EQBK - Earnings call 4 2023 | Equity Bancshares, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the Q4 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.

begin. may You

Brian Katzfey

you Fourth Thank us for today Good Earnings for Call. Bancshares Quarter Equity morning. joining

Before let webcast cause that being materials. Today's to recorded materially with we certain call differ earnings actual presentation and today's begin, our those and which from is results me contains remind risks, forward-looking to available are and uncertainties could via release at statements, along that investor.equitybank.com, discussed. presentation you subject is factors other

further allow to will Brad you time over we discussion. presentation, and With like Thank for questions I'd to the turn us. joining Following Elliott. CEO, all for call Chairman that, and the

Brad Elliott

Good morning, earnings Bancshares Equity you and for joining call. thank

our Rockhold Kirksville. We company through are earnings, fourth of you bond excited Bancorp, of our Bank quarter of our portfolio merger announced the to beating and results, parent with today take including repositioning consensus a

our are and Chief Slupkowski, today our Rick me Joining President; Sems, CFO; our Chris Krzysztof Officer. Navratil, Credit Bank

balance early at back reserves liquidity look Let's to robust positioned build loan the environment for the of take and to our the including future. the loss available current bank quarter. In high levels of capital, advantage quarter, sheet fourth strength,

expanding of merger announced the We organizations in which footprint Bank with like-minded combines while the our Missouri. Kirksville,

transactions, impacting in with received will investment tangible not to conflicts quarter, electronic to due excited until the anticipate past report year Different not from our are repositioned during this scheduling improving earnings systems and portfolio, We Reserve we convert core that our core of million different the approval we May this equity. providers. Also significantly $XXX February. while Federal and with than week we the Bank the of in closing

you in during book year-over-year, and slide will tangible value deck. the quarter fact, In see our expanded as

transactions reflect on our creation. These value focus team's

drive to provide base shareholders. to employees outcomes, motivated which employee is engaged value our and customers, exceptional and Our

reflect at been have accomplished for is than challenges of better is change. December proud about we positioned all we before. than excited year what of XX, throughout the accomplish this never XXXX. am and I was And more It and I Equity a Equity starting as incredibly to quarter future I'm XXXX. positioned ever

We an bank for our to choice guiding strong expectation excellent balance have management the sheet of a communities. be and team,

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

Chris Navratil

Brad. expenses, million we you, loss of share deck, $X.XX of was realized income share within operating million income for well was per net loss $X.XX diluted Thank million while Net net $X.XX $XX.X to interest declined share. in margin Last per our a interest reported as onetime $X.XX down or investment linked the $X.X merger repositioning per as compared the portfolio to or third quarter, quarter. $XX.X the $X.XX. from Adjusting

in detail We later will discuss more margin call. in dynamics this

million that due was Almena higher not M&A advertising accruals costs. $XX.X to State onetime during for modestly $X.X Noninterest Noninterest incentive and asset linked related for adjusted expenses in of or repositioning The on attributable the million $XXX,XXX is change Bank income totaling to quarter-over-quarter, adjusted recur. QX charges increased derivative QX to primarily of did down primarily investments a fair benefit special value quarter. decline loss and

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

for reserve hold to continue challenges. We potential economic

ACL However, The to markets. any to XX is our seen December date, we operating have in concerns X.XX%. specific not loans of coverage

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

Krzysztof Slupkowski

Thanks, Chris.

remained charges of were basis closing at X.X% points. with XX metrics remained in the of a average XX year total Asset loans. below classified as for fourth the Nonaccrual loans basis bank or loans million levels total of quality total Net $XX.X low quarter points regulatory historically percentage at loans quarter the capital.

concern individual in in on circumstances specific of which operate. reflective to we been broader have the and markets related charge-offs Recognized credits not

We affirmed latest have economic our the borrowers. resilience operating have whole for portfolio These of results now annual a our incorporating and interest of the environment. rate renewals, cycle and in reviews completed the current

at book. any our seen commercial point not this estate real deterioration in have We

to of deterioration. portfolio signs our for continue We early monitor

has strategies. risk practices Our migration in origination, historically our resulted of to A strength economies the credit rating and local ratios. a problem disciplined during proven this cycle testament, underwriting low at our workout

economic positive, While and our capital, credit credit outlook in terms strength maintain potential position of to a any reserves for future we XXXX challenges. is confront favorable

Chris Navratil

Thanks, Krzysztof.

sold quarter, As forward bond portion of portfolio during large cash pulling a we of $XXX our million. previously the flow mentioned, approximately

funds held the in of end have in to and all The XXXX. been expensive sheet. were funding alternative the the balance cash more be to period, have of expected of securities quarter of loans settled benefits an in funding sources transaction used realized or As are redeployed the of purchases, first sales for the being are fully as

of totaled coupon Loans of average during compared with million X.X%. the $XXX third a average an quarter weighted increased $XXX the weighted rate quarter in coupon a at the in and quarter. fourth annualized Loan to X.XX% million X.XX% originations of

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

nonaccrual levels quarter, basis yield points. on points in loans versus period-over-period, declined accounting X contributed XX consistent in quarter the be coupon increased yield have to NIM loan fourth points to purchase these loan as Were X.XX%. accounting, improved Total the quarter would X X. fees X.XX% During from basis and basis X

average quarter, X.XX% XX.X% Cost in in fund the the by used assets expansion a the the declined excess XX third points down totaled noninterest-bearing of $X.X and the quarter, points while to average the million basis balances. bank cash XX.X%. Net average income deposits declining fourth basis mix decline deposit the driven interest-bearing of to contribution quarter, maintaining from been of in third liquidity earning the from from quarter the to was XX in average increased million the decline $XX.X deposit has interest to deposits

Reserves term Federal at million continue funding the program. outstanding Bank We to $XXX have

decline have spread excess it for We margin. the We borrowing, that the mature as in to X due reducing $XXX,XXX in year-end increased to accruals. attract for of a the benefits and a incentive the Marketing by continue quarter advertising are from positive currently reducing of compensation Salaries to effect quarter. earning has on elevated the well effect basis does as liquidity deposits. share-based calculate though that remain expenses points current margin

effects Our our outlook as though includes portfolios. the well and for first still We the repricing of loan XXXX. forecast year rate includes deposit quarter lighting, slide future the do in include full both changes, not our forecast the as

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

merger. and announcement does of impact disclosure for that the forecast the include of income XXXX. accretion of indicated note, to Important not Kirksville $X.XX the Rick? Bank Previous

Richard Sems

emphasize I'm that in of banking creation as positioned scale to expansion, markets. we what accomplish professionals which contribute Partnering XXXX. Bank XXXX provides of our accomplished pleased with added we to and growth forward the market continue and to moving committed we in our value with Kirksville all will and team in are their goals

non-brokered by During the inflows increased seasonal operating deposit our to in accounts. municipality million attributed quarter, our $XX.X base

we to continue Bank our closing on Kirksville maintained We the first as pressure the see in of pricing consider quarter. have disciplined of impact and approach

internally will a by new believe our we XXXX, with value be designed of market for to accounts will we checking suite enter which Julie going proposition enhance Huber, customers. Jonathan we Roop and As

our In to the further base, Inc. of to We with services to provide markets our enhancing serve. banker of we digital partnered customer value wealth in new remain believe and choice products the addition our Marstone, proposition we accounts, our suite to team have consumers. with we the have the

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

as pull-through pressures we moderate. are strong, we increase As XXXX, rate to to look pipelines and expect

XX% million. the bringing of XX% pipeline was end probability of pipeline while $XXX at our stood greater million, XX% our to over $XXX As million, the probability $XXX quarter, a than

As we outlook loan expect to mid- slide, drive single-digit to growth high organic indicated XXXX. our in in

place We in the forward the look discipline, to I tools people expectation. realize have this in to assisting strategy, team execution. and

previous revenue treasury we contributions investment down wealth and quarter-over-quarter, management though in see continue to Service cards, and from was increasing insurance.

to forward. are lines focused teams in XXXX we enhancing on business value expansion the moving and expect drive which Our beyond, customer of

regional to the Finally, Community I've announce been Harris South. CEO, promotion to Justin of pleased

markets. We will leading our and Kansas both Southeast Ozark be will now now, he

Justin role. I market expanded for leading for to forward Ozark look be the Equity markets. is and has a partnering Justin an been ready couple as build -- with Bank of to to years continue in these to look we

Chris Navratil

is Our well company capitalized.

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

is to with improve Our addition base, Kirksville. is solid, of Bank of we and positioned which deposit granular structure balance a the have the sheet

have in the their collaboration have goals Our set been strategic for has running. and Justin poised Daniel directives Harris, Parman, and hit XXXX ground to Mark Brad XXXX. with Rick our hit the teams for team

Kirksville assets that new to look members We and our forward value. build franchise team and onboarding continuing the relationships to customer redeploy

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

strategy I our record a ago. execute As the proven right that and the you right XX presentation, believe track geography we on can years started see the team, right to from sheet, have we some balance

We team time M&A. an members. to our and through exciting ability have the for grow organically What

it up Equity we'll Thank interest open your you in for Bancshares, and for questions.

Operator

Terry from Stephens Inc. our And first Instructions] McEvoy [Operator comes from question

Terence McEvoy

outlook the year, margin no changes positioned of rate the question this Chris, interest we forward if accurate you is a correctly, balance middle for cuts? get heard is let's the rate I and in my assumes think the guess is curve call I it, you do rates? part how if cut,

Chris Navratil

a to it a Terry. the as at near neutral the look Yes, moment. great at sheet can it's as question, be balance We as

to come react attempting the for industry challenged short-term real market challenge begins deposit forecast terms down does is on And in to out. the how is competition rates. Our think that rates of I as

in become balance to So the cut can being have positioning but international, a where to situation be capacity, we we able have it quickly, on is challenging. our sheet competition the

exactly look going But readjustment have the sheet pinpoint basis, to downward rate a in today. contractual to environment. we at on it maintain neutral you to we're react how capacity a a balance hard it's So when

Terence McEvoy

find margin, just I have with the XX sticking points and QX, couldn't the fourth accretion I but And in I quarter? was the apologize if it. missed I in QX. basis What

Chris Navratil

accretion? purchase The accounting

Terence McEvoy

Correct. Yes.

that. about Sorry

Chris Navratil

quarter X. in was point accounting X basis Purchase

Terence McEvoy

on of maybe just us the comments And suppliers have impact that lastly, some update how you the share with? and Perfect. loan could aviation have may at size of relationships challenges Wichita-based portfolio Boeing on then, your any might the you you

Krzysztof Slupkowski

This a minimal. question question. the very given tell Thanks recent developments. Spirit exposure the you Boeing direct I that It's fair is can in is our for and Krzysztof. the

the with years about our conscious X COVID. a everything transpired decision made reduce and and in got just have aerospace, X We you've exposure X MAX ago given that's to

As this and direct of local of about exposure today, to to million only in Boeing million only is aerospace, is which credit. some and -- have has $XX Spirit we $X exposure

-- that The borrowers have are making that $X up stream. making revenue million, this diversified they

more portion exposure this a of half And of Spirit. has only government So revenue to flavor to it, comes their from add guarantees.

risk some So pretty good to we at time. feel the exposure sector do we this have about

Brad Elliott

$XX a years years been would That different ago. few ago. few a of million probably have We had Terry, would exposure have

Operator

And Jeff D.A. Rulis comes our next question from Davidson. from

Jeff Rulis

down Just Wanted to questions the rate, margin on slide. the of path. sort get outlook a couple of the

about I if talk maybe the you X.XX%. kind of way X.XX% reported, of of kind onetime Is some right, So regular been mentioned version you have impact that I as right, would there? hear you think

Chris Navratil

If it was the X.XX%. to have quarter, been Jeff, would last it compared normalized

at. last I -- on high, it, a bit normalized look I'd so call what quarter, basis think look it little X.XX% I is a between was at somewhere so

Jeff Rulis

X.XX%.

the expectation the X.XX% the into Okay. to that X.XX%, range first What of And the increase? quarter. hop is in underpinnings

Chris Navratil

Yes.

into tied the quarter. all efforts repositioning the in that's So fourth bond

the in realize up what's a that NIM. first So benefit repositioning we driving from benefit the quarter, period small saw full period bond which is that on into of the of December, we'll

Jeff Rulis

at the And is point? all that margin repositioning? gaining on traction some that Or core there is

Chris Navratil

loan portfolio. of gained in repositioning. of the growth some is of a it's majority our terms being traction There So generally

it You portfolio. capacity continue our the bullish linked we're in throughout we QX, on quarter growth, it call, saw referenced grow the X% to to loan

of additive of that there's majority to driven the putting is on repositioning So some those by the assets. benefit higher-yielding bonds. uptick the And then

Jeff Rulis

for comments upon sort but will got on on depend Got kind Does I your -- flat get Kirkland extend impact, a the of the the would maybe it. cuts layered as all, balance in deposits neutral And at then on margin? sheet year. of pretty vacuum that of sort in, if -- what

Chris Navratil

I Jeff, you get we Kirksville I'll earnings. up. margin talk, is $X.XX impact as to get overall got accretive pulled the to it

Jeff Rulis

we flat. of say looks the and like tack the pretty that The earning Is safe -- for kind similar growth, the just year? on asset earning legacy a asset that's of just kind it question expectation Kirksville, to average on could full

Chris Navratil

I way it. about average Yes, right the being think think flat The to some essentially is earning that's assets repositioning.

on using we loan would books adding not incrementally earning we have it, currently build of our Kirksville, that then So Jeff. assets top on to you cash loans, And portfolio. more fund the as Yes. average so tack

Jeff Rulis

Okay.

I Just one quick about just in that one on to nonaccruals. credit. wanted increase talk

there? think but was it credit, if walk the I us a addition singular could you through

Brad Elliott

Yes.

primary good mortgage that that first we see primary that related credit a the it's residents large makes from up a another smaller that is the have larger But to a loan-to-value very residence, So that loan about credit. you of feel a There was, most we increase credit, standpoint. it on difference. large X was

So get it soon. we're out of to hoping

Jeff Rulis

Is a Or other lending that bank? is residents? relationships the singular has borrower with that a this

Brad Elliott

only the is have. we This loan

Jeff Rulis

transpire. Brad, if of we And as your the, on if deals maybe, M&A go real next Kirksville, of quick buyback don't checking that additional transactions Kind maybe Okay. you attractive? without just on into some in look maybe that, time on the leaning month, appetite any kind have closed

Brad Elliott

Yes. the day. looking in at back with you, would M&A we're What is each tell front, buyback the, the even I Jeff,

have did So quarter we've in the transaction. we fund the we're back to enough the excess close last capital transaction. make -- capital sure got that capital to We could to the hold

that. So we accomplished

this buyback at quarter. looking now we're So

deal fruition, before M&A or we'd would X an quarter X came close. if As to have it

we're and pretty building so, and are strong. cash And fast earnings

looking back we're basis. So a at buybacks daily on

Operator

[Operator comes Instructions] And Andrew from our next from Sandler. question Liesch Piper

Andrew Liesch

what but slide the average the And you there. outlook ins heard pretty up, check-in pretty here some brokers flat the on I you suite and growth loan got looks obviously, coming account new have the throughout optimistic. the the on are I guess you with deposit Sticking growth? is outs year. deposit mention

that do we that you're the flows securities going much growth? assume from deposit without fund to So use to cash book

Chris Navratil

Yes.

So talked we it of as we do seasonality business. on mean public first we had some at inflows we've normally off, just looking about, I as flat. the got, I'm the funds

it moved that So up.

we're of to kind see that large That's why a So you that. going year. the backfill won't throughout in growth

disciplined Kirksville, taken conservative that we've we a far in to as the as very of In as funds addition on continue to Bank cost add that, sure of we what more just approach are. our making be

a that's less so And I bit is new little think look which to what and sure our why make try going we're viewing geared this to see push we as also products mix are towards. the to and to growth. We're try

you the But noninterest-bearing on give know, time accounts. maybe that replace of deposits Andrew, to you and transactional to continuing hopefully, up So little sorry, a with more it, there? question? I I'm question bit don't on had wanted Chris another other

Andrew Liesch

remixing that going Is cash out in the to the be flows loan you securities just what are it the then. book? have funding really growth Yes. --

Chris Navratil

Yes.

we at Andrew, the have throughout meaningful flow as our pursuing perspective, book. continued coming meaningful fourth portfolio a and of of have cash quarter. that opportunities securities creates for some the the sell at And of end did repositioning at the in look to level potentially the capital to continuing from directly continuing opportunistic were quarter, cash to of We're the in look we continuing do more at market We've a bond levels excess on having off opportunity So in us you be capital as to year. we fourth kind cash sitting point.

get more relatively when or coming that of loan investments. that cash. repositioning with Kirksville, that out then some right bringing Bank of and we funding we're And transaction, cash of part on to is So short-term

So there's that off too. cash of quickly, flow one coming

we So continue meaningful we we're level without the to at capacity have, deposit balance here. the loans to the growth, that depicting believe, fund

Operator

our And from KBW. DelMonte comes next from Damon question

Damon Del Monte

deposit the One here. ones quick of couple a that's Just been occurring. on remixing

from noninterest-bearing floor should do you Or deposits. out like of migration there? kind feel to it deposits still that XX% some of total of category? think there? the around there's Do rotation down or you've you now And to start hold feel I reached are

Brad Elliott

answer mean could seeing I Well, decreasing. I I that. accounts seeing, exact I give on we're think wish not you we're an

seeing balances So seeing what within really accounts. we're is balanced decrease we're those

but accounts to getting we to think are those accounts. consumer But start we're fairly that an it's So area. growing granular, it do us so something we're in on, low that eye continuing keep the since requires obviously

that's looking so of kind what And at. we're

So I feel slowing. like is don't that it think number I think does

a the little I continues have to average we a here. And shrink of But on still where so an if point kind basis. final case, mean, to bit of I quarter it getting that that's think might also, more of we're

Chris Navratil

tick, roundings, to And somewhere because what it yes, XX didn't you a only would moved below moved right? from tick just It XX the is, move down it XX. down a into I it moved XXs. tell in from down down but we're So

it like quarter-to-quarter. So percentage points whole a it's fell not even

Damon Del Monte

it. Right. Right. Got

on Okay. income, million noninterest to the million next I for think And $X $X then you're for guidance guiding quarter. to slide,

$X I figure in an through think just from was get Can quarter the this where walk fourth you quarter kind to of $X low you range. and you kind how million help us million in here level? $X were us like million the to of

Chris Navratil

Yes.

So we rate. were look run light at as a to this we quarter compared somewhat what

Some by fair is of derivative driven valuation. that

with from acquired kind we bringing and We shift. to benefit same being are hurt in what's from upticks in to that fair kind we previous reflected of what some in it as in that look were repurchase some from some next assets. look through legacy comparative seeing is figure. by in in to additional of benefit So when had QX. change year, back opportunities realize quarters and about. We're continuing into of throughout special opportunity you some we've year, talked derivative assets QX. of first from the have in of Similar the then the that don't and benefit we've come to the value things other out which working expect And again, level obligations quarter-over-quarter, we We benefited some see our quarter we're expect

Damon Del Monte

it. Got

as lastly, growth. to little just That's Okay. Could loan And a on helpful. color bit of the outlook. you just give what The single-digit areas more high kind of then us portfolio the Is the Or expenditure side more folks? on side are the where capital you investing projects? businesses most it C&I feel in comfortable about? is CRE it with development on

Chris Navratil

HELOCs we're So C&I and strong. movement additionally, as to see numbers. being small, able good confidence CRE that on We've start definitely us portfolio sort exposure and hit banking I C&I owner-occupied to small seeing things pretty And at have positive really Both private when had then of of like a year those our those to the a well. look like in really and you think give our that. things we look we'll

growth I as think well. in you'll small just that incremental see

will up definitely funding deals. construction -- have year, this of We'll development be it's have forward, that our looking So some definitely at. we're looking -- we'll that are,

So we have there. that confidence in

coming a -- not deals we're on us. the that being we're but stuff to back seeing that in thoughtful we really lot do space, we're of So new

concern held those deal falling other by borrower by can from deals to at both we are look there's if the the that firm see perspective, that another banks on -- as getting perspective maybe the done. on a wayside some credit and or a either get things bank pricing we're So

not the CRE them, C&I one say of and sure, those So it's added little I side. consumer it's owner-occupied with kind of but bit wouldn't really just it's it's just a on and for not, all area,

Brad Elliott

NIM accretion one BoK. circle on this had accretion to open modeled back to Jeff, year. question it for just really NIM The quickly we way points is X.X basis XX to from on of

Operator

And conference showing concludes for I am participating. today's no you questions. further Thank This call.

disconnect. all may You

Equity Bancshares (EQBK) 25 Jan 242023 Q4 Earnings call transcript