Equity Bancshares Earnings Call Signals Confident Growth

Equity Bancshares Inc. ((EQBK)) has held its Q4 earnings call. Read on for the main highlights of the call.

Equity Bancshares Projects Confident Growth Despite Near‑Term Margin Pressures

Equity Bancshares’ latest earnings call struck a decidedly confident tone, with management emphasizing substantial strategic progress driven by two major transactions and strong fourth-quarter results. Executives highlighted nearly 50% year-over-year balance sheet growth, improved capital ratios, active share repurchases, and steadily improving credit trends. While they were candid about integration expenses tied to the Frontier acquisition, litigation accruals, and competitive pressures on deposits and loan pricing, the overarching message was that these are manageable headwinds against a backdrop of robust profitability and an ambitious earnings target of more than $5.00 per share in 2026.

Transformational Balance Sheet Growth Through M&A

A central theme of the call was the dramatic balance sheet expansion driven by mergers and acquisitions. Assets climbed from $5.3 billion to $6.4 billion heading into 2025, with the Frontier deal alone adding roughly $1.4 billion and representing nearly 50% growth year-over-year. Management underscored that this is not just growth for growth’s sake: the combined footprint now spans six states and five major metropolitan areas, giving the bank greater scale, diversification, and relevance in its markets. The expanded platform is expected to support both organic loan growth and future M&A, positioning Equity Bancshares as a more competitive regional player.

Earnings Beat and Ambitious EPS Targets

Equity Bancshares delivered results that modestly outpaced expectations and used that momentum to frame an aggressive earnings outlook. Reported net income came in at $22.1 million, or $1.15 per diluted share, with adjusted net income of $23.3 million, or $1.21 per share—both up from the prior quarter’s adjusted $1.17 per share. Management repeatedly pointed to operational leverage and the benefits of recent acquisitions as drivers of the quarter’s outperformance. Looking ahead, they set a clear goal of exceeding $5.00 per share in 2026, signaling confidence that integration, cost saves, and balance sheet growth can collectively offset margin pressure and incremental expenses.

Stronger Capital and Liquidity Support Growth and Buybacks

The bank enters this next phase of growth with notably improved capital and liquidity metrics. Tangible common equity rose to 9.9%, up 23 basis points quarter-over-quarter, while CET1 stood at 13.1% and total capital at 16.3%. At the bank level, tangible common equity reached 10.3%. Management framed these robust ratios as strategic ammunition: they provide ample capacity to support mid-single-digit organic loan growth, ongoing share repurchases, and potential future acquisitions. The strengthened balance sheet is a key part of Equity Bancshares’ argument that it can pursue both offense (growth, M&A) and defense (capital protection, credit quality) simultaneously.

Solid Loan Production and a Healthy Pipeline

Loan production and pipeline activity were portrayed as another pillar of the growth story. Quarterly loan production totaled $220 million—down sequentially but up roughly $100 million versus a year ago—with new originations carrying an attractive average rate of 6.77%. The 75% confidence pipeline stands at $452 million, and line utilization remains around 54%, leaving room for customers to draw more on existing commitments. Management believes this combination positions the bank to deliver mid-single-digit organic loan growth in 2026, even as it remains selective on pricing in a competitive environment.

Net Interest Income Growth and Margin Still Above Guidance

Net interest income (NII) continued to trend higher, benefiting from both organic growth and recent acquisitions. NII reached $63.5 million, up $1.0 million from the prior quarter, and the reported net interest margin improved slightly to 4.47%, an increase of 2 basis points quarter-over-quarter. Executives noted that Frontier is accretive to NII, reflecting the earnings power of the acquired loan book, even though it will weigh on the bank’s overall margin percentage. While the current margin is running above management’s full-year guidance range, the bank leaned on this quarter’s performance as evidence that its balance sheet repositioning strategy is working.

Asset Quality Trends Continue to Improve

Asset quality was a clear bright spot and a key source of management’s confidence. Nonaccrual loans declined to $40.3 million from $48.6 million, a 17% sequential improvement. The combination of loans past due plus nonaccruals fell to 1.53% from 1.55% quarter-over-quarter, and annualized net charge-offs were just 7 basis points for the quarter, down 4 basis points, with year-to-date charge-offs at 6 basis points. These figures suggest that credit costs remain well controlled and provide a cushion as the bank absorbs integration risk and navigates a still-competitive lending environment.

Capital Return via Disciplined Share Repurchases

Alongside its growth and acquisition strategy, Equity Bancshares continued to return capital to shareholders through buybacks. During the quarter, the bank repurchased 172,338 shares at a weighted average price of $41.69. There are still 872,662 shares available under the current board authorization. Management stressed that repurchases will remain disciplined and opportunistic, balanced against the need to preserve capital for organic expansion and potential future deals. This flexible capital plan is intended to support shareholder returns while maintaining the capacity to scale further.

Funding Cost Improvements and Bond Portfolio Repositioning

Funding costs moved in the right direction during the quarter, boosting both NII and margin. The cost of deposits declined by roughly 10 basis points, and the overall cost of funding fell about 12 basis points quarter-over-quarter as the bank executed on its bond portfolio repositioning. These actions helped Equity Bancshares outperform margin expectations versus internal midpoints. Management suggested that, even as headline margin compresses over time, the underlying earnings contribution from lower funding costs and better asset mix should remain supportive of profitability.

Merger-Related Expenses and Integration Headwinds

Management was transparent about the expense and margin implications of the Frontier acquisition. The deal is expected to add $23 million to $24 million of noninterest expense in 2026, while contributing only $2 million to $3 million of noninterest income, making it a meaningful near-term drag on the efficiency ratio. Furthermore, the transaction will be dilutive to reported margin, even though it is accretive to NII dollars. Executives emphasized a targeted 23% cost save from Frontier and framed integration and systems conversion as key execution milestones. In their view, successfully delivering these cost efficiencies is central to hitting the long-term earnings targets.

Rising Adjusted Noninterest Expense Weighs on Efficiency

Beyond merger costs, the underlying expense base ticked higher. Adjusted noninterest expense, excluding M&A and litigation, rose to $44.1 million from $42.9 million quarter-over-quarter, a 2.7% increase. A notable contributor was a $1.2 million rise in provisioning for unfunded commitments, which flows through expenses and partly explains the quarter’s upward drift. Management acknowledged these pressures but suggested that as integration benefits are realized and growth scales, the bank should regain operating leverage over time.

Litigation Accrual Adds to One‑Off Costs

Equity Bancshares also recorded a $1.0 million litigation settlement expense accrual connected to anticipated resolution of overdraft-related suits. While described as manageable, this reserve affects adjusted earnings and highlights an ongoing, though diminishing, risk factor. Management’s commentary implied they are working to put these issues behind the company, suggesting that such charges should not be recurring at the same level going forward.

Intense Competition Squeezes Deposit and Loan Pricing

The competitive backdrop in the bank’s markets remains challenging, especially for deposits and loan pricing. Management reported instances of deliberately letting certain lower-rate business go in order to preserve overall portfolio yields, underscoring a disciplined stance on risk-adjusted returns rather than volume at any price. Deposit gathering continues to require effort despite improvements in account origination. Brokered deposits declined by about $80 million, reflecting a shift toward more stable funding sources, but also highlighting the push-and-pull in maintaining balances in a rate-sensitive environment.

Expected Margin Compression From Current Levels

Although current margin performance is strong, the bank prepared investors for some compression ahead. The reported 4.47% margin this quarter is expected to trend down into a 4.20%–4.35% range for 2026 as Frontier is fully integrated and higher-cost liabilities are repositioned. Management emphasized that this is “modest” pressure in the context of higher NII dollars and growing balance sheet scale. In effect, the bank is trading some percentage margin for absolute earnings growth, a trade-off they believe will be rewarded as EPS climbs.

Loan Payoffs Create Near‑Term Growth Noise

One softer spot in the quarter was the impact of one-time payoff and paydown activity, which weighed on ending loan balances. Management noted that unscheduled payoffs and higher payout activity—similar to volatility seen in the prior year—created some near-term uncertainty around loan growth cadence. While the pipeline remains healthy, these payoffs can mask underlying origination strength in reported period-end numbers. The bank expects this volatility to normalize over time as the larger portfolio and new markets help smooth out such swings.

Forward-Looking Guidance and Strategic Outlook

Looking ahead, Equity Bancshares set out a detailed roadmap that leans on both growth and discipline. Management is targeting more than $5.00 in EPS in 2026, underpinned by a full-year net interest margin in the 4.20%–4.35% range, with the first quarter around 4.25%. Q1 balance expectations imply loans at roughly 80% of earning assets and a loan-to-deposit ratio near 88%, consistent with a conservative yet growth-oriented balance sheet. The Frontier acquisition—bringing in around $1.3 billion in loans and $1.1 billion in deposits—is expected to boost NII even as it trims reported margin and adds $23 million to $24 million in annual noninterest expense against $2 million to $3 million in noninterest income. Management is targeting about 23% cost saves from Frontier, with systems conversion scheduled for mid-February and the bulk of savings expected by the end of the first quarter. Anchoring this outlook are fourth-quarter fundamentals: solid earnings, a 4.47% GAAP margin (about 4.36% on a core basis after purchase accounting effects), strong asset quality, reserve coverage of 1.33%, and elevated capital ratios, all while pursuing mid-single-digit organic loan growth and maintaining flexibility for share repurchases and future M&A.

In sum, Equity Bancshares’ earnings call painted a picture of a bank in transition but firmly on the front foot. Management balanced near-term caution around expenses, integration, and margin compression with a confident long-term view driven by scale, improved capital, and strengthening credit metrics. For investors, the key takeaways are clear: the balance sheet is larger and stronger, profitability is improving, capital is being actively deployed, and leadership is openly aiming for a higher earnings run-rate. If the bank can execute on its integration and cost-save plans while maintaining asset quality, the constructive tone of this call suggests meaningful upside potential in the coming years.