Equity Bank(EQBK) - 2024 Q1 - Quarterly Results

Financial Highlights Equity Bancshares reported a strong first quarter for 2024, highlighted by record net interest income of $44.2 million and significant net interest margin expansion to 3.75% Q1 2024 Key Financial Results | Metric | Value | Note | | :--- | :--- | :--- | | Net Income | $14.1 million | - | | Diluted EPS (GAAP) | $0.90 | - | | Diluted EPS (Adjusted) | $1.03 | Excludes $1.6 million merger expenses and $1.0 million provisioning | - Completed the all-cash acquisition of Rockhold Bancorp, adding eight locations, $118.7 million in loans, and $349.6 million in deposits. A gain on acquisition of $1.2 million was recorded[2][3] - Net interest income reached an all-time high of $44.2 million for the quarter[3] - Gross loans held-for-investment grew by $149.3 million in the quarter. Excluding the acquisition, organic loan growth was $30.6 million, representing a 3.70% annualized rate[3] - The company repurchased 209,591 shares at a weighted average cost of $32.24, with 790,409 shares remaining available for purchase under the current plan[3] - Asset quality remains strong, with the classified asset ratio at a historically low 6.65% of total risk-based capital and the allowance for credit losses at 1.28% of total loans[3] Financial Performance Analysis This section analyzes key financial performance metrics including record net interest income, credit loss provisions, non-interest income, expenses, and effective tax rates Net Interest Income Net interest income reached a record $44.2 million in Q1 2024, a significant increase from $39.5 million in the previous quarter Net Interest Income and Margin (Q1 2024 vs. Q4 2023) | Metric | Q1 2024 | Q4 2023 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $44.2 million | $39.5 million | +$4.7 million | | Net Interest Margin (NIM) | 3.75% | 3.49% | +26 bps | | Yield on Interest-Earning Assets | 6.09% | 5.69% | +40 bps | | Cost of Interest-Bearing Deposits | 2.77% | 2.58% | +19 bps | - Key drivers for the improved asset yield include the Bank's bond portfolio re-positioning, purchase accounting accretion from the acquisition, and improving loan coupons[5] Provision for Credit Losses The company recorded a provision for credit losses of $1.0 million, an increase from $711 thousand in the prior quarter Credit Loss Provision and Net Charge-offs (Q1 2024 vs. Q4 2023) | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Provision for Credit Losses | $1.0 million | $711 thousand | | Net Charge-offs | $668 thousand | $1.4 million | - The entire provision for the quarter was for establishing reserves on loans acquired in the Rockhold Bancorp acquisition[6] Non-Interest Income Total non-interest income was $11.7 million for Q1 2024, driven by positive resolutions of specific loan assets and a gain on the Rockhold acquisition Non-Interest Income (Q1 2024 vs. Q4 2023 Adjusted) | Period | Non-Interest Income (Reported) | Non-Interest Income (Adjusted) | | :--- | :--- | :--- | | Q1 2024 | $11.7 million | $10.4 million | | Q4 2023 | $(43.4) million | $7.3 million | - Adjusted non-interest income for Q1 2024 excludes a $1.2 million gain on acquisition and a $43 thousand gain on securities transactions, while Q4 2023 adjusted income excludes a $50.7 million loss on securities transactions[7][40] - The increase was primarily driven by a $3.0 million gain on the resolution of specific loan assets and a $1.2 million gain on the acquisition, which was attributable to the improved fair value of Bank of Kirksville's bond portfolio[7][8] Non-Interest Expense Non-interest expense increased to $37.1 million from $35.0 million in the prior quarter, primarily due to the newly acquired Bank of Kirksville and compensation adjustments Non-Interest Expense (Q1 2024 vs. Q4 2023) | Metric | Q1 2024 | Q4 2023 | | :--- | :--- | :--- | | Total Non-Interest Expense | $37.1 million | $35.0 million | | Merger Expenses | $1.6 million | $0.3 million | - The quarter-over-quarter increase was driven by the addition of Bank of Kirksville expenses, annual compensation adjustments, and early-year payroll tax dynamics[9] Income Tax Expense The effective tax rate for Q1 2024 was 20.8%, an increase from the normalized rate of 7.5% in Q4 2023 - The effective tax rate was 20.8% for Q1 2024, an increase from the normalized rate of 7.5% in Q4 2023[10] - The rate increase was caused by a lower benefit from tax credit investments, offset by a tax benefit from the gain on the Rockhold acquisition[10] Balance Sheet and Asset Quality This section details the company's balance sheet growth, including increases in total assets, loans, and deposits, alongside a review of stable asset quality metrics Loans, Total Assets and Funding As of March 31, 2024, total assets increased by 4.1% to $5.20 billion, with significant growth in loans and deposits driven by the Rockhold acquisition Key Balance Sheet Items (as of March 31, 2024) | Metric | Value | Quarterly Change | | :--- | :--- | :--- | | Total Assets | $5.20 billion | +$204.4 million | | Loans Held for Investment | $3.48 billion | +$149.3 million | | Total Deposits | $4.4 billion | +$225.6 million | - The company replaced a matured $140.0 million Federal Reserve Bank borrowing with borrowings from the Federal Home Loan Bank, increasing total FHLB borrowings to $219.9 million[13] Asset Quality Asset quality remained strong and stable as of March 31, 2024, with consistent allowance for credit losses and improved classified asset ratios Asset Quality Ratios (Q1 2024 vs. Q4 2023) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Allowance for Credit Losses / Total Loans | 1.3% | 1.3% | | Nonperforming Assets / Total Assets | 0.5% | 0.5% | | Classified Assets / Regulatory Capital | 6.65% | 7.1% | - Non-accrual loans decreased to $24.2 million from $25.0 million at the end of the prior quarter[14] Capital Management This section reviews the company's capital position, including regulatory ratios and changes in book and tangible capital, alongside details of share repurchase activities Capital Ratios and Position Book capital increased to $456.8 million, while tangible capital decreased due to acquisition-related intangibles, with all regulatory capital ratios remaining strong Company Capital Ratios (Q1 2024 vs. Q4 2023) | Ratio | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Common Equity Tier 1 (CET1) | 11.1% | 11.7% | | Total Capital to Risk-Weighted Assets | 14.7% | 15.5% | | Total Leverage Ratio | 9.1% | 9.5% | - The decrease in tangible capital was primarily due to the addition of $11.5 million in core deposit intangible assets associated with the acquisition[15] Share Repurchase Activity During the first quarter, the company actively repurchased 209,591 shares at a weighted average price of $32.24, with 790,409 shares remaining available - Purchased 209,591 shares at a weighted average cost of $32.24 during Q1 2024[3] - 790,409 shares remain available for purchase under the current repurchase plan[3] Non-GAAP Financial Measures The company utilizes non-GAAP financial measures to supplement GAAP results, providing additional perspectives on operating performance and facilitating peer comparisons - The efficiency ratio is used to understand the expense structure relative to total revenue, excluding non-core items for better peer comparability[19] - Return on average assets before income tax and provision for loan losses is used to demonstrate 'core' operating performance before these specific expenses[20] - Tangible common equity and related measures (like ROATCE) are used to evaluate performance consistently by excluding the impact of intangible assets, whether acquired or internally developed[21] Unaudited Financial Tables This section provides a comprehensive set of unaudited financial tables detailing the company's financial position and performance for Q1 2024 and comparative periods - The report includes the following unaudited financial tables: - Table 1: Quarterly Consolidated Statements of Income - Table 2: Consolidated Balance Sheets - Table 3: Selected Financial Highlights - Table 4: Quarter-To-Date Net Interest Income Analysis - Table 5: Quarter-Over-Quarter Net Interest Income Analysis - Table 6: Non-GAAP Financial Measures[30]