Prepared remarks
Hello everyone. Thank you for joining us. And welcome to the Equity Bancshares Second Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Brian Katzfey. Brian, 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 will open the floor up for questions and discussion. We look forward to the conversation. With that, let me turn the call over to our Chairman and CEO, Brad S. Elliott.
Good morning, everyone, and thank you for joining us. Today's results are what we have 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 a 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 ROTCE was 16.6%. Core EPS was $1.41, and ROTCE 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 two complementary companies come together, or in this case three, 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 am 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 that banks that win will be the ones that grow the balance sheet and deepen relationships without growing the cost structure at the same pace. Technology is exactly how we do that. We are not talking about this—we are actually doing it. Today, 15% of our staff are actively using Anthropic 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 cannot use it or benefit from it, so we are not adding the expense. We currently have six 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 to implementation. 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 have 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 Siebeck 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 McArtor and Travis Fielder has already begun optimizing the inherited portfolio and attracting new customers. As we look to the back half of the year, I am excited about the contributions each of our markets is now positioned to make to our organic growth efforts. Former NBC markets should approach an inflection point over the next two 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 continued 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 a 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 nonacquired markets grew at an annualized rate exceeding 10% and are up 3% compared to Q2 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 works 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. Newer 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 nonbrokered balances declined modestly. Q2 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 relationships 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. 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 a comprehensive product suite. To that end, we have brought in Melissa Morrissey 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 six states and seven 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 will turn it to Chris to cover the financials in detail.
Thanks, Rick. 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, 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 as we look for expansion of average earning assets to $6.85 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 thousand in the quarter. 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 thousand shares of our stock. Total shares repurchased year-to-date are 711 thousand shares at $44.84 per share. I will 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. A year and a half 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, in a franchise that is generating returns that are among the best in our peer group. Our core ROTCE 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 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 are seeing in the marketplace and the opportunities in front of us. I want to thank you for joining our call today. We are happy to take any questions at this time.
Questions and answers
We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. First question comes from the line of Damon DelMonte with KBW. Your line is open. Please go ahead.
Hey. Good morning, guys. Hope everybody's doing well. Question just on loan growth. Good to hear the color on the pipeline and the trends in the legacy portfolio. As we think about the ongoing attrition and rightsizing of the acquired portfolios, how should we think about net growth for the next few quarters until you work through that? Do you think it is kind of flattish, or could it be on a net basis low single digits?
Yes, hey, Damon. Thanks. This is Rick. We think we are going to have some loan growth in total. We believe and are seeing that we will have loan growth with what is happening in the legacy markets—strong pipeline and strong growth there. You just start having that flowing as you get into a year past NBC. We think we are getting close to that, and the same thing as we get later into the Frontier deal. So we are looking at low single-digit or mid single-digit growth for the second half of the year.
Got it. Okay, that is helpful. And are there any industries where you are seeing a good flow of opportunities, or is it kind of broad-based?
Yeah. I think it is more broad-based. I do not think we are seeing concentration. We are honestly seeing really good originations out of everywhere—places we have not gotten business before. One of our better C&I credits last quarter was booked out of Southeast Kansas, a $10 million-plus credit; we have never had a $10 million-plus credit out of that area. We got the right banker down there doing the right things. We are seeing credits across the footprint. Rick has done a really good job of building up a team and encouraging his people; our regional CEOs are getting their people to do the right things, and we are getting the business out of that. So it is coming from Western Kansas, Oklahoma, Nebraska. Kansas City is doing great. Wichita is doing really well. So it is kind of across the entire footprint.
Got it. Okay, great. And then I appreciate the guidance on margin, Chris, and the outlook there. How would you characterize the positioning of the margin given a higher-for-longer interest rate environment and the possibility of a rate hike either later this year or in early 2027?
Yeah, Damon. What I would point to in terms of a rising interest-rate environment is really the last cycle we went through. The balance sheet has not changed meaningfully from a posturing perspective for rising interest rates, so I think we are positioned to do well in that world. There is 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 are well positioned to execute similarly to the last iteration.
Okay, great. That is all I had. Thank you.
Your next question comes from the line of Brandon Nosal with Hovde Group. Your line is open. Please go ahead.
Hey. Good morning, folks. Hope you are doing well. Good morning. Let me start 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 curious: is there anything specific driving that improvement—whether it be some of the AI and automation initiatives you spoke to, cost savings from Frontier, or is it more just blocking and tackling as you work through 2026?
It is heavily the latter two, Brandon. The first thing—and we emphasized it in the prepared comments—was it was really important to get Frontier closed and converted in Q1 so we could create visibility to where expenses really should be. A lot of the benefit is coming from getting through that conversion process and realizing the reduction in their technology costs and the people costs associated with managing those systems. So that is a lot of where you are seeing the benefit. There is obviously still focus internally on where we can find other opportunities to reduce cost over time, so you are seeing a little bit of that come through with AI and automation. As Brad mentioned, we are leaning into it and working hard to figure out how it moves the needle over time, but there is not a tangible benefit from AI in this quarter versus last that we would point to as the cause of the decline in expenses. That is still too early stage, but we are excited about where it can go.
Awesome. Okay, that is helpful color. Maybe circling back to the margin for a moment. Can you talk about the puts and takes in that back-half margin outlook that would get you toward either the high end or the low end of the range as you look ahead?
The high end, execution really lives in the liability side of the balance sheet. To the extent that we can maintain and continue to decline liability costs—and we have talked in the past about Frontier accounts that came on board relatively high cost—there is tailwind there. If we can execute on declining that liability position, our opportunity on the asset side with loan growth allows us to hit the high end of the margin. On the low end, the alternative is liability costs creeping up or different behavior in the market that pressures margin. So it really comes down to how liability pricing evolves versus our ability to expand earning assets at accretive yields.
Thanks, Chris. Appreciate you taking my questions.
Your next question comes from the line of Nathan Race with Piper Sandler. Your line is open. Please go ahead.
Hey, guys. Good morning. Thanks for taking the questions. Curious, Rick, if you can speak to what you are seeing in terms of pricing on new loan production relative to roughly the 6.50 core loan portfolio yield. Are you seeing any degradation in new loan-yield production given that you seem to be going upmarket in clientele to some degree?
Yeah. On loan pricing, we are continuing to see it stay fairly strong. We are disciplined on pricing; the team takes that to heart. We are not seeing a lot of downward movement. Occasionally you get an irrational player in a market and we choose not to play at that level and instead widen. We look at every exception through our pricing model, and those are not accelerating. So pricing continues to hold firm for us.
Okay, great. That is really helpful. And then changing gears, I believe you guys have just over 100 thousand shares left on the remaining buyback authorization. Could you speak to the appetite for buybacks given the valuation relative to peers and the fact you are building capital at a strong clip—and you have existing excess capital to pursue acquisition opportunities as well?
We always balance the use of capital between share buybacks, making sure we have enough for M&A transactions and holding capital to pursue acquisitions. We use a model similar to what we use on the acquisition side for buybacks: when we are in range to do buybacks, we think those are no-brainers—there is no integration risk—so we will deploy capital to do buybacks. It all depends on the earn-back on that and whether it fits our model. We discuss it at every board meeting and set target prices. We will be active in buybacks when it makes sense and hold capital for M&A when it does not. I hope that answers that question. To follow up on your point about increased authorization: we already have an authorization from the board and are waiting on standard regulatory approval to up that. We are not in a big rush because we still have shares available to repurchase. We always plan to maintain a buyback approval from the board.
Okay, great. I appreciate the color. Thanks, guys.
As a reminder, if you would like to ask a question, please press *1 to raise your hand. Your next question comes from the line of Matt Olney with Stephens. Your line is open. Please go ahead.
Hey. Thanks, guys. Appreciate you taking the question. I want to circle back on the loan growth discussion. With the paydowns we have seen so far this year, it sounds like most of this is from the recent acquisitions. Any color you can provide on customer retention and employee retention from those deals and how that compared to internal expectations?
Yeah. When we look at both transactions, the Nebraska market is actually in better shape than when we acquired it because Carmen did a great job of pre-hiring for that market. We already had an LPO office there, so we had boots on the ground, and we had a lot of color on people in the marketplace we wanted to talk to. The Lincoln team is very exciting: they mostly came from larger institutions and are excited to be back with a company like ours—big enough to do the deals they like to do without the complication of working for a $30 billion bank. We are really excited about the team in Omaha, Lincoln and Nebraska and how that team is shaping out. We have kept a core group in Omaha. We probably started with 18 bankers on acquisition day and we are up to 22 bankers. From an ability to produce, we actually have more capacity in that market, which is what attracted us to it. Oklahoma City is similar: we are continuing to hire bankers there.
Acquisitions give us a core base to build off of and a footprint to hire into. People do not want to work for a loan production office without something to build around; long term, you need scale. We have scale and great reputations in both markets, so hiring into those markets is an exciting venture. Our organic growth piece is very exciting: legacy markets are 25%–30% better than they were a year ago, and you add these new markets on top of that with the acquisitions and it is great.
I would add on the customer side that in these banks there are really good core blue-chip customers that we can expand with over time. You do not see all of that in quarter one or quarter two; that expansion happens in years two and three. Both NBC and Frontier had some really good core customers that we are looking to expand with significantly over time. The retention piece on core customers is really, really strong.
Okay, great. I appreciate the color. On that topic, switching back toward the margin outlook, Chris, you have provided good color for the back half of the year. Any more color on when you think those near-term headwinds will moderate as you think about margin for 2027? Any puts and takes we should be mindful of?
Near-term headwinds are moderating; there are puts and takes on both sides with both tailwinds and headwinds operating right now. The range we provided is reasonable and could hit either end. I am more optimistic about the higher end of the range. As we get our organic growth engine going, I think you will see maintenance of where we are on a larger earning asset base. I am optimistic we will be able to accomplish that as we look out into 2027, 2028 and beyond.
Your next question comes from the line of Brett Rabatin with Stonex Group. Your line is open. Please go ahead.
Hey, guys. Good morning. Wanted to ask on the fee income guidance. At the investor day, you seemed pretty excited that mortgage banking could be a bigger contributor despite where rates are. Can you talk about the low end or the high end of the fee income guide and what drives it to the high end? Could that be mortgage, or would that be other things like trust and wealth?
Good question, Brett. The high end of that range is driven by continued growth in all the business lines. As we continue to integrate Frontier and NBC customers, and look at cross-sell opportunities on the commercial side and treasury, there are means to expand that line item. Mortgage banking—Frontier brought a good practice in that area. Interest rates are a challenge today and refinancing is limited, so mortgage upside is muted versus a lower-rate environment. Trust and wealth management continues to grow and provide opportunities. Debit and credit card income are expanding as we deepen relationships. So the high end is the continued trajectory of what we have been doing, and the low end is a function of seasonality or mortgage banking moderating with the rate environment.
We have added people and strategy in these areas. There are simply more calls and more opportunities to win team business. We see opportunities in items like waivers and other fee-producing activities. The mortgage production is bigger than before, but it is heavily rate-sensitive.
I think anybody who says we are not in the early innings of adopting AI does not realize how much this will change the world. I compare it to when we first adopted personal computers: within a few years, everyone had one, networks were established, and assets per employee jumped dramatically. I think we are at the beginning of a similar shift over the next three to five years. As a growth company with great people, it allows us to leverage their abilities as we continue to grow and likely means we do not need to add as many people as we scale. Our efficiency ratio should improve as we grow. We listed some things we are using today because they are easy to use—loan review, M&A review, headhunter placements—but we are really in the very beginning phases.
Your next question comes from the line of Jeff Rulis with D.A. Davidson. Your line is open. Please go ahead.
Thanks. Good morning. Wanted to ask about the added nonaccrual loans from Frontier. I guess just the question of why were those not added at the jump in Q1, and can you speak to the migration from when you closed until now, as you optimized loans in Nebraska and addressed credits that developed post-close?
What happens is credits can be paying as agreed and come across as accrual at acquisition, but we may choose not to renew them under current terms. We use that as leverage to work them out of the bank, and sometimes that process flips them to nonaccrual. During that process they may have been appropriately marked as part of the acquisition, but they were still accruing because they were making payments. When we do not renew them, they can become noncurrent. So it is a modest uptick and not systemic. There are many reasons credits move—for example, a house under construction that we do not think is going in the right direction, family or partnership issues, or other common situations in lending. Those are the types of issues we work through regularly.
You answered the follow-up—those were marked at acquisition and then migrated. Appreciate it. It sounds like the forward guidance on provisioning is unimpacted. Quick follow-up on the opportunity to decrease some Frontier deposit costs: is there more there or has that largely been worked through?
There will continue to be some opportunity over time. Frontier had a healthy level of maturing deposits that were laddered; we will continue to see some of that over the next two to four quarters. 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.