Equity Bank(US:EQBK)2023-10-18 19:56Financial Data and Key Metrics Changes - Net income for Q3 2023 was $12.3 million, or $0.80 per diluted share, compared to $0.74 per diluted share in Q2 2023 [10][38] - Net interest income increased by $1.6 million to $41.0 million, driven by higher yields on interest-earning assets [18][38] - Net interest margin improved to 3.51% from 3.38% in the previous quarter [38] - Non-interest expenses totaled $34.2 million, higher quarter-over-quarter due to one-time incentive compensation reversals [13] Business Line Data and Key Metrics Changes - Loan originations in Q3 totaled $149 million with a weighted average coupon of 8.46%, compared to $153 million at 7.80% in Q2 [43] - Non-interest income adjusted for a loss on repositioning of investments was up $500,000 linked quarter, with a 4% increase in service fee revenue [13] - The average loan size was $2.2 million, with a total loan portfolio of $77 million, representing 2.3% of the total loan portfolio [41] Market Data and Key Metrics Changes - The company experienced a decline in non-brokered deposits by $98 million due to seasonal outflows, particularly in municipality operating accounts [20][47] - The cost of interest-bearing deposits increased by 26 basis points to 2.40% [44] - The company maintained $140 million outstanding at the Federal Reserve's bank term funding program, which reduced margin by 6 basis points [19] Company Strategy and Development Direction - The company is focused on organic growth in both deposits and loans, as well as M&A opportunities [11][24] - Management emphasized the importance of maintaining a disciplined approach to M&A, focusing on value while controlling dilution [24] - The company aims to attract customers through a balanced approach across various lending categories, including small business lending, C&I, and CRE [53] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment, highlighting opportunities for growth despite challenges [11][51] - The company is proactive in managing its portfolio and working with customers to mitigate potential risks [36] - The outlook for Q4 and preliminary view for 2024 includes expectations for continued loan growth and improved asset quality [20][49] Other Important Information - The company reported a provision for credit loss of $1.2 million, with a coverage ratio of 1.35% of loans [39] - Total classified loans were at their lowest level since the company's inception, closing the quarter at $37.3 million [40] - The company is well-capitalized with strong asset quality metrics and a solid balance sheet structure [51] Q&A Session Summary Question: Can you discuss loan growth opportunities in 2024? - Management indicated that all markets are focused on loan growth, with Kansas City, Wichita, and Tulsa being key areas of focus [25] Question: What are your thoughts on excess liquidity impacting margin? - Management acknowledged that excess liquidity has reduced margin but expects to normalize cash positions as conditions change [54][74] Question: How do you view the margin outlook for 2024? - Management expressed some conservatism in margin forecasts due to uncertainties on the liability side of the balance sheet [62] Question: What is the strategy regarding M&A in the current credit environment? - Management remains confident in their underwriting ability and is looking at institutions with good credit for potential acquisitions [78] Question: How do you plan to manage expenses in light of inflation? - Management is working on rationalizing vendor contracts and expects some non-repeating costs to help keep expense growth minimal [66]