KBRA Assigns Ratings to Equity Bancshares, Inc.

KBRA assigns a senior unsecured debt rating of BBB, a subordinated debt rating of BBB-, and a short-term debt rating of K3 to Wichita, Kansas-based Equity Bancshares, Inc. (NYSE: EQBK) (“the company”). KBRA also assigns deposit and senior unsecured debt ratings of BBB+, a subordinated debt rating of BBB, and short-term deposit and debt ratings of K2 to the company's primary subsidiary, Equity Bank ("the bank"). The Outlook for all long-term ratings is Stable.

Key Credit Considerations

The ratings are supported by the bank's recent stability in credit trends that resulted in asset quality converging to rated peer levels with NPA and NCO ratios of 0.77% and 0.02%, respectively, as of 1Q25. While volatility in the NPA ratio over the company’s long-term history has reflected acquired loan portfolios, NCOs have remained fairly contained, supported by favorable loan marks. Though we expect some degree of credit normalization, EQBK's disciplined underwriting standards and conservative credit culture should support favorable asset quality trends over the longer term.

EQBK's proven deposit strategy is supported by a strong core deposit base. We note that ~80% of its deposits are gathered in the bank’s stable operating markets which then fund organic growth opportunities in metro markets. Reflective of EQBK’s favorable deposit mix, its cost of deposits has tracked meaningfully below rated peer averages benefiting its net interest margin (NIM). In addition, average loan yields – aided, in part, by the accretion of purchase discounts - have trended well above peer averages and have been a significant contributor to a higher NIM relative to peers.

To that end, profitability trends have strengthened, driven by significant NIM expansion resulting from the securities portfolio repositioning undertaken in 4Q23, along with proactive asset repricing and the aforementioned, well-managed funding costs. Additionally, profitability is supported by a respectable level of noninterest income, which is largely comprised of durable sources including service charges, fees, and debit card income.

Furthermore, EQBK has maintained a conservative approach to capital management, demonstrated by CET1 and total capital ratios that have consistently remained above those of rated peers. In 4Q24, the company completed a $92 million capital raise which further strengthened its capital ratios to support growth initiatives, including organic expansion and strategic acquisitions. We expect the firm's CET1 ratio to remain higher than rated peers as it continues to build out its franchise.

EQBK has an experienced and entrepreneurial management team, comprising seasoned bankers with extensive market knowledge and a strong track record of execution. This expertise has been pivotal in successfully integrating the company’s strategic acquisitions and driving balanced growth through both acquisitions and organic opportunities. As a proven acquirer and integrator, EQBK is well-positioned to capitalize on attractive market opportunities, further enhancing its scale and operational efficiency.

Rating Sensitivities

Sustained core profitability comparable to higher rated peers, combined with well-managed credit costs and effective capital and risk management, would support positive rating momentum over time. Conversely, a significant shift in risk profile, marked by credit deterioration beyond expectations, which adversely affects core profitability and regulatory capital levels, could lead to rating pressure.

To access ratings and relevant documents, click here.

Methodologies

• Financial Institutions: Bank & Bank Holding Company Global Rating Methodology
• ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1009729

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