Hello and welcome to the Equity Bank Shares 2025 Q3 Earnings Call. My name is Carla and I will be coordinating your call today. During today's presentation, you can register to ask questions by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I would now like to hand you over to the Vice President, Director of Corporate Development and Investor Relations, Brian Katzai, to begin. Please go ahead when you're ready, Brian.

Good morning. Thank you for joining us today for Equity Bank Shares' third quarter earnings call. Before we begin, let me remind you that today's call is being recorded and is available via webcast at investor.equitybank.com, along with our earnings release and presentation materials. Today's presentation contains forward-looking statements which are subject to certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed. Following the presentation, we will allow time for questions and further discussion. Thank you all for joining us. With that, I'd like to turn the call over to our chairman and CEO, Brad Elliott.

Good morning, and thank you for joining Equity Bankshare's earnings call. Joining me today is Rick Sims, our bank CEO, and Chris Navratel, our CFO. I'm excited to take you through one of the busiest, most transformational quarters our company has realized in its history. We kicked off the quarter with the close of our merger with NVC on July 2nd, adding locations throughout Oklahoma, including a new metro market in Oklahoma City and many outstanding other communities in Oklahoma. At close, the merger added $665 million in loans and $808 million in deposits to the legacy equity bank balance sheet. serviced by an excellent team that is motivated to continue to drive growth in our now broader Oklahoma market. The last two weeks of August, we converted NBC onto Equity Bank's core system. We are now operating fully integrated and all of the expenses will be rung out in the third quarter with a few trailing into the fourth quarter as we've now fully integrated that transaction. Following close of NBC, we marketed and closed on a subordinated debt raise, providing $75 million in capital at the holding company to allow the continued execution of our dual growth model. In September, we announced our definitive merger agreement with Frontier Holdings, the parent company of Frontier Bank. The transaction will extend equity bank's footprint into Nebraska, a market we have been working to enter for many years. This adds strong earning assets and an engaged and highly productive team with locations in Omaha, Lincoln, and other nearby communities. Entering the year following our capital raise in December 2024, we had a strategic roadmap to enter both Oklahoma City and Omaha in 2025. Five. We have accomplished our goal via two mergers with like-minded partners that provide ready-built scale to each of these markets. I want to take a minute to thank all the Equity Bank team members that have put the time and effort to position us for success on all of these transactions. Julia Huber is best in class at organizing due diligence, spearheading the process, in driving integration our continued to success in closing these transactions is a credit to Julie and her team Dave pass and Becky winner drive the technology integration and adoption process allowing for near seamless conversions Johnson room and his team of retail operators and ambassadors manual lobbies to assist customers with the transition, and Brian Catsby and Brett Reber work with our regulators to facilitate a timely application process that allows them to be approved in as quick as time as possible. All transactions take committed effort from our organization and our team members for us to continue to shine and be able to execute on our strategies. In addition to all of that, our legacy franchise and team members continue to be there for the communities and customers as we realize non-acquired growth in both loans and deposit portfolios during the period. We closed the quarter with our annual board strategic retreat and left it energized to continue to grow Equity Bank, both in our current footprint that we're operating in and an expanding footprint in Nebraska. The board and management are aligned and confident in our capacity to execute on the opportunities ahead of us. I am proud of all that we have accomplished in the quarter, and I'm excited about all that we have positioned to accomplish as we close 2025 and to move to 2026. I'll pause and hand it over to Chris to walk you through our financial results.

Thank you, Brad. Last night, we reported a net loss of $29.7 million, or $157 for diluted share for the In addition to all the expansionary developments Brad discussed, we also completed a bond portfolio repositioning during the quarter, selling $482 million in investment par value at a realized loss of $53.4 million. The sold assets were yielding 2.2% on average, while the cash flow was reinvested in cash and securities yielding approximately 5%. Impact on expectations for future quarters will be discussed in greater detail later in this call. Adjusting earnings for the pre-tax loss of $53.4 million, as well as costs incurred on M&A of $6.2 million and CECL double-count provisioning of $6.2 million, pre-tax earnings were $28.4 million. Tax affected at 21% yielded net income of $22.4 million, or $117 for diluted share. Net interest income for the period was $62.5 million, up $12.7 million late quarter. Margin for the quarter was $4.45, an improvement of 28 basis points when compared to margin of $4.17 late quarter. Non-interest income, excluding the impact of the portfolio repositioning for the quarter was 8.9 million dollars, up 300,000 from Q2. The increase was driven by improvement in customer service charge line items including deposit services, treasury, debit and credit card, mortgage, and trust and wealth as we integrated the MBC franchise. Notably, non-interest income was not a core contributor of the acquired franchise and end results were in line with expectations. Non-interest expenses for the quarter were $49.1 million. Adjusted to exclude M&A charges, non-interest expenses were 42.9, an increase of 8.3%, reflecting the impact of the NBC acquisition. Non-interest expense as a percentage of average assets improved 22 basis points during the quarter to 2.80%. System conversion was completed in late August, with associated expenses primarily out entering the fourth quarter. Our GAAP net income included a provision for credit loss of $6.2 million. The Day 2 Provisioning, or CECL Double Count, accounted for all of the provisioning. The ending coverage of ACL loans was 1.25%. The ending reserve ratio, inclusive of discounts related to MBC, closed the quarter at 1.36%. The periodic increase in ratio reflects the addition of non-PCB credit marks from MBC. PCE closed the quarter at 9.7%, reflecting the impact of the MBC transaction offset by strong core earnings. With the reissuance of $75 million of sub-debt during the quarter, we closed with total risk-based capital of 16.1% and sufficient cash at the holding company to facilitate the frontier acquisition and more. At the bank level, the TCE ratio closed at 9.9%, benefited both by earnings, exclusive of the cost of repositioning, and improvement in the unrealized loss position on securities portfolio. I'll stop here for a moment and let Rick talk through our asset quality for the quarter.

The addition of NBC's loan portfolio during the quarter added $7 million in non-accrual relationships and $16.7 in classified asset. Total PCD loans acquired were $32.8 million with a fair value mark of $7.5 million or 23%. management is actively working on resolution on these additions and does not anticipate losses in excess of marks not accrual loans close the quarter at forty eight point six million while classified assets close the quarter at eighty two point eight million or twelve point three seven percent of bank regulatory capital excluding additions from NBC not accrual and classified assets declined $1 million and $4.9 million, respectively. Loans past due and non-accrual as a percentage of end-of-period loans declined to 1.55 percent from 1.65 percent linked quarter. Net charge-offs annualized were 10 basis points for the quarter as a percentage of average loans, while year-to-date charge-off annualized were six basis points. ACL coverage is sufficient to absorb more than 10 years of current period annualized losses. Looking ahead, we remain positive on the credit environment and the outlook for the remainder of 2025. Despite some uncertainties in the broader economy, credit quality trends across our portfolio remain stable and below historic levels. Our partnership with NBC has yielded a combined organization with shared disciplined underwriting, strong capital, and reserve levels positioned to navigate any potential headwinds. Chris?

Thanks Rick. As I previously mentioned, margin improved 28 basis points during the quarter to 4.45%. Period results were positively impacted by 13 basis points of expansion and purchase accounting amortization and seven basis points of non-accrual improvement. The remaining eight basis points is attributable to improving asset mix and the bond portfolio repositioning. Normalizing purchase accounting to 12 basis points of margin and backing out non-accrual benefit would yield core margin of 4.35 percent. Cost of interest-bearing liabilities and cost of deposits increased three and five basis points respectively during the quarter as NBC's liabilities were diluted to equities position entering the period. The impact of the FOMC's decision to reduce rates late in the quarter will not have a meaningful impact on margin as the balance sheet remains neutrally positioned for this type of cut. During the quarter, average earning assets increased 16.3% to $5.6 billion. The combination of margin and asset expansion led to an increase in net interest income of $12.7 million, approximately $2 million ahead of the midpoint of our forecast. Comparative outperformance was driven by better than expected purchase accounting and asset quality as well as the mid-period reposition of the bond portfolio and continued positive earning asset remixing. Loans were 76.2% of interest earning assets for the quarter versus 75.8% in the previous quarter. As we look to the fourth quarter, we anticipate margin in a range of 4.4% to 4.5% as additional tailwinds from the investment portfolio repositioning are partially offset by normalization of purchase accounting accretion and the removal of positive non-accrual impacts as a reminder within our outlook we do not include future rate changes though our forecast continues to include the effects of lagging repricing in both our loan and deposit portfolios the outlook slide includes the fourth quarter 2025 exclusive of our announced transaction with Frontier and a full year 2026 inclusive of Frontier Impacts. As we close the quarter, the transaction is progressing through the approval process and we anticipate receiving approvals in the fourth quarter. Depending on the impact of the government shut down on the process, we continue to anticipate closing the transaction in 2025.

Rick?

Thanks Chris. I wanted to start by echoing Brad's comments acknowledging the exceptional efforts of the equity bank team over the past 90 days it's been a transformational quarter and it would not have been possible without the committed efforts of the best community bankers in the business our balance sheet was bolstered by the addition of NBC locations customers and team members in the quarter an acquisition the transaction added 665 million in loan balances and 808 million in deposit balances as I've had the chance to work closely with the teams in Oklahoma City and throughout the state of Oklahoma since the close of the transaction my excitement for the contribution of this market to equity continues to grow there is tremendous opportunity in the communities and tremendous potential in the bankers who are now a meaningful part of the equity bank franchise throughout the footprint our production teams continue to originate loans and relationships at a high level exclusive of NBC we realized modest growth in both the loan and deposit portfolio with the majority of our markets contributing loan production in the quarter was 243 million of 23 percent linked quarters originations came on at an average rate of 7.14 percent representing continued accretion to current coupon loan yield on the portfolio the team continues to focus on growing relationships deepening wallet share and pricing for the value provided which will benefit equity bank into the future in addition to realized production our pipelines continue to grow throughout our banker network positioning the bank to execute on organic growth initiatives as we close out 2025 and look to 2026 as we close the quarter our 75 pipeline is 475 million line utilization was flat for the quarter at approximately 54 percent though unfunded positions rose with the addition of NBC and production in the quarter providing opportunity for increases moving forward total deposits increased approximately 860 million during the quarter excluding 808 million in balances added by NBC and 15 million in brokerage account growth organic deposit growth during the period was approximately 37 million. Non-interest bearing accounts closed the quarter at 22.52% of total deposits, up from 21.56% at the end of Q2. Our retail teams have been busy in 2025, and the first nine months have showed positive trends in gross and net production levels, including net positive DDA account production, though we have a long way to go to meet the aggressive goals we have I look forward to assisting this group in realizing success throughout 2025 and beyond. The addition of NBC and the announced addition of Frontier at asset generation depth to our footprint, while complementary community markets continue to provide funding opportunities. As we closed our annual strategy session in September, management and the board left a line in the expectation for realized growth in the balance sheet and non-interest revenue lines through the remainder of 2025 and into 2026. I look forward to assisting this excellent team in executing. Brad?

I take a great deal of pride in all that the equity team has accomplished in 2025. We enter the year with capital to grow and an expectation that we can deploy it. As we close the third quarter and we look to the end of the year. We will have leveraged that trust to grow the balance sheet by approximately 40% while positioning the company to earn $5 per share in 2026. I am excited to lead this organization as we work to empower our employees, our customers, and our communities while integrating a strong return for our shareholders. managers. Management and the board are aligned as we continue to execute on our mission throughout our growing footprint. Thank you for joining the call, and we're happy to take your questions at this time.

Thank you. We will now begin the question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure your devices are muted locally. We'll make a quick pause here for the questions to be registered. And our first question comes from Terry McEnvoy with Stevens.

Hi, good morning, everybody. Maybe just start with the deposit question.

Could you just talk about your pricing strategy, kind of actions taken before and then after the Fed rate cut last month to cut deposit it costs and maybe has the market moved uh moved along with you yeah i'll touch on it quickly terry and then rick might add some additional color uh in terms of pricing strategy we've been relatively consistent as we look at the rate cuts since the the starting of the rate cut cycle in terms of being able to take the higher end of our deposit rates and consistently bring them down in line with the moves on the FOMC rates. So as the most recent cut came into place, we implemented the same strategy and today haven't seen any meaningful shifts from it. On a competition basis, we haven't seen any meaningful outliers to competition at this point. Really consistent trends in terms of what they're doing relative to what we're doing. So positive outcomes there is related to costs moving forward.

And I don't think I have anything to add to that terry we're not seeing we're able to get those costs out and we're not really seeing a backlash okay thanks for that and then as a follow-up could you just be run through business sentiment in your operating operating footprint and how that's kind of captured or incorporated into your outlook for loan growth yeah so we look at that pretty regularly from our from our team i get feedback from the markets, and right now things look pretty strong. You know, we're not really seeing impacts or much of a, you know, obviously tariffs continue to be a big question that people ask. We're just not really seeing that being a problem. They seem to be able to be absorbed, and a lot of our businesses really don't seem to have a lot of impact because of the local nature of it.

So we look at that on a regular basis, and we're still really fairly, and what we're seeing fairly bullish on on what the market looks like great thanks for taking my questions thank you the next question comes from jeff really cda davidson thanks good morning uh question on the on the deposit side as well the i thought you mentioned that the lift in deposit cost was some of that uh lean quarter was that due to nbc uh not so much um just competition increasing that was more acquired lift?

Yeah, Jeff, the increased period over period is entirely attributable to the liabilities brought on.

Okay, and then also on the loan front, it looks like, you know, based on averages, kind of a mid-single-digit period, and, you know, 26 over 25 kind of loan growth expectation, and just wanted to kind of dig into that a little bit. Is that, are you thinking that maybe payoff activity that's been a little bit of a near-term headwind that subsides a little bit or or is that given the production and the pipelines that you think the clip of of growth could could kind of pick up into that big single digit range just trying to unpack the expectations for payoff activity if that's in that guide so so a couple things on that jeff so when we look at it we look at and kind of uh obviously the amount of production so the production we're getting better at being consistent and having having that at a higher number so when you look at over the last three years kind of on a on a same banker by banker basis we're just high we're doing more

production this year than we've done in either of the last two years and we can we see that continuing to move so that's that's one factor then you're adding in uh oklahoma city and we'll next year be adding in in Omaha. Those are two markets in which you're going to see strong, likely to see strong production in that. So that's going to help out. On the payoff side, in 2023 and in 2024, we had amortization payoffs, paydowns of around 15 or 16 percent in each of those years from a beginning balance. So far this year, we're on pace to be around 23 3% on an annualized basis. So that's obviously an uptick. Historically, you look at it, we kind of think around in that upper teens, 18 to 20% is what payoffs and paydowns should be. So likely there's a scenario in there next year where we kind of bounce back a little bit to that lower level.

So you put all those things together and that gives us confidence in that ability to have growth next year uh that's great detail thanks um maybe just one last one on the on the credit side you know the the kind of core legacy balance is coming down on on problem loans encouraging and then in your commentary it kind of sounded like if anything you know maybe some broader economic um you know watching things but i guess from from your end of things if you're looking at your portfolio areas of strain you know it sounds pretty contained but where you would point to that

that maybe you continue to watch for potential issues if anything um across the portfolio we're watching all areas closely we're not seeing a lot of strain in any areas we talked about qsrs we don't have a lot of uh qsr restaurant exposure as a percentage of our portfolio but you know the if you look nationally the food industry is tight it's really hard for them to expand their ability to collect more and they can't cut costs because labor costs are still high and food costs are still high that's an area I think the consumer we're watching the consumer we don't have a big consumer direct exposure but we all have an indirect exposure to consumer so you know I just think the consumer has to be getting tighter and tighter all the time um which has to at some point has to lead to something um i don't know what that is but it has to lead to something agriculture you know our our ag guys we're watching those guys pretty close we have real low loan to leverage on those uh the frontier bank credits up there are really well structured and good and so we're not looking for a lot of issues on those they're going to have really good crops this year uh although price isn't great uh but you know i just think inflation is bigger part of this economy than people are talking about and i think where those where inflation hits people is where you're going to have exposure eventually we're going to have a bubble pop i i still don't see that bubble yet okay thanks brad i'll step back the next question comes from natan race with piper sentler hi guys uh good morning thank you for taking the questions um i appreciate the loan production um specifics in the court but just curious you know what

early indications you're seeing out of the team at mbc in terms of how they're contributing to you know loan growth these days in the third quarter and how they're kind of maybe taking advantage of the larger hold limits and extended products that that equity brings to the table yeah so just a couple things in there when we for instance when we talk about pipeline right now we haven't put them into our pipeline so that's that's all positive i want to just make sure we're clear on that and then we're just really starting uh that process i mean having great costs over down uh has really really helped because we're seeing uh we're able to make credit decisions pretty quick down there so i think what what we're seeing is a lot of their really, they've got some really great clientele down there and they are already taking advantage of the opportunity for us to do larger holds. They have a fantastic footprint of million dollar and under loans, two million dollar and under loans. It's really granular, but some of those are real strong borrowers and so we are, and just last week we were with a number of them and so we've already gotten a couple of requests. Can you do can you do a five million dollar deal for us? Can you do a ten million dollar deal? So we're you know, it's anecdotal at this point in time, but we're really seeing some some Some of them taking advantage of that in addition to that We also added a few bankers and this is something that we'll be continuing to do as we as we bring the Frontier online as well in Omaha. There's opportunity for growth So we're adding more bankers just like we did in Oklahoma City and and taking full advantage of that the robustness of those markets. So, you know, so far, again, it's anecdotally really positive, really positive opportunities and outcomes for us.

Okay, great. That's a really helpful caller. And then question for Chris on the margin guidance for next year. You know, obviously implies a step down from 4Q, but just curious, as you look at some of the offsets to, you know, some variable and floating rate loans, repricing lower, following additional presumable Fed cuts, I was hoping you could just kind of expand on some of the inherent levers that you guys have to mitigate some of that potential loan yield compression and, you know, just what the opportunity set looks like to improve the funding mix and cost of Frontier, which I think has run above equity historically.

Yeah, good questions, Nate. In terms of the forward-looking net interest margin compression, all of that's a function of the impact of Frontier relative to where Equity Bank is. So as I mentioned in the comments, there's not factored in reducing costs and associated impacts or reducing marked interest rates and associated impacts on Equity Bank core margin. So that declines just attributable to the margin being brought on by the Frontier Group post-purchase accounting adjustments. In terms of ability to address declining interest rates in the environment and how the balance sheet will operate, a couple of things I'd point out. One is on the liability side, price is above two percent today. We got there's three billion dollars plus on our balance sheet today, currently costing us above that two percent Mendoza line. At three percent it's 2.5, at three and a half plus 2.2 billion dollars. On the asset side in terms of repricing through the end of 2026, we have 425 million dollars of loan repricing that's currently on the books sub prime rate. So there's room to, some of it will come down, some of it will potentially move up, there's room to maintain kind of relative neutrality there. As the Fed makes modest decisions around interest rates that the structure of the balance sheet will allow for Nate I think control and consistency and margin figures. So there's quite a few levers in that mix that we can obviously pull as we as we begin to kind of pull downs on the FOMC side of things. In terms of doing or improving the mix at Frontier specifically, as we bring them on we'll have a balance sheet that has some excess cash, that has some capacity to to pivot and close out of what are the highest costing aspects of their cost of funding base. And then as we look to grow in Omaha, I think we're excited about the opportunity that there is to continue to expand franchise around the markets that we're acquiring there, as well as continue to grow in our legacy core markets to be able to drive some repositioning of funding and as we see some maturities and we see some roll off in the nbc footprint or not the nbc but the frontier footprint replacing them with with those alternative lower cost core structures okay that's super helpful thanks for all that chris and i'm sorry can you also remind us if you have any floors that would become impacted you know, based on the number of future Fed cuts within the floating rate portfolio? Yeah, we do have floors built into many of our loans. The actual floor rate being triggered, there's quite a bit of gap in terms of when we would actually start to hit them. So the majority have 200 basis points plus of capacity to be cut before they're going to meaningfully hit those floors driving uh pre-payment so um there's still a question on that but there are floors that are in place at a level um after after a moderate cuts for me okay great i appreciate all the color thanks guys just as a reminder to ask a question please press star followed by one on your telephone keypad our next question comes from damon dalmonte with kbw hey good morning guys

uh thanks for taking my questions um just first question on the outlook for 26 and the the range for provision um chris does that include like the day two cecil expectation or is that what you expect on a like an operating basis that's just reflective of an operating basis provision damon so it does not exclude it doesn't include the double count okay and so that seems to be a bit higher than kind of where you guys have been tracking recent more recently um any any color kind of behind that there's no specific drivers i would say that um you know we think there's an additive risk it's really just conservatism i think as we look forward as it relates to provisioning okay great um and then uh with regards to like the securities portfolio this quarter i think it it's down to about 16 a little bit over 16 percent of of average earning assets which is, you know, lower than where it's tracked the first half of the year, which was closer to like 20, 21 percent. How do you kind of, when you look over the next few quarters here, where do you kind of see that ratio shaking out? Do you think it goes back towards the 20, or do you kind of have it more in the mid-teen range?

Yeah, David, I think it'll settle at a lower than 20 percent position with the additions of, with the expected addition of Frontier and the addition of NBC, that that ratio is going to kind of inherently move down based on the combination they brought over. But the relative maintenance of kind of that mid to high team position will continue because there's liquidity and pledging needs where that portfolio is going to need to continue to maintain it at kind of that relative level.

So I would look for it to make it closer to where it is versus expanding back to where it was got it okay great uh everything else has been asked and answered so thank you thank you and the next question comes from brett roberton with host group hey guys good morning um wanted to go back to payoffs for a second um on loans and you guys gave the number for payoffs this year versus historical and i'm just curious you're thinking about payoffs going forward, how does the recent movement of the intermediate to longer end curve, how do you sort of factor that into your thoughts on a possible cessation or slowing of loan payoffs?

Yeah, I mean, I think as it comes down a little bit, you know, kind of perhaps, you know, I actually don't, as we've been looking at, I don't think that we really think that there's going to be having too much impact on that we've as I've kind of looked at it again it's more of when projects are being completed that we're seeing some of those taking it to the permanent market or having sales that's again what we tend to see we don't tend to see a lot of of our customers that that all of a sudden decide that they're going to change it if there's a if there's a massive change in the rates you know then that can happen but right now we're

not seeing you know it's not a hundred basis point 150 basis point movement that would get them you know kind of out of bed to make the change so I just don't I just don't see that necessarily being a big driver either to slow it or to speed it up with those rate movements right now okay we had or I can tell you some of them are driven by kind of we can't go into too much detail from a customer information but driven by kind of a weird situation that happened with one of our relationships from a death standpoint and so that drove a lot of movement from a relationship and related relationships that they the estate needed to just clear it out so we aren't going to see that again ever probably so So that drove a big chunk of payoffs this quarter.

Yeah, Brett, that's going to be positive in terms of declining rates and sentiment is we do still carry consumer real estate, you know, half a billion dollars of residential real estate loans that have relatively low coupons. In a world of improving sentiment on the consumer side, you'll see some increased prepayment there, which will actually have a positive impact on margin kind of regardless of how to redeploy. So some opportunity will come with that declining rate and sentiment as well.

Okay, that's helpful. And then, Brad, I wanted just to get, if you could, the outlook from an M&A perspective and just how you think about the changing landscape and what that might mean for your strategy relative to pricing, you know, maybe earnback periods are going to be lower, or maybe you're going to be able to buy bigger, you know, better banks relative to historical from a profitability perspective. You know, just wanted to get maybe your thoughts on how you see the environment for you guys over the next year.

Yeah, I don't think the environment's changed much in the last year. I think there's still a lot of opportunities there, a lot of conversations. As we look at these opportunities, there's ones that are going to garner better pricing and there's ones that are going to not garner that pricing. So we have a whole bucket and we don't stratify them and say, we like this one more than that one. We look strategically, do they fit? How do we integrate them? What's the timing of them? And so we still have lots of conversations going on with opportunities and we'll continue to be selective from the standpoint that it has to fit our earn-back model and our strategy.

Okay. Great. Appreciate all the color guys.

Just as a final reminder, if you'd like to ask a question, please press star fellow 1 on your telephone keypad. It's star 1 on your telephone keypad to ask a question. And as we have no further questions in the queue, this does conclude today's Equity Bank Share earnings call. Thank you everyone for joining today's call. Have a great day and you may not disconnect.