Release Date: October 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Equity Bancshares Inc (EQBK, Financial) reported a net income of $19.8 million, or $1.28 per diluted share, with adjusted net income of $20.2 million or $1.31 per diluted share.
- The company achieved a significant recovery of $8.5 million from a defaulted borrower, showcasing their expertise in managing problem credits.
- Loan balances increased by $147 million during the quarter, indicating strong growth and a robust pipeline.
- Equity Bancshares Inc (EQBK) successfully closed and converted its second bank merger of 2024, integrating KansasLand into its operations.
- The company increased its dividend by 25% and reported a tangible book value per share growth of 10.4%.
Negative Points
- Net interest income was flat quarter-over-quarter, and net interest margin slightly declined from 3.94% to 3.87%.
- Non-accrual loans as a percentage of total loans increased by 10 basis points to 0.87%, driven by the addition of one relationship.
- The company noted an increase in negative migration of small loans, indicating emerging credit quality concerns.
- Cost of interest-bearing deposits increased to 2.85%, contributing to a flat total cost of funds at 3.11%.
- Inflationary pressures are affecting smaller operators and quick service restaurants, leading to pricing pressures and margin constraints.
Q & A Highlights
Q: Can you comment on the loan growth towards the end of the quarter and whether visibility had any impact on this?
A: Richard Sems, Executive Vice President, President of Equity Bank, mentioned that the loan growth was not significantly influenced by visibility. It was more about deals and relationships that had been in progress, which culminated at the end of the quarter. The focus is on identifying opportunities with existing clients and expanding the prospect base.
Q: Regarding expenses, is the amortization expense included in your expense guide?
A: Brad Elliott, Chairman of the Board, Chief Executive Officer, confirmed that the CDI intangible amortization is included in the expense guide. Chris Navratil, Chief Financial Officer, added that the current run rate is expected to continue for the next couple of quarters before it starts to decline.
Q: How is the balance sheet positioned for potential rate cuts in the fourth quarter and 2025?
A: Chris Navratil explained that the bank has positioned itself to neutralize the impact of moderate rate changes. There is room to adjust both contractual and non-contractual funding costs, allowing the bank to manage margin effectively even if rates decline.
Q: Are there specific markets where you are gaining traction, and where do you see the most upside in the coming quarters?
A: Chris Navratil noted strong performance in Tulsa, Wichita, and Western Missouri, with Kansas City also being a consistent contributor. The focus is initially on loan growth, but efforts are being made to increase deposits and fee income, with expectations for more significant deposit growth into mid-2025.
Q: What is the outlook for the loan-to-deposit ratio, and how does it impact earnings and profitability?
A: Brad Elliott stated that the bank is working on increasing the loan-to-deposit ratio, with a focus on non-interest-bearing deposits to provide flexibility. The bank expects solid loan growth in the 6% to 10% range, supported by strategic efforts and team buy-in.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
