Good day, ladies and gentlemen and welcome to the Equity Bancshares Second Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. John Hanley, Senior Vice President, Investor Relations. Sir, you may begin.

Thank you. Good morning. Thank you all for joining the Equity Bancshares presentation and conference call, which will include discussion and presentation of our Q2 and six months 2017 results. Joining me today are Equity Bancshares' Chairman and CEO, Brad Elliott; and Equity Bancshares’ Executive Vice President and Chief Financial Officer, Greg Kossover. Presentation slides to accompany our call are available for download at investor.equitybank.com. The presentation accompanies discussion of our Q2 results and is available by clicking either the Presentations tab for download as PDF or by clicking the Events icon for today's call posted at investor.equitybank.com. If you are viewing this call on our webcast player, please note that slides will not automatically advance. Please note Slide 2 including important information regarding forward-looking statements. From time to time we may make forward-looking statements within today's call and actual results may differ. Please also note Slide 3 with important additional informational for investors and shareholders. Following this presentation, we will allow time for questions and further discussion. Thank you all for joining us. And with that I'd like to turn it over to Brad.

Thanks John. Good morning and thank you for joining our second quarter 2017 Equity Bancshares earnings call. I'm Brad Elliott, Chairman and CEO and here with me this morning is our CFO, Greg Kossover. It has been a very exciting week in the Equity Bank franchise. The announcement of the mergers with Patriot Bank in Tulsa and Eastman National Bank in Ponca City in Newkirk, signals of entry into Oklahoma with two new outstanding banking partners. I'd like to say again how impressed we are with Michael Bezanson team in Tulsa and the team in Ponca City in Newkirk led by Mark Detten and Jim Leach. We follow that great news today and with our record second quarter 2017 results. This performance is the result of very hard work and unselfishness of our teams here at Equity Bank. The teams at Hoxie, Grinnell and Quinter have now been with Equity Bank for a full quarter and has integrated nicely. Mike, Jeff, Sherry and Steve and their teams are already making an impact as deposits and have also increased 4 million in deposits since closing. And we're just as excited about the future of the Western Kansas markets, as we were when we introduced the Hoxie team to our franchise. Also our operating teams in Wichita, once again made the process of integrating a new bank look easier than it is. Myself and our Board of Directors thank each of our hard-working teams for all you do every day which takes us back to our record quarter. By closing and converting our mergers, at the same time the focus can turn immediately to integration and performance. In the second quarter that have lead to $6,354,000 in net income or $0.51 per share both records for Equity Bancshares. For the quarter annualized return on assets was over 1% and return on tangible common equity was over 12.3% and our efficiency ratio was less than 60%. These metrics are the hard earned results from everyone at Equity Bank for our shareholders. And as I have said in recent announcements, we've bolstered the teams with the addition of Wendell Bontrager's President Scott Smits as Chief Credit Officer and transitioned Julie Huber to lead Mergers and Integrations. The impact of these individuals and their teams allows Greg and I to - resources to continue to build our merger pipeline with opportunities in our footprint. Before we go through our second quarter numbers, I want to thank our Board of Directors for their leadership in our journey. To serve as Chairman of the Board with these talented and diverse individuals is a privilege. Each of them brings something unique to the table and collectively they come together with hard work, passion, experience, and business acumen to deliver value and growth to our shareholders. Thank you directors for all you do. Greg?

Thank you, Brad. We begin with our earnings and as Brad said Q2 delivered $0.51 per share and $6,354,000 in after-tax income to the shareholders. This is 50% earnings per share growth compared to $0.34 per share, the same quarter in 2016 and 28% growth over the $0.40 per share in the March 2017 quarter. Interest income was up 1,867,000 from first quarter and interest expense was up 561,000 both increases largely due to the Hoxie branches being online for an entire quarter. Loan yield in the second quarter was 5.45% and scrubs for higher-than-expected purchase accounting accretion of about $125,000 was approximately 5.42%. This compares to adjusted Q1 yield on loans of about 5.38%. Securities yield was 2.57% in the second quarter normalized for $215,000 bond call gain compared to 2.44% in the first quarter. This increasing yield is due primarily from a slowdown in CMBS prepayment speeds resulting in less premium amortization. Deposit cost increased from 62 basis points to 65 basis points, a modest reflection of overall rate increases. Cost of other borrowings increased 23 basis points to 1.28% as a Federal Home Loan Bank cost increased following the Fed rate hikes. All of this leads to net interest margin of 3.91% and adjusted for the unusual purchase accounting and securities yield lift as mentioned above results a net interest margin of 3.83% compared to about 3.80% for Q1. Provision for loan losses was 628,000 in the quarter on muted net charge-offs of $108,000 or about three basis points. Our credit quality remains high and our ALLL has grown 18% since the beginning of the year. Noninterest income was generally in line with expectations. Noninterest expense was higher than expected primarily from growth related expenditures of approximately $136,000 in merger expenses, $100,000 in recruiting, and $50,000 in core deposit intangible amortization greater than forecast, and from higher than budgeted EDP of $115,000 and travel and training of $50,000. Income taxes were approximately in line with our expectations at about 32.4%. As mentioned earlier, stated earnings per share is $0.51 per share, left in the securities payoff gain and purchase accounting accretion in excess of business plan represent about $0.02 per share and drag from merger expenses represent about $0.01 per share resulting in an adjusted EPS of about $0.50 per share. Turning to the balance sheet, Brad will add some color to loans and deposits.

Our loan growth was lower than normal in the second quarter at just over $9 million primarily because we had one large credit payoff. As we did not chase rate and credit structure below our standards in order to retain it. Our team has continued to an outstanding job of sourcing and servicing customers who understand relationship banking and the value it brings to their businesses. I remain pleased with our pipeline for quality credits. Our community markets are doing well thanks to efforts from all our lenders in those markets and our metro lending team led by Mark Parman in Kansas City and Jeremy Machain in Wichita continued to develop and close fee relationships within our guidelines. It is also exciting to think about onboarding Mike Bezanson and his team in Tulsa later this year and Mark Detten and his team in Ponca City. They had two new markets with outstanding lenders to the Equity team. Regarding deposits, our teams did a nice job of cultivating new deposits. One of our highly successful customers invested approximately $25 million in their business in the second quarter utilizing deposits held through first quarter year - first quarter end to do so. Otherwise, our deposits increased by approximately $23 million in the quarter.

On the rest of the balance sheet, investment securities balances were relatively flat during the quarter and OREO was up only because of the known nonperforming loan identified premerger and marked appropriately move to OREO as anticipated. Our ALLL stands at 49 basis points of loans up three basis points quarter-over-quarter and from year end, nearly every special asset metric improved during the quarter. Classified assets to regulatory capital has already declined 4% after the most recent acquisitions to 24%, past due loans declined 26% from 27 basis points to 20 basis points of loans and nonaccrual loans dropped 9% to 1.69% of total loans quarter-over-quarter. These improvements are the result of a lot of hard work from Julie, Scott Smits and their teams. Federal Home Loan Bank advances end of the quarter at about the same level as March 31. Our asset liability position has not changed measurably quarter-over-quarter and we remain day one liability sensitive and year one asset sensitive. Capital ratios all remained strong and is worth mentioning that we issued over 3,980,000 common shares in the last three quarters in the two acquisitions and the pipe representing share growth of 49%. This type of share growth is cost efficient, adds float and the dispersion of shares is healthy for our stock and its holders.

As I said at the top of the call, we cross several key lines on our core metrics, greater than 1% ROA per quarter and efficiency ratio of less than 60%. We are growing into our efficiencies and we believe our too-pronged approach of growing organically and through mergers gives us an advantage in our markets. Our credit quality remains high, our margin is healthy, our organic loan and deposit pipelines are active, as is our merger pipeline. Our Board and leadership are more excited than ever for what is possible for our stakeholders. I would like to thank all of our shareholders for their trust in Equity Bancshares and all its team members. This is an exciting time for everyone and we could not be successful without each of you. At this time, I'd be happy to entertain questions.

[Operator Instructions] And our first question comes from Andrew Liesch from Sandler O’Neill. Your line is open.

Question on the margin and any benefits from the rate hike I think in prior quarters you said it will be about two basis points, was that the case this quarter and then do you think the June hike will be similar benefit in the third quarter?

Yes Andrew, I think our margin improved for a couple of reasons the rate hike and then also we had a small lift from the yield on the portfolio brought over from Hoxie but primarily the rate hike and yes we would anticipate a similar reaction in Q3.

And then - I am sorry I missed it, the other line item in noninterest income just curious what drove that increase?

Increase in noninterest income is - boy...

Just may be the four quarter in fact the Hoxie, do it couple hundred thousand dollars as well.

The impact from Hoxie and Andrew off the top of my head, I don't know what the other component is most of it would be the increase in Hoxie, give me a minute and let me dig into what that is.

And our next question comes from Michael Perito from KBW. Your line is open.

Greg, I apologize. I know, I think you probably went through it in the opening remarks, but I got on the call little late. I just want to confirm a couple margin numbers with you. I think last quarter, the loan fees were about 16 basis points, do you have that number for the second quarter?

Yes, it’s real similar, loan fees were flat to a little better quarter-over-quarter and are pretty strong so that number has not changed measurably.

Okay. And then the purchase accounting or accruable impact, I think it was 16 basis points last quarter and once again, I apologize, if you gave it already, but what was it in the second quarter?

About the same.

About the same, okay. And then any comments on kind of where you expect the quarterly expense trajectory to run here? I guess really just - in the next couple of quarters before Patriot and Eastman close.

Yes, if you carve out transaction expenses related to those two acquisitions a core run rate is probably between $14,600,000 a quarter $14,800,000 I think is a good run rate and probably closer to $14.8 million.

Okay. And do you expect the - maybe a question on the balance sheet, do you expect the investment portfolio to kind of I guess - with these two deals coming off at the end of the year and it build a little on the quarter. My guess is because the loan growth - the net loan growth didn't materialize. But how do you - what is your kind of six months outlook through the investment portfolio. Do you think it kind of hangs out in this real north of $600 million range or do you think there's room to move it down as the growth picks up in the back half of the year?

I think that probably you’re going to see it relatively flat $600 million is probably a good number for us right now, I don't think it will increase Michael, it may go down a little bit but I don't think it will be higher than what it is today.

Thank you for that. And then just last one for Brad. Maybe just, do you - and again, I apologize if I missed it. But the, maybe the dollar on the pipeline, how does it compare today versus three months ago or maybe at the beginning of the year? And I guess it sounds like you guys despite things putting on credit expect loan growth to rebound a bit in the next quarters. Is that a fair statement?

So we've got a really good pipeline, July is looking like a solid month, August assuming that all the fundings hold in that are scheduled for closing July will be a very large months for us probably double what July would be then we have a kind of normal month in September. So we have a pretty good pipeline for this quarter and we also have a pretty good longer than 60 days pipeline a lot of those fundings we got a good growth number coming from just construction draws that are already on the books. So, I think our pipeline is holding in there pretty well. I think the number show we’re going to back on plan for this month. So I think we've got a good pipeline and anticipating knock on wood that nothing comes out of the wood work on our paydown or something. I think we've got a pretty good opportunity to continue to grow loans. Our teams in Wichita, Kansas cities and the guys in Western Kansas are really kicking in and have a lot of really good opportunities that we've approved so.

[Operator Instructions] And our next question comes from Terry McAvoy from Stephens. Your line is open.

Hey guys this is actually Nat standing for Terry. Maybe some commentary on deposit pricing and deposit betas in some of your community markets might be helpful?

Repeat that question Terry.

This is actually Nat, any commentary around how deposit are repricing right now, how betas are looking and then your outlook for that would be helpful?

You will take that Greg.

One more time

He wants know about the deposit - you’re breaking a little bit I think we’ve got it. So the question Nat is how deposits repricing is working and how the betas are working.

Exactly.

Yes, so Nat I think they broke on me - the betas are still very low, deposit repricing is still very small. We still - other than in our public deposit sector which does is influenced more easily by rate increases than the retail base. We really haven't seen significant upward pressure on our rates and therefore our betas are still low. I don’t how long that will last and we were adding some new markets which might have a different characteristic as we go forward. But so far we’re not seeing a huge spike and the need for rate increases to draw deposits. Public funds because of the nature of their ownership are more sensitive to rate increases and we do carry public funds as a core business for us. And so that would be the exception to that comment.

And then maybe one more from me. And I'm sorry we keep beating a dead horse here, but credit keeps looking great. Do you guys have any areas that you’re watching out for specifically, any areas of concern or anything that you’re staying away from that?

So at this time we don't see a lot of weakness, I mean we are staying away from things that would have a lot of volatility but we aren’t getting a lot of those requests either in the oil and gas business but - direct oil and gas business but at this time outside of, you know that sector we just don't see - we haven't felt or seen a lot of weaknesses in our marketplace. We’re watching the Ag credits closely and we’re monitoring our borrowers. They actually are having a pretty good year this year especially if they have a balance at all of any cattle they have a lot of rebound in the cattle markets. So that sector is actually doing better than we had anticipated but we've got our eye on multi-family making sure that you know we’re in projects at work and we don't have a lot of concentration in that but we got our eye on that sector it just seems like it's overheated for some reason, but they still seem to be written up and leasing up

And our next question comes from [Bruce Binisie] from Private Investor. Your line is open.

You're talking about the efficiency ratio of 59% however when I look at Page 5 it’s 60.7, it was the 59 just second quarter or what the…?

59% is just the second quarter.

Okay.

So the 60% is year-to-date and as you can see really with the integration of Prairie merger we’ve got - it's coming down.

One other question, on Page 12 under the capital ratios, its listing risk-weighted for both Equity Banks here and the bank at 1,685,000,000. They don't have the same amount of assets do they, is there a difference there or what amount are looking at?

On the capital ratios roughly the same Bruce.

Yes, okay, all right well that's fine. I was just making sure. Those are my question.

And at this time I'm showing no further questions, I'd like to turn the call back to Mr. John Hanley for any closing remarks.

Andrew this is Greg again. Since you've asked your question I have done quick scan of our other miscellaneous incomes and a lot of it comes from having the Western Kansas be bigger from the Prairie acquisition and a lot of those accounts are related to customer activity which is always a little more brisk in the second quarter than the first quarter. So I'm not seeing anyone category that's driving that change in other income.

With that said, ladies and gentlemen thank you once again for joining the discussion and presentation of our Equity Bancshares Q2 results. This webcast and archive will be available for one week on-site. Have a great day and a great weekend and thanks again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.