Wichita, Kan.-based Equity Bancshares Inc. is facing a class-action lawsuit over allegedly making materially false and misleading statements about its operations.
Stephen Burr filed the suit in the U.S. District Court for the Southern District of New York on behalf of investors who acquired the company's shares between May 11, 2018, to April 22. Equity Bancshares CEO Brad Elliott and CFO Gregory Kossover were also named as defendants.
The suit detailed that on Jan. 24, Equity Bancshares disclosed that one credit relationship was downgraded to Watch, which resulted in the company's shares to drop more than 6% to $32.15. On April 22, the company recorded a $14.5 million provision for loan losses against this credit relationship and shares plummeted more than 16% to close at $24.71.
The plaintiffs argue that the defendants did not disclose that Equity Bancshares lacked the needed internal controls to assess credit risks, which made it likely that it will record major losses on substandard loans, and thus, positive statements about the company's operations were misleading. They are also asking the court to award compensatory damages in favor of them.
Equity Bancshares reported first-quarter net loss allocable to common shareholders of $4.1 million, or 26 cents per share, compared to a net income of $8.7 million, or 58 cents per share in the year-ago period. Provision for loan losses saw a sharp year-over-year increase to $15.6 million from $1.2 million due to the $14.5 million provision.
Elliott and Kossover did not immediately respond to emails sent by S&P Global Market Intelligence.