Equity Bank(US:EQBK)2020-10-29 20:56Financial Performance - The company reported a net loss of $90.4 million for the three-month period ended September 30, 2020, compared to a net income of $10.4 million for the same period in 2019[201]. - For the three months ended September 30, 2020, the net loss was $90.4 million, a decrease of $100.8 million compared to a net income of $10.4 million for the same period in 2019[224]. - For the nine months ended September 30, 2020, the net loss was $87.5 million, a decrease of $103.0 million compared to a net income of $15.6 million for the same period in 2019[224]. - Non-interest expense increased by $106.6 million in the three months ended September 30, 2020, primarily due to a $104.8 million charge to goodwill impairment[224]. - The company recorded a goodwill impairment charge of $104.8 million for the quarter, contributing to the net loss[204]. Assets and Liabilities - As of September 30, 2020, the company had consolidated total assets of $3.87 billion, total loans held for investment of $2.69 billion, total deposits of $3.13 billion, and total stockholders' equity of $402.2 million[201]. - The company's total liabilities were $3.46 billion, with total stockholders' equity at $402.2 million[204]. - Total assets as of September 30, 2020, were $4,029,618 thousand, an increase from $3,994,626 thousand in 2019[231]. - Total loans held for investment increased to $2,725,713 thousand, a rise of $169,061 thousand or 6.6% from $2,556,652 thousand[284]. - The allowance for loan losses reached $34.1 million, or 1.25% of total loans, significantly up from $12.2 million, or 0.48% of total loans, at December 31, 2019[316]. Loan Performance - The provision for loan losses was $815,000 for the quarter, significantly lower than $12.5 million in the previous quarter[204]. - The allowance for loan losses is significantly impacted by changes in economic conditions due to COVID-19, with potential for further increases in required allowances if conditions worsen[210]. - The company had nine non-performing loan relationships totaling $41.3 million with outstanding balances exceeding $1.0 million as of September 30, 2020[309]. - Nonaccrual loans increased to $52.7 million as of September 30, 2020, compared to $38.4 million at December 31, 2019[307]. - Total nonperforming assets rose to $61.7 million, representing 1.60% of total assets, up from 1.19% at the end of 2019[307]. Deposits - Total deposits increased to $3.13 billion, up from $2.96 billion in the previous year[204]. - Non-interest-bearing demand deposits increased to $693.97 million, representing 22.1% of total deposits, up from 15.7% at December 31, 2019[346]. - Interest-bearing demand deposits rose to $870.40 million, accounting for 27.8% of total deposits, compared to 23.0% in the previous year[346]. - Time deposits fell to $623.34 million, representing 19.9% of total deposits, down from 27.2%[346]. Interest Income and Expenses - Net interest income for the quarter was $32.1 million, a slight decrease from $32.4 million in the previous quarter[204]. - The net interest margin for the three months ended September 30, 2020, was 3.47%, compared to 3.42% for the same period in 2019[228]. - The average outstanding balance of total loans for the three months ended September 30, 2020, was $2.76 billion, with a total interest income of $32.3 million[228]. - The cost of interest-bearing deposits decreased by 106 basis points from 1.56% to 0.50%, contributing to a total cost of interest-bearing liabilities that fell to 0.70% from 1.69%[229]. - The impact of loan fees on net interest income was $2.5 million for the three months ended September 30, 2020, compared to $1.3 million for the same period in 2019[229]. COVID-19 Response - The company has 63 loans totaling $40.2 million that have been granted a payment deferral as part of its COVID-19 response, with deferrals lasting either 90 or 180 days[215]. - The company continues to monitor the safety of staff and has introduced temporary changes to assist customers facing financial hardship due to COVID-19[221]. - The company has implemented a modified working strategy emphasizing social distancing and remote work to ensure business continuity during the pandemic[214]. - The company’s interest and fee income could be reduced due to COVID-19, with potential reversals of accrued interest income if credit losses on deferred payments emerge[210]. Capital and Ratios - The Tier 1 Risk Based Capital Ratio was 13.32%, indicating a strong capital position[205]. - The efficiency ratio was 67.4% for the three months ended September 30, 2020, compared with 63.6% for the same period in 2019, indicating increased non-interest expenses[270]. - The ratio of tangible common equity to tangible assets was 9.23% as of September 30, 2020, up from 8.00% for June 30, 2020[380]. - Return on average tangible common equity (ROATCE) for the period was 12.01%, compared to 3.03% for June 30, 2020, indicating significant improvement in earnings quality[384]. Market Risk Management - The primary component of market risk for the company is interest rate volatility, which affects net interest income (NII) and economic value of equity (EVE) due to fluctuations in interest rates[390]. - The Asset Liability Committee (ALCO) manages interest rate risk, meeting monthly to review the sensitivity of assets and liabilities to interest rate changes and other financial metrics[392]. - ALCO employs simulation analysis to monitor the pricing and maturity of assets and liabilities, incorporating various assumptions to assess the potential impact on NII and EVE[393]. - The company does not have material exposure to leveraged derivatives or foreign exchange risks, focusing instead on managing interest rate risk through its balance sheet structure[391].