Equity Bancshares (NYSE:EQBK) has reported a net income of $12.3 million or $0.80 per diluted share in the third quarter of 2023, surpassing consensus earnings. The company also announced a 20% increase in their quarterly dividend and highlighted their strong balance sheet and asset quality metrics. The bank is optimistic about future growth, with a focus on loan growth in various markets, and expects to normalize excess liquidity in 2024.
Key takeaways from the call:
- Equity Bancshares reported a net income of $12.3 million or $0.80 per diluted share in Q3 2023, beating consensus earnings.
- The company increased their quarterly dividend by 20% and emphasized their focus on shareholder return. This aligns with InvestingPro's data showing a dividend growth of 50.0% in the last twelve months, and a dividend yield of 1.94% as of the end of September 2023.
- The bank highlighted its strong balance sheet, robust loan loss reserves, and high levels of capital and liquidity. The company's market cap, as provided by InvestingPro, stands at 364.5M USD, and it has a P/E ratio of 7.79, which is slightly above its adjusted P/E ratio for Q2 2023 at 7.56.
- The company expects to normalize excess liquidity in 2024, allowing for the repositioning of cash into earning assets.
- The bank is optimistic about future growth, with a focus on loan growth in various markets. This is in line with InvestingPro Tips that point out the company's high earnings quality, with free cash flow exceeding net income, and its management's aggressive share buyback strategy.
During the earnings call, Equity Bank expressed confidence in their products, technology, and leadership team. The bank anticipates continued momentum in mergers and acquisitions (M&A) and plans to remain disciplined in their approach to assessing opportunities. They revealed a three-year earn-back period for acquisitions and expressed comfort with their underwriting ability.
The bank expects a normalization of excess liquidity by the first quarter of next year and plans to reposition that cash into earning assets, primarily loans. They remain cautious about the liability side of the balance sheet and uncertainty around deposit repricing. Provisioning is expected to remain around 130-140 basis points of total loans. They are working on expense rationalization, mitigating costs, and expect minimal expense growth in 2024.
The bank also discussed the potential impact of a rate reduction cycle from the Federal Reserve on their net interest margin (NIM) and expenses. They have the capacity to reprice their liability book quickly, but acknowledged that market dynamics will play a role.
In terms of expenses, the bank is working on rationalizing vendors and replacing legacy vendors to minimize growth. Certain expenses built into non-interest expenses will not repeat next year, resulting in cost savings of around $3 million. Additionally, the removal of solar tax investments from non-interest expenses will increase the effective tax rate.
Regarding capital deployment, the company is considering both the TCE ratio excluding the AOCI (9.55%) and the TCE ratio including the AOCI (7.29%) to assess the best utilization of capital, including potential buybacks or M&A activities. They have been holding back capital for future deployment opportunities. The bank expressed confidence in their ability to sign a partner in the next six to nine months and is optimistic about future M&A deals. This is supported by InvestingPro Tips, which note that strong earnings should allow management to continue dividend payments, and that analysts predict the company will be profitable this year. For more insightful tips, check out the InvestingPro product here.
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