Damon Del Monte

Damon Del Monte from KBW asked about the significant increase in the UPV (Unpaid Principal Balance) on loans serviced for others, seeking clarification on the drivers. He also questioned whether future custodial deposit relationships would be as large as the recent $300 million increase and requested a re-explanation of the expense guidance for Q4 2025 and full-year 2026.

Answer

President and Secretary Kevin Comps attributed the UPV increase to ramping up sub-servicing of AIO-like products for new end investors and retaining MSRs from own production. EVP and CFO Brad Howes stated that the recent custodial deposit relationship was likely an outsized one, but the company continues to seek additional non-brokered funding sources. Brad Howes then reiterated the expense guidance: Q4 2025 similar to Q3, and $140 million-$144 million for full-year 2026, driven by higher mortgage volume, variable compensation, business activity, cost of living adjustments, and team strengthening.

Damon Del Monte, a Managing Director and Equity Research Analyst at Keefe, Bruyette & Woods (KBW), questioned whether Equity Bancshares' 2026 provision outlook includes day-two CECL expectations or represents an operating basis. He also asked for clarification on why the provision outlook appears higher than recent trends. Additionally, Mr. Del Monte inquired about the expected future ratio of the securities portfolio to average earning assets, specifically if it would return to 20-21% or settle in the mid-teen range.

Answer

CFO Chris Navratil confirmed that the 2026 provision outlook is on an operating basis and does not include the day-two CECL double count. He attributed the higher outlook to conservatism rather than specific additive risks. Regarding the securities portfolio, Chris Navratil stated that it is expected to settle at a lower than 20% position, closer to the mid-to-high teens, due to the additions of NBC Oklahoma and Frontier Holdings, as well as ongoing liquidity and pledging needs.