we the Yes. we say are and ratios ratios what of at at very both deploying look both and in

moves from a most what dilution. the lot now, of needle an not per earnings share basis. so Right there's And

we doing there recently that the some think looking because capital versus capital future. -- are We've back in been could are near at that we holding are very deploy that in really buybacks we So that. things

a been light lately. we've on . So buyback the little

Operator

you concludes call. Thank today's And this Thank you. participating. for conference

disconnect. now may You

Equity Bancshares (EQBK) 18 Oct 232023 Q3 Earnings call transcript