Equity Bancshares Reports Q3 Net Income of $26.8 Million

Equity Bancshares (NYSE: EQBK ) released third-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

The full earnings call is available at Summary Equity Bancshares reported a net income of $26.8 million for the third quarter, with core earnings at $29 million and a core ROTCE of 16.5%. The company experienced significant organic loan growth, with legacy market loans growing at an annualized rate of nearly 12%. Total loan balances increased for the first time since the acquisition. Equity Bancshares remains focused on technology initiatives for process automation and expanding customer services to enhance shareholder returns.

The company announced a strategic merger with Lincoln Bank Corp., expected to close in the fourth quarter, which will expand their market presence in Des Moines and Waterloo—Cedar Falls, Iowa. Total deposits declined by 2.2% to $6.17 billion, mainly due to declines in large rate-sensitive customers, but the company is focusing on rebuilding core relationship deposits. Net interest margin was reported at 4.2%, down from the previous quarter, but expected to return to 4.25% to 4.35% in the fourth quarter, excluding the impact of the Lincoln merger.

Equity Bancshares plans to leverage Lincoln’s acquisition for future growth, aiming for mid-single-digit organic growth in 2027. The company remains confident in its credit portfolio, with nonperforming assets at 1% of total assets and net charge-offs at 15 basis points annualized. Equity Bancshares increased its dividend by 22% to $0.22 per share, reflecting strong capital generation and confidence in future growth. Management expressed optimism about organic growth potential and strategic M&A opportunities, with a focus on maintaining a strong balance sheet and enhancing shareholder value.

Full Transcript OPERATOR To differ materially from those discussed. After the presentation, we'll open the floor up for questions and discussion, a conversation we look forward to. With that, let me turn the call over to our Chairman and CEO, Brad Elliott. Brad Elliott, Chairman Of The Board Good morning everyone and thank you for joining us.

Joining me today is Rick Sems, our Bank CEO, and Chris Navratil, our CFO. Our third quarter shows what happens when a larger franchise starts to work together. Net income was $26.8 million or $1.29 per diluted share. Core earnings were $29 million or $1.40 per share and our core ROTCE was 16.5%.

Pre-tax, pre-provision earnings were $36.9 million, the highest since we combined the three companies together, and our efficiency ratio was 54%. The story of the quarter is organic loan growth. This improvement is something that we have focused on for the last several years. Loans in our legacy markets grew at an annualized rate of nearly 12%.

Production was the largest in our history and for the first time since closing the acquisition, total loan balances increased during the quarter. Under Rick's leadership, Mark Parman, Justin Harris, Greg Kosover, Craig Dunn and their teams have continued to make sales calls, cultivated relationships and emphasized value creation for our customers on both lending and the deposit side. The results in the quarter reflect the effort and confirm the ability of our franchise to grow the balance sheet organically.

Remaining focused on technology initiatives, finding ways to automate processes, enhancing lead generation and expanding the services our customers rely on provides opportunity to add operating leverage and enhance shareholder returns as the balance sheet grows. I continue to be excited about the emerging technology we'll do in our industry and what it will do in our bank as we continue to pursue all that it offers. The funding market has tightened over the quarter and we have seen migration within both our legacy and acquired footprints.

Declines are concentrated in large rate-sensitive customers including public funds, while our retail and treasury teams continue to grow relationships. Full-service relationships which start with deposits are the focus of our teams and that will never change. We have strong strategies to deal with the pricing challenges that come during these cycles in our industry. Our branch network during these periods is the strength of Equity Bancshares and we are excited to operate during these periods as we think we have a competitive advantage.

Mergers create financial statement noise, but strategically adding core deposits and expanding markets to the Equity Bancshares franchise is core to what we do. Execution on this strategy will provide opportunity to continue the success realized in the quarter. As you know, on September 3rd we announced our agreement to merge Lincoln Bank Corp., the holding company of Lincoln Savings Bank headquartered in Reinbeck, Iowa, into Equity Bancshares. The transaction gives us a meaningful presence in the Des Moines and Waterloo—Cedar Falls area and a strong in-market deposit franchise.

It is financially attractive and builds on the disciplined approach of our 15 prior transactions since 2015. Pro forma will be approximately $9.1 billion. As a company, we are on track to close Lincoln in the fourth quarter and momentum is building. We anticipate Lincoln will convert onto Equity Systems in the second quarter of 2027.

We do not plan to close or consolidate any branches, which protects the customer relationships that make this franchise so valuable. Closing on time lets us capture cost savings and earnings accretion as early as possible. Lincoln brings exceptional banking talent, deep relationships and strong communities to the consolidated franchise under the continued leadership of their commercial and retail teams. We are excited for what this strategic combination will contribute to our growing company.

I'm excited about the quarter and the trajectory of Equity Bank. Let me turn this over to Rick at this time. Rick Sems, Chief Executive Officer Thanks Brad. This quarter was about organic growth and the numbers show it.

Total loans grew $39 million to $5.44 billion, our first quarterly increase since the acquisitions closed. In our legacy markets, balances grew $106 million, or 2.9%, to $3.5 billion. That is nearly 12% annualized. Within our acquired markets, we continue to see period-over-period decline in balances, although it was slowed as production improved by 55%.

As our teams continue to find traction post-integration into Equity's processes, production across the bank reached a new high. We closed $379 million in loans at an average rate of 6.9%, up $64 million or 20% from last quarter and up $136 million or 56% from a year ago. Our legacy markets produced $279 million of that, up 11% from last quarter.

Specifically, I would like to note Kansas City under the leadership of Jeff Keyes, Wichita under the leadership of Harrison Helms, Western Missouri under the leadership of Blake Moreland, Tulsa under the leadership of Ryan Morris, and Western Kansas under the leadership of Levi Getz for the production and balances they were able to generate this quarter. Looking forward, our 75% weighted pipeline stands at $534 million, up 27% from last quarter, and line utilization was at 55.3%. We have hired 13 bankers year to date across Oklahoma City, Omaha, Lincoln, Wichita and Des Moines, and those teams are still ramping up.

Total deposits declined $136 million or 2.2% to $6.17 billion. In our legacy markets, deposits were down $102 million. Excluding public funds, which declined due to pricing pressure and seasonal payments, balances in legacy markets were effectively flat on the quarter and up 3.6% from a year ago. Average deposit balances for the period were flat.

Noninterest-bearing deposits were 18.7% of total deposits, down from 20.2% in the first quarter. Rebuilding that mix and replacing brokered funding with core relationship deposits over time is a priority for our retail and treasury teams. On accounts, our legacy markets produced 6,269 accounts in the quarter, up 22% over the same quarter last year. In addition, digital active users reached almost 79,000, up 10% from a year ago.

759 business accounts were opened in the quarter, which is an area of focus, with the average balance per business account growing nearly 4%. Fee income momentum continued. Treasury fees grew 4% on the quarter and 11% on the year. We are just getting started there.

Continued momentum from trust and wealth and mortgage banking provided additional benefit. On credit, the provision was $1.7 million and the allowance stands at 1.18% of loans. Net charge-offs were $2.1 million, or 15 basis points annualized, up from 12 basis points last quarter. Nonperforming assets were 1% of total assets.

Nonaccrual loans were $69 million. Classified assets to regulatory capital were 10.42%, down 140 basis points in the quarter. We remain comfortable with the overall credit posture of the portfolio. On Lincoln, integration planning is well underway.

Local leadership and decision making will stay in place as we welcome their teammates and customers and communities. We now operate in seven growing metro markets — we believe the best in the Midwest — and with Lincoln we add density in Des Moines and now enter Waterloo—Cedar Falls as well as other surrounding community markets, which gives us opportunity for future growth. I'll now turn it over to Chris. Chris Navratil, CFO Thanks Rick.

Good morning. Net income for the quarter was $26.8 million or $1.29 per diluted share. Excluding M&A expenses of $1.0 million, intangible amortization of $1.8 million and securities gains, core net income was $29.0 million or $1.40 per share, in line with last quarter. Core return on average tangible common equity was 16.5%.

Net interest income was $72.8 million, down $1 million from the second quarter. The period—over—period decline was driven by increasing costs within the deposit portfolio as well as declining yield on interest—earning assets. Total cost of deposits moved up 7 basis points on a flat average balance. As both Brad and Rick mentioned, the market tightened for deposits as we saw the short end of the curve rise.

Investment yield declined as excess discount realization from the previous quarter did not recur. Loan coupon yields declined 5 basis points. Net interest margin was 4.2%, down 16 basis points, affected by the same drivers as net interest income as well as composition dynamics. Average earning assets increased to $6.87 billion from $6.80 billion, driven by cash and securities which were funded by expanded borrowings.

The impact of the growth is, absent other changes, accretive to income and dilutive to margin. Year to date, margin has averaged approximately 4.30%. Looking to the fourth quarter, excluding Lincoln, we expect margin to return to the 4.25% to 4.35% range. We enter the quarter with $50 million in loan balances in excess of the average for the third quarter.

The FOMC's decision to raise interest rates in September will provide a near—term benefit as contractual earning asset balances are repriced. 14% of the loan portfolio reprices daily and 22% monthly. New production is coming on at 6.91%. The spot coupon on the loan portfolio is up 8 basis points to 6.48%.

While production and repricing will continue to be accretive to the book, on the other side of the balance sheet, as forward rate curves continue to indicate near—term rate rise, competition is expected to continue. As Rick indicated, we are committed to continue driving deposit growth and relationship expansion, but the potential for headwinds is evident. Noninterest income was $10.8 million compared to $10.3 million of core noninterest income last quarter. That is an increase of $0.5 million, and noninterest income represented 12.9% of total revenue, up from 11.2%.

Debit and credit card, trust and wealth management, and treasury all grew. We expect fourth quarter noninterest income, exclusive of the impact of Lincoln, between $10 and $11 million. Noninterest expense was $47.7 million. Excluding $1 million of merger costs, expenses were $46.7 million, flat with the second quarter.

The efficiency ratio was 54%. We expect fourth quarter noninterest expense, exclusive of the impact of Lincoln, between $47 and $48 million. Provision expense was $1.7 million and the allowance for credit losses was 1.18% of loans, effectively flat to the previous quarter. The allowance covers 7.7 years of current period annualized charge—offs.

We continue to expect a provision run rate of roughly $1.5 to $2 million per quarter depending on loan growth and charge—off levels. Capital remains strong. TCE closed the quarter at 9.1%, up 3 basis points in the period, and tangible book value per share was $32.30 compared to $33.45. The decline in per share value reflects a $35 million negative adjustment to AOCI as rates rose during the period.

Excluding AOCI, tangible book value per share grew $1.19, or roughly 3.6%. CET1 was 12.15% and total risk—based capital was 14.94%. Capital generation was approximately $21 million for the quarter. During the period we announced a 22% increase in our dividend to $0.22 per share.

Our repurchase plan remains in place, though it is currently paused as we work to finalize the Lincoln transaction. At close, we expect pro forma TCE to total assets of approximately 8.5% and total risk—based capital of approximately 13.4%. As Brad and Rick mentioned, the Lincoln merger is continuing to progress as anticipated as we expect a late fourth quarter close. Impact of the transaction has been excluded from our forecast figures.

No changes to previously announced expectations have been identified. I'll turn it back to Brad for closing remarks. Brad Elliott, Chairman Of The Board Thank you, Chris. Now let's step forward and let's talk a little bit about 2027.

We ended the quarter at 7.6 billion in assets. With Lincoln, we expect to be 9.1 billion. As a company over the past year, we built a stronger franchise. In 2027, we plan to show what that franchise can do, and it comes down to four things.

Franchise growth. Our legacy markets grew loans at nearly 12% annualized, and production was a record $379 million. The Lincoln and Omaha teams — that's Lincoln, Nebraska — we hired are building pipelines in markets we were not present in a year ago. As the transition from our recent acquisition works through the balance sheet, that growth shows up in total balances, and this quarter we saw the first signs that we are able to grow as an organization organically.

Second, Iowa, Lincoln Savings Bank contributes excellent bankers, strong communities, and additional scale to perform a balance sheet. It also positions us for further bolt-on opportunities in the state, with more than 200 banks under $2 billion in assets chartered there. We convert in the second quarter of 2027, and with half the cost savings realized in the year, 2027 is where the accretion begins. Third, customers and deposits.

We have 166,000 accounts, 79,000 active digital users, and a treasury platform that continues to gain momentum. Core relationship growth and a full treasury suite are the answers to growing new deposit relationships and fee income. And the early signs are in the numbers, as Rick shared in his comments. Fourth, efficiency.

Expenses were flattened this quarter. We believe we can grow the balance sheet and deepen relationships without growing the cost structure at the same pace. M&A has always been part of how we have built this company, and Lincoln Savings Bank is a good example of the discipline we apply. It fits our strategy, it meets our return for shareholders, and it makes Equity Bancshares a better company.

We remain active, but our energy is on executing what is in front of us: organic growth, integrating Lincoln, and building tangible book value for our shareholders and increasing earnings per share. Year to date, core earnings per share are at $4.14, which puts us in a position to surpass our $5 target for 2026. That is what this team has done every year, and we plan to keep doing it — building earnings per share as we grow the company. Thank you for joining us on the call today, and now we're happy to take your questions at this time.

OPERATOR We will now begin the question and answer session for this earnings call. If you would like to ask a question, please press star one. To withdraw your question, press star one. Again, we ask that you pick up your handset when asking a question to allow for optimum sound quality.

If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jeff Rulis with DA Davidson. Your line is open.

Please go ahead. Jeff Rulis, Analyst at DA Davidson Thanks. Good morning. Maybe a jump-off from Brad, your comments as you look into ’27, and I guess preliminarily want to think about maybe net loan growth given the expectations — the organic side really coming on strong.

And then I guess if you kind of think about the possible runoff from Lincoln, kind of framing, I guess, you know, this year you're kind of on pace for low single digit. If you add the acquisitions, how does it frame up for ’27? You know, either big picture or specifically. Brad Elliott, Chairman Of The Board Yeah.

So we've, in some of the modeling and the numbers that we released, Jeff, we reflected some of the runoff that we expect already in Lincoln Savings Bank. If you just smash the two companies together on an asset basis, it doesn't equate to $9.1 billion. So we think we did a better job of disclosing some of that shrinkage that naturally happens as part of the merging of the companies together.