Executive Summary / Key Takeaways

• Equity Bancshares is executing a dual-pronged growth strategy, combining disciplined strategic mergers and acquisitions with a revitalized organic growth engine, underpinned by a strong balance sheet and relationship-focused community banking model.
• Recent M&A activity, including the completed 2024 deals and the announced NBC Corp. merger, is significantly expanding EQBK's footprint and asset base, leveraging its proven integration capabilities.
• An internal reset of the organic growth engine, supported by enhanced sales training and incentives, is yielding strong loan production and pipeline growth, positioning the company for mid to high single-digit organic expansion.
• Solid financial performance in Q1 2025, marked by net interest income growth, margin expansion, and improved efficiency, reflects effective balance sheet management and operational execution despite a dynamic rate environment.
• While facing competitive pressures on efficiency and digital innovation from larger peers, EQBK differentiates through its diversified geographic footprint, granular deposit base, niche lending expertise, and commitment to full-service, relationship-based banking.

A Foundation for Growth: Strategy Meets Opportunity

Equity Bancshares, Inc., operating primarily through its subsidiary Equity Bank, has established itself as a prominent regional financial institution across Arkansas, Kansas, Missouri, and Oklahoma. Founded in 1985, the company has grown by providing a comprehensive suite of banking, mortgage, and financial services tailored to individuals and businesses within its communities. At its core, EQBK's strategy is built on a relationship-first community banking model, differentiating itself through personalized service and a deep understanding of local market needs.

This foundational approach is complemented by a clear dual strategy for expansion: driving robust organic growth from its existing footprint and pursuing disciplined strategic mergers and acquisitions. This strategic framework is not new, but recent periods highlight a renewed emphasis and accelerated execution, positioning EQBK for significant transformation and potential value creation.

The competitive landscape for regional banks like EQBK is dynamic, marked by pressure from larger, more technologically advanced institutions and nimble fintech firms. Competitors such as BancFirst (BANF), BOK Financial (BOKF), Commerce Bancshares (CBSH), and Simmons First National (SFNC) operate in overlapping markets, bringing varying strengths to the fore. While EQBK offers a comparable range of services, including digital banking solutions, mobile banking, and treasury management services (utilizing platforms like Q2), the competitive analysis suggests that some peers may hold advantages in operational efficiency and the speed of digital innovation, potentially stemming from higher R&D investment or more integrated technology platforms. For instance, some competitors reportedly enable faster loan approvals or transaction processing through advanced tech.

In response, EQBK's strategic positioning leverages its extensive branch network and local presence to foster customer loyalty – a tangible advantage in relationship-based banking. While investing in digital capabilities is crucial for service delivery and efficiency improvements, EQBK's competitive edge appears more rooted in its ability to execute M&A effectively and drive organic growth through motivated teams and targeted sales efforts, rather than a unique, quantifiable technological moat. The company's focus on enhancing commercial banking capabilities through training and incentives underscores its approach to improving efficiency and service delivery through human capital and process, alongside technology adoption.

Executing the Dual Strategy: M&A and Organic Momentum

The past year has vividly demonstrated EQBK's commitment to its dual growth strategy. 2024 saw the successful completion of two whole bank acquisitions, the Bank of Kirksville merger and the KansasLand Bancshares acquisition, both notable for their rapid execution, closing within 75 days of announcement. This capability in identifying, closing, and integrating acquisitions is a core competency that management highlights as a source of pride and a key differentiator.

Building on this momentum, Q1 2025 brought the significant announcement of a definitive merger agreement with NBC Corp. of Oklahoma, expected to close in Q2 2025. This transaction is strategically vital, promising to add approximately $900 million to EQBK's pro forma assets and substantially expand its presence and market share in Oklahoma, including gaining access to the Oklahoma City metro market. This expansion is intended to fuel further organic production in key areas like lending and treasury management. Management expressed excitement about integrating the NBC team, recognizing their strong community ties and relationships.

Complementing the M&A drive is a focused effort to revitalize the organic growth engine. Following a reset of incentives and sales strategies, the company reported strong organic originations in Q1 2025, totaling $197 million, a 64% increase linked quarter. This contributed to overall loan growth of $131 million in the quarter, an annualized rate of 15.5%. Management attributes the improving yield on organic originations (7.41% in Q1 2025) to the team's emphasis on providing value beyond transactional facilitation. Pipelines are described as strong, with the 25% pipeline hitting an all-time high in Q3 2024, indicating robust opportunity identification. This organic momentum, coupled with strategic M&A, positions EQBK for anticipated mid to high single-digit organic loan growth in 2025.

Supporting this aggressive growth posture is a strengthened capital base. An $87 million common equity capital raise in Q4 2024 provided offensive capital specifically earmarked for funding M&A and organic growth. As of March 31, 2025, the tangible common equity ratio stood at a healthy 10.13%, a significant increase from Q1 2024, and management confirmed the company and bank meet all regulatory capital requirements. This capital strength provides flexibility to pursue opportunities.

Financial Performance and Balance Sheet Strength

EQBK's financial performance in Q1 2025 reflects the early benefits of its strategic initiatives and effective balance sheet management in a challenging rate environment. Net income allocable to common stockholders increased to $15.0 million, or $0.85 per diluted share, compared to $14.1 million, or $0.90 per diluted share, in Q1 2024 (the per-share decrease reflects a higher share count).

A key driver was the increase in net interest income, rising to $50.3 million in Q1 2025 from $44.2 million in Q1 2024. This 13.8% increase was fueled by both higher average earning asset volumes and an expansion in the net interest margin, which grew to 4.27% from 3.75% year-over-year. The net interest spread also widened significantly to 3.63% from 3.10%. This margin expansion is primarily attributed to the increase in loan interest income and a decrease in the cost of interest-bearing deposits, demonstrating the bank's liability sensitivity in the recent rate environment.

Non-interest income saw a decrease to $10.3 million in Q1 2025 from $11.7 million in Q1 2024. This decline was largely due to lower recovery on zero basis loans and reduced gain on acquisition compared to the prior year, partially offset by a notable increase in the value of bank-owned life insurance, which included the realization of a death benefit. Management sees opportunities to grow fee income from areas like treasury management, trust, wealth management, and insurance as they deepen customer relationships.

Non-interest expense increased to $39.1 million in Q1 2025 from $37.2 million in Q1 2024. This rise was driven by higher salaries and employee benefits (reflecting payroll costs, incentive/stock compensation, and staff increases from recent mergers), increased data processing costs (related to software license renewals), and higher amortization of core deposit intangibles from acquisitions. However, merger expenses were significantly lower compared to Q1 2024. The company's efficiency ratio improved to 62.43% in Q1 2025 from 63.45% in Q1 2024, indicating a more efficient use of resources relative to income generation.

The balance sheet expanded, with total assets reaching $5.45 billion at March 31, 2025, up from $5.33 billion at December 31, 2024. This growth was primarily driven by the increase in loans held for investment ($3.59 billion net) and cash and cash equivalents, partially offset by a decrease in available-for-sale securities. Total liabilities increased to $4.83 billion, mainly due to increases in total deposits ($4.41 billion) and Federal Home Loan Bank advances. While total deposits saw a modest increase, deposits excluding brokered funds decreased, and brokered deposits increased significantly, highlighting ongoing funding dynamics. The loan-to-deposit ratio increased to 82.4% at March 31, 2025, from 80.0% at year-end 2024.

Asset Quality and Risk Management

EQBK's asset quality metrics generally remain strong, with nonperforming assets decreasing in Q1 2025 and staying at historical lows. Net charge-offs were low in Q1 2025 (2 basis points annualized), reflecting specific credit circumstances rather than broader systemic issues. Total classified assets saw a linked-quarter decrease, although they are up year-over-year, primarily influenced by one QSR-related customer. Management does not currently expect losses on this specific credit and notes that recognized charge-offs continue to be isolated incidents.

The provision for credit losses increased in Q1 2025 to $2.7 million, compared to $1.0 million in Q1 2024. This higher provision is primarily linked to the quarter's loan growth and increased uncertainty regarding the economic outlook, particularly concerning recent trade policy announcements. Management's allowance for credit losses (ACL to loans of 1.26%) incorporates assumptions about potential market disruption, elevated inflation, and the impact of monetary policy. While acknowledging minor weaknesses emerging for smaller operators and quick service restaurants due to inflation-related pricing pressures, management emphasizes that exposure in these areas is granular and meaningful losses are not anticipated. They continue to leverage portfolio monitoring tools and maintain prudent underwriting standards. The credit outlook for 2025 remains positive, with problem trends below historic norms and trending down in Q1 2025.

Interest rate risk remains a primary market risk, impacting net interest income and asset/liability values. Management uses simulation analysis to monitor sensitivity, noting that while the balance sheet is liability-sensitive, they are positioned to defend margin in moderate rate cut scenarios and could see modest upside. The complexity of estimating the allowance for credit losses under CECL, particularly concerning the impact of changing economic conditions on quantitative and qualitative inputs and loan life, introduces inherent uncertainty. Additionally, the company is involved in overdraft fee litigation, which it intends to defend.

Outlook and Future Trajectory

Management's outlook for the remainder of 2025 is optimistic, centered on continued execution of the dual growth strategy. The expected closing of the NBC merger in Q2 2025 will significantly alter the pro forma balance sheet and is anticipated to meaningfully change the full-year outlook, which will be updated accordingly.

For Q2 2025 specifically, management anticipates a net interest margin between 4.00% and 4.10% on average earning assets between $4.8 billion and $4.9 billion. This forecast, while not incorporating future rate changes, reflects the expected benefits of lagging repricing in the loan and deposit portfolios. The provision for credit losses is forecasted at 12 basis points to average loans on an annualized basis, primarily driven by expected loan growth under stable credit conditions.

The organic growth engine is expected to continue its momentum, with management anticipating mid to high single-digit organic loan expansion in 2025. This is supported by strong pipelines and motivated sales teams leveraging enhanced training and incentives. The company's focus on being a full-service banker, including growing deposit and fee income relationships, is crucial for funding future growth and enhancing profitability.

Conclusion

Equity Bancshares is strategically positioned for continued growth, leveraging its strong balance sheet, proven M&A execution capabilities, and a revitalized organic growth engine. The announced NBC merger represents a significant step in expanding its footprint and market presence, particularly in the attractive Oklahoma market. While navigating competitive pressures on efficiency and digital innovation, EQBK's relationship-focused community banking model, coupled with targeted investments in sales capabilities and technology platforms, provides a foundation for deepening customer relationships and driving value.

The company's solid financial performance in Q1 2025, marked by margin expansion and loan growth, underscores its operational effectiveness. While macroeconomic uncertainties and specific credit risks warrant monitoring, asset quality metrics remain favorable, and management appears proactive in managing potential challenges. For investors, EQBK's story is one of disciplined expansion and operational improvement, with the successful integration of recent and upcoming acquisitions and the sustained momentum of organic growth serving as key catalysts for future performance.