Equity Bancshares, Inc. Class A Aktie

Hello, everyone. Thank you for joining us, and welcome to the merger announcement call for Equity Bancshares, Inc. [Operator Instructions]

I will now hand the conference over to Luke Pfeifer, Director of FP&A and Investor Relations. Luke, please go ahead.

Welcome, everyone, and thank you for joining Equity Bancshares Third Quarter Earnings Call. A quick note before we begin. 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. After the presentation, we'll open the floor up for questions and discussion, a conversation we look forward to.

With that, let me turn the call over to our Chairman and CEO, Brad Elliott.

Good morning, everyone, and thank you for joining us. Joining me today is Rick Sems, our bank's CEO; and Chris Navratil, our CFO. Our third quarter shows what happens when a larger franchise starts to work together. Net income was $26.8 million or $1.29 per diluted share. Core earnings was $29 million or $1.40 per share, and our core ROTCE was 16.5%. Pretax pre-provision earnings were $36.9 million, the highest since we combined the three companies together, and our efficiency ratio was 54%.

The story of the quarter is organic loan growth. This improvement is something that we have focused on for the last several years. Loans in our legacy markets grew at an annualized rate of nearly 12%. Production was the largest in our history. And for the first time since closing the acquisition, total loan balances increased during the quarter.

Under Rick's leadership, Mark Parman, Justin Harris, Greg Kossover, Craig Dunn and their teams have continued to make sales calls, cultivated relationships and emphasize value creation for our customers on both lending and the deposit side. The results in the quarter reflect the effort and confirm the ability of our franchise to grow the balance sheet organically.

Remaining focused on technology initiatives, finding ways to automate processes, enhancing lead generation and expanding the services our customers rely on provides opportunity to add operating leverage and enhance shareholder returns as the balance sheet grows. I continue to be excited about the emerging technology will do in our industry and what it will do in our bank as we continue to pursue all that it offers.

The funding market has tightened over the quarter as we have seen migration within both our legacy and acquired footprints. Declines are concentrated in large rate-sensitive customers, including public funds. While our retail and treasury teams continue to grow relationships, full-service relationships, which start with deposits are the focus of our teams, and that will never change.

We have strong strategies to deal with the pricing challenges that come during these cycles in our industry. Our branch network during these periods is the strength of Equity, and we are excited to operate during these periods as we think we have a competitive advantage.

Mergers create financial statement noise, but strategically adding core deposits and expanding markets to the Equity franchise is core to what we do. Execution on this strategy will provide opportunity to continue the success realized in the quarter. As you know, on September 3, we announced our agreement to merge Lincoln Bancorp, the holding company of Lincoln Savings Bank, headquartered in Reinbeck, Iowa into Equity. Lincoln has served the Iowa community since 1902 and operates 16 locations across Central and Northeast Iowa. The transaction gives us a meaningful presence in the Des Moines and Waterloo Cedar Falls area and a strong in-market deposit franchise. It is financially attractive and builds on the disciplined approach of our 15 prior transactions since 2015. Pro forma will be approximately $9.1 billion as a company. We are on track to close Lincoln in the fourth quarter and momentum is building. We anticipate Lincoln will convert on to Equity systems in the second quarter of 2027. We do not plan to close or consolidate any branches, which protects the customer relationships that makes this franchise so valuable.

Closing on time lets us capture cost savings and earnings accretion as early as possible. Lincoln brings exceptional banking talent, deep relationships and strong communities to the consolidated franchise. Under the continued leadership of their commercial and retail teams, we are excited for what this strategic combination will contribute to our growing company. I'm excited about the quarter and the trajectory of Equity Bank.

Let me turn this over to Rick at this time.

Thanks, Brad. This quarter was about organic growth and the numbers show it. Total loans grew $39 million to $5.44 billion, our first quarterly increase since the acquisitions closed. In our legacy markets, balances grew $106 million or 2.9% to $3.5 billion. That is nearly 12% annualized. Within our acquired markets, we continue to see period-over-period decline in balances, although it was slowed as production improved by 55% as our teams continue to find traction post integration into Equity's processes.

Production across the bank reached a new high. We closed $379 million in loans at an average rate of 6.9%, up $64 million or 20% from last quarter and up $136 million or 56% from a year ago. Our legacy markets produced $279 million of that, up 11% from last quarter. Specifically, I would like to note Kansas City under the leadership of Jeff Keyes, Wichita under the leadership of Harrison Helms, Western Missouri under the leadership of Blake Moreland, Tulsa under the leadership of Ryan Morris and Western Kansas under the leadership of Levi Getz for the production and balances they were able to generate this quarter. Looking forward, our 75% weighted pipeline stands at $534 million, up 27% from last quarter, and line utilization was at 55.3%. We have hired 13 bankers year-to-date across Oklahoma City, Omaha, Lincoln, Wichita and Des Moines, and those teams are still ramping up.

Total deposits declined $136 million or 2.2% to $6.17 billion. In our legacy markets, deposits were down $102 million. Excluding public funds, which declined due to pricing pressure and seasonal payments, balances in legacy markets were effectively flat on the quarter and up 3.6% from a year ago. Average deposit balances for the period were flat. Noninterest-bearing deposits were 18.7% of total deposits, down from 20.2% in the first quarter. Rebuilding that mix and replacing brokered funding with core relationship deposits over time is a priority for our retail and treasury teams.

On accounts, our legacy markets produced 6,269 accounts in the quarter, up 22% over same quarter last year. In addition, digital active users reached almost 79,000, up 10% from a year ago. 759 business accounts were opened in the quarter, which is an area of focus with the average balance per business account growing nearly 4%. Fee income momentum continued. Treasury fees grew 4% on the quarter and 11% on the year. We are just getting started there. Continued momentum from trust and wealth and mortgage banking provided additional benefit.

On credit, the provision was $1.7 million and the allowance stands at 1.18% of loans. Net charge-offs were $2.1 million or 15 basis points annualized, up from 12 basis points last quarter. Nonperforming assets were 1% of total assets. Nonaccrual loans were $69 million. Classified assets to regulatory capital were 10.42%, down 140 basis points in the quarter. We remain comfortable with the overall credit posture of the portfolio.

On Lincoln, integration planning is well underway. Local leadership and decision-making will stay in place as we welcome their teammates, customers and communities. We now operate in seven growing metro markets, we believe the best in the Midwest. And with Lincoln, we add density in Des Moines and now enter Waterloo Cedar Falls as well as other surrounding community markets, which gives us opportunity for future growth.

I'll now turn it over to Chris.

Thanks, Rick. Good morning. Net income for the quarter was $26.8 million or $1.29 per diluted share. Excluding M&A expenses of $1.0 million, intangible amortization of $1.8 million and securities gains, core net income was $29.0 million or $1.40 per share, in line with last quarter. Core return on average tangible common equity was 16.5%. Net interest income was $72.8 million, down $1 million from the second quarter. The periodic decline was driven by increasing costs within the deposit portfolio as well as declining yield on interest-earning assets. Total cost of deposits moved up 7 basis points on a flat average balance.

As both Brad and Rick mentioned, the market tightened for deposits as we saw the short end of the curve rise. Investment yield declined as excess discount realization from the previous quarter did not recur. Loan coupon yields declined 5 basis points. Net interest margin was 4.2%, down 16 basis points, affected by the same drivers as net interest income as well as composition dynamics. Average earning assets increased to $6.87 billion from $6.80 billion, driven by cash and securities, which were funded by expanded borrowings. The impact of the growth is, absent other changes, accretive to income and dilutive to margin. Year-to-date margin has averaged approximately 4.30%.

Looking to the fourth quarter, excluding Lincoln, we expect margin to return to the 4.25% to 4.35% range. We entered the quarter with $50 million in loan balances in excess of the average for the third quarter. The FOMC's decision to raise interest rates in September will provide a near-term benefit as contractual earning asset balances are repriced, 14% of the loan portfolio reprices daily and 22% monthly. New production is coming on at 6.91%. The spot coupon on the loan portfolio is up 8 basis points to 6.48%, while production and repricing will continue to be accretive to the book.

On the other side of the balance sheet, as forward rate curves continue to indicate near-term rate rise, competition is expected to continue. As Rick indicated, we are committed to continue driving deposit growth and relationship expansion, but the potential for headwinds is evident.

Noninterest income was $10.8 million compared to $10.3 million of core noninterest income last quarter. That is an increase of $0.5 million and noninterest income represented 12.9% of total revenue, up from 11.2%. Debit and credit card, trust and wealth management and treasury all grew. We expect fourth quarter noninterest income, exclusive of the impact of Lincoln between $10 million and $11 million. Noninterest expense was $47.7 million. Excluding $1 million of merger costs, expenses were $46.7 million, flat with the second quarter. The efficiency ratio was 54%. We expect fourth quarter noninterest expense exclusive of the impact of Lincoln between $47 million and $48 million. Provision expense was $1.7 million and the allowance for credit losses was 1.18% of loans, effectively flat to the previous quarter. The allowance covers 7.7 years of current period annualized charge-offs. We continue to expect a provision run rate of roughly $1.5 million to $2 million per quarter, depending on loan growth and charge-off levels.

Capital remains strong. TCE closed the quarter at 9.1%, up 3 basis points in the period, and tangible book value per share was $32.30 compared to $33.45. The decline in per share value reflects a $35 million negative adjustment to AOCI as rates rose during the period. Excluding AOCI, tangible book value per share grew $1.19 or roughly 3.6%. CET1 was 12.15% and total risk-based capital was 14.94%. Capital generation was approximately $21 million for the quarter.

During the period, we announced a 22% increase in our dividend to $0.22 per share. Our repurchase plan remains in place, though it is currently paused as we work to finalize the Lincoln transaction. At close, we expect pro forma TCE to total assets of approximately 8.5% and total risk-based capital of approximately 13.4%. As Brad and Rick mentioned, the Lincoln merger is continuing to progress as anticipated. As we expect a late fourth quarter close, impact of the transaction has been excluded from our forecast figures. No changes to previously announced expectations have been identified.

I'll turn it back to Brad for closing remarks.

Thank you, Chris. Now let's step forward and let's talk a little bit about 2027. We ended the quarter at $7.6 billion in assets. With Lincoln, we expect to be $9.1 billion as a company.

Over the past year, we built a stronger franchise. In 2027, we plan to show what that franchise can do, and it comes down to four things: Franchise growth. Our legacy markets grew loans at nearly 12% annualized and production was a record $379 million. The Lincoln and Omaha teams, that's Lincoln, Nebraska, we hired are building pipelines in markets we were not present in a year ago. As the transition from our recent acquisition works through the balance sheet, that growth shows up in total balances. And this quarter, we saw the first signs that we are able to grow as an organization organically. Second, Iowa. Lincoln Savings Bank contributes excellent bankers, strong communities and additional scale to pro forma balance sheet. It also positions us for further bolt-on opportunities in the state with more than 200 banks under $2 billion in assets chartered there. We convert in the second quarter of 2027. And with half the cost savings realized in the year, 2027 is where the accretion begins. Third, customers and deposits. We have 166,000 accounts, 79,000 active digital users and treasury platform that continues to gain momentum. Core relationship growth and a full treasury suite are the answers to growing new deposit relationships and fee income. And the early signs are in the numbers, as Rick shared in his comments. Fourth, efficiency. Expenses were flat in this quarter. We believe we can grow the balance sheet and deepen relationships without growing the cost structure at the same pace.

M&A has always been part of how we have built this company, and Lincoln Savings Bank is a good example of the discipline we apply. It fits our strategy. It meets our return for shareholders, and it makes Equity a better company.

We remain active, but our energy is on executing what is in front of us, organic growth, integrating Lincoln and building tangible book value for our shareholders and increasing earnings per share. Year-to-date core earnings per share are at $4.14, which puts us in a position to surpass our $5 target for 2026. That is what this team has done every year, and we plan to keep doing it, building earnings per share as we grow the company.

Thank you for joining us on the call today, and now we're happy to take your questions at this time.

[Operator Instructions] Your first question comes from the line of Jeff Rulis with D.A. Davidson.

Maybe a jump off from Brad, your comments as you look into '27 and I guess, preliminarily, I want to think about maybe net loan growth, given the expectations, the organic side really coming on strong. And then I guess, if you kind of think about the possible runoff from Lincoln, kind of frame -- I guess, this year, you're kind of on pace for low single digit if you ex any acquisitions. How does it frame up for '27, either big picture or specifically?

Yes. So we've -- in some of the modeling and the numbers that we released, Jeff, we reflected some of the runoff that we expect already in Lincoln Savings Bank. If you just match the two companies together on an asset basis, it doesn't equate to $9.1 billion. So we think we did a better job of disclosing some of that shrinkage that naturally happens as part of the merging of the companies together. So hopefully, the modeling and analytical work that's been done on that in the industry is already better suited than we had in the last two transactions.

So we're looking -- I mean, Rick's teams are doing a really, really good job. I feel very confident that the Oklahoma Group and the Nebraska group are on the way to growth. We have really strong production out of all the rest of our team, everyone in the company from the Board down to the line lender is all focused on doing the right thing every day. So on an organic basis, I think single digit upwards of that is something that we can definitely target in 2027.

Sorry, Brad, you said is that mid-single digit or...

Mid-single digit. Yes. I don't think we're going to get to 10%, but somewhere between 5% and 7% is something that I think we can hit as a company. with the acquisition -- without the acquisition, I think we could be actually stronger than that.

Okay. Appreciate it. And Brad, another one for you on the M&A side. Just wanted to see if kind of the shifting sands of maybe rate expectations as we -- that new environment, do you think that, coupled with -- we've heard kind of rumors of sort of midterm approach and any potential catalyst if there's a shift on that front. I guess to the question, rates or midterm elections, do you think -- do you see that having any preliminary impact to deal activity? Or is it kind of business as usual on that front?

So most of the things that we've done are driven by age of ownership and age of management. And so those 2 factors still exist. And so the conversations that I already have scheduled for this quarter, the reach out that I've received or that we've made, we have four or five conversations that are active at this point in time. And so it just matters on where they go.

I do think the rising rates will put smaller banks on the sidelines again. I think their AOCI is going to go the wrong direction for them. I think that's what's kept them from coming to market in the past year or two. And I think it will again be exacerbated. And so I do think that there will be a slowness in consolidation based on that because they missed kind of a window of correction here the last six months to get something done. But from our standpoint, we have a lot of active conversations that are agnostic to that or don't have AOCI real issues. So I think we have a lot of opportunity that we can pick and choose from as we go through the process. It's not something that we need to do next year, but there are conversations that could happen next year if the numbers work together and the strategies work in the right direction.

Okay. And it doesn't sound like the political wins are anything that you're overly concerned with or impacting conversations maybe broadly speaking?

They're not -- I think if there's a blue wave that happens on the House and the Senate side, I think some people are going to get more focused on getting something done before the White House seat comes up in two more years. So I think over the next 24 months, I think there could be a wave of activity that comes to the marketplace. How that affects Equity Bank is we'll just be consistent on what we're doing and how we're doing it. We can do one or two deals a year. And so we'll have to pick and choose what those opportunities look like for us.

Your next question comes from the line of Brendan Nosal with Hovde Group.

Maybe starting off here on the net interest margin, a bit of a soft result this quarter, but you kept the outlook for the fourth quarter of this year. There's a bunch of moving pieces in there. Can you kind of maybe decompose the magnitude of each of those drivers for next quarter? I mean you've got the tailwind of asset remixing and the Fed hike, but you've also got the headwind of rising funding costs also from the Fed. So kind of how much of each of those work as you kind of work the math on getting to your range?

Yes. So good question, Brendan. There's a bit to unpack there. On the current period results, if you take in the excess liquidity that we allowed to carry for the period, that's 7-ish basis points of impact to net interest margin that's neutral to net interest income. So managing that, reduced cash, et cetera, takes care of 7 basis points of the delta.

On the changing interest rates, the Fed move adds about 10 basis points to loan yields. The increase in deposit funding has been -- is heavily realized through the end of the quarter. We're going to continue to see some migration up there, but the 10 basis points on the loan side should outpace it. So normalizing for the liquidity is 4.27%, adding the impact of the additional rate movements add a few more basis points to get you in that range of that 4.25% to 4.35%.

Okay. Got it. That's helpful. And then to the extent that we get additional rate hikes in the future, and we don't have kind of mix considerations as well. What's like a rough ballpark estimate of kind of what each rate hike does to your margin?

Yes, it adds between 3 and 5 basis points for every 25 basis points.

Your next question comes from the line of Matt Olney with Stephens.

On the deposit side, it sounds like the balances in the third quarter were relatively flat in the legacy markets ex those public funds that you highlighted. It sounds like you're expecting some nice deposit growth here in the near term. Just any more color on just the incremental cost of these new deposit flows that you're anticipating?

Yes. So I'd say a couple of things. One, we're optimistic about continued remixing and opportunity in our noninterest-bearing and low-cost commercial and retail aspects of the business. We went through payment of taxes in April. We've seen continuation of a relatively lower balance. So there's some opportunity there as we close out the year as balances grow into the end of the year that we typically see seasonally. So there's some benefit there.

As you think about a new incremental deposit to the extent you're pulling it from, call it, special or a public fund opportunity or something that's actively bid, you're seeing it up at the top end of what you would think a short-term interest rate is. But that's most of where Rick's time is spent, most of where his team's time is spent is on the customer relationship, the development of those customers that aren't as rate sensitive and are focused on the broad relationship aspect. So that's where our time and efforts are. But where we have to go get funding kind of at market, it's more aligned with brokered funding and those kind of costs.

We always have a huge, large percentage inflow of deposits in the fourth quarter because I don't remember the number of municipalities, but it's somewhere between 50 and 100 municipalities that we bank across our system that have tax revenues that come in, in the fourth quarter. So we always see a nice flow of deposits into those accounts because we have their operating accounts.

And Matt, I would add sort of strategically and down to the tactical level, one of the things that we've been doing is we're actually on accounts kind of sort of year-over-year same stores, we're about 20% up in the quarter, third quarter for the number of accounts. So our teams are really driving those accounts. We've also implemented a few tools that allows them to be more proactive in identifying additional business that customers have with other banks. And so we're actively seeking that.

So those things take a little time on it, but those are some of the tactical things we're doing that we -- why we're optimistic. Obviously, we've seen that in the legacy markets with the growth of loans, and we're doing more of that now on the side of deposits. And so we're positive on that.

Okay. That's all great color. I appreciate that. And then I guess, shifting over towards the credit side. Curious what you're seeing this quarter. It looks like charge-offs were a little bit heavier, but any cleanup commentary there? And then just taking a step back with high rate expectations from here into '27, I'm curious what the credit team is focused on at this point.

Yes. I don't think we're -- I mean, we're still optimistic with our credit. We're obviously seeing positive results from most of our commercial customers. And we cleaned up a lot of stuff in the classified had positive resolutions along those lines. So we're -- obviously, the consumer is being a little bit impacted. You see that sort of in some of their deposit base is a little stress in that with -- from a cost perspective. But that said, we're not -- we don't have a lot. That's not a big piece of our portfolio. And we haven't seen that fully move through to commercial. So we're still very positive on the credit side at this point.

It seems like that the commercial business is making money, and we see that because the average balance of our commercial account is actually up. So the average commercial customer is stronger, where our consumer customer average balance is down about $1,000 on average per account. So you can see that coming through in those two ways.

Your next question comes from the line of Nathan Race with Piper Sandler.

Just curious, maybe, Rick, if you can just comment on what you're seeing from a competitive pricing perspective on new loan production. Obviously, record production in the quarter. It sounds like the pipeline is pretty strong. But just curious as you guys kind of expanded your teams in some larger markets, whether it's Oklahoma City or Omaha, if we're seeing some degradation in terms of kind of what you're getting on new loan pricing kind of relative to what you guys have been able to garner historically in some of the less competitive rural markets that you've operated in historically?

Yes, sure. So one thing I'd note again is our average yield on production this quarter was 6.91%. So it's accretive to what we've got on our full portfolio. And I would -- the answer is it depends on the market. So there are a couple of our markets that are more competitive on there, and we've got to get a little skinnier in those transactions. But we've got -- we're still holding our line on in most markets to make sure that we're recovering an ROE. We run an ROE model and we recover that. So we've seen some competitive craziness in a few of our markets. But in the most -- at this point in time, we're actually -- and I think that's part of why you're seeing the pipeline grow is that we're in pretty good shape at this point in time.

Okay. Great. That's helpful. And then just as we think about kind of excess capital management priorities in the next year, I imagine you're probably going to be in a kind of digestive phase with Lincoln at least in the next quarter or two. But as you kind of just think about kind of returning excess capital to shareholders into '27, can you just maybe, Brad, comment on the buyback appetite given where the stock trades today and kind of any other capital initiatives you're contemplating? Obviously saw the dividend hike here in 3Q as well.

Yes. So as everyone knows, when there's a filing with the SEC, companies are blocked out from repurchasing or trading in their shares. So we aren't active at this point buying back our shares just because of the lockout that comes with the S-4 on file. But we'll continue to be active in that. We have a Board approval to continue to be active in that to have $1 million or 1 million shares outstanding authorization. So that's one way we'll return capital. And then I think we have plenty of ways to deploy capital through acquisition and organic growth.

Okay. And then just maybe one last one for Chris. Obviously, it's going to be a bit noisy expense-wise next year, but just kind of any thoughts around the kind of legacy expense growth run rate that we expect from the Equity franchise. And within that context, curious to what degree some of the AI initiatives and other technology items that are laid out in the slide deck and kind of limit expense growth to some degree next year.

Can you summarize that question again for us?

Yes. Just trying to think about the legacy operating expense growth run rate from the legacy Equity franchise into next year and to what degree some of the technology initiatives and the AI implementations laid on the slide deck can maybe limit expense growth to some degree to 2027?

Yes Nate. I'll say around that, just generally speaking, we're in the process of budgeting and outlook expectations. So more formality to come around this as we move forward. But off the top, our expectation is that these initiatives over time allow us to grow the balance sheet without growing the expense rate at the same clip.

So as we look to next year, as you look at NIE to average assets and you look at efficiency ratio, our goal and expectation is that on a legacy basis, that's coming down. Some of that comes with asset growth, a lot of it comes with control of costs, specific initiatives for how technology moves the needle there are coming together, but I don't have clear line of sight today to give you kind of the specifics. But I can tell you we're focused on it. We're motivated by it. And we do see that there is positive leverage to be attained there. We just don't have it to a number that I want to stand on today and say it's definitively this?

We spent the last two days with a team going through some account verification and loan verification processes that are meaningful moves. If we -- when we get those implemented. Chris' point is this stuff will trickle in, you'll see it come in through the balance sheet. It's not going to be a huge announcement that we're implementing this wonderful software, and it's going to eliminate 4% of our efficiency ratio. That's not how these things are going to be implemented. They're going to be implemented as we -- as the companies all in the industry are able to implement these things and through growth and through shrinkage of turnover, you'll see these things optimize fairly quickly. And we're already seeing it today, but it's not going to happen in stair steps. It's going to happen in a gradual line.

Your next question comes from the line of Damon DelMonte with KBW.

Just to kind of follow up on the expense commentary. Chris, just wondering if you kind of had a ballpark of kind of where first quarter '27 would start on a combined basis with Lincoln and then kind of a cadence over the coming quarters throughout the year?

Yes. The -- what I'll say on noninterest expense and really the culmination of what is Lincoln is the expectation on the EPS side continues to be the $0.27. But as we have moving pieces into closing that transaction and understand the dynamic of some various pieces we've talked about, I don't want to specifically say, hey, it's going to be noninterest expense or it's going to be NII or some other component. We're fully confident that we'll get the $0.27. It's where it comes from.

So, Damon, on that one, I just -- we'll provide more explicit guidance as we get closer and close that transaction. But for now, specific line items aren't the way to look at it.

Okay. Fair enough. And then I think Brad mentioned that pro forma, you guys are $9.1 billion, always having ongoing discussions with potential suitors for M&A. At this point, is there anything that would hold you back from going over $10 billion in 2027 if you were to find a couple of deals? Like do you feel you made the necessary investments in the infrastructure side of things from risk management and compliance and things of that nature to go over whenever that time comes? Or do you feel you need to continue to do work in that regard?

No. We've made a lot of progress over the last three years. We've been very focused on that. We have a very specific operating plan on how to get to that number. Rick honestly did a good job of bringing in a couple of federal Reserve Bank risk employees that were on furlough at the time that helped us write that plan over a 90-day period. We've been operating off of that plan. And so our Chief Risk Officer, we hired 18 months ago, I believe, approximately, has done a great job with his team and building out the processes. So I feel very confident with where we sit today that if a transaction took us over tomorrow, we'd be ready to meet those challenges.

Your next call comes from the line of Brett Rabatin with StoneX Group.

I wanted to go back to the margin and just assuming that Lincoln closes, let's say, early December, just wanted to see if you guys could give some thoughts on the margin impact from Lincoln in 4Q aside from the stand-alone operation.

Yes. The impact to Lincoln as currently modeled, and again, Brett, I'll caveat this with the moving pieces of what is the closing of Lincoln and the composition of both balance sheet and income streams is a little bit in flux, but the impact to -- of Lincoln on the run rate margin is 8 to 10 basis points down. So as you think about that on a single month out of three, you're looking at 2 to 3 basis points of degradation based on, call it, a December 1 close.

Okay. Yes, that's kind of what I was looking at. Okay. And then just -- I know you don't want to give margin guidance for '27, and there's a lot of variables that are in play, so to speak, but there's some definite tailwinds on the loan side with the origination rates and loan repricing and higher rates. But my question is, is there a risk that the margin relative to 4Q would see some additional pressure in '27 just from funding new growth, i.e., new production on the balance sheet is at a lower margin than the existing one, which is obviously better than most peers.

Yes. I think I'll say two things there. One, 4.36% margin in Q2, 4.20% today, all numbers that we're really proud of and as an industry are hard to retain. So maintaining and growing margin from here is going to be, to your point, Brett, tough. But we're focused on how can we control for credit risk challenges to the balance sheet while also growing NII over time. So we don't want to take high-risk investments. We don't want to play capital poorly. But where we can grow the balance sheet, drive NII increase, even if it's at a slight detriment to overall margin, we're okay with it because we want to get EPS and we want to get tangible book value growth for our shareholders, and that's what's driving us at this point. So yes, there could be some compression there based on incremental growth, but it's expansive to NII.

Okay. Yes, perfect answer there. And then the last one, if I could, just around M&A. Brad, this is a question for Brad. Your first response around M&A kind of led me to question, you've obviously been an M&A-focused institution doing a deal every quarter or 2 or 3, and you've built out the geography quite a bit in the past few years. Do you think there's a shift to, hey, we're an organic story now and maybe we're less interested in M&A? Or Brad, just any thoughts on what you see as the tools to double your franchise, as you say, in every five to seven years from here? Can that be more organic than it is M&A?

Yes. I think we actually traditionally have been good at organic. We actually are good at organic today. And as Rick has helped bring some clarity to that, we're doing a really good job in our core markets of originations. I think we have a lot of room for that growth. I'm most excited about this year. The number of checking accounts we have grown in our same-stores legacy markets is exceptional. Jonathan Roop and that retail team have done an amazing job of growing those number of checking accounts, and I think we can just improve on that every year. So I think there is an organic story in our picture.

We don't need to do another M&A transaction to be meaningful and relevant. So we're always -- this the LSB transaction came up because Iowa has been on our list of places we wanted to be for the last four or five years. And its footprint is so similar to everything else we operate at Equity Bank that it fits strategically so well. I think the combined company is going to be much better than the two companies separated. And so if we have other opportunities that look like that, we're going to jump on them, but it's only going to be in the footprint that we're currently in.

There are no further questions at this time. This concludes today's call. Thank you for attending, and you may now disconnect you line.

Hello, everyone. Thank you for joining us, and welcome to the merger announcement call for Equity Bancshares, Inc. [Operator Instructions] I will now hand the conference over to Luke Pfeifer, Director of FP&A and Investor Relations. Luke, please go ahead.

Good morning, everyone, and thank you for joining us on today's Equity Bancshares conference call. This call is being recorded and is also available live via webcast on our Investor Relations site, where you can also find the corresponding slide presentation. Before we begin, let me remind you that today's discussion will include forward-looking statements. These involve risks and uncertainties, and actual results may differ materially from those discussed. More detail on these risks is available in our SEC filings. Following our prepared remarks, we will open the line for questions and discussion.

With that, it's my privilege to turn the call over to our Chairman and CEO, Brad Elliott.

Thank you, and good morning, everyone. I'm glad to be with the Lincoln Savings Bank team this morning to share some big news together. We are announcing today that Equity Bancshares and Lincoln Bancorp have agreed to merge. This brings together two strong organizations that share a vision, a culture, and a commitment to serving communities.

For Equity Bancshares, this partnership is more than a transaction. It is the next step in the strategic plan we have worked towards for many years. Iowa has long been a growth priority for us, and this merger lets us expand our presence there in a meaningful way. The combination adds locations in Des Moines, Waterloo-Cedar Falls, along with the surrounding communities in the Cedar Valley area that Lincoln has served since 1902.

Each of these markets is unique, each has a strong customer base, and each gives us a platform for long-term growth. Des Moines is one of the top midsized metros in the country for economic development, with strong population and household income growth projected over the next 5 years. Waterloo-Cedar Valley is home to many major employers like John Deere, Tyson Foods, UnityPoint Health, and is consistently ranking in the top places to live in Iowa.

The surrounding counties that make up Cedar Valley bring deep roots and long-standing customer relationships. Together, these markets create a network that is diverse and complementary to our legacy franchise. They connect well with our existing operations in Kansas, Missouri, Oklahoma, Nebraska, and Arkansas, while extending our reach into one of the most attractive regions in the Midwest. But beyond geography, what excites us most about this combination is the people and the culture we are joining with.

Lincoln Savings Bank was built on customer trust, community focus, and prudent growth. Under the leadership of Chair Sally Hollis, along with Sean Willett, Emily Girsch, and Andy Borrmann, Lincoln has grown into one of Iowa's largest private community banks, known for its strong customer service and its involvement in the communities it serves. This is exactly the kind of partner we look for. Values align, leadership is strong, and the future is built on doing what's right for customers, employees, and communities.

I want to be clear, this transaction is not about changing Lincoln's model. It is about building on it. We will retain all of the branches of Lincoln, keep local leadership in place, and continue to empower local decision-making. Doug Anderson and Mike Cisney will continue to lead the Iowa markets, ensuring continuity, consistency, and a clear path forward. They know these communities and they have earned their trust. That will not change. At Equity, we believe the best combinations happen when cultures align and we can grow together without imposing change from the outside.

Lincoln's story is one of entrepreneurial spirit, long-term discipline, and deep ties to communities. That is also the story of Equity Bank. When you combine 2 organizations built the same way, the result is very powerful. Before I turn it over to Sally and Sean, I want to recognize Lincoln's entire team. They have built a bank that is respected in its markets and trusted by its customers. That does not happen by accident. It happens because of leadership, vision, and execution. We are honored to welcome Lincoln's employees, customers, and shareholders to Equity.

With that, I will turn it over to Sally Hollis, Chair of Lincoln Bancorp.

Thank you, Brad. Today is truly a milestone for Lincoln Savings Bank. Since our founding in 1902, our goal has been simple: to build a bank that could serve customers with integrity, provide local decision-making, and foster strong relationships. Over the years, we've grown into one of Iowa's largest community banks, earned the trust of our communities, and built a balance sheet that reflects disciplined growth. We are proud of what our team has accomplished, and we are proud of the impact we've had on the communities we serve.

As we look to the future, we wanted to find a partner who shares our values and could help us scale while preserving our culture. In Equity, we found exactly that. Brad and his team believe in community banking, they believe in local leadership, and they believe in long-term growth. That makes this partnership a natural fit. By joining with Equity, we gain access to additional resources, technology, and scale, all of which will benefit our customers and our employees, while, at the same time, we maintain our commitment to the communities we serve. This is not the end of Lincoln's story. It's the beginning of a new chapter. I'm confident that our team will play a significant role in the growth and success of the combined company, and I'm excited about what lies ahead.

Sean, let me turn it over to you.

Thank you, Sally. At Lincoln Savings Bank, our philosophy has always been that banking is about relationships. Customers trust us because they know the people they work with, and they know the decisions are made locally. Joining with Equity provides greater access to products and services for our customers, more career opportunities for our employees, and more support for the communities we serve. It also means the chance to build something larger together, a bank that combines the strengths of two great institutions while staying true to our roots. I'm excited to partner with our local leaders in Iowa as we integrate these two great organizations. Together, we will take what Lincoln Savings Bank has built and make it even stronger.

Rick, let me turn it over to you.

Thank you, Sean. On behalf of all of us at Equity, I want to congratulate Lincoln on what you've built. This is a franchise with $1.7 billion in assets and 16 branches across Central and Northeast Iowa, fueled by organic growth and a reputation for excellence. This is a financially attractive and strategically important combination. The expanded footprint diversifies our markets, better leverages our balance sheet, and provides new growth opportunities, including a robust pipeline of potential bolt-on acquisitions with more than 200 banks with less than $2 billion in assets across Iowa.

Importantly, we are not just adding branches, we are adding strong communities, talented employees, and a proven leadership team. We intend to retain all Lincoln branches and to invest further in Iowa as we grow together. As part of our due diligence, we conducted a detailed credit review covering approximately 70% of total loans, 78% of the commercial portfolio, and 100% of all classified, nonperforming, and watch credits.

As we look to the pro forma portfolio, we are confident in the strength of the combined credit profile and do not foresee any concerns with concentrations of credit or levels of exposure, with nonowner-occupied and total CRE ratios remaining within internal limits and regulatory expectations.

This transaction is about building on Lincoln's legacy, not replacing it.

And with retained leadership, an excellent deposit base, and exceptional markets in both the metro and community markets of Iowa, I'm confident that this market will be a source of strength and opportunity for years to come. With the addition of Lincoln, we are strengthening our franchise with a talented team, an excellent customer base, and a shared operating approach that positions Equity for long-term growth and success.

Chris, let me turn it over to you for the financial details.

Thank you, Rick. As the team has outlined, this is a strategic partnership built on culture and markets, but it is also a transaction that makes strong financial sense. We expect the merger to be approximately 5.1% accretive to earnings per share in 2027, 7.5% in 2028, and 10.1% in 2029. Tangible book value dilution at close is estimated at 3.8% with an earn-back period of approximately 2.6 years.

Lincoln shareholders will receive approximately 1.89 million shares of Equity stock plus $29.5 million in cash consideration for a total deal value of approximately $123 million, or 1.05x Lincoln's tangible book value. The resultant pay-to-trade ratio is approximately 70.3%. On a pro forma basis, Equity shareholders will own approximately 91.6% of the combined company, with Lincoln shareholders owning 8.4%.

We have modeled cost savings of 30% of Lincoln's consolidated noninterest expense, phased in at 50% in 2027 and 75% in 2028, reaching 100% thereafter. Transaction expenses are estimated at approximately $23.7 million pretax. The agreement provides protections for identified transaction expenses attributable to Lincoln in excess of those contemplated in this figure.

The modeling of the loan portfolio includes a gross credit mark of $18 million, or 1.5% of gross loans, and a loan interest rate discount of $27.8 million, or 2.3%. The merger agreement also contains additional protections for unresolved credit issues, which would result in a reduction in price commensurate with identified marks as of the close date. Core deposit intangibles are estimated at $20.7 million, or 2% of core deposits. We expect the merger to close in the fourth quarter of 2026, with Lincoln Savings Bank converting and integrating on Equity Bank system in the second quarter of 2027.

On a pro forma basis, following reduction of excess liquidity positions, the combined company is modeled to have approximately $9.1 billion in total assets, $6.7 billion in total loans, and $7.7 billion in total deposits. Pro forma capital ratios remain strong with an estimated Common Equity Tier 1 ratio of 10.6%, total risk-based capital of 13.4%, a leverage ratio of 9.0%, and tangible common equity to tangible assets of 8.6%, all comfortably above regulatory and internal thresholds.

Brad, let me turn it back to you.

Thank you, Chris. And as I close, I want to again thank Sally, the Board of Directors, Sean, and Andy, and the entire Lincoln team. You have built a franchise that reflects the best of community banking, and we are honored to partner with you. For Equity, this is about more than scale. It is about growth, culture, and people. Our guiding principles remain the same: strong service for our customers, opportunity and development for our employees, and solid sustainable returns for our shareholders. With this transaction, we are in a stronger position to deliver on all three of those.

Equity Bancshares remains well capitalized and well positioned for future growth. We will continue to pursue opportunities that align with our disciplined approach and long-term vision for community banking across the Midwest. Thank you for your time today, and thank you for your interest in Equity Bancshares. We will now open up the line for questions.

[Operator Instructions] Your first question comes from the line of Brendan Nosal with Hovde Group.

Just to start off here at a top level, can you just take us through how the transaction came to be? And then how did you folks, kind of, balance the desire to get more penetration in Iowa with, kind of, some of the credit and profitability idiosyncrasies at Lincoln?

Sure. We met Lincoln. We have been working, as you guys know, to get in further into Iowa for the last 5 years. And so we met Lincoln about a year ago, not quite a year ago, just had a conversation with them about what their plans were, what might be interesting to them, what they're working on. And as we continue to get to know one another, develop that relationship, we felt like culturally, the footprint fit us really, really well. The markets are so similar to what we do with the rest of our franchise being -- we're in rural markets in Nebraska, Kansas, Missouri, Oklahoma, and Arkansas, but we're also in metro markets in those same states. So this fits so well with that same footprint. They're very, very similar to us in that.

On the credit side, there are some identified credits that they had already identified that they were working out. They've been doing a good job of that the last 2 or 3 years. They have their arms around those. So, we were able to get through that credit portfolio fairly easily and came together on agreements on what those marks would look like. So we feel very confident that they'll either work those credits out prior to closing or we'll work them out after closing, but they're all marked appropriately. So we don't have a lot of concern on that side. It's what Equity Bank has done historically is be able to work through credits as they have come at us. So that doesn't give us any pause whatsoever.

We had a good strategy on -- they've been making a lot of progress as an organization and have a good strategy on how to continue to focus on expenses and get those expenses in line with the industry. And so they were already on a good path on that. Strategically, it didn't take a lot for us to come together on that. So the combination came together fairly easily from a strategic and desire of what do we have at the end of the day. And so we've got a really good financial transaction, but we also have a really good strategic transaction as well.

That's really helpful color, Brad. Maybe turning to the deal math itself. It sounds like there's a little bit more accretion in 2029 versus 2028. I think you mentioned 10.1%. Guessing that's tied to the timing of the cost saves not being fully in the run rate until that time. Maybe just, kind of, walk us through what items don't get checked off until you turn the calendar to that out year.

Yes, Brendan, the -- so as you look at 2027, '28, 2029, you're seeing a ascending number for EPS accretion, which has been primarily tied exactly into what you're talking about, which is the realization of cost saves over time. So as you mentioned, there's profitability constraints coming in. The Lincoln team has done an excellent job. We're getting positioned where there's going to start to be pulled through there. But in the deal math, there was some necessitated, I'd say, conservatism around when you can realize the benefits on cost saves, and that's what you're seeing roll through there. So that expansion, both in 2029 as well as 2028, is effectively entirely attributable to that timing of that cost saves.

Got it. Okay. That's perfect. I'm going to sneak in one more here. When I think back to the Frontier and the NBC deals, one of the topics we've spoken a lot about is just, kind of, runoff in that loan book and how that's impacted organic growth, kind of, at Equity overall. So when we look at Lincoln, just curious if you're modeling any runoff of the acquired loan book, and then how that impacts organic growth once they're part of your balance sheet.

Yes. No, I mean, we're -- we really like their loan book to start out with on what they're going. We actually think there's some real opportunities for us to expand within, again, the types of deals that they're doing to be able to do larger pieces of it. We're actually now seeing, for instance, out of the Frontier deal, we're actually -- we're going to be positive this quarter down there. And so that, kind of, that runoff, we think, is going to be able to be muted, and we're going to be able to mute that with additional growth. The overall production -- loan production continues to be at the highest levels we've ever seen. So we really believe within the model that we'll be able to cover that.

And I would say we conservatively modeled this so that to take in -- I'd say we conservatively model this to take into account. So I think the EPS target numbers for 2027 and 2028 have those factors in that we'll be able to get those numbers fairly easily without having to have outsized loan growth.

Your next question comes from the line of Jeff Rulis with D.A. Davidson & Co.

Just to circle back on the -- maybe on that growth end of things, I wanted to, kind of, narrow back into that. It looked like in '25, they had some runoff. And I don't know if that was related to some of the -- like, the credit issues that they were working out. I just wanted to, kind of, get a sense for -- and it looked like a return to growth in the second quarter for Lincoln. If you could just walk us through what was maybe flowing through the balance sheet and the like.

Yes. So they were working through how to set their balance sheet that would work for them as a stand-alone community bank. And so they had refocused themselves about 3 years ago on focusing on the types of credit that they wanted to be in. And so they were running off certain types of credit and they're back in the -- they've got a really good origination team. And so put back in place over the last 3 years, and Sean has done a good job originating new people in the organization along with the consistent people that they've had at the organization. So they were just resetting their portfolio about 3 years ago and have been back in the building mode the last several quarters, which we hope to continue to be able to expand on.

Got it. And it does look like NPAs are a little more elevated, but really modest loss content. And just what is the sector that maybe is represented in the NPA figure, just so we're aware of what they're, kind of, working through?

They've got some commercial real estate, C&I. They also had a national SBA portfolio that had higher losses in it as they were selling off the secured portion and keeping the unsecured portion. But they've got good people in place to manage that and have been doing a good job working through those credits. But as I said, we've got a good mark on all this portfolio. We feel very confident that the marks are appropriately rightsized. And as you looked at the last 25 deals, honestly, that we've done, knock on wood, we've been able to mark those portfolios and not have additional losses in those portfolios outside of what we did during due diligence.

Your next question comes from the line of Damon DelMonte with KBW.

So, this question probably is for Chris. I think you mentioned on the pro forma combined balance sheet basis, you commented on like $9.1 billion when you address the excess liquidity. Can you just remind us of, kind of, what that is and, kind of, how the combined balance sheet is on the lower end of $9 billion versus the middle part of $9 billion?

Yes. There's -- so really between both balance sheets in the aggregate, excess cash and securities relative to what's needed to facilitate pledging, liquidity needs, et cetera. So there's cushion there, about $250 million to $300 million to bring down the balance sheet in the aggregate and retain the same level of profitability. So that's what's being modeled to get to $9.1 billion.

Okay. Great. That's helpful. And then you guys mentioned a fourth quarter closing. I mean is it fair to do like a 12/31 from a modeling standpoint? Or do you think, it could be, kind of, in the mid-fourth quarter?

Yes. To me, I'd rather be done in the mid-fourth quarter than I would on 12/31, Damon. But I think for modeling purposes, you can assume 12/31, and you'll be in a fine spot. If we get it done sooner, that would be good news for everybody.

Okay. Great. And then just lastly on the lending side from Lincoln. Can you just talk a little bit about maybe some areas that they have an expertise in or maybe are a little stronger in that they focus on in their markets?

Yes. One, it looks very similar to us. So the percentages, and as you look at the types of things they do, very, very similar to us. But they also have a tax credit business that they have that we plan on keeping and has some expertise in there. But it's nothing that's necessarily real material at this point in time. It really is -- looks -- it's why it fits so well. It fits really exactly into what we've been doing.

It's a very granular portfolio, which is what we appreciate about NBC and Frontier Bank as well. They're not whale hunters. It's not a lumpy portfolio. And so if we can continue to focus on those $5 million relationships and under, expand relationships that are larger than that, really gives us a great footprint. The Waterloo-Cedar Falls market is a really, really strong market from an industrial standpoint. It's about a 175,000-person MSA. Des Moines is a very vibrant, one of the fastest-growing Midwest communities in the United States. And so it's got so much positive going on just like Omaha and Oklahoma City did for us, and Kansas City as well. So we really -- this really fills out the footprint for Equity Bank as a combined company, gives us a lot to focus on and grow organically.

Your next question comes from the line of Nathan Race with Piper Sandler.

Maybe for Chris, just curious, when I look at the relatively expensive sub-debt that Lincoln raised in the first quarter of this year, and it looks like they repositioned about half their securities portfolio as well in the first quarter. Just curious to what extent there's some capital stack optimization factored into the EPS accretion and if you're intending to reposition the securities portfolio as well.

Yes. So we're going to take a look at the securities portfolio as it comes over. And generally, what we do in these M&A transactions is keep the pieces that make sense for our portfolio, sell the rest, and then to the extent that we need the securities for either earnings retention or liquidity purposes, we'll reposition the things that make sense for our book. So looking at what Lincoln has done, there's a number of securities in there that will make sense and they'll come into our portfolio, all marked based on AOCI marks, and we'll earn out based on those aspects.

So yields will be good. There's pieces that won't make sense for our portfolio long term. So we will spin those out and either reinvest in securities or find alternative means to yield the same kind of earnings benefit through our combined balance sheets.

Okay. So it doesn't sound like the sub-debt and additional securities portfolio repositioning is factored into the accretion guide?

There's not a further repositioning of a bond portfolio, no.

Okay. Great. And then maybe one broader question for Brad. With the balance sheet getting up to $9 billion with this acquisition, curious how you're thinking about approaching $10 billion. And within that context, what inning are you guys in terms of getting the cost and infrastructure in place to surpass $10 billion? And then also, what's, kind of, the ideal, kind of, M&A sequence as you near and approach $10 billion? Ideally, are you looking for a smaller deal to get close to $10 billion and maybe 1 or 2 acquisitions to get over $10 billion? Or just any thoughts on just, kind of, the cadence of how that cross could unfold?

Sure. Yes. With the addition of Lincoln, we can really focus on the organization organically on a risk-based approach. We've been working on this for 3 years. We brought on a Chief Risk Officer in Shea, who brings talent to us and the ability to build that out a couple of years ago. He's done a great job in our organization, getting that ready. Rick, when he came on board, put together with a couple of Federal Reserve -- former Federal Reserve risk managers from Ohio came in and built a plan for us.

We've been executing on that plan with the regulators. So I think from a risk standpoint, we have a really good framework, and we have most of the expense in place. So I don't think from that aspect, if we had something that took us over today, I feel confident we're ready for that. But strategically, we're also going to be very thoughtful about how that happens. And so we're going to be about $9.1 billion. That would be 2 to 3 years of organic growth to take you over the top of that. So we've got a lot of room in our balance sheet and a lot of room organically to take over the top.

If we have the right strategy from the standpoint of something inside the footprint would make sense for us. We -- we're ready to go. The Board is committed to that last year. So we've got all the options in our hand, and we will do it in a very strategic, meaningful way when it happens. We are not going to do an MOE. And to do that, we're going to do that through what Equity Bank knows how to do, and that's like transactions we've always done.

So we've got those in our footprint. If you remember, there's 900 banks within the 6 states that we're in that are chartered under $2 billion in assets. So we've got lots of opportunities there, and we're going to be very thoughtful about that process to go over the top. It will take us about $700 million to $900 million in assets to pay for the interchange loss. So we already know that. That's one transaction that phases in over 18 months. So we think we can replace that in a very normal fashion and not affect the shareholders in a meaningful way. So we've got a good process in place, a good strategy in place, and we'll continue to execute on that.

Got it. That's super helpful. If I could just sneak one more in on the deposit mix. It seems that Lincoln has a similar deposit complexion relative to Frontier in terms of maybe being a bit more CD-heavy relative to the franchise historically at Equity. So just curious how long do you think it's going to take to maybe get the deposit mix to look more like legacy Equity, and similar in terms of how you're embarking on that strategy in Omaha with Frontier?

Yes. Sure. Normally, that takes us -- we, kind of, take it over a 2-year period is, kind of, how we start moving it through. We don't make major changes on day 1, and we just, kind of, continue to work it through on pricing. As I think we've talked about. I mean, we do hand-to-hand combat one-on-one relationship with customers as opposed to, sort of, like, wide swath of, kind of, an edict across the board. So I really, kind of, look at it as it will probably typically roll through over 2 years is, kind of, how we do that. We'll certainly take out high cost immediately and certain things that we can. But as far as the overall mix and changing, kind of, the culture on how it does that, that typically takes a couple of years.

Yes. If you actually look at that chart on Page 5, the percentages line up pretty close. And so we've got some opportunities and some room. I think there's actually opportunities in these markets with marketing and the ability to go out and focus and sell and try to grow these markets from a deposit standpoint on the noninterest-bearing and interest-bearing and money market account. So I don't -- I think there's a lot of opportunity in this market that we -- with a balance sheet desire to be larger, probably faster than what Lincoln has been constrained a little bit on capital. So I think there's some marketing opportunities in these markets to grow from a deposit base. So we're -- I've spent some time driving all the branches in all the markets. I'm excited about those opportunities.

In addition, I mean, 8 of the locations, they're the only bank in town, which does really well for us. We really like them.

And we've really been focusing on technology marketing. So we're opening over 200 checking accounts a month, which is more than double it was 6 months ago online only. And of those, which I think is really a positive number, only five of those each month are outside of our current geographic footprint. So it means they're opening checking accounts online around the branches that we currently serve.

And so that marketing that we're doing, Laurel is doing a great job, our new Director of Marketing, of target marketing, how do we get more accounts opened around the branches that we currently serve. And so if we can deploy some of those same tactics around Lincoln as we get them merged in with Equity, I think there is growth opportunities around that.

I think with focusing on digital marketing and growing around our current footprint and expanding the number of concentrations within the rural markets, as I say, we want to be the Capital One in all the rural markets that we're in.

And so can we be the best technology in the rural markets we're in and can we bring that to that customer base with products and services is what excites me about this footprint and our current footprint that we currently have. Most of the time, we're competing with $200 million and $300 million banks around us. And so that's why we can be the Capital One around those markets. If you look at this map, that's who our competition mostly is outside of the metro markets. And so if we can continue to target those and grow, and Rick and Jonathan Roop and Laurel have done a great job putting a strategy together and focusing on that, and we're continuing to do that.

Your next question comes from the line of Matt Olney with Stephens.

I guess to start with, Chris, just to clarify your commentary, as you initially, kind of, rightsize the liquidity from this transaction and presumably benefit from discount accretion, are you saying that margin and the ROA that those levels can maintain what we've seen more recently over the last few quarters from Equity Bank? Or will these take an initial step backwards before improving over time?

I still think you're going to see a modest step backward in margin and ROA as we layer in Lincoln for 2027 close nearing on an ROA basis, kind of normalization in '28, and then expansion in '29 as we've talked about. So you'll see a small step back. It will be a lesser step back because of some of the management, I think, we can do around the balance sheet.

Okay. And then we've talked before about efficiency ratio longer-term targets moving in that, kind of, lower 50% range as you gain scale. With, kind of, full integration and cost savings from this transaction, can you speak more to this long-term goal and moving to that low 50% range?

Yes. Nothing's changed in our book, Matt. We still anticipate being able to get -- to reduce NIE to average assets first. And as a function of that, as we continue to see revenue opportunities and expansion, efficiency continue to drive down, too. We've talked about on previous calls, initiatives around technology and ways we're thinking about allowing for scale in our structure as we integrate artificial intelligence or opportunities for automation throughout our footprint. So none of that direction is shifting as we do M&A. And I think within Lincoln, there is a lot of opportunity to continue to contribute to the expansion of the earnings side while continuing to control expense, which will allow for that efficiency control over time.

Okay. Appreciate that, Chris. And then just last one for me, following up on Brad's comments on crossing $10 billion interchange impact there. I think you gave us some context as far as what that could look like. Can you give us just the current estimate of the dollar impact of that interchange once you do cross $10 billion, how much you think that would cost you initially?

Somewhere between $7 million and $13 million probably. So we look at it on a -- if you can earn 125 basis points ROA, how many assets does it take you -- how many dollars in assets does it take, somewhere between $400 million and $900 million in assets required to clear that hurdle, which is where Brad's numbers were coming from earlier. There is a relatively broad range. There's a lot to be digested before you get to 10 before you really know that number, but it's somewhere in that ballpark.

Your next question comes from the line of Brett Rabatin with StoneX.

Brad, I wanted to talk about for a second, one of your secret sauces, I think, over time has been the very strong loan portfolio yield, and you talked quite a bit about asking for rate. Otherwise, you're an order taker and whatnot. When I look at -- we've talked quite a bit about the balance sheet, the loan portfolios and the deposits of both franchises being fairly similar, but their loan portfolio yield is quite a bit lower than you guys. And I know you don't rush into a deal at close and start changing pricing aggressively. But can you talk about maybe their loan portfolio? And just do you think Brad or Rick, if you can improve that yield over time and if any of that is in the accretion you're anticipating?

Sure. So the drag on their yield really comes from prior management. And so the origination of prior management had a lower yield model strategy of trying to put on volume and not focused as much on pricing. And so, the new management team has been originating yields similar to what Equity Bank has been doing. So I think on a new origination basis, I think we're pretty similar in strategy and thought process, which is a positive for us. And so that work has been done from an education standpoint by Sean and Doug on the teams. And so I don't believe that we have a lot to do on that side. I think they have a very similar strategy to us on that and their customer base that they have been originating over the last 2 years is very similar to that. So, we're very hopeful. Rick has spent some time with them, Rick, do you want to comment?

Yes. In addition to that, we're going to add more people to the mix. I mean we want them to have more bankers. We think there's just a fantastic opportunity in these markets. So when you do that, you're going to continue to, kind of, challenge and up the talent pool. And I think that competition leads to pushing the existing bankers to be better. And you're going, as we always do, try to attract a banker that's willing to do that long-term building of yield. So we're -- I really like their team, the bankers that they have right now. They get it. They understand what's going to happen here and how they're going to do this. And I think we're just going to give more tools to do that. So I don't think this is going to be really much of an issue from a cultural standpoint to mesh this together.

Okay. And then, Rick, you mentioned adding bankers. I mean, when I look at this transaction, a lot of the footprint looks a lot like the legacy footprint of Equity Bancshares, but it does look like -- I didn't realize Des Moines was such a growth market, and you're not high on the list of market share there, and there are some large banks, 3 of the large banks or money center or whatever banks are in the mix. Will Des Moines be the focus for the growth? And then can you maybe just talk about the strategy in Des Moines, just given that it's such a strong growth?

Yes, there's 2 pieces there. I mean, obviously, Des Moines is a real opportunity for us to grow on the asset side. But I'd also -- I wouldn't overlook the Cedar Valley area. I mean, as Brad mentioned, what's here, this is a fantastic market. And there's, again, 175,000 people in the MSA. It's a real good opportunity for us. We think there's more investments can be made here to grow. So you're going to get both. You're going to get the aspect of being able to do a little larger deal size, a focus on specific companies that are headquartered here.

So I think we, kind of, put that combination together. And so you're going to obviously see growth in Des Moines, but I think there's also in some of these other markets, especially in the Cedar Valley here that will grow as well. So yes, there are some community markets that are going to be smaller, and it's -- as we always do, it's a retained strategy there just to make sure we're strong in those communities. But we've got 2 areas clearly within Des Moines and Cedar Valley that are real growth opportunities for us.

Your next question comes from the line of Brendan Nosal with Hovde Group.

Just one follow-up from me on overall capital. You've been quite active in the buyback the past couple of quarters, and I think you recently, kind of, preemptively refill with another 1 million shares. Just, kind of, walk through your ability and appetite to be active in the program versus, kind of, waiting until the deal closes and you can rebuild capital ratios on the combined earnings power of the franchise.

Yes. So we always have a repurchase plan in place because we think that's important to do from a shareholder standpoint and a shareholder protection standpoint. And we've always had an earn-back that we target on that repurchase plan. And so if we're outside that earn-back, we aren't active in that repurchase plan. We have plenty of capital and capital resources to do both of these.

So continuing to buy shares back and continue to do this M&A transaction, we can do both of those at the same time if the earn-back hit in our range for that buyback. So this doesn't preclude us from doing that. It keeps us opportunistic to be able to take advantage of something if there's a market disruption, being able to eliminate some shares out of the marketplace. But also strategically, we have a buyback in place always so that we can take opportunity of the things that we need to do.

There are no further questions at this time. This concludes today's conference. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the Equity Bancshares Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Luke Pfeifer. Luke, please go ahead.

Welcome, everyone, and thank you for joining the Equity Bancshares Second Quarter Earnings Call. A quick note before we begin. 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. After the presentation, we'll open the floor up for questions and discussion, a conversation we look forward to.

With that, let me turn the call over to our Chairman and CEO, Brad Elliott.

Good morning, everyone, and thank you for joining us. Today's results are what we've been working towards since we announced the NBC and Frontier transactions. We knew what the numbers would look like once the merger noise was muted, and we could see the earnings power of the combined companies with Equity Bank. Our teams worked hard to get the Frontier transaction closed on January 1 and merged in the first quarter, with the desire to keep as much of the M&A noise in the first quarter to let everyone see a more normalized number this quarter.

For the first time since closing, we are clearly showing investors what this franchise earns without the noise of merger charges, day 2 provisions and integration costs overshadowing the combined earnings of Equity. GAAP EPS was $1.27 per diluted share and ROATCE was 16.6%. Core EPS was $1.41 and ROATCE was 17.2%. Our efficiency ratio for the quarter was 53.4%. Those are exciting numbers that we want to talk about today.

When you have worked hard to negotiate and structure these transactions, and you can see firsthand the power of what happens when 2 complementary companies come together or, in this case, 3, it means something special. It is exciting to see that the hard work shows up in the operating metrics. Margin was 4.36%, up 3 basis points from last quarter, driven by a more favorable earning asset mix we talked about on previous calls and a higher bond discount accretion.

As I said, the core conversion is complete and behind us. Now our teams are locked in on what we have been focused on, and that is organic growth. We have exciting things to talk about in this area. It always looks muted as we work to reset portfolios, but organic growth is our priority. Let me take a moment on a topic I'm genuinely excited about and one that Equity Bank is leaning into aggressively, AI and automation.

This is not new for us. It has been core to how we built this company. When you build an organization around entrepreneurship, it naturally adapts to new technologies and new ways of thinking as they come along. We have always believed the banks that win will be the ones that grow the balance sheet and deepen relationships without growing the cost structure at the same pace. And technology is exactly how we do that.

We are not talking about this. We're actually doing it. Today, 15% of our staff are actively using Anthropic AI products and 75% have Microsoft Copilot installed. I want to be clear, we do not plan to reach 100% with Copilot or Anthropic in our organization as some roles in our company can't use it or benefit from it. So we're not adding the expense.

We currently have 6 bots running in production, and AI is actively supporting functions like loan review and M&A due diligence, along with many other practical improvements across the bank. We have moved from theory, or it being cool, to the implementation phase. We are putting these tools to work across our operations, streamlining back-office processes, speeding up onboarding and credit workflows and giving time back to our bankers so they can spend it with what matters most, our customers.

We have not yet fully tapped the expense reduction opportunity, and that is intentional. Phase 1 is implementation, stabilization and proof of concept. Phase 2 is where the efficiency gains show up in the numbers. Honestly, this area excites me more than anything I've seen in my career since the adoption of personal computers. That era took us from assets per employee from under $1 million per employee to around $5 million per employee in a few short years. I believe we are on the front end of a similar shift and Equity Bank is positioned to lead it.

Let me turn it over to Rick, our bank CEO, to walk you through the bank operations. Rick?

Thanks, Brad. Our transformative year continued in the second quarter as we work with intention to position our teams across both the Oklahoma City and Nebraska footprints to best serve our customers and grow our franchise. In the quarter, we added a team in Lincoln led by Russ Sebek and saw immediate benefit. We also added experienced bankers in each of our new metro footprints, individuals with large bank and complex customer backgrounds to position each market for growth. Notably, our Omaha team under the leadership of Kevin McCroden and Travis Flodine has already begun optimizing the inherited portfolio and attracting new customers.

As we look to the back half of the year, I'm excited about the contributions each of our markets is now positioned to make to our organic growth efforts. The former NBC markets should approach an inflection point over the next 2 quarters. And while the Frontier portfolio will likely experience continued pruning, the addition of the Lincoln and Omaha teams should help us absorb some of that attrition.

During the quarter, loan and deposit balances in total continue to face headwinds from normal runoff and optimization efforts surrounding the acquired portfolios. Importantly, our legacy markets absorbed the majority of that loan pressure, resulting in effectively flat balances period-over-period. Production, however, began to reflect the scale of our now larger franchise. We closed $315 million in loans, our largest quarterly production level ever at an average rate of 6.56%. That represents $119 million or 60% increase compared to the same period in 2025. Key contributors were Kansas City, Des Moines and Western Kansas.

I want to specifically recognize the work Levi Getz, our Western Market President, has done. That team has demonstrated the power of a disciplined customer-focused calling culture. And Levi will now be expanding his oversight to include Central Kansas as well.

Loan balances in non-acquired markets grew at an annualized rate exceeding 10% and are up 3% compared to quarter 2 2025. The underlying sales discipline, customer experience prioritization and operational strength are clearly there. Our current pipeline, which stands at $1.6 billion, a 23% increase over last quarter and our 75% pipeline, which is now at $475 million, show the trajectory that we are on.

As the more pronounced J-curve from our recent acquisitions work through the balance sheet, we will be well positioned to accelerate growth. Throughout the balance sheet transition, we have maintained discipline on pricing and structure. New originations continue to come on at a level accretive to coupon loan yields, and we have not chased production that would erode margin or diminish returns on deployed capital. Total deposits were flat for the quarter, while non-brokered balances declined modestly. Quarter 2 is a seasonal period of outflows as customers meet tax obligations and service debt. This quarter was no exception.

The decline in core balances were concentrated in existing customer relations, which we view as transitory rather than structural. Cost of deposits declined modestly as utilization of lower-cost accounts offset continued optimization of higher cost acquired funds.

Looking forward, the groundwork being laid by our retail team will position the bank to deepen existing relationships and expand our customer base. Our legacy markets never lost focus during the M&A activity, and that discipline shows. On a same-store basis, we generated checking accounts at our highest level ever, up 24% versus Q2 2025 and achieved net checking account growth in legacy markets at a rate this company has not previously seen. The second half of 2026 is about expanding existing relationships and winning new ones, and this team is well positioned to do exactly that. In addition, our focus on customer service in the branches is taking hold as our customer satisfaction scores continue to rise.

Within fee income, we continue to see momentum. Trust and wealth management is growing revenue. Mortgage banking is benefiting from the addition of the Nebraska footprint and debit and credit card results are expanding with added volume. Investments in our treasury functions will enhance our ability to fully serve commercial customers across the comprehensive product suite. To that end, we have brought in Melissa Moehring to lead that strategic initiative to grow treasury management, mirroring our commercial lending expertise with a full product suite designed to meet the complete scope of our customers' banking needs.

On credit quality, nonperforming assets moved from 76 basis points to 86 basis points of total assets. A portion of that increase is attributed to credits inherited from Frontier, which we are actively working through. Net charge-offs were $1.7 million or 12 basis points annualized. Classified assets to regulatory capital improved modestly at 11.9%. We remain comfortable with the overall credit posture of this portfolio. We now operate in 6 states and 7 major metros, all growing markets. Behind the merger-driven noise, our organic growth engine is evident and strong. Our leaders understand our value proposition, and I look forward to what they will accomplish through the remainder of 2026 and beyond.

I'll turn it to Chris to cover the financials in detail.

Thanks, Rick. Good morning. Net income for the quarter was $26.4 million or $1.27 per share. Excluding M&A expenses, intangible amortization and losses on securities, core net income was $29.4 million or $1.41 per share. Pretax pre-provision net revenue adjusted for merger expenses and losses on securities was $36.4 million, up $2.4 million quarter-over-quarter. Net interest income was $73.9 million. This reflects declining purchase accounting accretion and lower average earning assets, offset by higher security yields and a lower cost of funds. Net interest margin expanded 3 basis points to 4.36%. Loan purchase accounting accretion contributed $2.9 million or approximately 17 basis points, in line with our expectations.

For the second half of 2026, the margin may decrease modestly as we look for expansion of average earning assets to $6.85 billion to $6.95 billion. The compression reflects the expected mix shift and continued accretion burn down. Noninterest income was $8.1 million. Excluding $2.2 million in losses realized on securities and the write-down of a fund investment, core noninterest income was $10.3 million, up $0.7 million linked quarter.

We are encouraged by the growth in fee income from debit and credit card activity, mortgage and trust and wealth management. We are guiding to noninterest income of $18 million to $22 million for the second half. Noninterest expense was $46.9 million, down from $55 million in the previous quarter. Excluding merger costs in both periods, expenses declined $2.5 million to $46.8 million. Noninterest expense also benefited from gain on sale of assets of $850,000 in the quarter. The efficiency ratio improved to 53.4%, an improvement of over 10 percentage points compared to the same quarter last year. Our second half guidance for noninterest expense is $94 million to $98 million.

As Brad and Rick have noted, we remain committed to delivering on operational efficiency. Capital remains strong. TCE closed the quarter at 9.07%, CET1 was 11.84% and total risk-based capital was 14.66%. Tangible book value per share grew to $33.45 from $32.58. We returned capital to shareholders through an $0.18 per share dividend and the repurchase of an additional 211,000 shares of our stock. Total shares repurchased year-to-date are 711,000 shares at $44.84 per share.

I'll turn it back to Brad for closing remarks.

Thank you, Chris. We are proud of the progress this quarter and the trajectory of the Equity Bank franchise. 1.5 years ago, we told you we were building something. You trusted us by investing new capital in equity so that we could execute on what we saw in the marketplace, accretive M&A targets. We thank you for the trust. We are now $7.7 billion in assets, reflecting a 19.4% total compounded annual growth rate since 2010 and a franchise that is generating returns that are among the best in our peer group.

Our core ROATCE of 17.2% is evidence that the strategy is working. The second half of 2026 is about executing on what is right in front of us, organic growth, deepening relationships across Kansas, Missouri, Oklahoma, Nebraska, Iowa and Arkansas, driving efficiency across the franchise and continuing to build tangible book value for our shareholders. That is where the majority of our energy and attention is concentrated, and we are seeing real momentum on all fronts.

This team has done that every single year, and we plan to keep doing it. That said, M&A has always been part of how we have built this company, and that has not changed. We remain active in evaluating opportunities and our pipeline reflects that. When something fits our strategy, meets our return standards and genuinely makes Equity a better company, we move on it. When it does not clear the bar, we stay disciplined and keep our attention on the growth we are already generating. We are not chasing deals for the sake of activity. We are focused on the right deals. And right now, we like what we're seeing in the marketplace and the opportunities in front of us.

I want to thank you for joining our call today, and we're happy to take any questions at this time.

[Operator Instructions] Your first question comes from the line of Damon DelMonte with KBW.

First question, just on loan growth. Good to hear the color on the pipeline and the kind of the trends in the legacy portfolio. As we kind of think about the ongoing attrition and kind of rightsizing of the acquired portfolios, how do we kind of think about like net growth for the next few quarters until you kind of work through that? Do you think it's kind of flattish? Or do you think there's -- on a net basis, it could be kind of low single digits?

Yes. Damon, this is Rick. Yes, we think we're going to have loan growth in total. So -- we're believing and seeing that we will have loan growth with what's happening in the legacy markets, strong pipeline, strong growth there. And you just start having that slowing as you get into a year past NBC. We think we're getting close to that. And then the same thing as we get later into the Frontier deal. So we're looking at low single digits or mid-single digits growth for the second half of the year.

Got it. Okay. That's helpful. And are there any like industries where you're seeing a good flow of opportunities? Or is it kind of broad-based?

Yes, I think it's more broad-based. I mean I don't think we're...

Yes, we're seeing good, we're honestly seeing really good originations out of everywhere places we haven't gotten it before, like one of our better credits, C&I credits last quarter was booked out of Southeast Kansas and $10 million-plus credit. We've never had a $10 million-plus credit out of that area. We got the right banker down there, doing the right things. And so we're seeing credits across the footprint. Rick has done a really good job of building out the team, encouraging his people to -- our regional CEOs are doing a good job on getting their people doing the right things, and we're getting the business out of that. So it's kind of coming from Western Kansas, Oklahoma, Nebraska, Kansas City is doing great. Wichita team is doing really well. So it's kind of across the entire footprint.

Got it. Okay. Great. And then I appreciate the guidance on the margin, Chris, and the outlook there. How would you characterize the positioning of the margin, kind of, given a higher for longer interest rate environment and potentially a rate hike either later this year or in the early part of -- or sometime in 2027?

Yes, Damon, what I'd point to in terms of a rising interest rate environment is really the last cycle we went through. The balance sheet hasn't changed meaningfully from a posturing perspective for rising interest rates. So I think we're positioned to do well in that world. There's always the caveat of what happens in liability pricing and how everybody behaves through that environment. But in an upward rate scenario, I think we're well positioned to execute similarly to the last iteration.

Your next question comes from the line of Brendan Nosal with Hovde Group.

Just starting off here on expenses. Nice to see the run rate come down so much this quarter as well as the improved guide for the back half of the year. Just kind of curious, is there anything specific that's driving that improvement, whether it be some of the AI automation initiatives you spoke to or cost savings from Frontier? Or is it more just kind of blocking and tackling as you work through 2026?

It's heavily the -- back to there, Brendan. So the first thing, and we emphasized it on the prepared comments, it was really important to us to get Frontier closed and converted in Q1, so we could create some of this visibility to where expenses really should be. So a lot of the benefit is coming from getting through that conversion process, realizing the reduction in their technological costs, the people costs associated with managing those systems, et cetera.

So that's a lot of where you're seeing the benefit. There's obviously still focus internally on where we can find other opportunities to reduce cost over time. So you're seeing a little bit of that come through. As you think about AI technology automation, as Brad mentioned, we're leaning into it. We're working hard on figuring out how it moves the needle for us over time, but there's not tangible benefit to it today where we'd say, as you look at expenses this quarter versus last, it's due to artificial intelligence benefit. So that's still too early stage, but we're excited about where it can go.

Awesome. Okay. That's helpful color. Maybe circling back to the margin for a moment. Can you just talk about the puts and takes in that back half margin outlook that would get you towards either the high end or the low end of the range as you look ahead?

Yes. The high-end execution to me really lives in the liability side of the balance sheet. So to the extent that we can maintain and decline liability costs over time, and we've talked about in the past, the frontier accounts that came on board, relatively high cost. So there is some tailwind there. If we can execute on declining that liability position, our opportunity on the asset side that we've talked about, Rick talking about loans, we can hit the high end of that margin. On the low end, it's really the alternative, right? So as liability costs creep up, we talked about yield curve kind of moving the other direction on us at the moment, that's the potential to deteriorate a little bit margin over time. So it's really that, Brendan.

Your next question comes from the line of Nathan Race with Piper Sandler.

Curious, maybe, Rick, if you can kind of speak to kind of what you're seeing in terms of pricing on new loan production relative to roughly the 6.50% kind of core loan portfolio yield. And curious if you're seeing any kind of degradation in new loan yield production just given that you guys seem to be going upmarket in terms of clientele these days to some degree?

Yes. So I think on the loan pricing, we're continuing to see it stay fairly strong. We're really disciplined on that. So as a result, that is something that the team takes to heart and goes after. So I'd actually say that maybe it's -- maybe we're seeing a little bit of stress there in certain markets. Every once in a while, you get an irrational player. And in those markets, we choose not to play at that level and kind of decide to go wider. So we're not really seeing a lot of downward movement in that. I get -- I look at every exception that we have as we run it through the pricing model, and those are not accelerating. So it tends to be that we're about the same as we've been over the last 2 years and those types of exceptions. So I think pricing has continued for us to hold firm.

Okay. Great. That's really helpful. And then changing gears, I believe you guys have just over 100,000 shares left on the remaining buyback authorization. So just curious if you can kind of speak to the aptitude just given the valuation relative to peers these days, which seems quite low to that end. And just considering you guys are building capital at pretty strong clips and even have existing excess capital currently to maybe pursue some additional acquisition opportunities as well.

Yes. So we always balance the use of capital between share buyback, making sure we have enough for M&A transactions. We are in conversations with people on the M&A side. So we always want to have enough there to be able to perform those transactions. And then we use a model very similar to what we use on the acquisition side for the buybacks. So when we're in range to do buybacks, we think those are no-brainers. There's no integration risk. So we'll deploy the capital to do buybacks.

And so it all just depends on what's the earnback on that and does that fit our model, or we'll hold the capital looking for M&A opportunities, and we balance those 3 things at the Board meeting. We talk about it at every Board meeting, set our target price. And so we'll always be active in the buyback when it makes sense, and we'll be out of it just like we are on the M&A side when it doesn't make sense. So I hope I answered that question. You can't really figure it out.

Yes. No, I appreciate the various dynamics there, Brad. But if I could just follow up. So it sounds like we shouldn't be surprised if there's an increased authorization at some point, maybe later this year or...

Yes. I think we already have an authorization...

The Board has authorized and we're waiting on formal approval, but we plan to maintain...

We'll always have an open -- we always plan to maintain a buyback approval from the Board. The Board has actually already approved that, and we're just waiting for standard regulatory approval to up that. We haven't been in a big rush for that because we still have shares available to buy back.

[Operator Instructions] Your next question comes from the line of Matt Olney with Stephens.

I want to circle back on the loan growth discussion. And with the paydowns we've seen so far this year, it sounds like most of this is from the recent acquisitions. Any color you can provide as far as customer retention, employee retention from those deals and how that compared to your internal expectations?

Yes. So I think when we look at both of these transactions, the -- my expectation is it's exactly kind of what happened in Nebraska, it actually better than [indiscernible] [ Mark Parman ] did a great job of prehiring for that market. We already had opened an LPO office there. So we already had boots on the ground, but also we had a lot of color on other people in the marketplace that we might want to talk to.

And so I would say that the Nebraska market is in better shape than actually when we acquired it by quite a bit. The team that we have in Lincoln is very exciting. They mostly came from larger -- they all came from larger institutions and are excited to be back with a company like ours that's big enough to do the deals that they like to do without the complication of working for a $30 billion bank. And so we're really excited about the team in Omaha and Lincoln, Nebraska and how that team is shaping out. We've kept a core group in Omaha with us, and we've added to that. We probably started with 18 bankers on acquisition day, and we are up to 22 bankers.

So from an ability to produce, we actually have lots of ability to produce in that market, which is what attracted us to that market to begin with. And I think it's playing out exactly as we anticipated. Oklahoma City is kind of the same way. We're continuing to hire bankers in Oklahoma City. It gives us the reason to enter these markets, which is what I wanted to do with acquisitions is it gives us a really core base to build off of. So there's core customers there we can expand. And it gives us a footprint then to go hire people into. People don't want to work for a loan production office because they don't know if you're truly committed to that market or not. So it's hard to get people to work for you in those environments long term without having something to build around. And man, we've got scale in both of those markets now, great reputations in both of those markets. And so hiring people into those is an exciting venture.

So I'm as excited about our organic growth piece as possible. Even more so because of the legacy markets are, I don't know, 25%, 30% better than they were a year ago today, and you add these new markets on top of it with the acquisitions, it's great. And I'll turn it over to Rick.

Yes. I was just going to add, Matt, on the customer side of it, one of the things you find in these is there's always these really good core blue-chip customers. And what we're then able to do is really expand with them. And so that's -- you don't see that quarter 1, quarter 2, I mean, but that happens over time. So then you've got some really good customers. We spend a lot of time with them. Those are the ones then that allow you to expand from a -- they've got stuff at numerous other banks. Those are the ones we really are able to go after and you see that in year 2 and year 3 as that expansion really comes into play. And both of these banks, both NBC and Frontier had some really good core customers that we're looking for significant expansion over time with. So the customer -- the retention piece of that is on the core customers is really, really strong.

Okay. Great. I appreciate the color on that topic. And I guess switching back towards the margin outlook. Chris, you already provided some great color for us for the back half of the year. Any more color on when you think those near-term headwinds are going to moderate? And as we think about the margin for '27, any puts and takes we should be mindful of for that?

Near-term headwinds moderating. I think there's puts and takes on both sides where I'd say we have both tailwinds and headwinds operating right now to where that range, 4.25% to 4.35% is reasonable. And I think you could hit either end. I'm more optimistic about the 4.35% side of it. But I don't know that there's a specific kind of indicator of challenge today that I'm worried about alleviating. As we look into 2027 to -- as we get this organic growth engine going, I think you're going to see over time, maintenance of where we are on a larger earning asset base. And I'm optimistic we'll be able to accomplish that as we look out further into 2027 and 2028 kind of beyond.

Your next question comes from the line of Brett Rabatin with StoneX Group.

I wanted to ask on the fee income guidance. I know at the Investor Day, you seem pretty excited about despite where rates are, that mortgage banking could be a bigger contributor. Can we talk maybe about the low end or the high end of the fee income guide and just what drives it to the high end? Could that be mortgage? Would that be other things like trust, wealth? Any thoughts on that?

Yes. Good question, Brett. The high end of that is driven by continued growth in really all the business lines, right? So as we look to continue to integrate Frontier customers, NBC customers and looking to -- at the, call it, sales cycle on the commercial analysis side, looking at treasury opportunities, there's going to be means by which we continue to expand that particular line item. Mortgage banking -- I'm sorry, Frontier brought a good practice in that world. The interest rates are a challenge today, Brett, as you noted, with the rise in yield curves becoming -- the challenge of that -- the opportunity for that to expand versus stay is a little bit muted. But trust and wealth management continues to grow and provide opportunities. Debit card and credit card income are expanding as we continue to deepen relationships with those customers.

So the high end of that range is just continued trajectory of what we've been doing. And the low end is a function of -- it could be seasonality, it could be mortgage banking going down somewhat with the changing interest rate environment. That's what I would point to. I don't know, Rick, if you have anything else?

No, I think that's right. I mean we've added the people. We've added the strategy on there. I mean we're seeing on the TM side, for instance, there's just a lot more calls and a lot more opportunities for winning TM business. And there's just a sort of change in attitude. So we're looking at things like waivers and stuff like this. So it's just it's -- I think that piece will be coming. And Chris is absolutely right on the mortgage side. We've got a bigger mortgage production team than we did before. But again, that's one obviously heavily rate driven.

Okay. That's helpful. And then, Brad, you seem really excited about AI and deploying technology, and I'm looking at Slide 16, specifically. And I wanted just to hear maybe what inning you think you're in, in adopting AI in terms of what it can do? And then just aside from -- I think there's obvious benefits on loan review, getting things done faster and credit review, kind of maybe some of the other things that might be coming down the road in terms of efficiency from that perspective?

I think anybody that says we're not in the first inning or even at bat doesn't realize how much this is going to change the world. So I think anybody that says they're on second base probably doesn't realize what the power of this technology trend or change is going to be. So I look at this as -- and I said in some of my prepared comments, I think it has a lot to do with when I started banking, the bank I started at, we had 1 PC in the whole institution that had 2 floppy drives in it. And within 4 years, everyone had one on their desk, and they were all connected through Novell network and you could communicate with one another and share files. And all of a sudden, we dropped from $800,000 or $900,000 per employee to a couple of million dollars per employee within 5, 6 years, it was $5 million per employee. Now we're at $10 million per employee is kind of the benchmark.

So I think we're in a trend where we're going to be doing the same thing over the next 3 to 5 years. And so I think we're all in the beginning phases. And I think you're going to see costs coming out of all organizations because of this trend. And so as a growth company, it's very exciting to me because we've got great people that work for us. It allows us to continue to leverage their abilities as we continue to grow, it probably means we don't need to add as many people as we continue to grow as an organization and our efficiency ratio continues to get better and better as we continue to grow.

So I think we listed some things that we actually are using today and because they're easy to use on the loan review side, M&A review, headhunter placements, those types of things. But I think we're all in the very beginning phases.

Your next question comes from the line of Jeff Rulis with D.A. Davidson.

I wanted to ask about the added nonaccrual loans from Frontier. And I guess just the question of why weren't those added at the jump in 1Q? And just kind of speaking to more of the migration. And Rick, I think you talked about the Nebraska optimization of loans there. Just trying to track anything that developed kind of as when you closed and from then until now of just pointing to that migration piece.

Yes. What happens, Jeff, is there are credits that are paying as agreed. We tell the customer, we're not going to renew under the current terms. And so there's a little battleground that starts with that. We use that as leverage to start working them out of the bank. Sometimes that flips them to nonaccrual during that process of getting them out of the bank. We have them appropriately marked as part of the acquisition, but they come across as accrual because they are making payments and accruing.

But when we don't renew them, then they're not current any longer. So it just is something that happens regularly as we work through portfolios and collect things. So it's a modest uptick. There's nothing systemic in it. There's a house under construction that we don't think is going in the right direction. And so we wanted to find another bank, find another opportunity or we're going to work out of the thing.

I mean there's a whole host [indiscernible] through that process...

There's a divorce on an ag deal that causes a problem, and there's a whole host of issues that happen in the lending business, and that's what we do.

You kind of answered the follow-up. Those were marked at least on the Frontier side. So I appreciate it and it sounds like the loss content in the forward guide on provisioning, unimpacted. So just a quick follow-up is on the -- so it sounds like the opportunity on the Frontier side to decrease some of those deposit costs. Is there further there? Has that largely been worked through? Just wanted to get an update on how that's progressed.

Yes. There will continue to be some opportunity there, Jeff, over time. So Frontier had a healthy level of, call it, maturing deposits that had laddered maturities. So we'll continue to see some of that over the next 2, 3, 4 quarters. So it's there. A lot of it has been worked through, but there is still some opportunity.

We have reached the end of the question-and-answer session. This concludes today's call. Thank you for attending. You may now disconnect.

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Equity Bancshares, Inc. 2026 First Quarter Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Brian Katzfey, Vice President, Corporate Development and Investor Relations. Please go ahead.

Good morning. Welcome, everyone, and thank you for joining Equity Bancshares first quarter earnings call. A quick note before we dive in. 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. After the presentation, we'll open the floor for questions and further discussion. With that, let me turn the call over to our Chairman and CEO, Brad Elliott.

Thank you for being here with us today. We have a lot of exciting news to share today. Joining me are Rick Sems, our bank's CEO; and Chris Navratil, our CFO. We hit the ground running in 2026, welcoming new customers and team members in Nebraska on January 1. Entering the Nebraska market has been a strategic priority for us, and I cannot be more excited about what we will accomplish for the communities we now have the privilege to serve. The Frontier acquisition drove a 20% increase in assets and contributed to record quarterly revenue. It will be a great organic driver, setting us up for an exceptional 2026 and beyond. As we grow the teams in Nebraska, as we have been growing the teams throughout our entire footprint, this is going to be a great strategic platform for us to grow organically.

In February, we completed the Frontier core system conversion on time and on plan. The ability of our team to align vendors, allocate resources and execute complex integrations is a genuine competitive advantage. Julie Huber, David Pass and every team member who works with them and made this possible, I want to say thank you. As reflected in the year-over-year changes, we have accomplished a great deal over the past 12 months.

Compared to March 2025, our asset base has grown by more than 40% -- while driving that level of growth through strategic acquisitions, we've grown tangible book value per share by 5% and just posted a quarter with core EPS of $1.32 and core return on average tangible equity of 16.1%, exceeding the same period of 2025 by 32% and 46%, respectively. Core net income for the quarter grew faster than modeled expectations for the combined company. When you put this with less tangible book value dilution than we expected, the result is an exceptional start to 2026.

Having added Oklahoma City, Omaha, Lincoln, Des Moines and many other exceptional community markets to our legacy markets, we are positioned to continue to provide exceptional shareholder returns. Beyond merger-driven momentum, our bankers entered 2026 with purpose and energy, focused on our mission, creating opportunities for growth, rolling out new products and processes to better serve our communities, staying laser-focused on delivering outstanding returns and driving a more efficient company.

Serving our customers is the core of what we do. and we never lose sight of it. We're leveraging technology and continuously monitoring performance to ensure we're meeting the needs of every customer who relies on us. In the first quarter, we opened a record number of DDA accounts as a result of our retail teams being led by Jonathan Ruth, prioritizing customer needs and delivering differentiated exceptional service. We began 2026 with a larger, stronger balance sheet and earnings that beat even our own expectations. We're deploying capital with conviction, driving toward our mission of being a premier community bank in our markets while delivering exceptional returns for our shareholders.

The market is competitive, but our value proposition is intact, and our balance sheet gives us the runway to execute. Capital is strong, capital generation capacity is at an all-time high, and we remain confident in our $5 per share target for 2026. Our Board, leadership and team are aligned for continued growth. We are operating at a high level and see additional opportunities on the horizon. I'm very excited about what lies ahead. Now let me hand it over to Chris to walk you through the numbers.

Thank you, Brad. Last night, we reported net income of $17.0 million or $0.80 per diluted share. Adjusting for non-core items in the quarter, including merger expense of $5.7 million and Frontier provisioning of $6.1 million, adjusted earnings were $26.2 million or $1.23 per diluted share, up from adjusted earnings of $23.3 million or $1.21 per diluted share in the prior quarter. Purchase accounting accretion on the loan portfolio was $3.3 million in the current period compared to $2.3 million in Q4 2025. Excluding the after-tax impact of core deposit intangible amortization of $1.5 million and $1.0 million, respectively, adjusted earnings on tangible common equity were $27.7 million versus $24.3 million.

Adjusted return on average tangible common equity was a strong 16.1% for the quarter. Net interest income was $73.7 million, up $10.2 million linked quarter. Margin came in at 4.33% versus 4.47% last quarter. That dynamic, higher earnings, slightly lower margin reflects the expected impact of integrating Frontier's balance sheet. Purchase accounting accretion came in $800,000 ahead of forecast. Normalizing for that, margin would have been 4.29%, right in line with expectations. Noninterest income held steady at $9.5 million, expanding fee lines, including debit card, credit card, mortgage, insurance and trust and wealth offset declines in security transaction losses and swap fee revenue for the period.

Noninterest expenses for the quarter were $55 million. Adjusting for M&A charges in both periods and the prior period litigation settlement accrual, noninterest expenses were $49.2 million versus $44.1 million, an 11.5% increase linked quarter, driven by the Frontier integration. On a normalized basis, adjusted noninterest expense as a percentage of average assets improved 25 basis points to 2.57%. Pretax pre-provision net revenue, excluding M&A costs $748,000 in provisioning for unfunded commitments was $34.7 million or $1.63 per share. That's up from $28.8 million or $1.56 per share in the prior quarter.

Comparing to the same period in 2025, the ratio has improved from $1.23 per share or 33.1%. The effective tax rate for the quarter was 23.7%, impacted by periodic items not expected to recur. We continue to forecast a full year effective rate of 22% to 23%. Our GAAP net income included a $6 million provision for loan losses attributable to loan balances added through the Frontier acquisition. Ending ACL coverage was 1.18%. The ending reserve ratio, inclusive of merger-related discounts closed at 1.77%, up from 1.67%. During the quarter, we were active under our repurchase authorization, buying back 500,000 shares at a weighted average cost of $44.74. 327,662 shares remain under the Board's September 2025 authorization.

TCE closed the quarter at 9.0%, while CET1 and total capital were 11.5% and 14.4%, respectively. At the bank level, the TCE ratio closed at 9.8%. Now let me hand it to Rick to walk through asset quality.

Thanks, Chris. Q1 delivered strong underlying credit. Nonperforming assets closed at $58.3 million, up $11.6 million, primarily attributed to the addition of Frontier. As a percentage of total assets, they moved just 3 basis points higher to 0.8%. Nonaccrual loans rose similarly to $52.4 million from $40.3 million, again, primarily driven by addition of Frontier assets. Our nonaccrual exposure is granular with only 4 relationships exceeding $1.5 million.

Charge-offs reflect continued resolution activity on credits we previously flagged. Loans past due and nonaccrual as a percentage of end-of-period loans increased to 1.86% from 1.53% linked quarter. The move is primarily in the 30- to 59-day bucket concentrated in one acquired market. It's a merger process issue, not a credit issue. These bankers are simply navigating a new renewal process post conversion. We anticipate full resolution in Q2. We see nothing systematic that would suggest that this becomes the new normal for our portfolio. Net charge-offs annualized were 10 basis points for the quarter as a percentage of average loans, up 3 basis points linked quarter.

Looking ahead, we remain confident in our credit trajectory. Despite macro uncertainty, credit quality trends across our portfolio are stable and running below historic norms. The Frontier portfolio is granular and well underwritten as evidenced by their track record, and we do not expect a meaningful impact on our credit quality going forward.

Thanks, Rick. As I mentioned, margin closed the quarter at 4.33%, ahead of expectations. Total purchase accounting contributed $3.3 million or 19 basis points in the period. Absent near-term payoffs on acquired loans, we anticipate purchase accounting normalizing to approximately $2.5 million in future quarters.

Adjusting March results for anticipated accretion yields a normalized margin of 4.29%. Frontier contributed its funding portfolio with a higher cost of funds as compared to legacy equity, improving future liability sensitivity while creating the anticipated near-term margin tightening. The addition of Frontier balances drove average interest-earning asset growth of 22.2%, average interest-bearing liability growth of 25.6% and the ending interest-bearing liability to interest-earning assets ratio of 76.4%. Our loan-to-deposit ratio closed the quarter at 86%. We continue to expect full year results consistent with our outlook in the slide deck, including margin in the 4.20% to 4.35% range with periodic variability tied to purchase accounting. Rick?

Thanks, Chris. Before I get into loan production, I wanted to take a moment to recognize the extraordinary effort of the Equity Bank team over the last 180 days. This has been a truly transformational period for our company, and it would not have been possible without the best community bankers in the business showing up every single day. As we enter 2026, we operate in 6 states, including 7 major metros and a deep network of strong communities. We have the tools, the products and the motivated teams to deliver outstanding performance.

During Q1, our production teams continue to fire on all cylinders across the footprint. Loan production was $267 million, up 21.7% linked quarter. Originations came on at an average rate of 6.87%, continuing to drive accretion to current coupon yield with a 10 basis point increase versus the prior period. Both our metro and community legacy markets contributed positively to the production outcome and were net positive for loans in the quarter. As we discussed, the first 9 to 12 months following the merger involves intentional portfolio optimization and planned integration-related attrition, a dynamic we've managed proactively.

We've recruited and hired new bankers in Wichita, Oklahoma City, Lincoln and Omaha, and we'll keep adding talent across the footprint. The opportunity to deepen commercial relationships, both loans and deposits across these new markets is significant, and our teams are locked in on growing our organic engine. Our pipelines continue to build throughout the banker network. At quarter end, our 75% pipeline stands at $517 million. Line utilization was up slightly for the quarter at approximately 56%, with unfunded positions rising alongside production growth and the addition of Frontier, creating meaningful opportunity going forward. Total deposits increased approximately $1.2 billion during the quarter.

In addition to the contribution of Frontier, the majority of our legacy markets saw growth as our retail teams continue to gain traction and execute on our aggressive goals. Outside of our administrative and Nebraska cost centers, balances increased $191 million, including more than 5% growth in 5 of our community markets. I want to specifically call out our North Central Missouri market, including Kirksville, which saw a 7% increase in balances in the quarter. Acquired in the spring of 2024, I'm excited to see Norman Baylis and his team finding success to kick off the year.

Frontier carried brokered funding positions that are now part of our balance sheet. We have a clear, disciplined plan to reprice and replace those with core relationship deposits over time. Noninterest-bearing accounts are at 20.2% of total deposits. Our retail teams are off to a terrific start in 2026, opening record levels of DDAs and executing on the company's goal of deepening wallet share and delivering exceptional service. Heading into 2026, we are well positioned to deploy available liquidity and drive growth across our markets. We continue to anticipate mid-single-digit organic loan growth. The addition of NBC and Frontier add asset generation depth to our footprint, while our community markets continue to provide strong funding opportunities. Management and team members are aligned and [ bought ] in. I'm genuinely excited about what we'll deliver in 2026. Brad?

I take enormous pride in everything this team continues to accomplish, growing our asset base by more than 40% across 2 transactions. both fully converted and integrated is a remarkable achievement that speaks directly to the caliber of our people. I have never been more confident in what we will build together in 2026. We are committed to empowering our people, serving our customers and communities with excellence and delivering strong, consistent returns for our shareholders. Our Board and leadership team are fully aligned, and we are ready to keep executing on our mission. Sourcing, negotiating, integrating franchise accretive M&A transactions is a core competency of Equity. Our team has significant experience in this area given the number of transactions we've completed.

And I'm proud to announce that we're consistently achieving results better than what was expected at the time of announcement. This is a testament to the team's hard work and prudent and realistic modeling assumptions. This outperformance allows us to drive enhanced earnings and shorter tangible book value earnbacks. We fully appreciate the importance of tangible book value growth over time as a key metric for shareholders' performance and are committed to executing M&A transactions that align with our goals. We're putting the right tools, strategies and people in place to drive both organic and acquisitive growth. And I genuinely believe we are setting ourselves up for sustained long-term success across the entire footprint. Thank you for joining us today. We're happy to take your questions.

[Operator Instructions] We'll go first to Jeff Rulis at D.A. Davidson.

Just a question on the acquired loan balance. Do you have the Frontier loan balance at acquisition in millions? I know you said $1.3 billion, but also at acquisition and at quarter end, trying to back into -- it sounds like some decent organic growth. But if you had those Frontier balances, that would be great.

Yes, Jeff, it was about $1.28 billion in terms of acquired assets pre-purchase accounting mark. The decline period-over-period, excluding that, about $40 million as we talked about yesterday and Rick can expand on here is effectively what we saw is some short-term optimization decline in the Frontier footprint offset by [ what ] is positive production everywhere else in the footprint. So really a good outcome for us in our minds in terms of periodic production, but some of those headwinds exist at the beginning of the integration of that Frontier footprint.

Maybe put another way, do you have -- it's a combined company as of January 1, but do you have like legacy organic growth that you could also identify? Or is that difficult to carve out?

Chris, do you want to...

Yes. I mean, so on the loan side, specifically, we grew about just under 1% on our non-acquired markets. So if you take out Oklahoma and you take out Nebraska, so we grew about 1% on a kind of point-to-point basis. So just under 3% annualized or something like a 3-point something annualized in those legacy markets on the loan side.

Okay. I appreciate it. And then maybe a similar question on the nonaccrual increase. I think roughly 8 added from Frontier, 4 from sort of the legacy unit. Maybe if you could put any color on the type of loans that were brought on.

And then second piece to that, I think, Rick, you mentioned -- sorry, I missed the piece about the -- it sounded like there was a past due. Maybe if you could just outline the balance of that one that was brought on that sounds like it's got a quick resolution ahead.

Yes, it really wasn't a loan. It was kind of our -- we have one specific market that didn't understand how to get renewals done and manage those during that time from Nebraska. And so those are all correcting themselves or already have been corrected at this point, Jeff.

Brad, what was the balance of that -- those loans, if you could?

A little over $30 million.

About $30 million. But it's not one loan. It's about 10 or 15 different relationships.

[indiscernible]

Actually more than that, 30 or 40 relationships.

Yes.

Okay. And then maybe last one, if I could. The margin -- maybe, Chris, you kind of talked about a 4.29% core. Do you know what that core NIM was for the month of March? It sounds like you've got an opportunity to kind of alter Frontier's funding mix a bit, and it sounded more leaning upward than not. But do you have a March figure that would compare to the 4.29% core for the quarter?

Yes, Jeff, March actually compares pretty consistently with that 4.29% figure. There are still some potential tailwinds as we look into Q2 and beyond as we're working to reprice some of those Frontier deposits. But that's been happening throughout the quarter and really accelerating towards the end of the quarter. So we're not seeing that benefit in March. We'll see more of it in April and beyond.

The range that's kind of provided in the outlook, I have some optimism that we can hit the high end of that range based on some of those dynamics. But I think because of the periodicity of accretion and the challenges of continuing to work through a balance sheet, there's risk there as well. So somewhere in that range is fully accomplishable. I think the high end is also accomplishable based on some of those dynamics, but we have to execute on it.

We'll move next to Adam Kroll at Piper Sandler.

I'm on for Nate Race. Yes. So maybe starting on funding costs with deposit costs rising this quarter with the Frontier acquisition. And I know they had a piece of broker deposits. So I guess I'm curious if you could provide some additional color into repricing opportunities you have on the deposit side from both DD and a non-maturity?

Yes. Adam, I think there's an ample amount of repricing capacity. Just -- I mean, for some color, they had about $100 million that did get repriced in Q1 that was at a weighted average cost of [ 450 ] -- so that's an aspect of their cost of funds that, again, it accelerated towards the end of the quarter that we've been able to reposition into what is comparatively cheaper. Even the newly issued brokered in the period is about [ 375. ]

So that's -- you pick up 75 basis points on $100 million. They brought in a relatively higher overall cost of funding base. So we'll continue to see opportunity to reprice. Some of that did have some duration on it. There is some lockout. So we'll continue to have some heavier cost over time, but we're going to continue to see opportunities to bring some of those things down and anticipate being able to do so.

Got it. I appreciate the color there. Maybe moving to capital management. It's nice to see the step-up in the buyback during the quarter. And you've obviously been active on the M&A front with the 2 deals over the past year. Do you expect to continue to be active on the buyback? And are you seeing opportunities on the M&A front as well?

So we look at capital utilization all the time. Yes, we continue to look opportunistically at buybacks. And we also look -- and we also think we have plenty of capital for continued M&A. And so we've got good capital ratios. We're building capital at a little over $25 million of capital generation a quarter. And so we've got good capital generation from the operating company. And so we have lots of different prospects and lots of different opportunities we're talking to on the M&A front. And we will still remain active on the -- if it works on the buyback side.

We'll go next to Matt Olney at Stephens.

I wanted to ask more about the expense outlook from here and get some updated thoughts around deal cost savings from Frontier with that conversion now behind us, I'm curious how the cost savings are looking compared to the original expectations. And I would just love to get some thoughts on when you expect to get the fully loaded cost savings this year?

Yes. So a couple of things on that, Matt. On the technology side, so the integration as well as some of the people that we maintained through that conversion date, all of those items have been fully taken out of run rate at this point. So the cost savings on technology and people there are in line with what we expected, and we'll start to realize that. We started to realize in the back end of the first quarter, and we'll fully realize it in the second quarter. I think generally speaking, as it relates to the cost saves around this transaction, they were relatively conservative, something 23%-ish on expected cost savings. And I think our execution will realize that or better as we think into Q2 and beyond. So we anticipate being in line to a little bit ahead of where we originally anticipated as we contemplated the transaction.

Okay. And I guess the other part to that is just there was a mention about reinvestments, new producer hires. Just maybe an update on kind of what you're seeing thus far, new producer hires and what's in the pipeline?

Yes. So we've hired probably about -- between Oklahoma City and Omaha and Lincoln, we've probably hired about 10 additional or new bankers. Some are replacements and others are at that point in time. So all real positive there. The pipeline remains kind of consistent with where it was at the end of the year. And so -- but that number really bodes well for second and third quarter with what that is. So production numbers look really good. We're actually seeing a number of additional projects and things that both Brad and I are getting out to see customers and prospects on things.

And so it looks like it's going to be fairly robust opportunities for us. As we kind of mentioned before, pricing always comes into play on this. And every once in a while, you never count it until it's in. We're not seeing -- we do have a couple of crazy competitors on things. But for the most part, people are, I think, coming back to a little bit more in line with where we are on pricing. So that's positive as well.

We'll take our next question from Damon DelMonte at KBW.

I guess first question, just kind of probably for Chris on the reserve and the kind of the provision outlook. The reserve came down 6 basis points quarter-over-quarter with -- even though there was purchase marks against the acquired loans. So just trying to kind of get a feel for where you're comfortable with where the loan loss reserve can trend over the coming quarters.

Yes, Damon, I'd look at it as being consistent with where it is on a relative to asset basis. As we start to see depletion of those purchase accounting marks and looking it on a relative total position to the portfolio, there may be opportunity or need to build back up to, call it, 123 type of reserve. But I think in the near term, thinking about it as 118 basis points from here plus whatever production is. So my anticipation for me to provide absent any significant specific reserve items, specific deterioration in credit is that it's going to account for the production in the portfolio. So as we grow the portfolio, so too will we grow the reserve.

Okay. So the $6 million to $8 million guidance for '26 for the total provision, if you back out the onetime, the CECL impact on the first quarter, we kind of just extrapolate the remaining 3 quarters to fall in between that range?

Yes, that to maybe a little bit less, Damon. So I think thinking about it is kind of $1.5 million to $2 million run rate depending on growth is a good way to continue to think about it.

Got it. Okay. That's helpful. And then I guess just secondly here or lastly, on the fee income side of things, can you talk about some of the opportunities to kind of tap into the Frontier franchise and what products and services you guys think have the best opportunity to kind of ramp up some revenues for you guys?

Yes. So first and foremost, treasury management, our product in there, we've actually brought in a new Head of Treasury Management. And we see that as a real opportunity. That wasn't something that was really in the forefront of what they were doing, number one.

Number two, they had a decent-sized mortgage business. And so we're continuing to see some potential for mortgage fees going forward. And we see that across the footprint. So continue to get the team built out. And we use that as a product to really -- for our core customers and for bringing in core customers. We're not really a mortgage shop. just to bring in mortgages.

And then the third piece of it is on the wealth management side of it. And so we're already seeing some real positive results there on being able to grow with wealth management. And so we're actually looking to add a couple of additional people in our markets. We do really well in the community markets. So in Nebraska, Fall City, Tender, Norfolk and Madison, where we are -- we see those as real opportunities for growth for us in the future as well.

[Operator Instructions] And at this time, we have no further questions. This concludes today's conference call. Thank you for your participation. You may now disconnect.

Hello, and welcome to the Equity Bancshares, Inc. 2025 Q4 Earnings Call. My name is Carla, and I will be coordinating your call today.

[Operator Instructions]

I would now like to hand you over to your host, Brian Katzfey, Vice President, Director of Corporate Development and Investor Relations, to begin. Please go ahead when you're ready.

Good morning. Thank you for joining us today for Equity Bancshares' Fourth 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, everyone. Thanks for being here today. Joining me are Rick Sems, our bank CEO; and Chris Navratil, our CFO. I'm really proud to wrap up what's been a big year for Equity Bank. We ended 2025 with a strong balance sheet and earnings that beat our expectations. We started the year with $5.3 billion in assets and finished with $6.4 billion in assets. We added an additional $1.4 billion when we closed the Frontier merger on January 1.

That's nearly 50% growth. With that kind of scale, we're pushing to earn more than $5 per share in 2026. That's a huge milestone made possible by our team, our partners and the trust of our investors. I couldn't be more proud of what our team completed in 2025. While handling the 2 biggest transactions in our company's history, our folks stay focused on what matters most, our customers.

Despite a tough environment with more competition and lower rates, we still grew loans and deepened relationships. Everything we do is about making the best decisions for our customers, our employees and our shareholders.

In 2025 and into 2026, we stay true to our mission. We're creating opportunities for our people to grow, rolling out new products and processes to better serve our communities and staying laser-focused on delivering strong returns. Thanks to David Pass and our tech team, we're heading into 2026 with a big push on using technology to improve service and efficiency.

We're focused on using data smarter and moving faster across the board. Even with the Frontier acquisition, our capital position and generation remains strong. We'll keep being thoughtful about how we deploy capital to benefit everyone, our shareholders, customers and employees. Our Board, leadership and team are all aligned and energized. I'm excited about what's ahead in 2026. I'll stop here and hand it over to Chris to walk through the numbers.

Thank you, Brad. Last night, we reported net income of $22.1 million or $1.15 per diluted share. Adjusting for noncore items in the quarter, including merger expense of $1.5 million, litigation settlement expense of $1 million to fund anticipated resolution of our ongoing overdraft suits, and nonaccrual benefit of $900,000, adjusted earnings were $23.3 million or $1.21 per diluted share compared to adjusted earnings of $22.4 million or $1.17 per diluted share in the previous quarter.

Purchase accounting accretion on the loan portfolio was $2.3 million in each period. Net interest income for the quarter was $63.5 million, up $1 million linked quarter. Margin for the quarter was 4.47%, an improvement of 2 basis points when compared to margin of 4.45% linked quarter. Noninterest income for the quarter was $9.5 million, up $400,000 from adjusted Q3 and in line with expectations.

Noninterest expenses for the quarter were $46.6 million. Adjusted to exclude M&A charges and the litigation settlement accrual in both periods, noninterest expenses were $44.1 million compared to $42.9 million, an increase of 2.7% linked quarter. The increase is attributable to provisioning for unfunded commitments, which was up $1.2 million in the quarter. Excluding these noncore items for each period, adjusted noninterest expense as a percentage of average assets improved 2 basis points to 2.80%.

Our GAAP net income included an immaterial release of reserve through the provision as periodic loan balances were down and charge-offs were muted. The ending coverage of [indiscernible] ACL loans was 1.26%. The ending reserve ratio, inclusive of discounts related to MVC closed the quarter at 1.33%. During the quarter, we were active under our repurchase authorization, acquiring 172,338 shares at a weighted average cost of $41.69.

872,662 shares remained under the authorization approved by the Board in September. TCE closed the quarter at 9.9%, up 23 basis points quarter-over-quarter. CET1 and total capital closed the quarter at 13.1% and 16.3%, respectively. At the bank level, the TCE ratio closed at 10.3%, I'll stop here for a moment and let Rick talk through asset quality for the quarter.

Thanks, Chris. In the quarter, we saw a series of positive outcomes in our credit portfolio. Nonaccrual loans moved down to $40.3 million from $48.6 million linked quarter, a 17% decline. The improvement was driven by a relationship brought on through NBC, resolution of which also contributed positively to margin and provisioning. The remaining nonaccrual balance is comprised of a number of low dollar exposures with only 2 in excess of $1 million to $3 million, the largest QSR relationship we have discussed previously continues to move towards resolution. Loans past due and nonaccrual as a percentage of end-of-period loans declined to 1.53% in from 1.55% linked quarter. Net charge-offs annualized were 7 basis points for the quarter as a percent of average loans, down 4 basis points linked quarter. Year-to-date net charge-offs annualized were 6 basis points.

Looking ahead, we remain cautiously optimistic on the credit environment and the outlook for 2026. Despite some uncertainty in the broader economy, credit quality trends across our portfolio remained stable and below historic levels. The addition of Frontier's portfolio is not expected to have a meaningful impact on credit quality trends as their portfolio is granular and well underwritten as indicated in their history of strong credit performance.

Thanks, Rick. As I previously mentioned, margin improved 2 basis points during the quarter to 4.47%. The combination of loan purchase accounting and nonaccrual benefits contributed 22 basis points in each period. The modest expansion is attributable to declines in the cost of funding, outpacing declines in the earning asset yield as the impact of our bond portfolio repositioning was fully realized in the quarter. Normalizing loan purchase accounting to 12 basis points of margin and excluding nonaccrual benefit, yields a core margin of 4.36%. As we continue to see the [indiscernible] FOMC move down interest rates in the quarter, cost of deposits declined by 10 basis points and cost of funding declined by 12 basis points.

As we look ahead to future [indiscernible] FOMC decision, the balance sheet remains positioned to realize a neutral impact in a moderated decline scenario. During the quarter, average earning assets increased 1.21% to $5.64 billion. The combination of margin and asset expansion led to an increase in net interest income of $1 million, approximately $700,000 ahead at the midpoint of our forecast. Comparative outperformance was driven by better-than-expected purchase accounting and asset quality as well as the repositioning of the bond portfolio in the previous quarter.

Loans as a percentage of average earning assets declined from 76.2% to 74.6%. As we previously mentioned, we closed on our merger with Frontier on the first day of the new year. Frontier contributes $1.3 billion in loan assets against $1.1 billion in deposits. As we look to Q1 2026, we anticipate loans as a percentage of average earning assets of approximately 80% and a loan-to-deposit ratio of 88%. While purchase accounting remains in process, using the modeled expectations from our announcement, the addition of Frontier's portfolio will be accretive to NII, but dilutive to margins. We anticipate margin for the quarter and throughout 2026 of 4.2% to 4.35%.

In addition, the impact on margin, our merger with Frontier is expected to add noninterest expense of $23 million to $24 million and noninterest income of $2 million to $3 million. Refer to the outlook within our investor presentation for additional detail on expectations for 2026. The conversion of Frontier systems is scheduled to take place in the middle of February with anticipated cost saves realized by the end of Q1. Rick?

Thanks, Chris. I want to start by emphasizing the exceptional efforts of the Equity Bank team over the last 180 days. It has been a transformative year and it would not have been possible without the committed efforts of the best community bankers in the business. I want to thank all the operating teams that report to Julie Huber, David Pass, Chris Navratil and Krzysztof Slupkowski. The teams have done a great job executing on the integration of NBC and getting ready for Frontier. They have done a great job of making all this look routine. As we enter 2026, we have a presence in 6 states, including 5 major metros and many strong communities. We have the tools, products and motivated teams to drive excellent performance in the new year.

During the quarter, throughout the footprint, our production teams continue to originate loans and relationships at a high level. Loan production in the quarter was $220 million, down linked quarter, but up $100 million compared to the same period last year. Originations came on at an average rate of 6.77%, representing continued accretion to current coupon loan yield on the portfolio. Production was offset by continued headwinds in the portfolio from payout activity.

We were cognizant of the impact of Frontier on the pro forma balance sheet, and we're strategic in our approach to pricing new business in the quarter, resulting in a modest level of decline in ending balances. 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 look to 2026.

At the close of the quarter, our 75% pipeline is $452 million. Line utilization was flat for the quarter at approximately 54%, though unfunded positions rose with production in the quarter, providing opportunities for increases moving forward. Total deposits increased approximately $43.5 million during the quarter, including core deposit expansion of $123.5 million, offset by a decline in brokered deposits of $80 million.

Noninterest-bearing accounts closed the quarter at 22.4% of total deposits. Our retail teams were busy in 2025 and results showed positive trends in gross and net production levels, including net positive DDA comp production, though we have a long way to go to meet the aggressive goals we have set. As we welcome Frontier, Mark Parman will join Doug Ayer to lead the team through the transition and into the future. We couldn't be more excited about the expansion in these markets. Greg Kossover, has done a great job leading the NBC Group through the transition into the Equity Bank platform and into our culture.

Heading into 2026, we are well positioned to use available liquidity to grow throughout our markets as we look to deliver mid-single-digit loan organic growth. The additions of NPC and Frontier add asset-generation depth to our footprint, while complementary community markets continue to provide funding opportunities. As we close 2025 and look to 2026, management and the Board are aligned in the expectation for realized growth in the balance sheet and noninterest revenue lines.

I look forward to assisting our excellent teams in executing on that plan. Brad?

I take a lot of pride in what our team accomplished this year. We came into 2025 ready to grow, and we did just that, growing our balance sheet by nearly 50% and positioning ourselves to drive towards $5 per share in 2026. It's an honor to lead this company. We're committed to empowering our people, serving our customers and communities and delivering strong returns for our shareholders.

Our Board and leadership team are fully aligned, and we're ready to keep executing on our mission. I want to take a moment to thank Rick and Chris for their outstanding work this year. The amount of modeling, analysis and strategic planning that goes into evaluating M&A opportunities is immense. And while we only pursue a few, each one takes a tremendous amount of effort from the entire team to get across the finish line. Brett Reber also plays a critical role in these efforts, and I want to recognize his contribution as well.

Beyond M&A, I'm just as excited about the organic growth we're working on. We're putting the right tools, strategies and people in place to drive that growth. And I believe we're setting ourselves up for long-term success across our footprint. Thanks again for joining us today, and we're happy to take your questions at this time.

[Operator Instructions]

And our first question comes from Jeff Rulis with D.A. Davidson.

This is Ryan Payne on for Jeff Rulis today. Just on the margin guide, I want to confirm that, that includes expected accretion from Frontier if you have a read on that going into 2026, just trying to get at a consolidated core margin expectation?

Yes. Ryan, that does include the accretion for Frontier into 2026, yes.

Got it. And I appreciate the loan growth guide, but maybe on competition, are you seeing other stretch on pricing or underwriting standards? How do you see things shaking out there?

Yes. So this is Rick. So I think what we -- we're definitely seeing some of that on the competition front. So we just kind of strategically made that decision that we're continuing to hold our pricing higher. So again, we're -- we had about $1 billion of production. We had onetime payoffs this year of about $700,000 and when we get into that, there was about 40 -- actually, I want to break, about 3/4 of -- so that was about 30% of that. So roughly 200 and some are ones in which I would say it's really rate based where we saw people go really low. Going down into maybe a point lower than where we were and winning those.

So we've strategically decided to let those ones go and keep our pricing up at that point. So again, our production continues at that high level. We continue to expect that to happen through the quarter. And as we get that benefit of lower paydowns this quarter, we'll start seeing that growth. So we're not that concerned about that level.

We've gone into these periods before where we just finished a merger that was very high loan-to-deposit ratio. We're adding Frontier who's very high at loan-to-deposit ratio that also has assets that are [indiscernible] sold participations to other institutions that we can pull back. So we made a strategic look into that opportunity and said, we don't want to stretch down on rates on our portfolio, when we know we are getting rates that are at a higher number coming on our balance sheet in the very near future. So I think it was -- we've had really good originations, but in the same sense, it doesn't make sense to book things on our books at a point lower than where we think the market is just to keep loan volume.

And our next question comes from Damon DelMonte with KBW.

Just a follow-up on the commentary on the loans. Brad, you just mentioned about the opportunity to pull back some participations that left the Frontier bank. What types of loans are those? Are they traditional C&I loans? Or are they CRE? And kind of any color on the opportunity there?

Actually, this is Rick. It's a combination there -- it's probably $50-ish million in that range across the board of types. So it's not just one type of loan.

Got you. Okay. Great. And then when you look at your expense guide for next year, I think at the time of the merger, you guys have targeted around 23% cost saves. I guess now that the deal has closed and you've had a good look at the Frontier, how do you feel about those cost saves? And do you think there's opportunity to come in at the lower end of the expense range?

Yes, Damon. I tell you, so the 23%, I think, is still a good number, can we do a little better than that? I think we'll find out as we progress through the first quarter and know better. But today, I think that's a good baseline for thinking about Frontier. That said, the lower end of the expense guide to me is still an accomplishable number. So we've been talking about over the last few quarters and really the last couple of years of initiatives to drive -- try and drive additional efficiency into the way we go about operations looking specifically at [indiscernible]

contracts and driving cost reductions across some of our partnerships that products and services we're providing the customer. So there's absolutely opportunity to hit it without call it, outsized positives coming out of Frontier from a cost saves perspective. But that said, using 23% is still a good number today, and there may be upside to that as well.

Got it. Great. And then just lastly, from a capital management perspective, nice to see some buyback during the quarter. M&A has been a big topic of discussion with you guys particularly in the last year with the 2 deals that you got done. But I guess how do you feel about things now that Frontier has done and you're going through the integration process we think more about capital management falling into the buyback bucket in the near term? Or do you see more M&A opportunity in the near horizon?

Well, as you know, banks are sold and not bought. We say that all the time. But it's -- so it's going to depend on if there are opportunities for us to deploy that capital. And by the way, I think that would be midyear that we'd be doing that. We're making $25 million in the quarter, approximately. So we're building capital along the way. So we've got plenty of capital to do both, and we feel very confident that we are going to have opportunities to do both along the way.

So we're going to look at buybacks when it makes sense, and we'll deploy capital that way as we have -- even while we're doing the M&A. But I think M&A still has a -- we got a lot of really good conversations going on the M&A front.

And our next question comes from Nathan Race with Piper Sandler.

Chris, I was wondering if you could just help us on a good starting point for the margin? I know it's going to include some accretion in the first quarter. And what is that margin outlook for the first quarter contemplatinterms of the opportunities to reduce some of the higher cost funding that should be picking up from Frontier.

Yes. I would look at the low end to the midpoint for the first quarter. So let's call it, $425 million for the first quarter. It does contemplate some repositioning of debt and high-cost liabilities. On the frontier balance sheet. So immediately post transaction, we paid off all of the holding companies that they add. So there's some cost savings. There's some margin improvement there. They do have some higher cost FHLB borrowings and brokered funding that we'll continue to look at opportunistically reducing, which I'll comment the cost of cash.

So it becomes something of a neutral trade in terms of NII, but will improve margin a little bit. But yes, I'd look at about 4.5% for the first quarter and the holding company debt immediately out and looking at some other opportunities to reduce cost through the first quarter as well.

Okay. Great. That's really helpful. Then maybe for Rick, Curious if you have any visibility into kind of expected payoffs.

In the first quarter and just how you kind of see the guidance -- or I'm sorry, the cadence of net loan growth progressing over the course of this year. Do you anticipate to be kind of more 2Q and 3Q and 4Q weighted? Just any thoughts on kind of just the pipeline and visibility and payoffs and just how you see the cadence of loan growth over the course of 2026. Yes. So right now, the pipeline, again, as we talked about, is fairly strong, consistent with where it's been in the other quarter.

So we expect to still have the same amount of production for the quarter from this quarter. So that would be the first point there. As far as payoffs go, I mean, they're actually -- they're unexpected unscheduled payoffs. So there are times in where we have a lot less input and visibility into that. At this point in time, I mean, we're not seeing. I don't have a list from. And the guys do a pretty good job of staying ahead of it. I don't have a list that's saying, well, we're going to have a super high unexpected payoffs this quarter.

Normally, though, it is a situation where it's second -- the second and third quarter are really good growth opportunities for us are really good opportunities for us where we do grow the overall loan balances. So I don't know that exactly helps. But again, payoffs just -- they can do a lot of times come out of the blue. The borrower gets an offer, the borrower is marketing something doesn't know whether they want to sell it or not they aren't communicating with their lender on that strategy because it's not something that they want to spook the lender about, but so sometimes payoffs aren't scheduled.

We've never had payoffs like we had last year, so I don't anticipate that repeating itself. Rick's got the team doing really great originations. We had 4 quarters in a row last year where we had our strongest origination. So I think we're well positioned to continue to grow the balance sheet and keep it where we want it to be and increase our margin.

Got you. That's really helpful. If I could just sneak one last one. Just on the buyback appetite going forward, obviously, like to see some share repurchases in the quarter and was wondering if you could just remind us in terms of kind of what your governors are in terms of how aggressive you want to be on buybacks going forward. Obviously, you're going to be building capital at really strong clips just given the profitability profile these days and the outlook for this year.

And obviously, that includes some thoughts on kind of the expectations for acquisitions this year as well, which I appreciate your earlier comments, Brad, that there's still some active discussions going on.

Yes, we always look at -- we look at it similarly to acquisition opportunities. So we look at that 3-year earn-back range on buybacks. And as we're deploying capital and making sure that we know we have a capital need coming up, we might be less aggressive on the buyback side. if we don't think we'll have any opportunities coming up, we might be more aggressive.

But it kind of gives you a framework of how we think about it as an organization. We've been very active in the buyback market over the last 5 years, and consistently been in that market when it works for our company. And so on a return basis. So I might give you enough parameters there that you can come to some conclusion on, what kind of range we look at on buybacks and how we deploy capital.

[Operator Instructions]

And our next question comes from Brett Rabatin with Hovde Group.

This is Anya Pelshaw speaking on behalf of Brett. Just hoping you guys could comment on what you're seeing competitively as far as deposits go and also some thoughts on deposit generation in newer markets.

Yes. So this is Rick. I'll take it. So first off, I'd actually say that deposit account gathering is really good. So we've made changes there. We've been -- we're opening accounts in a manner that we haven't historically. So that part is really positive. Balances continue to be challenging because there are a lot of people out there looking for balances. And so we continue to be disciplined from a pricing perspective.

And so we look at it as we'd rather have the account, we'd rather have the transaction account later on, and that's going to come back to us. The team has done a really good job, though. And we definitely gathered deposits this year. And so the outlook for this year, again, it's going to be challenging, but I like the areas we're in. We're in some really good areas of adding in that give us opportunities in Oklahoma City and in Omaha now with both NBC and with Frontier.

And then their market -- their community markets are -- there are some really strong community markets that we added. And with our product sets we're adding on there, we're starting to see additional account generation. So we can see some growth coming out of there. Again, it's a challenging environment. So it's hard to say what competition will do in that space, but we feel confident that we can grow deposits this year.

And the next question comes from Terry McEvoy with Stephens

This is Brandon Rud on for Terry. My first one just on loan growth in 2026. Are there any markets or commercial segments, in particular, that you may anticipate outperform the portfolio as a whole?

Yes. Each year, we have a couple that seem to do well off of there. I like what's happening in Missouri. I think that's a market that can do really, really well for us. And then I think what we're doing down in Oklahoma, same type of thing. I think there's a lot of opportunity in Oklahoma City and in the surrounding communities. And as we're getting to know the team, up in Nebraska better, that's going to create a lot of opportunities for us as well. So those are the [indiscernible] in Oklahoma has been a very strong generator for the last couple of years, and I expect that to continue to be the case as well.

Kansas City had a booming year.

Yes, Kansas City had a great year this year, and that's what same with Missouri. I think that whole -- both in Kansas City and then also throughout the community markets in there, give us a real good opportunity for growth.

Okay. Perfect. Maybe more of a modeling question, but I think I heard your comments on loan pricing earlier. Where are new loans coming on at? And how does that compare to those that are paying up and maturing, I'm just trying to get a sense of the incremental benefit that they're picking up.

Yes. So the new originations are accretive today to where [indiscernible] coupon has been heading. So the new originations that are coming out about 50 basis points ahead of our coupon yield that's included within the margin. So we're seeing, call it, accretive impact of each of the incremental dollars that are going out. So as we can grow that balance sheet, you should see comparative expansion of loan yield on a coupon basis, right? So backing out the purchase accounting [indiscernible] nonaccrual [indiscernible]

Okay. Perfect. And I guess the last one for me. Over the near term, I heard your comments that accretion is within the $420 million to $435. I guess, is there any -- do you have a near-term sense of where that may shake out? I think you said normalized to 12 basis points for the fourth quarter. I'm assuming that steps up a bit in 1Q.

Yes. The 12 basis points is -- that's the cost benefit of NBC as we layer in additional Frontier components, you're going to have additional accretion. I can shoot to you, Brandon, in the basis point attribution. I don't have it in front of me, but it's included or encapsulated within that $420 million to $435.

[Operator Instructions]

We have a follow-up from Nathan Race.

[indiscernible] particular quarter and as compared to 3.34% reported for the year ago [indiscernible].

[Operator Instructions]

And as we have no further questions in the queue, this does conclude today's call. Thank you, everyone, for joining. You may now disconnect.

Hello, and welcome to the Equity Bancshares 2025 Q3 Earnings Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I would now like to hand you over to the Vice President, Director of Corporate Development and Investor Relations, Brian Katzfey, to begin. Please go ahead when you're ready, Brian.

Good morning. Thank you for joining us today for Equity Bancshares 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 Bancshares earnings call. Joining me today is Rick Sems, our bank CEO; and Chris Navratil, our CFO. We are 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 NBC on July 2, 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 2 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 road map to enter both Oklahoma City and Omaha in 2025. We have accomplished our goal via 2 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. Julie Huber is best-in-class at organizing due diligence, spearheading the process and driving integration. Our continued success in closing these transactions is a credit to Julie and her team. David Pass and Becky Winter drive the technology integration and adoption process, allowing for near seamless conversions.

Jonathan Roop and his team of retail operators and ambassadors [ man ] the lobbies to assist customers with the transition. And Brian Katzfey 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 realized non-acquired growth in both loans and deposits 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 $1.57 per diluted share for the quarter. 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%. Impacts on expectations for future quarters will be discussed in greater detail later in this call. Adjusting earnings for the pretax loss of $53.4 million as well as costs incurred on M&A of $6.2 million and CECL double account provisioning of $6.2 million, pretax earnings were $28.4 million. Tax effective at 21% yields net income of $22.4 million or $1.17 per diluted share. Net interest income for the period was $62.5 million, up $12.7 million linked quarter.

Margin for the quarter was 4.45%, an improvement of 28 basis points when compared to margin of 4.17% linked quarter. Noninterest income, excluding the impact of the portfolio repositioning for the quarter was $8.9 million, 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 NBC franchise. Notably, noninterest income was not a core contributor of the acquired franchise and results were in line with expectations. Noninterest expenses for the quarter were $49.1 million. Adjusted to exclude M&A charges, noninterest expenses were $42.9 million, an increase of 8.3%, reflecting the impact of the NBC acquisition.

Noninterest 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 NBC closed the quarter at 1.36%. The periodic increase in ratio reflects the addition of non-PCD credit marks from NBC. TCE closed the quarter at 9.7%, reflecting the impact of the NBC 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 the securities portfolio. I'll stop here for a moment and let Rick talk through our asset quality for the quarter.

Thanks, Chris. The addition of NBC's loan portfolio during the quarter added $7 million in nonaccrual relationships and $16.7 million in classified assets. Total PCD loans acquired were $32.8 million with a fair value mark of $7.5 million or 23%. Management is actively working on resolutions on these additions and does not anticipate losses in excess of marks. Nonaccrual loans closed the quarter at $48.6 million, while classified assets closed the quarter at $82.8 million or 12.37% of bank regulatory capital. Excluding additions from NBC, nonaccrual and classified assets declined $1 million and $4.9 million, respectively. Loans past due and nonaccrual as a percentage of end-of-period loans declined to 1.55% from 1.65% 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 6 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 remained 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 in purchase accounting amortization and 7 basis points of nonaccrual improvement. The remaining 8 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 nonaccrual benefit, would yield core margin of 4.35%. Cost of interest-bearing liabilities and cost of deposits increased 3 and 5 basis points, respectively, during the quarter as NBC's liabilities were dilutive to Equity's 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 nonaccrual 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 the full year 2026 inclusive of Frontier impacts. As we closed the quarter, the transaction is progressing through the approval process, and we anticipate receipt of approvals in the fourth quarter. Depending on the impact of the government shutdown 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. At 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, up 23% linked quarter. Originations came on at an average rate of 7.14%, 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%, 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 brokered account growth, organic deposit growth during the period was approximately $37 million.

Noninterest-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 9 months have showed positive trends in gross and net production levels, including net positive DDA account production, but we have a long way to go to meet the aggressive goals we have set. I look forward to assisting this group in realizing success throughout 2025 and beyond. The addition of NBC and the announced addition of Frontier add 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 align in the expectation for realized growth in the balance sheet and noninterest 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 entered 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. 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.

[Operator Instructions] And our first question comes from Terry McEvoy with Stephens.

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 costs? And maybe has the market moved along with you?

Yes. I'll touch on it quickly, Terry, and then Rick might add some additional color. In terms of pricing strategy, we've been relatively consistent as we look at the rate cuts since 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 to date, 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 as it relates to costs moving forward.

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. And then as a follow-up, could you just maybe run through business sentiment and your operating footprint and how that's kind of captured or incorporated into your outlook for loan growth?

Yes. So we look at that pretty regularly from our team. I get feedback from the markets. And right now, things look pretty strong. We're not really seeing impacts or much of a -- 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 then 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 -- at what we're seeing fairly bullish on what the market looks like.

The next question comes from Jeff Rulis with D.A. Davidson.

A question on the deposit side as well. I thought you mentioned that the lift in deposit costs, was some of that linked quarter? Was that due to NBC, not so much just competition increasing that was more acquired lift?

Yes, Jeff, the increase period-over-period is entirely attributable to the liabilities brought on through the NBC transaction.

Got you. Okay. And then also on the loan front, it looks like based on averages, kind of a mid-single-digit period and '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 is that given the production and the pipelines that you think the clip of growth could kind of pick up into that mid-single-digit range? Just trying to unpack the expectations for payoff activity, if that's in that guide.

So a couple of things on that, Jeff. So when we look at it, we look at and kind of obviously, the amount of production. So the production, we're getting better at being consistent and having that at a higher number. So when you look at over the last 3 years kind of on a same banker-by-banker basis, we're just -- we're doing more production this year than we've done in either of the last 2 years, and we see that continuing to move. So that's one factor. Then you're adding in Oklahoma City and we'll next year be adding in Omaha.

Those are 2 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% in each of those years from a beginning balance. So far this year, we're on pace to be around 23% 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 get -- 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.

That's great detail. Maybe just one last one on the credit side, kind of core legacy balances coming down on problem loans encouraging. And then in your commentary, it kind of sounded like, if anything, maybe some broader economic watching things. But I guess from your end of things, if you're looking at your portfolio, areas of strain, it sounds pretty contained, but where you would point to that maybe you continue to watch for potential issues, if anything, across the portfolio?

Yes. What I would say, Jeff, is we're watching all areas closely. We're not seeing a lot of strain in any areas. We've talked about QSRs. We don't have a lot of QSR restaurant exposure as a percentage of our portfolio. But 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. So 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 consumers. So I just think the consumer has to be getting tighter and tighter all the time, which has to -- at some point, has to lead to something. I don't know what that is, but it has to lead to something.

Agriculture, our ag guys, we're watching those guys pretty close. We have real low loan leverage on those. 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, although price isn't great. But I think inflation is a 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 still don't see that bubble yet.

The next question comes from Nathan Race with Piper Sandler.

I appreciate the loan production specifics in the quarter, but just curious what early indications you're seeing out of the team at NBC in terms of how they're contributing to loan growth these days in the third quarter and how they're kind of maybe taking advantage of the larger hold limits and expanded product set that Equity brings to the table?

Yes. So just a couple of things there. For instance, when we talk about pipeline right now, we haven't put them into our pipeline. So that's all positive. I want to just make sure we're clear on that. And then we're just really starting that process. I mean having great costs over down has really, really helped because we're seeing -- we're able to make credit decisions pretty quick down there. So I think 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 $1 million and under loans, $2 million and under loans. It's really granular. But some of those are real strong borrowers.

And so we are -- and just last week, we had -- we were with a number of them. And so we've already gotten a couple of requests. Can you do a $5 million deal for us? Can you do a $10 million deal? So it's anecdotal at this point in time, but we're really seeing 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 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 taking full advantage of that, the robustness of those markets. So far, again, it's anecdotally really positive opportunities and outcomes for us.

Okay. Great. That's really helpful color. And then a question for Chris on the margin guidance for next year. Obviously implies a step down from 4Q. But just curious, as you look at some of the offsets to 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 just what the opportunity set looks like to improve the funding mix and cost of Frontier, which I think is running above Equity historically.

Yes. Good questions, Nate. In terms of the forward-looking net interest margin compression, all of that is 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 market interest rates and associated impacts on Equity Bank core margin. So that decline is 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, at prices above 2% today, we got -- there's $3 billion plus on our balance sheet today, currently costing us above that 2% Mendoza line.

At 3%, it's $2.5 billion, at 3.5% plus, it's $2.2 billion. On the asset side in terms of repricing through the end of 2026, we have $425 million of loan repricing that's currently on the books subprime 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, the structure of the balance sheet will allow for, I think, control and consistency in margin figures. So there's quite a few levers in that mix that we can obviously pull as we begin to kind of pull downs on the FLMC 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 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 as we see some maturities and we see some roll-off in the NBC footprint -- I'm sorry, not the NBC, but the Frontier footprint, replacing them with those alternative lower-cost core structures.

Okay. That's super helpful. And I'm sorry, can you also remind us if you have any floors that would become impacted based on the number of future Fed cuts within the floating rate portfolio?

Yes. 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 prepayment. So there's still a cushion on them, but there are floors that are in place at a level after moderated cuts from here.

[Operator Instructions] Our next question comes from Damon DelMonte with KBW.

Just first question on the outlook for '26 and the range for provision. Chris, does that include like the day 2 CECL expectation? Or is that what you expect on 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 more recently. Any color kind of behind that?

There's no specific drivers, I would say that we think there's additive risk. It's really just conservatism, I think, as we look forward as it relates to provisioning.

Okay. Great. And then with regards to like the securities portfolio this quarter, I think it's down to about 16 -- a little bit over 16% of average earning assets, which is lower than where it's tracked the first half of the year, which was closer to like 20%, 21%. 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?

Yes, Damon, I think it will settle at a lower than 20% position with the additions of -- with the expected addition of Frontier and the addition of NBC, 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 teen 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 stay closer to where it is versus expanding back to where it was.

And the next question comes from Brett Rabatin with Hovde Group.

I wanted to go back to payoffs for a second 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?

Yes. I mean, I think as it comes down a little bit, kind of perhaps I actually don't -- as we've been looking at it, 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 our customers that all of a sudden decide year-end that they're going to change it. If there's a massive change in the rates, then that can happen. But right now, we're not seeing -- it's not 100 basis point, 150 basis point movement that would get them kind of out of bed to make the change. So 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.

Yes. The payoffs we had are -- 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 debt standpoint. And so that drove a lot of movement from a relationship and related relationships that the estate needed to just clear it out. So we aren't going to see that again ever probably. So that drove a big chunk of payoffs this quarter.

Yes. Brett, [indiscernible] to be positive in terms of declining rates and sentiment is we do still carry consumer real estate, $0.5 billion 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 it's redeployed. 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, maybe earn-back periods or going to be lower or maybe you're going to be able to buy better banks relative to historical from a profitability perspective? Just wanted to get maybe your thoughts on how you see the environment for you guys over the next year.

Yes. I don't think the environment has 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 it has to fit our earn-back model and our strategy.

[Operator Instructions] And as we have no further questions in the queue, this does conclude today's Equity Bancshares earnings call. Thank you, everyone, for joining today's call. Have a great day, and you may now disconnect.