Q2 2024 Equity Bancshares Inc Earnings Call

Hello, thank you for your patience. Everyone, the Equity Bancshares Quarter 2 2024 Earnings Call will begin shortly. Thank you.

Unknown Executive: Bancshares Corp. 2, 2024 Earning School will begin shortly. Thank you.

Unknown Executive: The Quarter 2 2024 earnings call will begin shortly. Thank you.

Ezra: Hello everyone and welcome to the Equity Bancshares. Second quarter, 2024 earning school, my name is Ezra and I will be coordinating you are cool today.

Unknown Executive: Unknown Executive, Richard Slupkowski, Chris Navratil, Damon DelMonte, Terence McEvoy, Chris Navratil, Richard Slupkowski, Craig Dunn, Equity Bancshares Inc. [inaudible] Hello everyone and welcome to the Equity Bancshares Second Quarter 2024 Earnings Call. My name is Ezra, and I will be coordinating your call today. If you would like to ask a question, please press star followed by one on your telephone keypad. And if you change your mind, it would be a star followed by two. I will now hand over to your host, Brian Katzfey, Director of Corporate Development and Investor Relations, to begin. Brian, please go ahead.

Speaker Change: Hello everyone and welcome to the Equity Bancshares

Ezra: Second Quarter 2024 Earnings School. My name is Ezra and I will be coordinating your call today.

Unknown Executive: If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, it would be star followed by two.

Ezra: If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, it would be star followed by two. I will now hand over to your host, Brian Katzfey.

Brian Katzfey: I will now hand over to your host, Brian Katzfey, Director of Corporate Development and Investor Relations, to begin. Brian, please go ahead.

Brian Katzfey: Director of Corporate Development and Investor Relations to begin. Brian , please go ahead.

Brian Katzfey: Good morning. Thanks for joining us today for Equity Bancshares second quarter earning school. 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 relief and presentation materials.

Brian Katzfey: Good morning. Thank you for joining us today for Equity Bancshares' second quarter earnings call. Before we begin, let me remind you that today's call is being recorded and will be 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,

Brian Katzfey: Good morning.

Brian Katzfey: Thank you for joining us today for Equity Bancshares second 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

Brian Katzfey: Today's presentation contains four looking statements, which are subject to certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed.

Speaker Change: 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.

Brian Katzfey: Following the presentation, we will allow time for questions and further discussion. Thank you all for joining us.

Brian Katzfey: 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.

Brad Allen: With that, I'd like to turn the call over to our Chairman and CEO, Brad Allen. Good morning. And thank you for joining Equity Bancshares earning school. We are pleased to take you through our second quarter results, including a set of new record high water works, integration of the Bank of Perksville merger, and the announcement of our acquisition of Kansas Land Bancshares. Joining me today are Rick Simms, our bank CEO. Chris Navratil, RCFO, and Krzysztof Slupkowski, our Chief Credit Officer. It was another exciting quarter of improving operating performance for our company, excluding the impact of Bolly, repositioning costs, and merger expenses.

Brad S. Elliott: Good morning, and thank you for joining Equity Bancshares' earnings call. We are pleased to take you through our second quarter results, including a set of new record high water marks. Integration of the Bank of Perksville merger and the announcement of our acquisition of Kansas Land Bank Shares. Joining me today is Rick Sems, our bank CEO. Chris Navratil, our CFO, and Krzysztof Slupkowski, our Chief Credit Officer.

Brad S. Elliott: Good morning, and thank you for joining Equity Bancshares earnings call. We are pleased to take you through our second quarter results, including a set of new record high watermarks.

Brian Katzfey: Integration of the Bank of Perksville merger, and the announcement of our acquisition of Kansas Land Bancshares.

Speaker Change: Joining me today are Rick Sems, our bank CEO .

Chris M. Navratil: Chris Navratil, our CFO .

Chris M. Navratil: and Krzysztof Slupkowski, our Chief Credit Officer.

Brad S. Elliott: It was another exciting quarter of improving operating performance for our company. Excluding the impact of BOLI, repositioning costs, and merger, we outperformed market expectations. With the momentum of rebalancing our portfolio last year and the Bank of Kirksville transaction in the first quarter, we realized expansion in both net interest income and net interest margin. We closed the quarter with a loan deposit ratio below 80%.

Chris M. Navratil: It was another exciting quarter of improving operating performance for our company.

Chris M. Navratil: Excluding the impact of BOLI, repositioning costs, and merger expenses.

Brad Allen: We outperformed market expectations. With the momentum of rebalancing our portfolio last year and the Bank of Kirchville transaction in the first quarter, we realized expansion in both net interest income and net interest margin. We closed the quarter with a low deposit ratio below 80%. Strong capital ratios and significant liquidity to continue to drive earnings growth in 2024, both organically and via strategic M&A. During the quarter, we completed the integration of systems from the legacy bank of Kirchville locations and announced and received regulatory approval of our acquisition of the Kansas Land Bank shares. The Kansas Land Transaction officially closed on July 1, 2024, 71 days after announcement.

Chris M. Navratil: We outperform market expectations.

Chris M. Navratil: With the momentum of rebalancing our portfolio last year and the Bank of Kirksville transaction in the first quarter, we realized expansion in both net interest income and net interest margin.

Chris M. Navratil: We close the quarter with a loan deposit ratio below 80%.

Brad S. Elliott: Strong capital ratios and significant liquidity should continue to drive earnings growth in 2024, both organically and via strategic M&A. During the quarter, we completed the integration of systems from the Legacy Bank of Kirksville and announced and received regulatory approval of our acquisition of Kansas Land Bancshares. The Kansas land transaction officially closed on July 1st, 2024, 71 days after an, We continue to emphasize shareholder return through our quarterly dividend, as well as active participation in our share repurchase program. During the quarter, we repurchased 152,982 shares under our current authorization of up to a million shares. At the close of the quarter, we have the capacity to purchase an additional 637,427 shares under the authorization.

Chris M. Navratil: Strong capital ratios and significant liquidity to continue to drive earnings growth in 2024, both organically and via strategic M&A.

Chris M. Navratil: During the quarter, we completed the integration of systems from the legacy bank of Kirksville locations.

Chris M. Navratil: and announced and received regulatory approval of our acquisition of Kansas Land Bank shares.

Chris M. Navratil: The Kansas land transaction officially closed on July 1st, 2024, 71 days after announcement.

Brad Allen: We continued to emphasize shareholder returns through our quarterly dividend, as well as active participation in our share repurchase program. During the quarter, we repurchased 152,982 shares under our current authorization of up to a million shares. At the close of the quarter, we have capacity to purchase an additional 637,427 shares under the authorization.

Chris M. Navratil: We continue to emphasize shareholder return through our quarterly dividends.

Chris M. Navratil: as well as active participation in our share repurchase program.

Chris M. Navratil: During the quarter, we repurchased 152,982 shares under our current authorization of up to a million shares.

Chris M. Navratil: At the close of the quarter, we have capacity to purchase an additional 637,427 shares under the authorization.

Brad Allen: During the quarter, we announced the promotions of RICSIMS to Bank CEO and Julie Hubert to CEO. These promotions strengthen the management team while reinforcing our operating structure. We are confident they will continue to excel in the expanded roles. As we emphasize at our investor meeting in June, we are bullish about where our company is positioned. We have an excellent leadership team, motivated producers, and abundance of deployable capital to drive positive stakeholder returns. I look forward to continuing our positive momentum.

Brad S. Elliott: During the quarter, we announced the promotions of Rick Sems to Bank CEO and Julie Humer to COO. These promotions strengthen the management team while reinforcing our operating structure. We are confident they will continue to excel in the expanded role. As we emphasized at our investor meeting in June, we are bullish about where our company is positioned. We have an excellent leadership team, motivated producers, and an abundance of deployable capital to drive positive stakeholder returns. I look forward to continuing our positive momentum. I'll let Chris talk you through our financial results.

Chris M. Navratil: During the quarter, we announced the promotions of Rick Sems to Bank CEO and Julie Humer to COO.

Chris M. Navratil: These promotions strengthen the management team while reinforcing our operating structure.

Chris M. Navratil: We are confident they will continue to excel in the expanded roles.

Chris M. Navratil: As we emphasized at our investor meeting in June , we are bullish about where our company is positioned.

Chris M. Navratil: We have an excellent leadership team, motivated producers, and an abundance of deployable capital to drive positive stakeholder returns.

Chris M. Navratil: I look forward to continuing our positive momentum.

Chris Navratil: I'll let Chris talk you through our financial results. Thank you, Brad.

Chris M. Navratil: I'll let Chris talk you through our financial results.

Chris M. Navratil: Thank you, Brad. Last night, we reported a net income of $11.7 million, or $0.76 per diluted share. Adjusting for merger expenses incurred related to the Bank of Kirksville and Kansas land transactions and the cost of surrendering a portion of our BOLI portfolio, net income was $15.2 million, or $0.99 per diluted share. During the quarter, our realized effective tax rate was 28.1 percent, driven up by one-time BOLI surrender charges of $1.8 million. As Brad alluded to, we repositioned approximately $60 million in BOLI into higher-yielding contracts during the quarter. Realized losses are modeled to be recovered within two years through the non-interest income and tax line.

Chris Navratil: Last night, we reported nut income of 11.7 million or 76 cents per diluted share. Adjusting for merger expenses incurred related to Bank of Kirkville and Kansas Landsharing Actions, and the cost of surrendering a portion of our bully portfolio, nut income was 15.2 million or 99 cents per diluted share. During the quarter, our realized effective tax rate was 28.1 percent, driven up by one-time bully surrender charges of $1.8 million. As Brad alluded to, we repositioned approximately 60 million in bully into higher yielding contracts during the quarter. Realized loss of our model to be recovered inside of two years through the non-interested income and tax.

Chris: Thank you, Brad. Last night we reported net income of $11.7 million, or $0.76 per diluted share. Adjusting for merger expenses incurred related to Bank of Kirksville and Kansas land transactions.

Speaker Change: and the cost of surrendering a portion of our BOLI portfolio, net income was $15.2 million or $0.99 per diluted share.

Speaker Change: During the quarter, our realized effective tax rate was 28.1%, driven up by one-time boldly surrender charges of $1.8 million.

Speaker Change: As Brad alluded to, we repositioned approximately $60 million in BOLI into higher yielding contracts during the quarter. Realized losses are modeled to be recovered inside of two years through the non-interest income and tax lines. Without the repositioning, the tax rate for the quarter would have been 17.5%.

Chris Navratil: lines.

Chris M. Navratil: Without the repositioning, the tax rate for the quarter would have been 17.5%. Net interest income was up $2.3 million last quarter, while net interest margin improved from $3.76 to $3.94. We will discuss margin dynamics in more detail later in this call.

Chris Navratil: Without the repositioning, the tax rate for the quarter would have been 17.5%. Net interest income was up $2.3 million link quarter, when net interest margin improved from $376 to $394. We will discuss margin dynamics in more detail later in this call. Net interest income was in line with our outlook for the quarter and included a 6.3% link quarter increase in service charge line items. Net interest expenses adjusted for one time M&H Arches, totaling $37.0 million, were up link quarter, primarily attributable to Bank of Kirkstall editions, including CDI amortization, technology, and facility expenses.

Speaker Change: Net interest income was up 2.3 million dollars last quarter, while net interest margin improved from 376 to 394.

Speaker Change: We will discuss margin dynamics in more detail later in this call.

Krzysztof P. Slupkowski: Non-interest income was in line with our outlook for the quarter and included a 6.3% linked quarter increase in service charge line items. Non-interest expenses adjusted for one-time M&A charges totaling $37.0 million were uplinked quarter primarily attributable to Bank of Kirksville additions, including CDI amortization, technology, and facility expenses. The purchase accounting for Bank of Kirksville was finalized during the quarter, resulting in an insignificant increase to the previously recognized gain on acquisition. As Brad noted, Equity announced our acquisition of Kansas land during the quarter and subsequently closed it on July 1st.

Speaker Change: Non-interest income was in line with our outlook for the quarter and included a 6.3% link quarter increase in service charge line items.

Speaker Change: Non-interest expenses adjusted for one-time M&A charges totaling $37.0 million were uplinked quarter primarily attributable to Bank of Kirksville additions, including CDI amortization, technology, and facility expenses.

Chris Navratil: The purchase accounting for Bank of Kirkstall was finalized during the quarter, resulting in an insignificant increase to the previously recognized gain on acquisition. As Brad noted, Equity announced our acquisition of Kansas land during the quarter and subsequently closed it on July 1st. Kansas land has $50 million in assets operating out of two branches. We modeled three cents to creation for 2024 ad announcement, which remains the expectation. Our gap net income included a provision for credit loss of $265,000. We continue to hold reserve for potential economic challenges; however, to date we have not seen specific concerns in our operating markets.

Speaker Change: The purchase accounting for Bank of Kirksville was finalized during the quarter, resulting in an insignificant increase to the previously recognized gain on acquisition.

Speaker Change: As Brad noted, Equity announced our acquisition of Kansas land during the quarter and subsequently closed it on July 1st. Kansas land has $50 million in assets operating out of two branches. We modeled 3 cents decretion for 2024 ad announcement, which remains the expectation.

Krzysztof P. Slupkowski: Kansas Land has $50 million in assets operating out of two branches. We modeled 3 cent secretion for the 2024 ad announcement, which remains the expectation. Our GAAP net income included a provision for credit losses of $265,000. We continue to hold reserves for potential economic challenges, however, to date, we have not seen specific concerns in our operating market. The June 30 coverage of ASEAN loans is 1.26%. I'll stop here for a moment and let Krzysztof talk through our asset quality for the quarter.

Speaker Change: Our GAAP net income included a provision for credit loss of $265,000. We continue to hold reserve for potential economic challenges. However, to date, we have not seen specific concerns in our operating markets.

Chris Navratil: The June 30 coverage of ACOT alons is 1.26%.

Speaker Change: The June 30 coverage of ACAuto loans is 1.26%. I'll stop here for a moment and let Krzysztof talk through our asset quality for the quarter.

Chris Navratil: I'll stop here for a moment and let Chris talk through our asset quality for the quarter. Thanks, Chris. Asset quality metrics continue to screen at historically low levels, with total classified loans closing the quarter at $49.6 million, or 8.8% of total bank regulatory capital. Not a cruel loans as a percentage of total loans remained below 75 basis points. Net chargers annualized were 14 basis points for the quarter. Recognized chargers have been reflected of specific circumstances related to individual credits, rather than broader market concerns. The acquisition of Kansas land bank mentioned earlier will have a negligible impact on bank's problem assets position.

Krzysztof P. Slupkowski: Thanks, Chris. Asset quality metrics continue to screen at historically low levels, with total classified loans closing the quarter at 49.6 million, or 8.8% of total bank regulatory capital. Non-accrual loans, as a percentage of total loans, remain below 75 basis points. Net charge-offs annualized were 14 basis points for the quarter. Recognized charge-offs have been reflected in specific circumstances related to individual credits rather than broader market concerns.

Krzysztof: Thanks, Chris. Asset quality metrics continue to screen at historically low levels, with total classified loans closing the quarter at 49.6 million, or 8.8% of total bank regulatory capital.

Krzysztof: Non-accrual loans as a percentage of total loans remain below 75 basis points.

Krzysztof: Net charge-offs annualized were 14 basis points for the quarter. Recognized charge-offs have been reflected of specific circumstances related to individual credits rather than broader market concerns.

Krzysztof P. Slupkowski: The acquisition of Kansas Land Bank, mentioned earlier, will have a negligible impact on the bank's problem asset position. We continue to utilize our portfolio monitoring tools to detect early signs of credit deterioration. At this point, we have not seen any systemic deterioration in any of our portfolios. Our continued stress testing confirms the resiliency of our CRE book. Our exposure to office space is very low and continues to perform well. Despite these positive indicators, we remain cautious in our underwriting and continue to monitor for any emerging risks while maintaining healthy levels of capital and reserves to face any future economic headwinds.

Krzysztof: The acquisition of Kansas Land Bank, mentioned earlier, will have a negligible impact on banks' problem asset position.

Chris Navratil: We continue to utilize our portfolio monitoring tools to detect early signs of credit that duration. At this point, we have not seen any systemic deterioration in any of our portfolios. Our continued stress testing confirms the resiliency of our CRE book. Our exposure to office space is very low and continues to perform well.

Krzysztof: We continue to utilize our portfolio monitoring tools to detect early signs of credit deterioration. At this point, we have not seen any systemic deterioration in any of our portfolios.

Krzysztof: Our continued stress testing confirms the resiliency of our CRE book. Our exposure to office space is very low and continues to perform well.

Chris Navratil: Despite these positive indicators, we remain cautious in our out of writing and continue to monitor for any emerging risks while maintaining healthy levels of capital and reserves to face any future economic headwinds.

Krzysztof: Despite these positive indicators, we remain cautious in our underwriting and continue to monitor for any emerging risks while maintaining healthy levels of capital and reserves to face any future economic headwinds.

Chris Navratil: Chris. Thanks, Chris. Average loans increased modestly during the quarter. Loan originations in the second quarter totaled $99 million with a weighted average coupon of 8.76% compared to $116 million with a weighted average coupon of 8.61% in the first quarter. During the quarter, the coupon yield on loans increased from increased to 6.96% from 6.84%. Overall loan yields improved 30 bits to 7.15%, driven by accretion from Carcassville, exploration of a pay fixed interest rate swap, and higher coupon originations. During the quarter, our bond portfolio yield improved to 3.99% from 3.89%, reflecting the impact of repricing Kirchial's bond portfolio at acquisition date.

Krzysztof: Chris. Thanks, Krzysztof.

Chris M. Navratil: Average loans increased modestly during the quarter. Loan originations in the second quarter totaled $99 million with a weighted average coupon of 8.76% compared to $116 million with a weighted average coupon of 8.61% in the first quarter.

Speaker Change: Average loans increased modestly during the quarter. Loan originations in the second quarter totaled $99 million with a weighted average coupon of 8.76%, compared to $116 million with a weighted average coupon of 8.61% in the first quarter.

Chris M. Navratil: During the quarter, the coupon yield on loans increased to 6.96% from 6.84%. Overall, loan yields improved 30 bips to 7.15% driven by accretion from Kirksville, the expiration of a pay fixed interest rate swap, and higher coupon origination. During the quarter, our bond portfolio yield improved to 3.99% from 3.89%, reflecting the impact of repricing Kirkshill's bond portfolio at acquisition date. Cost of interest-bearing deposits was materially flat at 2.78%, while the contribution of average non-interest-bearing deposits to the average deposit mix increased to 22.7% from 21.7%.

Krzysztof: During the quarter, the coupon yield on loans increased to 6.96% from 6.84%.

Krzysztof: Overall, loan yields improved 30 bps to 7.15%, driven by accretion from Kirksville, expiration of a pay fixed interest rate swap, and higher coupon origination.

Krzysztof: During the quarter, our bond portfolio yield improved to 3.99% from 3.89%, reflecting the impact of repricing Kirkschild's bond portfolio at acquisition date.

Chris Navratil: Cost of interest varying deposits were materially flat at 2.78%, while the contribution of average non-interest varying deposits to the average deposit mix increased to 22.7% from 21.7%. That interest income told on 46.4 million during the quarter, up 2.3 million from the prior quarter, as our earning streams benefited from previous periods' strategic decisioning and continued to outpace rising funding costs. We continue to carry excess cash balances, which are offset by wholesale borrowings. We are currently earning a positive spread on these positions, though it does have the effect of reducing margin. We calculate that the excess liquidity has the effect of reducing margin by 9 basis points for the current quarter.

Krzysztof: Cost of interest bearing deposits were materially flat at 2.78%, while the contribution of average non-interest bearing deposits to the average deposit mix increased to 22.7% from 21.7%.

Chris M. Navratil: Net interest income totaled $46.4 million during the quarter, up $2.3 million from the prior quarter, as our earnings streams benefited from previous periods' strategic decisioning and continued to outpace rising funding costs. We continue to carry excess cash balances, which are offset by wholesale borrowings. We are currently earning a positive spread on these positions, though it does have the effect of reducing margin. We calculate that the excess liquidity has the effect of reducing margin by nine basis points for the current quarter. Non-interest expense during the quarter was $37 million, excluding $2.3 million in realized merger charges.

Krzysztof: Net interest income totaled $46.4 million during the quarter, up $2.3 million from the prior quarter, as our earnings streams benefited from previous periods' strategic decisioning and continued to outpace rising funding costs.

Krzysztof: We continue to carry excess cash balances which are offset by wholesale borrowings. We are currently earning a positive spread on these positions, though it does have the effect of reducing margin. We calculate that the excess liquidity has the effect of reducing margin by nine basis points for the current quarter.

Chris Navratil: 9 interest expense during the quarter was $37 million, excluding 2.3 million in real-life merger charges.

Krzysztof: Non-interest expense during the quarter was $37 million excluding $2.3 million in realized merger charges.

Chris Navratil: The integration of core banking systems following the Bank of Kirchial transactions took place in May. Kirchial operating costs, including CVI amridation, with a primary driver of expense expansion.

Richard M. Sems: The integration of core banking systems following the Bank of Kirksville transaction took place in May. Bank of Kirksville operating costs, including CDI amortization, were the primary driver of expense expansion. Our outlook slide includes a forecast for the third quarter as well as full year 2024. We do not include future rate changes, though our forecast still includes the effects of lagging repricing in both our loan and deposit portfolio. Our provision is forecast to be approximately 12 basis points on average loans. Rick.

Krzysztof: The integration of core banking systems following the Bank of Kirksville transaction took place in May. Kirksville operating costs, including CDI amortization, were the primary driver of expense expansion.

Chris Navratil: Our outlook slide includes a forecast for the third quarter, as well as full year 2024. We do not include future rate changes; that our forecast still includes the effects of lagging, repricing, and both are loaned into positive portfolios. Our provision is forecast to be approximately 12 basis points to average loans.

Krzysztof: Our outlook slide includes a forecast for the third quarter as well as full year 2024. We do not include future rate changes, though our forecast still includes the effects of lagging repricing in both our loan and deposit portfolios.

Krzysztof: Our provision is forecast to be approximately 12 basis points to average loans. Rick?

Rick Simms: Rick, equity has grown during the first six months of 2024, and we are positioned to continue to do so.

Richard M. Sems: Equity has grown during the first six months of 2024, and we are positioned to continue to do so. During the quarter, our team was able to successfully integrate the Bank of Kirksville merger while also assessing, negotiating, and announcing our acquisition of Kansas land. Credit goes to Julie Huber and her operations teams for getting it done.

Richard M. Sems: Equity has grown during the first six months of 2024, and we are positioned to continue to do so. During the quarter, our team was able to successfully integrate the Bank of Kirksville merger while also assessing, negotiating, and announcing our acquisition of Kansas land.

Rick Simms: During the quarter, our team was able to successfully integrate the Bank of Kirchial merger, while also assessing, negotiating, and announcing our acquisition of Kansas Land. Credit goes to Julie Hoover and her operation teams for getting it done. Outside of M&A, our production teams remain focused on driving organic growth on both sides of the balance sheet.

Richard M. Sems: Credit goes to Julie Huber and her operation teams for getting it done. Outside of M&A, our production teams remain focused on driving organic growth on both sides of the balance sheet.

Richard M. Sems: Outside of M&A, our production teams remain focused on driving organic growth on both sides of the balance sheet. Following the company's annual meeting in late April, we rolled out a producer incentive program that is designed to award our team with ownership for hitting higher growth goals. The program kicked off in the quarter, and we anticipate it to yield benefits over the remainder of the year. We have also rolled out a comprehensive training program to help improve our commercial banking capabilities. In Q2, all of our commercial bankers successfully completed round one of their training. In addition, the team has identified 1,200 prospect companies which were called upon in Q2.

Rick Simms: Following the company's annual meeting in late April, we rolled out a producer incentive program that is designed to award our team with ownership for hitting higher growth goals. The program kicked off in the quarter, and we anticipate it to yield benefit over the remainder of the year.

Richard M. Sems: Following the company's annual meeting in late April , we rolled out a producer incentive program that is designed to award our team with ownership for hitting higher growth goals.

Richard M. Sems: The program kicked off in the quarter and we anticipate to yield benefit over the remainder of the year.

Rick Simms: We have also rolled out a comprehensive training program to help improve our commercial banking capabilities. In Q2, all of our commercial bankers have successfully completed round one of their training. In addition, the team has identified 1,200 prospect companies, which were called upon in Q2. We expect this expanded calling effort to lead to pipeline expansion in Q3 and Q4. During the quarter, we were able to grow average loan balances 2.3%. We expect pipelines to continue to grow, and our sales teams are motivated to meet the needs of our customers and communities, which will drive organic growth.

Richard M. Sems: We have also rolled out a comprehensive training program to help improve our commercial banking capabilities.

Richard M. Sems: In Q2, all of our commercial bankers have successfully completed round one of their training.

Richard M. Sems: In addition, the team has identified 1,200 prospect companies which were called upon in Q2. We expect this expanded calling effort to lead to pipeline expansion in Q3 and Q4.

Richard M. Sems: We expect this expanded calling effort to lead to pipeline expansion in Q3 and Q4. During the quarter, we were able to grow average loan balances by 2.3%. We expect pipelines to continue to grow, and our sales teams are motivated to meet the needs of our customers and communities, which will drive organic growth. During the quarter, customer deposit balances were generally flat, with immaterial levels of expected runoff from the Bank of Kirksville customer base.

Richard M. Sems: During the quarter, we were able to grow average loan balance of 2.3%. We expect pipelines to continue to grow and our sales teams are motivated to meet the needs of our customers and communities, which will drive organic growth.

Rick Simms: During the quarter, customer deposit balances were generally flat, with immaterial levels of expected runoff from the Bank of Kirkstall customer base. Our team continues to focus on net interest margin and managing a challenging yield curve. This focus has resulted in a passing on loan opportunities at lower yields, as well as higher cost transactional deposits. As discussed in our investor materials from June, we believe there is meaningful opportunity to both maintain and grow our deposit base in our current markets. Total deposits close the quarter at $4.34 billion. Lones is a percentage of deposits closed at 79.6%, positioning in our bank to be a capable lender for new and current customers in our footprint.

Richard M. Sems: During the quarter, customer deposit balances were generally flat, with immaterial levels of expected runoff from the Bank of Kirksville customer base.

Richard M. Sems: Our team continues to focus on net interest margin and managing a challenging yield curve. This focus has resulted in us passing on loan opportunities at lower yields, as well as higher-cost transactional deposits. As discussed in our investor materials from June, we believe there is meaningful opportunity to both maintain and grow our deposit base in our current markets. Total deposits closed the quarter at $4.34 billion.

Richard M. Sems: Our team continues to focus on net interest margin and managing a challenging yield curve. This focus has resulted in us passing on loan opportunities at lower yields as well as higher cost transactional deposits.

Richard M. Sems: As discussed in our investor materials from June , we believe there is meaningful opportunity to both maintain and grow our deposit base in our current markets. Total deposits closed the quarter at $4.34 billion.

Richard M. Sems: Loans as a percentage of deposits closed at 79.6%, positioning our bank to be a capable lender for new and current customers in our footprint. As indicated in our outlook slide, we expect to drive mid-single-digit organic loan growth in 2024. We have the strategy, discipline, tools, and people in place to realize this expectation. I look forward to assisting the team in its execution. Service revenues improved quarter over quarter, including increasing contributions from cards, treasury and wealth management, service charges, and mortgage. Under the leadership of Andrew Musgrave, Trust and Wealth Management saw its best revenue quarter in over three years as the team has been able to drive both AUM and pipeline growth. Our company is very welcome.

Richard M. Sems: Loans as a percentage of deposits closed at 79.6%, positioning our bank to be a capable lender for new and current customers in our footprint.

Rick Simms: As indicated in our outlook slide, we expect to drive mid single-digit organic loan growth in 2024. We have the strategy, discipline, tools, and people in place to realize this expectation.

Speaker Change: As indicated in our Outlook slide, we expect to drive mid-single-digit organic loan growth in 2024. We have the strategy, discipline, tools, and people in place to realize this expectation. I look forward to assisting the team in execution.

Rick Simms: I look forward to assisting the team in execution. Service revenues improved quarter over quarter, including increasing contributions from cars, treasury and wealth management, service charges, and mortgage. Under the leadership of Andrew Musgrave, trust and wealth management saw its best revenue quarter in over three years, as the team has been able to drive both AUM and pipeline growth. Our company is well-capitalized; our asset quality metrics continue to run at historic lows. Our balance sheet structure is solid, our team is experienced, and we have a granular deposit base. We look forward to continuing to redeploy assets in the customer relationships that build franchise value.

Speaker Change: Service revenues improved quarter-over-quarter, including increasing contributions from CARB,

Andrew Brian Liesch: Treasury and Wealth Management, Service Charges, and Mortgage. Under the leadership of Andrew Musgrave, Trust and Wealth Management saw its best revenue quarter in over three years as the team has been able to drive both AUM and pipeline growth.

Brad S. Elliott: Our company is well capitalized, but our asset quality metrics continue to run at historic lows.

Andrew Brian Liesch: Our company is well capitalized. Our asset quality metrics continue to run at historic lows. Our balance sheet structure is solid. Our team is experienced. And we have a granular deposit base.

Brad S. Elliott: Our balance sheet structure is solid, our team is experienced, and we have a granular deposit base. We look forward to continuing to redeploy assets into customer relationships that build franchise value. We see a lot of momentum on the M&A front and expect that to continue. Equity will remain disciplined in its approach to assessing these opportunities, emphasizing value while controlling dilution and the earn-back timeline. Thank you for joining the call, and we're happy to take your questions at this time.

Andrew Brian Liesch: We look forward to continuing to redeploy assets into customer relationships that build franchise value.

Rick Simms: We see a lot of momentum on the M&A front and expect that to continue. Equity will remain disciplined in our approach in assessing these opportunities, emphasizing value while controlling delusion and the earned back timeline.

Speaker Change: We see a lot of momentum on the M&A front and expect that to continue. Equity will remain disciplined in our approach in assessing these opportunities, emphasizing value while controlling dilution and the earn-back timeline.

Unknown Executive: Thank you for joining the call, and we're happy to take your questions at this time. Thank you very much.

Speaker Change: Thank you for joining the call, and we're happy to take your questions at this time.

Unknown Executive: Thank you very much. To ask a question, please press star followed by one on your telephone keypad. Now, when preparing to ask your question, please ensure your device is unmuted locally.

Unknown Executive: To ask a question, please press star followed by one on your telephone keypad now. When prepping to ask your question, please ensure your device is unmuted locally. And if you change your mind, please press star followed by two.

Speaker Change: Thank you very much. To ask a question, please press star followed by one on your telephone keypad now. When prepping to ask your question, please ensure your device is unmuted locally. And if you change your mind, please press star followed by two.

Jeff Rulis: Our first question is from Jeff Rulis from DA Davidson and Co. Jeff, your line is now open. Please go ahead. Thanks. Good morning. I did the question on the margin front; just looks, you know, I think kind of flat to down for the second half. And I wanted to, I think there was a mention of the lagging effect of repricing deposits. Is that the genesis for the kind of the conservativeness on margin? I just wanted to double-check that.

Unknown Executive: And if you change your mind, please press star followed by two. Our first question is from Jeff Rulis from D.A. Davidson & Co. Jeff, your line is now open. Please go ahead.

Speaker Change: Our first question is from Jeff Rulis from DA Davidson & Co. Jeff, your line is now open, please go ahead.

Chris M. Navratil: The question on the margin front, just I think kind of flat to down for the second half and wanted to, I think there was a mention of the lagging effect of repricing deposits. Is that the genesis for the... Kind of the conservativeness on margin? I just wanted to double check that.

Jeffrey Allen Rulis: Thanks. Good morning.

Speaker Change: The question on the margin front, just.

Jeffrey Allen Rulis: Unknown Speaker It looks, you know, I think kind of flat to down for the second half and wanted to, I think there was a mention of the lagging effect of repricing deposits. Is that the genesis for the?

Speaker Change: kind of the conservativeness on margin. I just wanted to double check that.

Rick Simms: I think it's two things, Jeff. One of it is just always that continuing potential pressure on deposits that we're recognizing in that number. But it's also the purchase of accounting adjustments that we really like to do, bank and cash bill. That particular transaction, we realize the level of purchase of accounting is about 10 basis points alone, 7 basis points to margin. During the quarter, is that normalizing down to 5 or 6? That drives down margin a little bit. It's a little bit of both those things. It's leading a little bit of conservatism in that.

Chris M. Navratil: I think it's two things, Jeff. One of them is just that continuing potential pressure on deposits that we're recognizing in that number. But it's also the purchase accounting adjustments as it relates to Bank of Kirksville. In that particular transaction, we realize the level of purchase accounting increase by about 10 basis points to loan and seven basis points to margin. During the quarter, if that normalizes down to five or six, that drives down margin a little bit. It's a little bit of both those things. It's leaving a little bit of conservatism in that number.

Speaker Change: Yeah, I think it's two things, Jeff. One of it is just always that continuing potential pressure on deposits that we're recognizing in that number. But it's also the purchase accounting adjustments as it relates to Bank of Kirksville.

Speaker Change: That particular transaction, we realized the level of purchase accounting accretion about 10 basis points to loan, 7 basis points to margin. During the quarter, if that normalizes down to 5 or 6, that drops down margin a little bit. So it's a little bit of both those things. It's leaving a little bit of conservatism in that number.

Rick Simms: Okay, and the just wanted to make sure you do not have rate cut expectations in that margin guide, and if not, what would that net effect be from your perspective? That's correct; we don't have any in the model itself or in those four in that outlook. What is our balance sheet to today? We're in a modestly asset sensitive position, so for small rate cuts we expect a small adjustment down in terms of margin, but at the same time we think we have ample opportunity on the liability side to be moving raised down to maintain or nearly maintain where we are from a margin perspective.

Chris M. Navratil: Okay, and the...

Speaker Change: I just wanted to make sure you do not have rate cut expectations in that margin guide and if not, what would that net effect be from your perspective?

Chris M. Navratil: That's correct. We don't have any in the model itself or any of those four in that outlook. As our balance sheet sits today, we're in a modestly asset-sensitive position. And so for small rate cuts, we expect a small adjustment down in terms of margin. But at the same time, we think we have ample opportunity.

Speaker Change: That's correct we don't have any in the model itself or any of those four in that outlook.

Speaker Change: As our balance sheet says today, we're in a modestly asset-sensitive position, so for small rate cuts, we expect a small adjustment down in terms of margin, but at the same time, we think we have ample opportunity on the liability side to be moving rates down to maintain or nearly maintain where we are from a margin perspective. So we think for small movements as we go forward, we won't see meaningful degradation in margin. If we start to see larger cuts, that's where there could be some challenge, but we're not forecasting or looking at that at the moment.

Rick Simms: So we think for small movements as we go forward, we won't see meaningful; there could be some challenge, but we're not for a gap there looking at the moment.

Rick Simms: Okay, and then hopping over to the the long growth outlook, I think you covered it well. I mean, the numbers and the outlook look fairly muted for the second half despite some of that positivity in those incentive plans, but I think you kind of mentioned some costiveness on underwriting and loan yield discipline, poking through those that second half. I think you talked about pipelines building, but yet kind of a flatish outlook. Any more color on the long growth front in the second half, and maybe trying to get to that those incentives that you launched, is that I want to say one thing, Jeff, in terms of the outlook, is that average balance depiction is part of what's driving that. So the slower first half, we do think there's some meaningful opportunity going into the second half and expect year-over-year loan growth of kind of mid-single digits, five-six percent.

Richard M. Sems: And then hopping over to the loan growth outlook, I think you covered that well. I mean, the numbers and the outlook look fairly muted for the second half despite some of that positivity in those incentive plans. But I think you kind of mentioned some cautiousness on underwriting and loan yield discipline. Poking through that second half, I think you talked about pipelines building, but yet kind of a flattish outlook, any more color on the loan growth front in the second half and maybe trying to get to those incentives that you launched. Is that more of a kind of 2025 impact? Just trying to get the timing of when you see that kick.

Speaker Change: Okay.

Speaker Change: And then hopping over to the loan growth outlook, I think you covered it well. I mean, the numbers and the outlook...

Speaker Change: Looked fairly muted for the second half despite some of that positivity in those incentive plans. But I think it kind of mentioned some cautiousness on underwriting and loan yield discipline.

Speaker Change: Poking through those, that second half, I think you talked about pipelines building, but yet kind of a flattish outlook. Any more color on the loan growth front in the second half, and maybe

Speaker Change: Trying to get to that, those incentives that you launched, is that more of a kind of a 2025 impact, just trying to get the timing of when you see that kick in?

Richard M. Sems: Yeah, I'll just say one thing, Jeff, in terms of the outlook is that average balance depiction is part of what's driving that. So the slower first half, we do think there's some meaningful opportunity going in the second half. And we expect year-over-year loan growth of kind of mid-single digits, 5-ish percent. So that's a little bit of that dynamic, but I'll let Rick further address

Speaker Change: Yeah, I'll just say one thing, Jeff, in terms of the outlook is that average balance depiction is part of what's driving that, so the slower first half, we do think there's some meaningful opportunity going into the second half.

Richard M. Sems: and expect year-over-year loan growth of kind of mid-single digits, 5-ish percent. So that's a little bit of that dynamic, but I'll let Rick further address expectations. Yeah, I mean, our expectations are we are going to see some growth here in the second half. You know, we've kind of gotten to a point where we think, and what we're seeing is some of the borrowers just a little slow to break loose and go ahead and commit to doing a deal. But we expect that to kind of click in in the second half. So we see loan growth, you know, into the late, you know, mid-late in this.

Rick Simms: So that's a little bit of that dynamic, but on that rig, further address expectation. Yeah, I mean, our expectations are we are going to see some growth in the second half. We've kind of gotten to a point where we think, and what we're seeing is some of the borrowers is a little slow to break loose and go ahead and commit to do an idea, but we expect that to kind of click in in the second half. So we see long growth into the late in this quarter, but probably into the fourth quarter, and then really trying to drive it into 2025 with what we're focused on with the incentives of the calling that's going on right now.

Richard M. Sems: I mean, our expectations are we are going to see some growth here in the second half. You know, we've kind of gotten to a point where we think, and what we're seeing are some of the borrowers just a little slow to break loose and go ahead and commit to doing a deal. But we expect that to kind of click in the second half. So we see loan growth into the late, you know, late in this quarter, but probably into the fourth quarter, and then really trying to drive it into 2025 with what we're focused on with the incentives and the calling effort that's going on right now.

Richard M. Sems: quarter but probably into the fourth quarter and then really trying to drive it into 2025 with what we're focused on with the incentives and the calling effort that's going on right now.

Jeff Rulis: Okay, and just the last one on the, just want to confirm the, and they're probably immaterial, but the loan, well, the loan balances from Kansas Land, that is in the guidance and maybe confirming that also just what were the 630 loan and deposit balances at that, at Kansas Land. 35 million on the loan side and 47 million on the deposit side. Okay, all right.

Chris M. Navratil: And just a last one on the, just want to confirm the, and they're probably immaterial, but the loan, well, the loan balances from Kansas land, that is in the guidance and maybe confirming that also, just what were the 630 loan and deposit balances at that?

Speaker Change: Okay, just the last one on the just want to confirm the and they're probably immaterial, but the loan. Well, the loan balances from Kansas land that that is in the guidance and and maybe confirming that also just what were the 630 loan and deposit balances that at that

Speaker Change: at Kansas Land.

Chris M. Navratil: I'm sorry. Yeah, yeah. $35 million-ish on the loan side and $40-some million-ish on the deposit.

Speaker Change: Yeah, 35 million-ish on the loan side and 40-some million-ish on the deposit side.

Unknown Executive: All right, thank you. Thank you. We've got another question from Andrew Liesch from Piper Sandler. Andrew, your line is now open. Please go ahead.

Unknown Executive: Thank you.

Speaker Change: Okay. All right. Thank you.

Andrew Liesch: We've got another question from Andrew Leish from Piper Sandler. Andrew, your line is now open. Please go ahead. Hi, thanks. Morning, guys. Just a question on the swap that expired. Just curious what base point benefit to the margin of the bet generate? Yeah, thank you, Andrew. The benefit for the quarter on that derivative transaction was eight basis points. I mean, potentially slightly greater as you look forward. So nine basis points that I go forward basis that expired in the middle of April.

Speaker Change: Thank you. We've got another question from Andrew Liesch from Piper Sandler. Andrew, your line is now open. Please go ahead.

Unknown Executive: Hi, thanks. Good morning, guys.

Andrew Brian Liesch: Hi, thanks, good morning guys, just a question on the swap that expired, just curious what base point benefit to the margin did that generate?

Unknown Executive: Yeah, thank you, Andrew. The benefit for the quarter.

Speaker Change: Yeah, thanks, Andrew. The benefit for the quarter on that derivative transaction was eight basis points. I mean, potentially slightly greater as you look forward, so nine basis points on a go-forward basis. That expired in the middle of April .

Andrew Liesch: Got it. Alright, that's helpful. And then the access liquidity that you mentioned, nine basis points last quarter, does the bid include that exit liquidity on there on the balance sheet? Yeah, the guide includes the cash and includes the margin, in fact. Got it. Alright, okay, that's helpful.

Unknown Executive: Got it all right, that's helpful, and then the excess liquidity that you mentioned nine basis points last quarter, does the guide include that excess liquidity on the balance?

Speaker Change: got it all right that's helpful and then the the excess liquidity that you mentioned nine basis points last quarter does the guide include that that excess liquidity on there on the balance sheet

Unknown Executive: Yeah, the guide includes everything, it includes the cash, and it includes the margin.

Speaker Change: Yeah, the guide includes, it includes the cash and it includes the margins, impact.

Unknown Executive: All right. Okay, that's helpful. And then, Brad, on the M&A front, I'm just curious if you could provide some more commentary on what's gone on maybe over the last six weeks or so, like how have your conversations been going with prospective targets?

Speaker Change: Got it.

Speaker Change: All right. Okay, that's helpful. And then, Brad, just on the M&A front,

Brad Allen: And then, Brett, just on the M&A front, just curious if you could provide some more commentary on what's going on, maybe over the last six weeks or so. How have your conversations been tracking with prospective targets? Yeah, we've got, there's actually several new conversations kicking up, Andrew, and so there's lots of conversations going on. As you know, that never means that anything is going to happen. But, you know, we take a lot of tires, have a lot of conversations, model a lot of deals, and then see if we're, you know, the partner they want to pick.

Brad S. Elliott: Just curious if you could provide some more commentary on what's gone on maybe over the last six weeks or so, like how have your conversations been tracking with prospective targets?

Brad S. Elliott: Yeah, we've got, there are actually several new conversations kicking up, Andrew. And so there are lots of conversations going on. But, as you know, that never means that anything isn't concrete going to happen.

Speaker Change: Transcribed by https://otter.ai

Brad S. Elliott: yeah we've got there's actually several new conversations kicking up Andrew and so there's lots of conversations going on as you know that never means that anything is isn't concrete going to happen

Brad S. Elliott: But, you know, we kick the tires, have a lot of conversations, model a lot of deals, and then see if we're, you know, the partner they want to pick. And so it's, you know, I'm encouraged by the standpoint of, I think there are a lot of opportunities that we are able to talk with right now. I think people have realistic expectations. I think conversations are going well, and so the stock price moving up probably helps some of those transactions. Some of those transactions are all cash, so it doesn't influence them at all. I think there's lots of positive momentum in the second half of the year for conversations.

Brad S. Elliott: But, you know, we kick a lot of tires, have a lot of conversations, model a lot of deals, and then see if we're, you know, the partner they want to pick. And so it's, you know...

Brad Allen: And so it's, you know, I'm encouraged by the standpoint of, I think there's a lot of opportunities that we are able to talk with right now. I think people have realistic expectations. I think conversations are going well. And so, you know, things, stock price moving up probably helps some of those transactions; some of those transactions are all cash, so it doesn't influence them at all. But I think there's, there's a lot of positive momentum the second half of the year for conversations. Great. All right. I've heard my other questions.

Brad S. Elliott: I'm encouraged by the standpoint of, I think there's a lot of opportunities that we're able to talk with right now. I think people have realistic expectations. I think conversations are going well.

Brad S. Elliott: You know, things, stock price moving up probably helps some of those transactions. Some of those transactions are all cash, so it's not, doesn't influence them at all. But I think there's, there's lots of positive momentum the second half of the year for conversations.

Unknown Executive: Great. All right. You've covered my other questions. I'll step back.

Speaker Change: Great. All right. You've covered my other questions. I'll step back.

Unknown Executive: I'll step back.

Unknown Executive: Thank you very much.

Unknown Executive: Thank you very much. We've got another question from Terry McEvoy from Stetson's. Terry, your line is now open. Please go ahead.

Terry Mcevoy: We've got another question from Terry McCavoy from Stessons. Terry, your line is now open. Please go ahead. Great. Thanks. Good morning, everyone. Chris, maybe a couple of questions for you. When we were together last month, you raised them. I'll look for the net interest margin, and I think you commented that there was some accretion behind the increase.

Speaker Change: Thank you very much. We've got another question from Terry McEvoy from Stetsons. Terry, your line is now open. Please go ahead.

Unknown Executive: Thanks. Good morning, everyone.

Terence James McEvoy: Great. Thanks. Good morning, everyone.

Terence James McEvoy: Chris, maybe a couple of questions for you. When we were together last month, you raised the outlook for the net interest margin, and I think you commented that there was some accretion behind the increase. Could you just maybe quantify the accretion last quarter, and how are you thinking about the second half of this year from an accretion perspective?

Chris Navratil: Could you just maybe quantify the accretion last quarter, and how are you thinking about the second half of this year from an accretion perspective? Yeah. So through the second quarter, Terry, the accretion recognized through margin with some basis points. As I look forward, I think it will range between and I expect for this year sizes. and eight. So the higher-rend is the kind of more meaningful accretion from B.O.K. plus some additional Kansas plans. The lower-rend would just be slower accretion on the B.O.K. side as well as Kansas Plans. So it's going to be between five and eight basis points.

Chris M. Navratil: Chris, maybe a couple of questions for you. When we were together last month, you raised the outlook for the net interest margin, and I think you commented that there was some accretion behind the increase. Could you just maybe quantify the accretion last quarter? And how are you thinking about the second half of this year from an accretion perspective?

Terence James McEvoy: Yeah, so through the second quarter, Terry, the accretion recognized through margin was seven basis points.

Chris M. Navratil: Yeah, so through the second quarter, Terry, the accretion recognized through margin was seven basis points. As I look forward, I think it'll range between, I expect for this year, five and eight. So the higher end is the kind of more meaningful accretion from BOK plus some additional Kansas land. The lower end would just be slower accretion on the BOK side, as well as additional Kansas land. So it's going to be between five and eight basis points the rest of the way.

Speaker Change: As I look forward, I think it'll range between, I expect for this year, five and eight.

Speaker Change: So, the higher end is the kind of more meaningful accretion from BOK plus some additional Kansas land. The lower end would just be slower accretion on the BOK side, as well as Kansas land. So, it would be between five and eight basis points, I think, the rest of the way.

Chris Navratil: I think the rest of the life.

Chris Navratil: And then just one other small that what are your thoughts on the tax rate in the fourth quarter in 2025? Yeah, so for the rest of this year, the way the Boldly transaction works is basically factored into the effective tax rate for the year. So, without any additional tax planning, we would see the tax rate realized year-to-date, which is about 24 to 24 and a half percent. That would be consistent the rest of the year. As you look at the outlook, we put 20 to 22 percent in there for the quarter and the year. And the reason for that is we do have some tax planning strategies we're working on that we think can lower that rate.

Chris M. Navratil: And then just one other question, Smanda: what are your thoughts on the tax rate in the fourth quarter of 2025?

Speaker Change: And then just one other, Smanda, what are your thoughts on the tax rate in the fourth quarter in 2025?

Chris M. Navratil: Yeah, so for the rest of this year, the way the BOLI transaction works is basically factored into the effective tax rate for the year. So without any additional tax planning, we would see the tax rate realized year-to-date, which is about 24% to 24.5%. That would be consistent for the rest of the year.

Smanda: Yeah, so for the rest of this year, the way the BOLI transaction works is basically factored into the effective tax rate for the year. So, without any additional tax planning, we would see the tax rate realized year-to-date, which is about 24 to 24.5%.

Chris M. Navratil: As you look at the outlook, we put 20% to 22% in there for the quarter and the year. And the reason for that is we do have some tax planning strategies we're working on that we think can lower that rate. So if we realize those benefits, we'll see that tax rate somewhere closer to 20%. If we don't, it'll be where it is today on a year-to-date basis, which is about 24.5%.

Smanda: That would be consistent the rest of the year.

Speaker Change: As you look at the outlook, we've put 20-22% in there for quarter end of the year.

Speaker Change: And the reason for that is we do have some tax planning strategies we're working on that we think can lower that rate. So if we realize those benefits, we'll see a lower...we'll see that tax rate somewhere closer to 20%. If we don't, it'll be where it is today on a year-to-day basis, which is about 24.5%.

Chris Navratil: So if we realize those benefits will be a lower, we'll see that tax rate somewhere closer to 20 percent. If we don't, it'll be where it is today on a year-to-day basis, which is about 24 and a half. Thanks, Chris.

Brad S. Elliott: Thanks, Chris. And then, Brad, going back to the M&A discussion, what's the profile of a potential M&A partner today? What are the reasons for having a conversation with equity? And are there any similar characteristics among some of those potential partners?

Brad Allen: And then Brad, going back to the M&A discussion, what's the profile of a potential M&A partner today? What are the reasons for having a conversation with equity, and are there any similar characteristics among some of those potential partners? You know, there are similar characteristics. Some reasons are their age; ownership is in their 70s, management in their 70s. Some of the reasons are their fighting the headwinds of margin compression, and it's continuing to get worse. They don't look like it's going to get better. And others are some regulatory pressure from different things in not high-risk areas, but just things that their board is tired of dealing with.

Speaker Change: Thanks, Chris. And then, Brad, going back to the M&A discussion.

Brad S. Elliott: What's the profile of a potential M&A partner today? What are the reasons for having a conversation with Equity? And are there any similar characteristics among some of those potential partners?

Brad S. Elliott: You know, there are similar characteristics. Some reasons are their, you know, age of ownership is in their 70s, and management's in their 70s. Some of the reasons are they're fighting the headwinds of margin compression, and it's continuing to get worse. It doesn't look like it's going to get better. And others are some regulatory pressure from different things in not high-risk areas, but just things that their board is tired of dealing with. And so there's kind of a whole bag of stuff.

Brad S. Elliott: You know, there are similar characteristics. Some reasons are...

Brad S. Elliott: The age of ownership is in their 70s, management is in their 70s, some of the reasons are they're fighting the headwinds of margin compression and it's continuing to get worse.

Speaker Change: They don't look like it's going to get better. And others are some regulatory pressure from different things in not high-risk areas, but

Brad Allen: And so there's kind of a whole bag of stuff. Each one's kind of different. There's not a theme across the board. The only one theme is several of them are fighting the headwinds of margin compression. And even if the Fed starts cutting rates, it's not going to improve their margin enough to make a difference in deposits. Every price is not a faster than the assets that are in the assets are still two or three years out.

Brad S. Elliott: Each one's kind of different. There's not a theme across the board. The only common theme is that several of them are fighting the headwinds of margin compression. And, you know, even if the Fed starts cutting rates, it won't improve their margin enough to make a difference in deposits, heavy price on them faster than the assets are, and the assets are still two or three years out.

Speaker Change: You know, even if the Fed starts cutting rates, it's not going to improve their margin enough to make a difference in deposits, have repriced on them faster than the assets are, and the assets are still two or three years out.

Unknown Executive: Perfect.

Unknown Executive: Perfect. Thanks for taking my questions. I appreciate it.

Unknown Executive: Thanks for taking my questions.

Unknown Executive: Appreciate it.

Damon Delmonte: Thank you, and we've got the next question from Damon Del Monte. Damon, your line is now open. Please go ahead. Hi, thanks. Good morning, everyone.

Unknown Executive: Thank you. And we've got the next question from Damon DelMonte. Damon, your line is now open. Please go ahead.

Speaker Change: Thank you. And we've got the next question from Damon DelMonte. Damon, your line is now open. Please go ahead.

Unknown Executive: Hi, thanks. Good morning, everyone.

Chris M. Navratil: So, quick question on the outlook for provision. You know, credit trends have been pretty stable, as Krzysztof provided a good overview. Do we kind of think of the reserve as just being flattish and provision just being driven by loan growth if net charge-offs are, you know, relatively modest?

Krzysztof Slupkowski: So, quick question on the outlook for provision. You know, credit trends have been pretty stable as Christoph provided a good overview. Do we kind of think of the reserve as just being flatish and provisioned just being driven by loan growth, if net charge-offs are relatively modest? Yeah, Damon, I think that's a good way to point it. Always pending other things, right? So, if we had some charge-offs worked through, if we had the deterioration and chronic quality, that thought was going to drive provisioning and reserve levels. But as things continue on their current trajectory, that statement is correct.

Speaker Change: Hi, thanks. Good morning, everyone. So, quick question on the outlook for provision. You know, credit trends have been pretty stable, as Krzysztof provided a good overview. Do we kind of think of the reserve as just being...

Speaker Change: Transcribed by https://otter.ai

Chris M. Navratil: Yeah, Damon, I think that's a good way to put it, you know, always pending other things, right? So if we had some charge-offs work through, if we had some deterioration in credit quality, that's obviously going to drive provisioning and reserve levels. But if things continue on their current trajectory, that statement is correct. We would see any meaningful provisioning coming through loan production and growth.

Speaker Change: Yeah, Damon, I think that's a good way to put it. You know, always pending other things, right? So if we had some charge-offs work through, if we had some deterioration in credit quality, that's obviously going to drive provisioning and reserve levels, but if things continue on their current trajectory, that statement is correct. We would see really any meaningful provisioning coming through loan production and growth.

Krzysztof Slupkowski: We would see really any meaningful provisioning coming through loan production.

Krzysztof Slupkowski: And then, with regards to the buyback, you know, again, active this quarter, we've seen a rally in the shares, and then, you know, the sector as a whole. Kind of just what, curious thing you're up to is thoughts on current prices, and if it's still attractive for you guys to remain active. I think we have to be strategic in thinking about, you know, that when we always are, we have a certain buyback and earnback that we do, and so we'll continue to look at that, Damon, to see if it still fits us. You know, we're getting to a level where it probably doesn't, which is a positive thing from the standpoint of the stock. You know, the prices performing, but we'll still, we'll evaluate on a daily basis on, you know, within the parameters that the board sets on whether we're buying shares back or not.

Brad S. Elliott: And then, with regard to the buyback, you know, again, active this quarter. We've seen a rally in the shares and, you know, the sector as a whole. Kind of just curious about your updated thoughts on current prices and if it's still attractive for you guys to remain active.

David: Got it, okay.

Speaker Change: And then with regards to the buyback, you know, again, active this quarter, we've seen a rally in the shares and, you know, the sector as a whole. I'm kind of just curious on your updated thoughts on current prices and if it's still attractive for you guys to remain active. Unknown Speaker

Brad S. Elliott: I think we have to be strategic in thinking about, you know, that, and we always are. We have a certain buyback and earnback that we do, and so we'll continue to look at that, Damon, to see if it still fits us or to get to a level where it probably doesn't, which is a positive thing from the standpoint of the stock, you know, how the price is performing. We'll still evaluate on a daily basis, within the parameters that the board sets on whether we should be buying shares back or not. Got it. Okay.

Damon: I think we have to be strategic in thinking about, you know, that we always are, we have a certain buyback and earnback that we do. And so we'll continue to look at that, Damon, to see if it still fits us, you know, we're getting to a level where it probably doesn't, which is a positive thing from the standpoint of the stock.

Unknown Executive: I got it. Okay, everything else I had was asked and answered. So, thank you very much.

Damon: [inaudible]

Unknown Executive: Got it. Okay. Everything else I had was asked to answer, so thank you very much.

Damon: got it okay everything else I had was asked and answered so thank you very much

Unknown Executive: Thank you. And the next question is from Brett Rabatin from Hovde Group, LLC. Brett, your line is now open. Please go ahead.

Brett Rabatin: Thank you. And the next question is from Brett Reboton from Holfday Group, LLC. Brett, your line is now open. Please go ahead. Hey guys, good morning.

Speaker Change: Thank you. And the next question is from Brett Rabatin from Hovde Group, LLC. Brett, your line is now open. Please go ahead.

Richard M. Sems: Hey guys, I joined a little bit late, but I just wanted to get a little flavor of what you're seeing on the competitive side of deposits. And, you know, if you're adding new money, have the expectations come down, you know, at all in some of your markets and just, you know, maybe a flavor for what you're having to pay if you want to add new money to the balance.

Rick Simms: I joined a little bit late, but I just wanted to get a little flavor for what you're seeing on the competitive side, on deposits, and you know, if you're adding new money, how do your expectations come down, you know, at all in some of your markets and just, you know, maybe a flavor for what you're having to pay if you want to add new money to the balance sheet. Yeah, so this, Rick, you know, we're seeing the pressure of bait a bit. I mean, every once in a while, you know, you get requests and things like that for, you know, for an exception; they come through, but we're clearly seeing the velocity of that decrease.

Brett D. Rabatin: Hey guys good morning. I joined a little bit late but I just wanted to get a little flavor for what you're seeing on the competitive side on deposits and you know if you're if you're adding new money have the expectations come down

Richard M. Sems: Yeah, Rick, you know, we're seeing the pressure abate a bit. I mean, every once in a while, you know, you get requests and things like that for, you know, an exception they come through, but we're clearly seeing the velocity of that decrease. And so that's good because in a lot of the markets that we're in, there aren't as many competitors, so we're able to, you know, kind of keep those rates down.

Brett D. Rabatin: Yeah, so this is Rick. You know, we're seeing the pressure abate a bit. I mean, every once in a while, you know, you get requests.

Brett D. Rabatin: and things like that for...

Brett D. Rabatin: You know, for an exception, they come through, but we're clearly seeing the velocity of that decrease. And so that's good, because in a lot of the markets that we're in, you know, there aren't as many competitors, so we're able to, you know, kind of keep those rates down. It still happens, and the issue is really more, I think, on the individual circumstances of those banks. That's more of what we're seeing. So banks, you know, struggling with their loan-to-deposit ratio, all of a sudden somebody comes out of the blue because of, you know, issues that they have there, and then we're facing a rate that might be in the fives for, you know, for some reason.

Rick Simms: And so that's good because in a lot of the markets that we're in, you know, there aren't as many competitors. So we're able to, you know, kind of keep those rates down. It still, it still happens. And the issue is really more, I think, on the individual circumstances of those banks; that's more of what we're seeing. So banks, you know, struggling with their loan deposit ratio, all of a sudden, somebody comes out of the blue because of, you know, issues that they have there. And then, and then we're, we're facing a rate that might be in the five for, you know, for some money market or, you know, you're out rate.

Richard M. Sems: It still happens, and the issue is really more, I think, about the individual circumstances of those banks. That's more of what we're seeing. So banks, you know, struggling with their loan-to-deposit ratio, all of a sudden somebody comes out of the blue because of, you know, issues that they have there, and then we're, you know, we're facing a rate that might be in the fives for the Money Market or Year Out rate. And we're just really not playing in that market at this point in time. So, as far as the outlook of it goes, I think we'll continue to see sporadic or one-off competitors doing things like that. So we just take them one at a time.

Brett D. Rabatin: money market or you know year-out rate and we're just really not playing in that in that market.

Rick Simms: And we're, we're really not playing in that, in that market at, at this point in time. So we, as far as on the outlook of it goes, I think we'll continue to see, you know, sporadic or one-off competitors doing things like that. So we just take them one at a time. Okay. That's helpful.

Brett D. Rabatin: at this point in time. So we, as far as on the outlook of it goes, I think we'll continue to see, you know, sporadic or one-off competitors doing things like that. So we just take them one at a time.

Brad S. Elliott: Okay, that's helpful. And then just thinking about, you know, M&A is obviously a strong topic with you guys. With your shock a little bit higher, you know, cash is something that you typically use in deals, but Would we not expect you to maybe use more stock in a transaction from here? And what are you guys thinking about? Tangible Book Dilution, Payback, etc. at this point.

Speaker Change: Okay, that's helpful. And then just thinking about, you know, M&A is obviously a strong topic with you guys. With your shock a little bit higher, you know, I know cash is something that you typically use in deals, but

Brad Allen: And then just thinking about, you know, M&A's obviously a strong topic with you guys. With your shock a little bit higher, you know, I know cash is something that you typically use in deals, but, you know, would we not expect you to maybe use more stock in transactions from here, and how are you guys thinking about it? Cantal book delusion, Payback, etc. at this point. Yeah, so our metrics haven't changed since we started the company, and so they're not going to change today. So, you know, we're still going to be under a three-year earn back stock to come more into play, although we've had a lot of conversations with people about taking shares all along the way. And, you know, some of it has to do with the smaller companies generally wanting cash, and just because they're less sophisticated and they've had 90% of their assets tied up in the bank. And so one of the reasons they're selling is to get liquidity later on in life, so that's why the cash usually comes into play. But, you know, there are conversations currently happening with stock, and I think it will increase with the stock market recovery.

Speaker Change: Would we not expect you to maybe use more stock in a transaction from here? How are you guys thinking about that?

Speaker Change: Tangible Book Dilution, Payback, etc. at this point.

Brad S. Elliott: Yeah, so our metrics haven't changed since we started the company, and so they're not going to change today.

Speaker Change: Yeah so our metrics haven't changed since we started the company and so they're not going to change today so you know we're still going to be under a three-year earn back. Stock does come more into play although we've had a lot of conversations with people about taking shares.

Brad S. Elliott: So, you know, we're still going to be under a three-year earn back stock to come more into play, although we've had a lot of conversations with people about taking shares all along the way.

Brad S. Elliott: And, you know, some of it has to do with smaller companies generally wanting cash, just because they're less sophisticated and they've had 90% of their assets tied up in the bank. And, and so one of the reasons they're selling is to get liquidity later on in life. So that's why the cash usually comes into play. But, you know, there are conversations currently happening with stocks, and I think that will increase with the stock market recovery.

Speaker Change: all along the way.

Speaker Change: And, you know, some of it has to do with the smaller companies generally want cash, just because they're less sophisticated, and they've had 90% of their assets tied up in the bank, and so one of the reasons they're selling is to get liquidity later on in life. So that's why the cash usually comes into play, but, you know, there are conversations currently happening with stock, and I think it will increase with the stock market recovery.

Brett Rabatin: Okay, great! Thanks for taking my questions.

Unknown Executive: Great, thanks for taking my questions.

Speaker Change: Okay.

Unknown Executive: Thank you very much. We currently have no further questions.

Unknown Executive: Thank you very much. We currently have no further questions. Thank you everyone for joining us. That concludes today's call. You may now disconnect your lines.

Speaker Change: Thank you very much.

Speaker Change: We currently have no further questions.

Unknown Executive: Thank you, everyone, for joining. That concludes today's course. You may now disconnect your line.

Speaker Change: Thank you everyone for joining. That concludes today's call. You may now disconnect your lines.