Equity Bancshares (NYSE:EQBK) reported third-quarter net income of $26.8 million, or $1.29 per diluted share, as the bank recorded its first quarterly increase in total loan balances since its recent acquisitions closed and continued preparations for its planned merger with Lincoln Bancorp.
Core net income, which excluded merger expenses, intangible amortization and securities gains, totaled $29 million, or $1.40 per share, matching the prior quarter, according to Chief Financial Officer Chris Navratil. Core return on average tangible common equity was 16.5%, while pre-tax, pre-provision earnings reached $36.9 million, the company’s highest level since combining its three companies.
Loan Production Reaches Record Level
Total loans increased $39 million during the quarter to $5.44 billion, marking the first quarter-over-quarter increase since the company’s acquisitions closed, according to Equity Bank CEO Rick Sems. Loans in legacy markets rose $106 million, or 2.9%, to $3.5 billion.
Loan production reached $379 million, up $64 million from the prior quarter and $136 million from a year earlier. The loans closed during the period carried an average rate of 6.91%. Legacy markets generated $279 million of production, an 11% sequential increase.
The company’s 75%-weighted loan pipeline stood at $534 million at quarter-end, up 27% from the prior quarter. Sems said the bank hired 13 bankers year-to-date across Oklahoma City, Omaha, Lincoln, Wichita and Des Moines, with those teams still ramping up.
Management said loan balances in acquired markets continued to decline from period to period, though the pace slowed as production in those markets improved 55% following integration into Equity’s processes.
During the question-and-answer session, Elliott said Equity expects organic loan growth of roughly 5% to 7% in 2027, including the Lincoln transaction. Without the acquisition, he said growth could be stronger.
Deposit Costs Pressure Margin
Total deposits declined $136 million, or 2.2%, to $6.17 billion. Deposits in legacy markets fell $102 million, though Sems said they were effectively flat excluding public funds, which declined amid pricing pressure and seasonal payments. Legacy-market deposits were up 3.6% from a year earlier when excluding those public funds.
Non-interest-bearing deposits represented 18.7% of total deposits, down from 20.2% in the first quarter. Management said rebuilding the non-interest-bearing deposit mix and replacing brokered funding with core relationship deposits remain priorities.
The bank opened 6,269 accounts in legacy markets during the quarter, a 22% increase from the same quarter a year ago. It also opened 759 business accounts, while average balances per business account rose nearly 4%. Active digital users approached 79,000, up 10% year over year.
Net interest income declined $1 million from the second quarter to $72.8 million, driven by higher deposit costs and lower yields on interest-earning assets. Net interest margin fell 16 basis points to 4.20%.
Navratil said the total cost of deposits rose 7 basis points during the quarter, while loan coupon yields declined 5 basis points. He said the company expects fourth-quarter margin, excluding Lincoln, to return to a range of 4.25% to 4.35%.
The Federal Reserve’s September rate increase is expected to provide a near-term benefit because 14% of Equity’s loan portfolio reprices daily and 22% reprices monthly, Navratil said. He estimated that each additional 25-basis-point interest-rate increase would add roughly 3 to 5 basis points to margin.
Credit Metrics and Capital Remain Stable
Provision expense totaled $1.7 million, while the allowance for credit losses was 1.18% of loans, essentially unchanged from the prior quarter. Net charge-offs were $2.1 million, or 15 basis points on an annualized basis, compared with 12 basis points in the preceding quarter.
Non-performing assets represented 1% of total assets, and non-accrual loans totaled $69 million. Classified assets as a percentage of regulatory capital declined 140 basis points during the quarter to 10.42%.
Sems said management remained comfortable with the portfolio’s overall credit posture. He said the company has seen positive results among most commercial customers and favorable resolutions involving classified assets, while some consumer customers have experienced pressure from higher costs.
Tangible common equity ended the quarter at 9.1% of assets, while common equity tier 1 capital was 12.15% and total risk-based capital was 14.94%. Tangible book value per share declined to $32.30 from $33.45, reflecting a $35 million negative adjustment to accumulated other comprehensive income as rates rose. Excluding that adjustment, tangible book value per share increased $1.19, or about 3.6%.
The company increased its quarterly dividend 22% to $0.22 per share. Its share repurchase program remains authorized but is paused while the company finalizes the Lincoln transaction.
Lincoln Deal Expected to Close in Fourth Quarter
Equity announced on Sept. 3 that it agreed to merge Lincoln Bancorp, the holding company of Lincoln Savings Bank in Reinbeck, Iowa, into Equity. Lincoln Savings Bank operates 16 locations across central and northeast Iowa.
The transaction is expected to give Equity a more meaningful presence in Des Moines and the Waterloo-Cedar Falls market, while adding an in-market deposit franchise. Equity expects to have approximately $9.1 billion in assets on a pro forma basis, compared with $7.6 billion at the end of the third quarter.
Management said the deal remains on track to close late in the fourth quarter, with systems conversion expected in the second quarter of 2027. Equity does not plan to close or consolidate branches as part of the transaction.
Navratil said Lincoln is expected to reduce the combined company’s run-rate net interest margin by roughly 8 to 10 basis points. If the transaction closes around Dec. 1, the fourth-quarter impact would be approximately 2 to 3 basis points, he said.
The company continues to expect the transaction to add $0.27 to earnings per share, although Navratil said Equity would provide more detailed guidance on specific income-statement items as the closing approaches.
Elliott said the company remains active in evaluating merger opportunities but is focused on organic growth, integrating Lincoln and increasing tangible book value and earnings per share. Equity reported year-to-date core earnings per share of $4.14 and said it remains positioned to surpass its $5 target for 2026.
About Equity Bancshares (NYSE:EQBK)
Equity Bancshares, Inc is a bank holding company headquartered in Wichita, Kansas. Through its subsidiary, Equity Bank, the company provides community banking services to individuals, businesses, agricultural customers and public-sector organizations.
Equity Bank offers checking and savings accounts, certificates of deposit, residential and commercial real estate loans, consumer financing, agricultural loans and commercial lines of credit. Its business banking services also include treasury management, cash management, electronic banking and other financial solutions designed to support operating and borrowing needs.
Founded in 2002, Equity Bancshares has expanded through organic growth and acquisitions.
