EQBK - Earnings call transcript Q3 2024

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Operator

Hello, everyone, and welcome to Equity Bancshares' Third Quarter 2024 Earnings Call. My name is Lydia, and I will be your operator today. [Operator Instructions] I'll now hand you over to Brian Katzfey to begin. Please go ahead.

Brian Katzfey

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

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

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

Brad Elliott

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

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

take our including pleased areas. through many in are quarter results third We record to results, you

to the from As our rates bond late have in restructuring started recovering AOCI XXXX. is well decline, done

we expand as in about holding strong are is optimistic in our our off, are starting margin discuss. Rick's to will growth Chris next to opportunity a the can sheet loans to pay in efforts steady, sales-driven Our our see you pipeline. lead and organization income interest several and as net balance quarters,

gross income problem expertise million. arise. of repayment and credits in $X.X debt. current from The of a significant and assure XXXX. also a final did they the the to reorganize borrower period structure allowed result resulted if a borrower noteworthy We Reber a that defaulted to received on commitment in and work underscores franchisor resolution This recovering in payment Brett excellent to Kossover our Greg a workout that

to building $XXX execute needs Period-end to balances shareholder meet the while by our During the of quarter, we continued increased on loan value. customers million. our also mission

aligned sales to teams, forward. Julie drive the are and While were bank balances the flat, Rick of and overall deposits under Huber, motivated operational Sems to and leadership and our materially nonmunicipal customer continue

while value tangible we also by results, quarter, of of TCE and realized growth during increasing share the with operating further capital closing book dividend XX% per expansion X.XX% excellent to addition In XX.X%. our of ratios

quarter, closed second XXXX, also systems taking the after third transaction its welcoming equity The XX we the During place and merger later converted with bankers days bank to KansasLand franchise. conversions quarter. announcement, in of closed the and our

to I As and we quarter markets, our enthusiastic the our ahead. look into opportunities lay that fourth the and XXXX, team, am about

be Chris our Our bank sheet to our and our is financial its through balance in footprint organization customers strong, talk the you aligned results. community let partners. I'll remains potential in our for premier goal and

Chris Navratil

Brad. to quarter-over-quarter, income share. or Thank KansasLand $X.XX we diluted night, net net income expenses you, Last reported of the interest incurred merger flat income interest while Net share. diluted for was million on gain was related net security per sales, and million X.XX%. $X.XX was margin $XX.X transaction versus $XX.X or Adjusting per X.XX%

an totaling charges noninterest recovery onetime for down $XX.X to quarter-over-quarter service items. million transaction. Noninterest driven expenses million was in $X.X due charge Also discussed. previously $XXX,XXX KansasLand adjusted a discuss in higher more for included continued in dynamics in future came in positive margin will maintenance for income and income than quarters. Noninterest expansion We remain this quarter the optimistic margin opportunities Brad acquisition reflected line the to M&A call in on outlook related were income about the our and trend gain detail and later

benefit, $XXX,XXX and $XXX,XXX, this of of incentive location linked was quarter. $XX.X flat bank accruals of expense, exclusive a of former at million write-down additive Excluding the noninterest M&A,

loss million, credit of for provision a $X.X late driven loan included income by primarily the third net growth in GAAP Our quarter.

hold continue potential reserve challenges. economic We for to

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

Krzysztof Slupkowski

Thanks, Chris.

basis XX screen Asset basis Total $XX.X increased regulatory X.XX%. quarter. loans of total points or improving historically to the total a metrics closed loans XX loans percentage levels. continue bank linked quality X.X% capital, at of at to million points classified quarter Nonaccrual low as

increase and quarter, relationship, increase basis were we XX. to one XX Net charge-offs annualized the Although annualized driven from on was continue in seeing migration $XX.X the by to Recognized addition points small of individual negative primarily were XX in indicate XX excess specific charge-offs concerns through broader the across points million our of an for credits $XX.X days of while September circumstances do year-to-date declined not reflect footprint. basis loans. Delinquency charge-offs are million.

credit we ongoing the our on weaknesses are our the positive, emerging outlook year remains impact of inflation to minor recognize While for due borrowers.

pressures and Specifically, and pricing constraints. restaurants margin service operators quick facing are smaller

While is are secured, adequately is losses there bank granular the and is exposure expected. not risk, meaningful

economic We and while portfolio face underwriting healthy credit challenges. prudent continue to tools our monitoring leverage maintaining identify of potential to future our in risks capital and Chris? to remain reserves any levels

Chris Navratil

annualized bank quarter Average an of earnings in in a the during million improved totaled of rate coupon fourth for originations positioning Krzysztof. loans at X.XX%, Loan the increased the Thanks, average quarter the with $XXX X.X%. weighted quarter.

purchase the quarter, basis nonaccrual X.XX%. and effect X additional yield X% accretion on coupon increased loans Overall to loan of to of basis driven yields X a points. decline X from by an third the X.XX%, accounting points points basis in declined During

loan increased discussed impact linked and production. loan average held previously cost drop mix down yields Total interest-bearing leading of FOMC's of to quarter additive balance to income was X.XX% at consistent on items, at the to up for earnings to the the X.XX%. Net to effectively average improved with in via rates neutralize contribution able we to drop decision deposits Based upside stable September, for sheet the the yield X continued are $XX potential margins. positioning noninterest-bearing earnings Excluding deposits deposit on interest were funds of and quarter basis dynamics. XX-basis-point million, XX%. Margin due the points. Cost slightly interest while the flat non-coupon of totaled these

by wholesale are carry to continue We balances, excess borrowings. cash which offset

positive the margin current reducing on it currently reducing excess by positions, We spread quarter. the XX these calculate basis of does of a liquidity the for margins. effect the points though that effect We earning are have has

the to first our outlook Our look the includes do include the changes, and though include We continues our not deposit forecast forecast for the effects at XXXX. as in fourth quarter rate lagging loan portfolios. well slide future both as of repricing

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

Richard Sems

bank strategic with held we of the and leadership. September, annual Board senior In retreat our members

and our we to team time left together, next years. over Our the on expect focused X accomplish X to all energized

for shareholders. and and aligned executing customers, employees to our We are committed

are facilitator well a region of of needs maintained our the banks of for We our ownership be in have as positioned sheet community a strong banking scale the and partner as to for liquidity. pursuing balance choice

during third quarter. mission our on delivered teams the Our

Excluding balances $XXX.X or M&A, by loan ending we million X.XX%. grew

We XX.X% increased KansasLand the on contributing $XX.X also added annualized during by basis. Total ending quarter, additional an balances million.

look indicator the strong million. which As at and to pipelines quarter opportunity of bucket, an $XXX XX% we our XXXX, the XX% all-time with is fourth million pipeline, in enter high greater $XXX identification, an remained and or of

to expansion million, bankers, decline leadership organic With Jonathan growth. into I'm non-relationship of the XXXX. strong in which year balances. Under bank over I the excluding and remainder beta while see the balances look continued Roop, and funds, balances, pipeline down allow the to QX, Deposit a optimistic see high the $XX we will were generally of for driving public the motivated continue to retail forward movement of relationship team

In this treasury addition to and on focused on retail, commercial deposit banker our to including a remain services. our focus base, full-service teams being customer

loan margin of opportunities interest as managing has prioritize net and cost curve. quarter deposits. to Our as We lower team ratio at closed the continues yields strategy This challenging passing yield loan-to-deposit XX.X%. in well a on higher a with transactional resulted

which closed Julie During each Under Huber completed in bank another the days. David XXXX, converted acquisitions and within our and our XX of team teams was announced acquisition. X closed have quarter, and the Pass, of successfully leadership

ability in transactions our both balance growth believe beyond. earnings maintain meaningful for grow facilitate is Our and a is allowing the markets, in a and our opportunity there sheet source and base pride deposit continued XXXX to of team. We further to for current these

We have I'm to capacity to over about driving excited M&A, quarters. training Coupled operate our with value. base coming organizational comprehensive incentives franchise with program, and expanding position sales the rolled facilitate strategic fostered our aligned out our a customer buy-in and

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

from have the look place I We and discipline, management cards, people to forward in contributions to execution. Service in tools team Brad expectation. quarter-over-quarter, strategy, wealth and trust increasing realize including and the revenue improved assisting mortgage. this

management Our to into continues wealth XXXX. trust add has fourth robust in and management and quarter assets headed team pipeline the under a

well is company capitalized. Our

Asset quality remains strong.

balance Our structure sheet solid. is

opportunities, to that line. Thank dilution base. deposit on our and time assessing disciplined and approach have value you momentum earn-back experienced, call. expect joining remain continue. the front we granular is earnings the while team emphasizing Equity controlling Our to these for We in M&A the see will a and

We to this questions your are happy time. take at

Operator

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

Jeff Rulis

Commenting on quarter. towards end the the inflection growth fairly loan of strong the sounded

optimism think do anything activity? terms get going base you that to your Do of that's had for, a in and do to of wanted forward? of visibility sense Just sort bit a think you little some triggered with of Fed customer your

Chris Navratil

point on. working in do not been to think this Probably on, end and Things of I to things the lot the been were of to with I that mean deals that. we've Yes. time. There's broke a we've a a at of people at think just done had get that. led working that that wanted I lot that quarter, number relationships

opportunities is the as in expanding we're That's that that calling haven't one obviously, we're on. we So past. I And grouping we're other the avenues. -- it's actually with forward identifying lent it, of we just look one, the that existing on to think prospects really of clients

that's saw I through. don't So reason think main things why probably the really break we

Jeff Rulis

an that call been widening so -- And really hasn't horizon. it the like Okay. year-to-date, time maybe overhang,

I'm I haven't where rates go. projects -- You are don't know going going generally to hold to back on speaking... heard

Chris Navratil

Yes, I generally think at We're But was point been that of I'm -- maybe this think driving time. No, really think, that what's, I that we've last hasn't have speaking. probably, I not year, been might part yes, sorry, now. that. hearing that in

Jeff Rulis

Appreciate expense, in expense guide? your it. included -- amortization that to Hopping the I is to expenses. want just

Chris Navratil

So amortization, what intangible the to, that CDI Jeff? you're is referring

Jeff Rulis

Yes.

Chris Navratil

that's Yes, included.

Jeff Rulis

was KansasLand for quarter. mean, -- closed million quarter, pretty first $X.X that And I the Okay. of day that's the

a that's run line pretty So item. on rate good that

Chris Navratil

of good be you'll start good bit start little couple. to for the rate then run for there. Yes, yes, that out But okay of will pivot and a a of from see rate next next run a the couple down to quarters, run

Jeff Rulis

line, we that exclude QX lower the run I at expect come the or Okay. cost this of kind rate, that some get quarter, dropout end will out will where one-timers, implied. to you the some you And looks the Is would is get saves. range there look possible, to if than I the anything at little of it modest costs, offsetting -- gain comp what of from, out on to the the Where of if absent of kind say maybe it maybe on expense would guess maybe expenses -- expense kind as a you of to the come of occur of merger declines -- low out guide?

Chris Navratil

this a say salaries I'd additive we're things few almost accruals of a around. and $X working included employee million current Yes, benefits quarter From on. perspective, there's time

-- to That's quarter. performance. final just repeat catch-up on year-to-date won't a that isn't that through expected the So

a shift includes The unfunded in here other commitments. item line

advertising some the have development. anticipate we're processing, quarter actual heading There unfunded I in here, reserving data fourth how there into items opportunities repeating line quarter. some don't So that quarter. There's did commitments is the we and depending on necessarily facilitated focused on production just other for there, into business that opportunities are fourth this are

additive incremental get, and and we that but salaries opportunities some the larger in So the wins ones other there's line. employee some benefits small through are can accruals

Jeff Rulis

kind sound that Okay. see you you're Great. of select doesn't pressures how like that is on And really from discussion Krzysztof. kind -- of broad-based. some little one, maybe last concerned of too quick of do on But more your borrowers, a this group? range-bound that with of a one it inflation the borrowers? somewhat transitory progresses Is perspective? that group And some Just

Krzysztof Slupkowski

Yes.

and few last and the year So for been really if at our our elevated positive. seeing the delinquency levels I historic quality this loans, we're But you average you list, has hitting they delinquencies we're of a down some at at low normalization if delinquencies in problem quarter what all comparing total the it's below recent which But very is of still points loans, country granular. only trends, categories. But historic rest credit is levels think at historicals. small XX moved loans But quarters our experiencing look the and now. the looking been what's the near have look the basis of to historical

at So credit a you that if then credit larger quarter. looks the a nonaccruals like -- the -- and nonaccrual it of that look similar or our outside hit loans, in midsized story third

like We yet. the have borrowers, the So that's not at you most see borrowers will, cost to the on smaller power think customers of kind it smaller don't borrowers bigger product to time. We pass looks increased stressed, the smaller smaller they that and getting if pricing do their like operators our do. that the of migrating to larger the this trend operators, operators the who's

for what I we So that's now. guess see

Brad Elliott

nonaccrual as or is the And have I guarantee idle went actually say, issues And them SBA well. of they to the SBA the is would loan credit funds. Jeff, related larger SBA gave that one

cash, And which created manage very had is issues. some the they so what excess it didn't it of well,

Operator

next comes Our with Stephens. from question McEvoy Terry

Terence McEvoy

question with quarter on and -- is are for, positioned for call just you it, managing Could more in relationships side, in then the a balance fourth how about margin? just new rate managing how more possibly the just cuts XXXX? Chris. the you sheet adding talk X And the deposit Maybe

Chris Navratil

Yes.

based commentary, for So quarter, relative noncontractual positioning. there's a point on both ultimately points sensitivity there to the move cost to significant first basis that, the and first we've do a of Terry, we got neutralize been the that from on room that, XX at looking mentioned in piece to through is to able perspective, the of total prepared cycle as basis. during continued And where funding. We room a down, contractual the

be significant or and those decline able moderate as of crazy, will neutralize neutralize the it with kind impact will something rest to impact nearly So impact just the of the the caveat of optimistic changes that like will it Fed meters us impact to do the industry.

how new as balance terms with significant of a higher deposits higher The customer in cost positioning amount there sit deposits, we're secondary deposits and cost sheet we of our say deposits, the relatively Where significant question we but approaching in higher I'd cost have of some cost lower funding. acquisition.

price we reprice advances one and line in already things as a have to high higher some is be in some there's opportunity credit there that well. Where would our So of what marketplace. costing, relatively

approach to So relationships discipline how can ways under. We're bit opportunistic to be make both being need we opportunities. and a some managing pricing our customers way operating and and we're in we're we've new and the on margin we with do service community the on bank and pursue going new been But continue want going effectively pricing the down. to via that that sure

to remain we So opportunistic we we're going optimistic or opportunity -- but disciplined. have there, some

Terence McEvoy

where out gaining we're do most you traction. several And next I is it which starting And specific markets when certain deposits calling categories? already a look new Any see, then or over you're X it as Is where quarters, feel the you the the a then follow-up, you loans, see on fee question maybe to efforts. and upside? or think really

Chris Navratil

Yes.

strong for So being real which quarter mean the the positive actually Tulsa some say signs we've and showing as on real Wichita, real and Missouri, well. is I Western of seen I fourth side,

well. for those Kansas there. are continues markets City a consistent really be So in us doing player to

also opportunities as Kansas -- some our as West markets for us of I see well. think I in Western out in

our there part all So get companies strong. been of working great has we're to. are to markets. that that in at just all really, I think And

deposits now them as see focused I get can all of fact that's I do on, with the we -- get that the said -- loans, that. And now. side get deposits optimistic something we loan to provide we really we right I'm when it in but so initially That well. So think what bringing that when we're

and going So on think really the the the phase on fee of our of more next sales team we're of deposit That's more that. to front income to kind I the process work see side. getting

I that But you to going But little funds it So a that, side will we'll into delay back we're the that on on in deposits bit the think rebounding public more think probably perspective, know, that as from -- just in growth the fourth of area. a the that. from see like new things seeing quarter. mid-'XX start I more

Operator

Sandler. we queue Piper with have in Next Andrew Liesch

Andrew Liesch

here, the a Just follow-up question topic. kind last of

through ran ratio historically XX%, would that profitability. to thoughts mean increase the You've from if some what on earnings you to XX% and loan-to-deposit

and some there's think of deposit in the you this start aspect that the increasing seasonal do deposits obviously, trend that efforts But might of expand here be loan-to-deposit redoubled base. slowly Now ratio? to a

Brad Elliott

the X really working industry think side, on until Yes. it's the Yes, focused -- I or the think deposits quarters. what that's And I on. we're never X last deposit is on

their you If in flow our high is deposits And the quarter, out the it's municipal balances deposit third low at December. balances. kind looked of cycles, always their always

So come you and the if we small and school bank all municipalities. And cities that's districts. in municipalities revenues when all the so the towns, in tax those counties the for the remember, these

actually flow big we that And thing about it's those do. of The on tied happens Chris those really to because indexes. and kind that usually good so have it's as it, something they're pricing in said, a we power markets, in

change. sheet, higher and So a balance they funds times, rates reprice are automatically there if cost of lot of for our

growth really loan using those cycle are hard with do process the as be see think, have we're we So and Rick working team, going the XX% as numbers, supposed Andrew, higher they're that's done into bought to not to during to something past. crazy us in in strategies to I reprice and the continue X% our and the really range has that cycle. And whole have that solid in been teams the for just doing it's to down not cost deposits the

And so I as loan we go company. think growth we're going as forward to see a solid

Krzysztof Slupkowski

loan us looking earlier, Chris' point mean, if go, disciplined to we just that noninterest-bearing. gives let for want that to be And to deposit, to always on we're the gives those I then And to us then flexibility. ability

head be pretty as we'll manage we the 'XX. to well think that, able So I into

Operator

with comes question next KBW. Damon from DelMonte Our

Damon Del Monte

the repricing you what so remind fourth Just could a couple loans the 'XX? probably the that in here either you questions be rate around quarter in or Chris, we'll margin. of of us have guys fixed just in way more

Chris Navratil

is Yes. today Through fixed our about of -- portfolio loans. so comprised rate of XX%

We And have quarters. reprice so dated. There's there's too. estate a few the $XXX CRE million, hundred million will is then some real to of to over million of there and there is $XXX in residential some X- stuff X-year that X it in next longer that there,

and So some the of XX% the to of about repricing we're composition the same, going rate. continue quarters, being next to portfolio kind see to X continues remain over the fixed

Damon Del Monte

what And what on where what do from average is happen have -- you have go? is would yield the like to it repricing to --

Chris Navratil

I that quarters. have of get portfolio next will it the a over don't sub-X%. can the I say Damon. we still X meaningful is for aspect you, that I have

up. opportunity meaningful to there's So reprice

Damon Del Monte

Do about CD blocks you Got -- it helpful. be on then it. any And have side? will up? that sizable coming That's repricing how the

Chris Navratil

a bit repricing, about and sporadic. those every that's been same continuous levels have No, little quarter really the a trend

quarter, during that some the cost. expansion saw we So you saw in

have over as that opposite come down. trend But month the consistent rates trend one over think relatively month. really we'll a month is I see

Damon Del Monte

it. Got

question just last Okay. one modeling And then here.

quarter impact it how was I last Do was X it around know basis was what value that to the much mentioned of this lower. points the margin. an fair think this it You know you was? quarter? you quarter, Do accretion

Chris Navratil

end I'll fall between second, it quarter, X to And more because we fall we will benefit X. X the basis X volatility lower on accounting basis Last -- purchase expect was rate lean accounting think run towards saw it points points September. to of purchase there's X just I one June. those some between now, I go-forward saw numbers. in but in and the

Damon Del Monte

also anything this was what goes Okay. Great. for the And kind quarter. unusual Anything guidance quarter, but we that? with I this And then unique lower quarter? the this tax rate to were know back of looking

Chris Navratil

Yes.

release planning company. were net of able losses to we the So and operating deferred take a allows that advantage taxes of holding strategy tax at some for our

offsetting the is during we're of benefit which impact BOLI last of So transaction. that quarter, the quarter's realizing the

X net quarter-over-quarter. outs for rate So full the but is trends about they're XX%, tax the opposing year definitely

Damon Del Monte

it. Got

Okay. there? acquire? That's Any with mentioned be lastly, guess are geographic Brad, to you M&A. that And helpful. any you'd And type change guys change the active of prospects the still to I in strategy for you then looking bank

Brad Elliott

No.

strong, honestly I have of in few would on picked strategy still M&A pipeline the up is that say same. we conversations Our the weeks. is the number the have last that going

a are But eventually. conversations to could clean not doing. some play but and come to now. have them, hanging our we're and deals that not we're going And -- to change FDIC going and to there going pretty not -- we're are is right change couple been of a strong those see geography them we're to the number we've going or what geography, of out change them of deals, actually stressed Some you couple there's in of mean get deals, them. But that doesn't there's that of

Operator

no have further questions. We

So Thank conference us. for call. this concludes you our as Q&A session joining the as well

disconnect your You may now lines.

Equity Bancshares (EQBK) 16 Oct 242024 Q3 Earnings call transcript