Hello everyone, and welcome to the Equity Bancshares mergers announcement. My name is Ezra, and I will be your coordinator today. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, press star followed by two. I will now hand over to Brian , Director of Corporate Development and Investor Relations, to begin. Please go ahead.
Good morning, everyone, and thank you for joining us on today's Equity Bancshares Conference Call. This call is being recorded and is also available live via webcast on our Investor Relations site, where you can also find the corresponding slide presentation. Before we begin, let me remind you that today's discussion will include forward-looking statements. These involve risks and uncertainties, and actual results may differ materially from those discussed. More detail on these risks is available in our SEC filings. Following our prepared remarks, we will open the line for questions and discussion. With that, it's my privilege to turn the call over to our Chairman and CEO, Brad Elliott.
Thank you, and good morning, everyone. I'm very pleased to be in Omaha this morning with the Frontier team to share exciting news that represents an important step in the growth and evolution of Equity Bancshares . We are announcing today that Equity Bancshares and Frontier Holdings, the parent of Frontier Bank, have entered into an agreement to merge. This transaction unites two strong organizations with a shared vision, a shared culture, and a shared commitment to serving communities. We have been in discussions about this opportunity for over five years. For Equity Bancshares Inc., this partnership represents more than a transaction. It's the realization of a strategic vision that we have pursued for over a decade. Nebraska has long been a growth priority for us, and with this merger, we will enter the state in a meaningful way.
This combination expands our footprint into key Nebraska markets: Omaha, Lincoln, Falls City, Pender, Madison, and Norfolk. Each of these markets is unique. Each has a vibrant customer base, and each offers a platform for long-term growth. Omaha, as Nebraska's largest city and major financial commercial hub, is an anchor market for any institution that wants to be relevant in this region. It also has been a very vibrant growth market over the last 30 years. Lincoln, with a combination of state government, education, healthcare, and growing businesses, is a strong and diverse market where community banking still matters. Norfolk, Madison, Pender, and Falls City bring with them deep community roots. Together, these markets create a network that is both diverse and complementary to our legacy franchise.
They connect well with our existing operations in Kansas, Missouri, Oklahoma, and Arkansas, while extending our reach into one of the most attractive regions in the Midwest. But beyond Geography what excites us most about this merger is the people and the culture we are joining. Frontier Bank has built a foundation of customer trust, community focus, and prudent growth. Under the leadership of Dave Rogers and Doug Ayer, Frontier has grown into one of Nebraska's premier community banks, known for its conservative credit culture, strong asset quality, and loyal customer base. This is exactly the kind of partnership we look for: one where values align, where leadership is strong, and where the future is built on commitment to doing what's right for customers, employees, and communities. I want to emphasize this transaction is not about changing Frontier's model. It's about building on it.
We will retain all of Frontier's branches, and we will keep local leadership in place, and we'll continue to empower local decision-making. Doug Ayer will serve as a Regional Leader overseeing the Nebraska markets, ensuring continuity, consistency, and a clear path forward. Doug and his team know these communities, and they have earned their trust. That will not change. At Equity, we believe the best mergers are those where cultures align and where we can grow together without imposing change from the outside. Frontier's story is one of entrepreneurial spirit, long-term discipline, and deep community ties. That's also the story of Equity Bank. When you combine two organizations with that kind of DNA, the result is powerful. Before I turn over to Dave and Doug, I want to also recognize Frontier's entire team.
They've built a bank that's respected in its markets, admired by its peers, and trusted by its customers. That doesn't happen by accident. It happens because of leadership, vision, and execution. We are honored to welcome Frontier's employees, customers, and shareholders to Equity family. With that, let me turn it over to Dave Rogers, Executive Chairman of Frontier Bank.
Thank you, Brad. Today is truly a milestone for Frontier Bank. When we started Frontier, our goal was simple: to build a bank that could serve customers with integrity, local decision-making, and strong relationships. Over the years, we've grown organically, earned the trust of our communities, and built a balance sheet that reflects conservative credit and disciplined growth. We are proud of what our team has accomplished, and we are proud of the impact we've had in Nebraska. As we look to the future, we wanted to find a partner who shared our values and who could help us scale while preserving our culture. In Equity, we found exactly that. Brad and his team believe in community banking. They believe in local leadership, and they believe in long-term growth. That makes this partnership a natural fit.
By joining with Equity, we gain access to additional resources, technology, and scale, all of which will benefit our customers and our employees. At the same time, we maintain our commitment to the communities we serve. This is not the end of Frontier's story. It's the beginning of a new chapter. I'm confident that our team will play a significant role in the growth and success of the combined company, and I'm excited about what lies ahead. Doug, let me turn it over to you.
Thank you, Dave. At Frontier, our philosophy has always been that banking is about relationships. Customers trust us because they know the people they work with, and they know we make decisions locally. That's how we've grown, and that's how we've maintained one of the strongest credit profiles in our region. Joining with Equity provides greater access to products and services for our customers, more career opportunities for our employees, and more support for the communities we serve. It also means the chance to build something larger together: a bank that combines the strengths of two great organizations while staying true to its roots. I'm excited to continue leading the Nebraska team as Regional President. Together, we will take what Frontier has built and make it even stronger. Rick, let me turn it over to you.
Thank you, Doug. On behalf of all of us at Equity, I want to congratulate Frontier on what they've built. This is a franchise with over $1.4 billion in assets, fueled by organic growth, strong credit, and a reputation for excellence. Bringing Frontier into the Equity family marks the largest transaction in our history, and it's one we're very proud of. This is a financially attractive and strategically important combination. The expanded footprint diversifies our markets, better leverages our balance sheet, and provides new growth opportunities. Importantly, we are not just adding branches. We are adding strong communities, talented employees, and a proven leadership team. We intend to retain all Frontier branches and to invest further in Nebraska as we grow together. Frontier was built through organic, granular lending practices with a clear focus on prudent underwriting and diversification of credit risk.
A comprehensive review of Frontier's loan portfolio was conducted, covering 83% of the commercial portfolio and 92% of all commercial loans exceeding $1 million, and 100% of all classified, non-performing, and special mention credits. Findings confirmed that portfolio performance is consistent with expectations, and underwriting discipline reflects a strong, conservative credit culture, well-aligned with Equity Bank's existing practices. Importantly, Frontier's portfolio is factorized by smaller dollar borrowing relationships, with 72% of exposures under $5 million and only 5% exceeding $10 million. This higher concentration of smaller borrowers enhances diversification and reduces reliance on large single-name exposures. As we look to the pro forma portfolio, we are confident in the strength of the combined credit profile and do not foresee any concerns with concentration of credit or levels of exposure, with non-owner occupied and total CRE ratios remaining within internal limits and regulatory expectations.
This transaction is about building on Frontier's legacy, not replacing it. With Doug's continued leadership, I am confident that the Nebraska market will remain a source of strength and opportunity for years to come. I also wanted to take a moment to recognize the successful completion of our acquisition with NBC Oklahoma. We finalized the conversion this past weekend, and I am pleased to report that everything went smoothly. Truly, even better than we anticipated. The integration has been seamless, and the strength of the NBC team has been evident from day one. Their bankers bring deep relationships, market knowledge, and a shared commitment to serving customers with excellence. We are already seeing the positive impact of their contributions, and we are excited about the opportunities ahead as we continue to build together.
With the addition of both NBC and Frontier , we are strengthening our franchise with talented teams, complementary markets, and a combined credit profile that positions Equity for long-term growth and success. Chris, let me turn it over to you for the financial details.
Thank you, Rick. As the team has outlined, this is a strategic partnership built on culture and markets. It is also a transaction that makes strong financial sense. We expect the merger to be approximately $0.34 accretive to earnings per share in 2026 and $0.45 accretive in 2027. Tangible book value earn-back is projected at 2.8 years, with meaningful cost synergies that we expect to realize beginning in 2026. Frontier Holdings shareholders will receive 2.22 million shares of Equity stock, plus approximately $32.5 million in cash consideration.
We have modeled synergistic cost saves of approximately 22.8%, with 85% expected in 2026 and 100% in 2027. Transaction expenses are estimated at $11 million pre-tax, with approximately $5.3 million attributable to Frontier pre-closing. Loan portfolio modeling includes a credit mark of $14.4 million, or 1.14% of gross loans, and core deposit intangibles are estimated at $11 million, or 2% of core deposits. We expect the merger to close in the fourth quarter of 2025, with system conversion in the first quarter of 2026. In addition, we announced today a partial repositioning of our bond portfolio. We sold $358.8 million of securities with a current tax equivalent yield of 2.18%, realizing an estimated pre-tax loss of $41.9 million. Proceeds of $320 million will be redeployed into assets yielding in excess of 4.75%. This repositioning is expected to add $7.4 million in annual pre-tax earnings.
We expect the repositioning to be approximately $0.29 accretive to earnings in 2026. Following these sales, approximately $130 million remain in bonds yielding below 3.5%, which we will continue to consider for further sales throughout the remainder of the quarter. Pro forma capital ratios reflective of both our mergers in 2025 and the repositioning remain strong, with estimated CET1 above 11.1%, total risk-based capital above 13.7%, and TCE above 8.5%, all comfortably above regulatory and internal thresholds. Brad, let me turn it back to you.
Thank you, Chris. As I close, I want to again thank Dave, Doug, and the entire Frontier team. You've built a franchise that reflects the best of community banking, and we are honored to partner with you. For Equity, this is about more than scale. It's about growth, culture, and people. Our guiding principles remain the same: exceptional service for our customers, opportunity and development for our employees, and a strong, sustainable return for our shareholders. With this transaction, we are in a stronger position to deliver on all three. Equity Bank shares remain well-capitalized and well-positioned for future growth. We will continue to pursue opportunities that align with our disciplined approach and long-term vision for community banking across the Midwest. Thank you for your time today, and thank you for your interest in Equity Bancshares. We will now open the line for questions.
Thank you very much. If you would like to ask a question, please press star followed by one on your telephone keypad now. Please ensure your device is unmuted locally. If you change your mind or your question has already been answered, press star followed by two. Our first question comes from Terry McEvoy with Stephens. Your line is now open. Please go ahead.
Thanks. Good morning and congratulations to everybody on the call. Maybe the first question, could you just talk about opportunities to grow fee income? It looks like about half of Frontier's fees came from the mortgage business. Just a follow-up on the branches. Rick, I think you said maybe continue to invest there. I read somewhere they had a branch-like model. Were you implying additional branches or kind of bigger picture and just future M&A?
I think what we were talking about there is future M&A. We like their branch model that they currently run. I think they've done a really good job with that, with their markets, Terry. We think there's other opportunities in this market that we have interest in, and we think this gives us a really, really solid platform and entry into Nebraska to build on. The reference was that there are other opportunities in these markets as we continue with our strategy at Equity. On the fee income side.
Yeah, on the fee income side, I think Terry was there. There are opportunities certainly on the treasury management side as well from the standpoint of the amount of C&I business that's here and just opportunities for that, quite frankly, across our entire footprint that we're focused on and that'll be coming out with. On the mortgage side, they've done a nice job with that, and we're actually, you know, kind of going to use some of those assets they have there to help improve our model as well.
They haven't had a trust and wealth management arm, and we've had a lot of success in the rural markets, honestly, more so than even the metro markets with the trust and wealth management business in growing arms. We think there's opportunities in Nebraska very similarly to what we've been able to do in Kansas, Arkansas, and Oklahoma.
The other thing I would say is they have a private banking arm that we're looking at, how we can expand that together with that trust and wealth. We think there's some real good synergies there to be able to drive some fee income in the future.
None of that model, though.
Okay. Chris, just on the 2026 EPS accretion, that assumes kind of 85% of the cost savings that year, and then in 2027, you get the full benefit. Is that correct?
Yeah, that's right, Terry.
Okay. Maybe I'll squeeze the last one, Brad, not related to the deal, but any update on the QSR credit that we talked about last quarter? I think you or somebody in the management team said there was a good path to exit that underperforming property or properties.
Yeah, I got Bret Rebber here. He's going to take that question.
Yeah, Terry, on the last call, we talked about our customer had an opportunity to sell off their Porsche stores in the Chicago market. That deal didn't happen, but they were successful in getting the franchisor to allow them to close all the stores in the Chicago market, which is supposed to happen by October 17th, I think. That's a huge step forward. That's been a drag on their operations, cost them a great deal of money every year. We think by the end of October here, they'll be back to their legacy stores, which have been productive, and they're working hard with us to get a capital injection, look at some transactions, and get them back to be performing. It's a step in the right direction.
Great. Thanks for taking my questions.
Thank you very much. Our next question comes from Jeff Rulis with D.A. Davidson. Your line is now open. Please go ahead.
Thanks. Good morning. Just interested in a bit of you touch on how the sort of how long the transaction came about, how the relationship between the two banks was negotiated, and then kind of part multi-part here, but also you plan to keep that Frontier name in the market, or would that be converted over?
Yeah, as we and David and Doug and their management team were looking for someone that they trusted and partnered with, we got to know them over the last several years and continued those relationships and conversations. We and they worked through different things and timing, and as you know, these things take a while to get to know one another. That's really how it came about. We were introduced to them by mutual contact. They thought we fit, and they thought they fit us. That's how it came about. We'll do the same thing we've done with the other franchises. We'll brand them all under one name of Equity .
Great. Thanks. Maybe a question on the looks like some ag exposure that you mentioned. No real worries or concern about concentrations. Could you just sort of maybe provide some detail on what type of ag exposure? It looks like a little more on the real estate land side than production, but hoping to get a little detail there. Thanks.
Sure. One is, I think Nebraska is one of the better ag-producing states, honestly, around. It has very stable returns on crop growth. They've done a really good job of structuring their credits. One of the reasons we're interested in, they structure their credits very, very similarly to how we do. They're a relationship lender and not a transaction lender. That's really important on the ag side because they're getting the whole farm relationship. That's what they do, and that's what we do at Equity. Honestly, we think this is an opportunity for us to be a good ag lender in these areas. I know everybody goes back to the 1980s and is still scared of that time period, but we don't do things like we did in the 1980s or the 1990s or the 2000s. We're cash flow lenders. They're cash flow lenders. They look at hard assets.
We look at hard assets. They have really good relationships with really good low loan-to-value in those. It really doesn't move our concentration levels from what core Equity was prior to these acquisitions to what we are today.
Okay. Thanks, Brad. One quick last one, just on the margin, maybe for Chris, you know, it's some moving pieces here with the deal and the loss trade. I don't know if there's a sense for kind of a settling point for that margin along with kind of core movement, trying to get a, I don't know, what a good timeline of maybe year-end or entering the next year of where that margin settles in.
Yeah. I mean, margin is going to be improving for both trades. You'll see, Jeff, as we go into the fourth quarter, as we close up the third quarter and as we move into the fourth quarter, I think we'll see more settlement of kind of understanding of exactly how the purchase accounting marks are going to settle out and what accretion looks like through, call it, Q4 and into Q1 of next year, where we have more buttoned-up guidance as we approach closing out the year and moving into 2026. We're going to see positive migration through all the trades that we're talking about today.
Okay. That's more on a core basis, and as you said, you'll offer some detail on the accretion side post-close.
Correct.
Okay. All right. Thank you.
Our next question comes from Damon DeMonte with KBW. Your line is now open. Please go ahead.
Hey, good morning, everyone. Thanks for taking my questions here. Just to follow up on the deal closing, Chris, are you expecting kind of mid-fourth quarter, or do you think it'll be like right at year-end, just from a modeling standpoint?
Yeah, I think we're thinking about it as a mid-fourth quarter event, Damon.
Okay. Great. Are there any plans to reposition or kind of restructure Frontier's balance sheet, whether it be securities or maybe, you know, exiting or running down certain loans? Trying to think how we think about the pro forma combined impact.
Yeah, on the securities portfolio basis, I'll speak to that one first. Damon, there's not a huge concentration of securities on the balance sheet today. It's all sub-$100 million. Compositions, you know, relatively low risk. There's about $25 million in Munis that are on the book. There's always, I think, in my mind, opportunity for us to restructure as we approach closing the deal. We'll look at best options for the balance sheet in terms of selling versus retaining as we approach it. I think all options are being considered as we relate to that $100 million of balance sheet exposure.
On the lending side, they don't have any credits that we're not interested in. We're interested in all the relationships. They're a very granular lender. As we put in the investor deck, they have a really great spread of what relationships they have, and they don't have anything that's real lumpy. We're very, very pleased with the portfolio they have. There's nothing that we're really looking at and not doing or trying to restructure.
Could you just talk a little bit about their deposit base and kind of how that mix lines up with yours and what opportunities you see there?
Yeah. Their deposit base is we've got to work on growing deposits. Treasury management business is something focused on. As you know, we've been looking as we have a large portfolio in deposits, but we've only had three markets until we grabbed Oklahoma City. From an engine standpoint, we had Kansas City, Wichita, and Tulsa. From a growth engine, we added Oklahoma City, which was in our strategies. Omaha and Lincoln are the same way. We really look at this as how do we continue to grow assets and focus on those asset growth. That's what was interesting to us about this opportunity is we needed another market or markets that would help us grow assets. From a lending standpoint, this is what we're after now.
We have to continue to do what we've done over the years, which is been able to acquire banks in smaller towns that have more deposits than they have assets with less potential to grow assets. Really just continuing on our strategy of how do we continue to add deposits from other core markets. We actually think there are some in Nebraska, but we also have conversations in Oklahoma, Missouri, and Kansas going the same way.
Got it. Okay. Good color. Thank you. Lastly, just quickly on the LPO that you're going to open up in Iowa. Is this just a single person? Do they bring a team with them? What's the thoughts around Iowa and strategy to try to grow that over time? Thanks.
Yeah. Right now, it's a single person with the goal to add two to three people to that branch in the near term and just prepare us for that opportunity if an Iowa bank presents itself. We've had really some great deal flow looking at that right now. We expect to start seeing a benefit to that in the fourth quarter.
Great. Okay, thank you very much.
Our next question comes from John Rodis with Janney. Your line is now open. Please go ahead.
Good morning, everybody. Brad, a question for you. Just where do you kind of stand today as far as future M&A? Do you think you could announce another deal before the year is over, or how are you feeling about things?
Yeah, we're always in lots of conversations with people. The two focus markets for us for the last several years have been, actually three, it was Des Moines, Iowa, Omaha, and Oklahoma City. We come out of this year very successful in what our strategy was, and that is to try to increase our presence in those markets specifically. Could we announce another deal? Absolutely. We're really focused on the integration and growth of these two opportunities now and how do we continue to make these two our priority. We have other conversations, and you can always announce something. We actually thought we would have announced something in July prior to this one. As you know, banks are sold and not bought. It's really on their timing on how these things go versus our timing. You usually cool down in the fourth quarter on conversations.
People wait till their year-end information is done to start those conversations back up after the first of the year. There are some conversations that we're working on. We'll see how they go. We're focused now on how do we make sure that these two deals that we have announced go extremely well and we continue making progress in these markets.
Okay. Makes sense. Chris, just a question for you on 2026 EPS accretion of 7% to 8%. In dollar terms, can you say how much roughly yield accretion and cost saves that includes?
Yeah, John. In terms of 2026 expected, the cost savings factored in are about $4.2 million. For mark accretion, interest rate mark on loans, we're factoring in $3.1 million. Accretable on the non-PCD portion for the credit mark $1.5 million. There's bids being offset by time deposit marks of $1.4 million. AFS security mark is adding $1.3 million. On the term loan and FHLB, there's another $600,000 of expense.
Okay, good stuff. Thank you, guys.
Thank you very much. We currently have no further questions. That concludes today's call. Thank you, everyone, for joining. You may now disconnect.