EQUITY BANCSHARES INC Q4 FY2024 earnings call

• Record earnings per share of $4.04, tangible book value per share growth of $4.70 or 18.5%, and successful $87 million common stock capital raise.
• Rick Sems reset organic growth engine, Julie Huber completed two whole bank acquisitions within 75 days, Brett Reber's credit team resolved legacy credits benefiting bottom-line by over $10 million.
• Chris Navratil discussed net interest income improvement, margin dynamics, non-interest income/expenses, provision for credit loss, and capital position.
• Krzysztof Slupkowski talked about asset quality, including non-accrual loans, nonperforming assets, classified loans, delinquency, and credit outlook.
• Rick Sems highlighted loan and deposit portfolio growth, discipline in loan coupon rates, loan production trend reversal, and return of Greg Kossover for capital market strategy.

Net income was $17 million or $1.04 per diluted share. Net interest income improved to $49.5 million from $46 million in the quarter, driving net interest margin to 4.17% from 3.87% linked quarter. Non-interest income was in line with outlook. Non-interest expenses, adjusted for one-time items, were $37.7 million. Provision for credit loss was $98,000. Capital increased $88.9 million to $593 million, with tangible equity ratio at 9.95%. Loan portfolio was $3.5 billion and deposit portfolio was $4.4 billion, both up 5% year-over-year. Loan portfolio contributed significantly to revenue, with deposit portfolio also a key component.

• Forecast margin between 3.95% and 4.05% in Q1 2025, with average earning assets between $4.75 billion and $4.85 billion.
• Provision for credit loss forecasted at approximately 12 basis points to average loans.
• Anticipate return to loan production growth in 2025 with mid to high single-digit expansion in organic growth.

• Historical challenging interest rate environment could impact margin and earnings.
• Potential economic challenges requiring reserves, though no specific concerns in operating markets yet.
• Granular quick service restaurants loan portfolio with one large credit classified as substandard, but with a plan to improve the credit's status.

Q: Looking at the margin going forward is the preference going to be for more or less rate cuts or any changes in rate sensitivity there?

A: No changes in terms of sensitivity as compared to recent performance; positioned neutral regardless of rate changes.

Q: On the credit front, do you have the total percent of loans to quick service restaurants?

A: Less than 3% of the loan portfolio; granular with diversification between borrowers and brands.

Q: Discuss what was behind the change in the 2025 expense and fee income outlook relative to the initial outlook that you talked about in October?

A: Fee income expansion due to data processing and people initiatives; fee income run rate at $8-9 million quarterly.

Q: Margin guide, conservatism baked in?

A: Conservatism due to purchase accounting, fee income volatility, and short-term headwinds from loan repricing.

Q: Capital market strategy, size of loans and retention vs partner out?

A: Lead bank on core customer loans, retaining good portion, not competing in large deal class.

Q: Spot margin for December?

A: Adjusted margin at 4.06% in December.