Equity Bank(US:EQBK)2023-11-08 16:00Financial Performance - The net income for the three months ended September 30, 2023, was $12.3 million, compared to $15.2 million for the same period in 2022, reflecting a decrease of approximately 19.1% year-over-year [214]. - The basic earnings per share for the quarter was $0.80, compared to $0.74 in the previous quarter, reflecting an increase of 8.1% [212]. - For the three months ended September 30, 2023, net income allocable to common stockholders was $12.3 million, or $0.80 diluted earnings per share, a decrease of $2.9 million compared to $15.2 million, or $0.93 diluted earnings per share for the same period in 2022 [224]. - For the nine months ended September 30, 2023, net income allocable to common stockholders was $36.1 million, or $2.30 diluted earnings per share, down from $46.1 million, or $2.79 diluted earnings per share for the same period in 2022, representing a decrease of $10.0 million [225]. - Non-interest income for the three months ended September 30, 2023, is $8,735,000, up from $6,950,000 in the previous quarter, indicating a growth of 25.6% [366]. Asset and Liability Management - As of September 30, 2023, the company reported total assets of $4.95 billion, total loans held for investment of $3.24 billion, total deposits of $4.08 billion, and total stockholders' equity of $418.1 million [213]. - Total liabilities decreased to $4.53 billion from $4.68 billion in the previous quarter, indicating a reduction in financial obligations [212]. - The company maintained a Tier 1 Risk Based Capital Ratio of 13.27%, which is above the regulatory minimum, indicating strong capital adequacy [212]. - Total assets as of September 30, 2023, amount to $4,945,267,000, a decrease from $5,094,883,000 as of June 30, 2023 [360]. - The equity to assets ratio as of September 30, 2023, is 8.46%, an increase from 8.21% in the previous quarter [360]. Interest Income and Expense - The net interest income for the quarter was $41.0 million, an increase from $39.4 million in the previous quarter, indicating a growth of 4.0% [212]. - Interest income increased by $16.5 million for the quarter ended September 30, 2023, compared to the same quarter in 2022, with $12.7 million attributed to higher loan yields [234]. - The average yield on loans for the three months ended September 30, 2023, was 6.67%, an increase from 5.09% in the same period of 2022 [229]. - Interest expense rose by $17.4 million due to a general increase in market interest rates and increased borrowing volume, particularly from the Federal Reserve Bank [235]. - The cost of interest-bearing deposits increased from 0.57% in Q3 2022 to 2.40% in Q3 2023, primarily due to the Federal Reserve's rate hikes [235]. Credit Quality and Losses - The provision for credit losses was $1.2 million for the quarter, compared to a reversal of $0.4 million in the same quarter last year, highlighting a shift in credit quality assessment [212]. - The allowance for credit losses at September 30, 2023, was $44.186 million, with total loans outstanding of $3.282 billion, resulting in an allowance to total loans ratio of 1.3% [311]. - Provision for credit losses for the nine months ended September 30, 2023, was $1.2 million, up from $276 thousand in the same period in 2022, with net charge-offs increasing to $2.8 million from $2.1 million [252]. - Nonperforming assets increased to $20,547,000 from $18,248,000 as of December 31, 2022, with a nonperforming assets to total assets ratio of 0.42% [303]. - The company believes the allowance for credit losses is adequate to cover current expected credit losses, but future losses could be substantial [312]. Operational Efficiency - The efficiency ratio for the quarter was 68.83%, slightly improved from 69.45% in the previous quarter, indicating better cost management [212]. - The efficiency ratio for the nine months ended September 30, 2023, was 69.3%, up from 62.6% in the same period in 2022, indicating less efficient resource allocation [279]. - Non-interest expense totaled $34.2 million for the three months ended September 30, 2023, an increase of $2.0 million compared to the same period in 2022, driven by higher salaries, data processing costs, and FDIC insurance [263]. Deposits and Funding - Total deposits as of September 30, 2023, were $4.08 billion, a decrease of $159.6 million, or 3.8%, compared to $4.24 billion at December 31, 2022 [331]. - Non-interest-bearing demand deposits accounted for 22.9% of total deposits at September 30, 2023, down from 25.9% at December 31, 2022 [331]. - Total savings and money market deposits rose to $323.3 million, up from $282.7 million, indicating a growth of 14.4% [335]. - Total time deposits increased by 49.7% to $218.2 million from $145.7 million year-over-year [336]. - Total reciprocal and brokered deposits increased to $618.4 million from $564.0 million, marking a growth of 9.6% [335]. Market Risk and Interest Rate Sensitivity - The company has established a measurement system for monitoring net interest rate sensitivity to manage market risk effectively [368]. - The Asset Liability Committee (ALCO) meets monthly to review interest rate sensitivity and other financial metrics to mitigate risks associated with interest rate fluctuations [370]. - The impact on net interest income for a +300 basis points change in prevailing interest rates is projected to be 7.3% as of September 30, 2023, compared to 5.0% as of December 31, 2022 [378]. - The economic value of equity is expected to decrease by 10.2% with a +300 basis points change in prevailing interest rates as of September 30, 2023 [379]. - The company is in a liability sensitive position, leading to a faster decrease in asset value compared to liabilities as interest rates rise [374].