Equity Bancshares (NYSE:EQBK) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.

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The full earnings call is available at https://events.q4inc.com/attendee/419906025

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Full Transcript

Audra

Good morning. My name is Audra and I will be your conference operator today. At this time I would like to welcome everyone to the Equity Bancshares Inc. 2026 First Quarter Earnings Conference Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star key followed by the number one again. At this time I would like to turn the conference over to Brian Katzy, Vice President, Corporate Development and Investor Relations. Please go ahead.

Brian Katzy

Good Morning. Welcome everyone and thank you for joining us Equity Bancshares' first quarter earnings call. A quick note before we dive in. Today's call is being recorded and is available via webcast at investor.equitybank.com along with our earnings release and presentation materials. Today's presentation contains forward looking statements which are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those discussed. After the presentation, we'll open the floor for questions and further discussion. With that, let me turn the call over to our Chairman and CEO Brad Elliot.

Brad Elliot

Thank you for being here with us today. We have a lot of exciting news to share today. Joining me are Rick Stens, our bank CEO and Chris Navratil, our CFO. We hit the ground running in 2026. Welcoming new customers and team members in Nebraska on January 1st. Entering the Nebraska market has been a strategic priority for us and I could not be more excited about what we will accomplish for the communities we now have the privilege to serve. The Frontier acquisition drove a 20% increase in assets and contributed to record quarterly revenue. It will be a great organic driver setting us up for an exceptional 2026 and beyond. As we grow the teams in Nebraska, as we have been growing the teams throughout our entire footprint, this is going to be a great strategic platform for us to grow organically. In February we completed the Frontier Core System conversion on time and on plan. The ability of our team to align vendors, allocate resources and execute complex integrations is a genuine competitive advantage. Julie Huber, David Pass and every team member who works with them and made this possible. I want to say thank you. As reflected in the year over year changes, we have accomplished a great deal over the past 12 months. Compared to March 2025, our asset base has grown by more than 40% while driving that level of growth through Strategic acquisitions We have grown tangible book value per share by 5% and just posted a quarter with core EPS of $1.32. A core return on average tangible equity of 16.1% exceeding the same period of 2025 by 32 and 46% respectively. Core net income for the quarter grew faster than model expectations for the combined company. When you put this with less tangible book value dilution than we expected, the result is an exceptional start to 2026. Having added Oklahoma City, Omaha, Lincoln, Des Moines and many other exceptional community markets to our legacy markets, we are positioned to continue to provide exceptional shareholder returns Beyond Merger Driven Momentum our bankers entered 2026 with purpose and energy focused on our mission, creating opportunities for growth, rolling out new products and processes to better serve our communities, staying laser focused on delivering outstanding returns and driving a more efficient companies Serving our customers is the core of what we do and we never lose sight of it. We're leveraging technology and continuously monitoring performance to ensure we're meeting the needs of every customer who relies on us. In the first quarter we opened a record number of DDA accounts as a result of our retail teams being led by Jonathan Root, prioritizing customer needs and delivering differentiated exceptional Service. We began 2026 with a larger, stronger balance sheet and earnings that beat even our own expectations. We're deploying capital with conviction, driving toward our mission of being a premier community bank in our market while delivering exceptional returns for our shareholders. The market is competitive but our value proposition is intact and our balance sheet gives us the Runway to execute. Capital is strong, capital generation capacity is at an all time high and we remain confident in our $5 per share target for 2026. Our board leadership and team are aligned for continued growth. We're operating at a high level and see additional opportunities on the horizon. I am very excited about what lies ahead now. Let me hand it over to Chris to walk you through the numbers.

Chris Navratil

Thank you Brad. Last night we reported net income of 17.0 million or $0.80 per diluted share, adjusting for non core items in the quarter including merger expense of 5.7 million and frontier related provisioning of 6.1 million. Adjusted earnings were 26.2 million or 123 per diluted share, up from adjusted earnings of 23.3 million or 121 per diluted share in the prior quarter. Purchase accounting accretion on the loan portfolio was $3.3 million in the current period compared to 2.3 million in Q4 2025 excluding the after tax impact of core deposit and tangible amortization of 1.5 million and 1.0 million respectively. Adjusted earnings on tangible common equity were 27.7 million versus 24.3 million adjusted return. On average, tangible common equity was a strong 16.1% for the quarter. Net interest income was 73.7 million, up 10.2 million. Linked quarter margin came in at 433 versus 447 last quarter. That dynamic higher earnings slightly lower margin reflect the expected impact of integrating Frontier's balance sheet. Purchase Accounting accretion came in 800,000 ahead of forecast. Normalizing for that margin would have been 429, right in line with expectations. Non interest income held steady at 9.5 million. Expanding fee lines including debit card, credit card, mortgage insurance and trust and wealth offset declines in security transaction losses and swap fee revenue for the period. Non interest expenses for the quarter were 55 million, adjusting for M and A charges in both periods and the prior period. Litigation settlement accrual non interest expenses were 49.2 million versus 44.1 million, an 11.5% increase. Linked quarter driven by the Frontier integration on a normalized basis, adjusted non interest expense as a percentage of average assets improved 25 basis points to 2.57%. Pre SACs pre provisioned net revenue excluding M&A costs and 748,000 in provisioning for unfunded commitments was 34.7 million or 163 per share. That's up from 28.8 million or 156 per share in the prior quarter. Comparing to the same period in 2025, the ratio has improved from 123 per share or 33.1%. The effective tax rate for the quarter was 23.7%. Impacted by periodic items not expected to recur. We continue to forecast a full year effective rate of 22 to 23%. Our GAAP net income included a $6 million provision for loan losses attributable to loan balances added through the Frontier acquisition. Ending acl coverage was 1.18%. The ending reserve ratio inclusive of merger related Discounts closed at 1.77%, up from 1.67% during the quarter. We were active under our repurchase authorization buying back 500,000 shares at a weighted average cost of $44.74. 327,662 shares remain under the board's September 2025 authorization. TCE closed the quarter at 9.0% while CET1 and total capital were 11.5% and 14.4% respectively. At the bank level, the TCE ratio closed at 9.8%. Now let me hand it to Rick to walk through asset quality.

Rick Stens

Thanks Chris. Q1 delivered strong underlying credit. Non performing assets closed at 58.3 million up 11.6 million, primarily attributed to the addition of Frontier As a percentage of total assets. They moved just 3 basis points higher to 0.8%. Non accrual loans rose similarly to 52.4 million from 40.3 million, again primarily driven by addition of Frontier assets. Our non accrual exposure is granular with only four relationships exceeding 1.5 million. Charge offs reflect continued resolution activity on credits we previously flagged. Loans past due and non accrual as a percentage of end of period loans increased to 1.86% from 1.53% linked quarter. The move is primarily in the 30 to 59 day bucket concentrated in one acquired market. It's a merger process issue, not a credit issue. These bankers are simply navigating a new renewal process post conversion we anticipate full resolution in Q2. We see nothing systematic that would suggest that this becomes the new normal for our portfolio. Net charge offs annualized were 10 basis points for the quarter as a percentage of average loans up 3 basis points linked quarter. Looking ahead, we remain confident in our credit trajectory despite macro uncertainty. Credit quality trends across our portfolio are stable and running below historic norms. The Frontier portfolio is granular and well underwritten as evidenced by their track record and we do not expect a meaningful impact on our credit quality going forward. Thanks Rick.

Chris Navratil

As I mentioned, margin closed the quarter at 4.33% ahead of expectations. Loan purchase accounting contributed 3.3 million or 19 basis points in the period absent near term payoff on acquired loans. We anticipate purchase accounting normalizing to approximately 2.5 million in future quarters. Adjusting March results for anticipated accretion yields a normalized margin of 4.29%. Frontier contributed a funding portfolio with a higher cost of funds as compared to legacy equity, improving future liability sensitivity while creating the anticipated near term margin. Tightening the addition of Frontier balances drove average interest earning asset growth of 22.2%, average interest bearing liability growth of 25.6% and the ending interest bearing liabilities to interest earning assets ratio of 76.4%. Our loan to deposit ratio closed the quarter at 86%. We continue to expect full year results consistent with our outlook in the slide deck including margin in the 420 to 435 range with periodic variability tied to purchase accounting.

Rick Stens

Rick thanks Chris. Before I get into loan production, I wanted to take a moment to recognize the extraordinary effort of the Equity bank team over the last 180 days. This has been a truly transformational period for our company and it would not have been possible without the best community bankers in the business showing up every single day. As we enter 2026, we operate in six states including seven major metros and a deep network of strong communities. We have the tools, the products and the motivated teams to deliver outstanding performance during Q1. Our production teams continue to fire on all cylinders across the footprint. Loan production was 267 million up 21.7%. Late quarter originations came on at an average rate of 6.87%, continuing to drive accretion to current coupon yield with a 10 basis point increase versus the prior period. Both our Metro and Community legacy markets contributed positively to the production outcome and were net positive for loans in the quarter. As we discussed, the first nine to 12 months following a merger involves intentional portfolio optimization and planned integration related attrition, a dynamic we've managed proactively. We've recruited and hired new bankers in Wichita, Oklahoma City, Lincoln and Omaha and we'll keep adding talent across the footprint. The opportunity to deepen commercial relationships, both loans and deposits across these new markets is significant and our teams are locked in on growing our organic engine. Our pipelines continue to build throughout the banker network. At quarter end our 75% pipeline stands at 517 million. Line utilization was up slightly for the quarter at approximately 56% with unfunded positions rising alongside production growth and the addition of Frontier creating meaningful opportunity going forward. Total deposits increased approximately 1.2 billion during the quarter. In addition to the contribution of Frontier, the majority of our legacy markets are our growth as our retail teams continue to gain traction and execute on our aggressive goals outside of our administrative and Nebraska cost centers, balances increased 191 million, including more than 5% growth in 5 of our community markets. I want to specifically call out our north central Missouri market including Kirksville, which saw a 7% increase in balances in the quarter acquired in the spring of 2024. I'm excited to see Norman Bailitz and his team finding success. To kick off the year, Frontier carry brokered funding positions that are now part of our balance sheet. We have a clear disciplined plan to reprice and replace those with core relationship deposits over time. Non interest bearing accounts are at 20.2% of total deposits. Our retail teams are off to a terrific start in 2026, opening record levels of DBAs and executing on the company's goal of of deepening wallet share and delivering exceptional Service. Heading into 2026, we are well positioned to deploy available liquidity and drive growth across our markets. We continue to anticipate mid single digit organic loan growth. The addition of NBC and Frontier add asset generation depth to our footprint. While our community markets continue to provide strong funding opportunities, management and team members are aligned and bought in. I'm genuinely excited about what we'll deliver in 2026 Brad.

Brad Elliot

I take enormous pride in everything this team continues to accomplish. Growing our asset base by more than 40% across two transactions both fully converted and integrated is a remarkable achievement that speaks directly to the caliber of our people. I have never been more confident in what we will build together in 2026. We are committed to empowering our people, serving our customers and communities with excellence and delivering strong, consistent returns for our shareholders. Our board and leadership team are fully aligned and we are ready to keep executing on our mission. Sourcing, negotiating, integrating franchise accretive M&A transactions is a core competency of equity. Our team has significant experience in this area given the number of transactions we've completed and I'm proud to announce that we're consistently achieving results better than what was expected at the time of announcement. This is a testament to the team's hard work and prudent and realistic modeling assumptions. This outperformance allows us to drive enhanced earnings and shorter tangible book value earnbacks. We fully appreciate the importance of tangible book value growth over time as a key metric for shareholders performance and are committed to executing M&A transaction that align with our goals. We're putting the right tools, strategies and people in place to drive both organic and acquisitive growth and I genuinely believe we are setting ourselves up for sustained long term success across the entire footprint. Thank you for joining us today. We're happy to take your questions.

Audra

Thank you. We will now begin the question and answer session. If you have dialed in, I would like to ask a question please. Please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. We'll go first to Jeff Rulis at D.A. davidson.

Jeff Rulis

Thanks. Good morning. Just a question on the acquired loan balance, do you have the Frontier loan balance at acquisition in millions? I know you said 1.3 billion but also at acquisition end at quarter end trying to back into Sounds like some some decent organic growth but if you had those Frontier balances. That'd be great.

Chris Navratil

Yeah Jeff, it was about 1.28 billion in terms of acquired assets pre purchase accounting mark the, the decline period over period excluding that's about $40 million as we talked about yesterday. And Rick, can expand on here is effectively what we saw is some short term optimization decline in the frontier footprint offset by what is positive production everywhere else in the footprint. So really a good outcome for us in our minds in terms of periodic production. But some of those headwinds exist at the beginning of the integration of that frontier footprint.

Jeff Rulis

But maybe put another way, do you have it's, you know it's a combined company as of January 1st but do you have like legacy organic growth that you could also identify or is that difficult to. To carve out?

Chris Navratil

Do you want. Yeah, I mean so. So on the, on the loan side specifically we grew about just under 1% on our, on our non acquired market. So if you take out Oklahoma and you take out Nebraska. So we grew about 1% on a kind of point to point basis. So just under 3% annualized or something like that. Three point something annualized in those legacy markets on the loan side.

Jeff Rulis

Okay, appreciate it. And then maybe a similar question on the non accrual increase, you know I think roughly eight added from Frontier, four from sort of the legacy unit. Maybe if you could put any color on the type of loans that were brought on. And then second piece to that I think Rick, you mentioned, sorry I missed the piece about the. Sounded like there was a past due. Maybe if you could just outline the balance of that one that that was brought on that that sounds like it's got a quick resolution ahead.

Rick Stens

Yeah, it really wasn't a loan. It was, it was kind of our. Well we had one specific market that didn't understand how to get renewals done and manage those during that time from Nebraska. And so those are all correcting themselves or already have been corrected at this point. Jeff. Brad, what was the balance of that, that those loans if you could about $30 million. But it's not one loan. It's about 10 or 15 different relationships or about 30 or 40 relationships. Yeah.

Jeff Rulis

Okay. And then maybe last one if I could the margin. Maybe. Chris, you kind of talked about a 429 Core. Do you know what that core NIM was for the month of March? It sounds like you've got an opportunity to kind of alter Frontier's funding mix a bit and it sounded more leaning upward than not. But do you have a March figure that would Compare to the 429core for the quarter.

Chris Navratil

Yeah, Jeff, March actually compares pretty consistently with that 429 figure. There are still some potential tailwinds as we look into Q2 and beyond as we're working to reprice some of those frontier deposits. But that's been happening throughout the quarter and really accelerating towards the end of the quarter. So we're not seeing that benefit in March. We'll see more of it in April and be beyond the range that's kind of provided in the outlook. You know, I, I have some optimism that we can hit the high end of that range based on some of those dynamics. But I think because of the periodicity of accretion and you know, challenges of continuing to work through a balance sheet, there's, there's risk there as well. So somewhere in that range is fully accomplishable. I think the high end is also accomplishable based on some of those dynamics. But you know, we have to execute on it.

Jeff Rulis

Great, Makes sense. Thanks.

Audra

We'll move next to Adam Kroll at Piper Sandler.

Adam Kroll

Hi, I'm on for Nate Race. Good morning and thanks for taking my questions. Morning. Yeah, so maybe starting on funding costs, you know, with deposit costs rising this quarter with the Frontier acquisition and I know they had a piece of broker deposits, so I guess I'm curious, you know, if you could provide some additional color into repricing opportunities you have on the deposit side from both DD and a non maturity.

Chris Navratil

Yeah, Adam, I think there's an ample amount of repricing capacity. I mean for some color they had about $100 million that did get repriced in Q1 that was at a weighted average cost of 450. So that's an aspect of their cost of funds that again it accelerated towards the end of the quarter that we've been able to reposition into what is comparatively cheaper. You know, even the newly issued broker in the period is about 375. So that's picking up 75 basically, not $100 million. They brought in a relatively higher overall cost of funding base. So we'll continue to see opportunities to reprice. Some of that did have some duration on it. There is some lockout. So we'll continue to have some heavier cost over time, but we're going to continue to see opportunities to bring some of those things down and anticipate being able to do so.

Adam Kroll

Got it. I appreciate the color there. Maybe moving to capital management. You know, it's nice to see the step up in the buyback during the quarter and you've obviously been active on the M and A front with the two deals over the past year. Do you expect to continue to be active on the buyback and you know, are you seeing opportunities on the M and A front as well?

Brad Elliot

So we look at capital utilization all the time. Yes, we continue to look opportunistically at buybacks and we also look and we also think we have plenty of capital for continued M and A and so we've got good capital ratios. We're building capital at a little over $25 million of capital generation quarter. And so we've got good capital generation from the operating company. And so we have lots of different prospects and lots of lots, lots of different opportunities we're talking to on the M and A front and we will still remain active on the if it, if it works on the buyback side.

Adam Kroll

Got it. Thanks for taking my question.

Audra

We'll go next to Matt Olney at Stevens.

Matt Olney

Hey guys, thanks for taking the question. Wanted to ask more about the expense outlook from here and get some updated thoughts around deal cost savings from Frontier. With that conversion now behind us, I'm curious how the cost savings are looking compared to the original expectations and would just love to get some thoughts on when you expect to get the fully loaded cost savings this year.

Chris Navratil

Yeah, so a couple things on that Matt, on the technology side, so the integration as well as some of the people that we maintain through that conversion date, all of those items have been fully taken out of run rate at this point. So so the cost savings on technology and people there are in line with what we expected and we'll start to realize that we started to realize in the back end of the first quarter and we'll fully realize it in the second quarter. I think generally speaking as it relates to the cost saves around this transaction, they were relatively conservative, something 23% ish on expected cost savings and I think our execution will realize that or better as we think into Q2 and beyond. So we anticipate being in line to a little bit ahead of where we originally anticipated as we contemplated the transaction. Okay. And I guess the other part of that is just there was a mention about reinvestments, new producer hires, just maybe an update on kind of what you're seeing thus far, new producer hires and what's in the pipeline. Yeah, so we've hired probably about between Oklahoma City and Omaha and Lincoln, we've probably hired about 10 additional or new bankers. Some are replacements and others are add at that point in time. So all real positive there the Pipeline remains kind of consistent with where it was at the end of the year and so but that number really bodes well for second and third quarter with what that is. So production numbers look really good. We're actually seeing a number of additional projects and things that both Brad and I are getting out to see customers and prospects on things. And so it looks like it's going to be fairly robust opportunities for us. As we kind of mentioned before, pricing always comes into play on this and you know, every once in a while you never count it till it's in. We're not seeing, we do have a couple of crazy competitors on things but for the most part people are I think coming back to a little bit more in line with where we are on pricing. So that's positive.

Matt Olney

Okay, perfect. Thank you guys.

Audra

And we'll take our next question from Damon Del Monte at kbw.

Damon Del Monte

Hey, good morning guys. Hope everybody's doing well. Thanks for taking my questions. I guess first question just kind of probably for Chris on the reserve and the kind of the provision outlook, you know, the Reserve came down 6 basis points Quarter over quarter, you know, with even though there was purchase marks against the acquired loans. So just trying to kind of get a feel for where you're comfortable with where the loan loss reserve can trend over the coming quarters.

Chris Navratil

Yeah, Damon, I'd look at it as being consistent with where it is on a relative to assets basis. You know, as we start to see depletion of those purchase accounting marks and look at it on a relative total position to the portfolio, there may be opportunity or need to build back up to call it 123 type of reserve. But I think in the near term thinking about it as 118 basis points from here plus whatever production is. So my anticipation for need to provide, you know, absent any significant specific reserve items, specific deterioration in credits is that it's going to account for the production in the portfolio. So as we grow the portfolio, so too will we grow the reserve.

Damon Del Monte

Okay, so the 6 to 8 million guidance for 26 for the, for the total provision, you know, if you back out the, the one time, you know the cecal impact on the first quarter, do we kind of just extrapolate the remaining three quarters to fall in between that range?

Chris Navratil

Yeah, that's maybe a little bit less Damon. So I think thinking about it as kind of a million and a half to two run rate depending on growth is a good way to continue to think about it.

Damon Del Monte

Got it. Okay, that's helpful. And then I guess this secondly here or lastly, you know, in the fee income side of things, can you just talk about some of the opportunities to kind of tap into the Frontier franchise and what products and services you guys think have the best opportunity to kind of ramp up some revenues for you guys?

Chris Navratil

Yeah. So first and foremost, Treasury Management, you know, our product in there, we've actually brought in a new head of Treasury Management and we see that as a real opportunity. That wasn't something that was really in the forefront of what they were doing, number one. Number two, they had a decent sized mortgage business. And so we're continuing to see some potential for mortgage fees going forward and we see that across the footprint. So continue to get the team built out and we use that as a product to really for our core customers and for bringing in core customers. We're not really a mortgage shop just to bring in mortgages. And then the third piece of it is on the wealth management side of it. And so we're already seeing some real positive results there on being able to grow with wealth management. And so we're actually looking to add a couple of additional people in our markets. We do really well in the community markets. So in Nebraska, Fall City, Pender, Norfolk and Madison where we are, we see those as real opportunities for growth for us in the future as well.

Damon Del Monte

Great. Thank you very much for the caller. Appreciate it.

Audra

And as a reminder, if you would like to ask a question, press Star one. We'll pause just a moment. And at this time we have no further questions. This concludes today's conference call. Thank you for your participation. You may now disconnect.

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