Bank7 Q4 2024 Earnings Report

Bank7 EPS Results

• Actual EPS: $1.16
• Consensus EPS: $1.05
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: N/A

Bank7 Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Bank7 Announcement Details

• Quarter: Q4 2024
• Date: 1/16/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, January 16, 2025
• Conference Call Time: 11:00AM ET

Bank7 (NASDAQ:BSVN) Corporation, through its subsidiary Bank7, National Association, is a regional banking organization that offers a full range of deposit and lending products to both consumer and commercial clients. Its deposit offerings include checking and savings accounts, money market funds and certificates of deposit, while its lending portfolio encompasses residential and commercial real estate loans, small business loans and consumer credit products.

Complementing its core banking services, Bank7 provides digital banking solutions such as online and mobile platforms for account management, bill payment and remote check deposit. The company also offers treasury management services—including automated clearing house (ACH) transactions, wire transfers, merchant card processing and cash management—to support the operational needs of small to mid-sized businesses in its markets.

Headquartered in Hobbs, New Mexico, Bank7 operates a network of branches and ATMs across eastern New Mexico, West Texas and Oklahoma. The company emphasizes relationship banking and community engagement, seeking to serve underserved or rapidly growing local markets through personalized service and local decision-making.

Bank7 Q4 2024 Earnings Call Transcript

Key Takeaways

• Robust capital and liquidity—the bank strengthened its balance sheet with two Fed backstops, maintained high capital ratios, disciplined balance-sheet matching and tight expense controls to support stable NIM and asset quality.
• Loan balances dipped in Q4 due to unscheduled payoffs in energy and hospitality, but management expects to redeploy that capital and achieve low single-digit loan growth in 2025, led by C&I lending.
• Net interest margin rose to about 4.50% GAAP (4.7% core) in Q4—partly boosted by one-time nonaccrual interest payoffs—and is forecast to trade within a narrow band despite rate uncertainty.
• Q4 deposit costs fell, yet re-pricing headroom is limited on CDs (only $150–200 million of $5 billion total), and deposit betas tend to capture early rate cuts more fully than deeper reductions.
• With excess capital and no 2024 deals closed, the bank is actively pursuing disciplined M&A opportunities—particularly in Texas—offering sellers attractive stock currency and tax benefits.

Presentation

[Operator]

Welcome to Bank7 Corp.'s Q4 and Full Year 2024 Earnings Call. Before we get started, I'd like to highlight the legal information and disclaimer on page 25 of the investor presentation. For those who do not have access to the presentation, management is going to discuss certain topics that contain forward-looking information, which is based on management's beliefs as well as assumptions made by and information currently available to management. Although management believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct. Such statements are subject to certain risks, uncertainties, and assumptions, including, among other things, the direct and indirect effect of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators.

[Operator]

Should one or more of these risks materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those expected. Also, please note that this conference call contains references to non-GAAP financial measures. You can find reconciliations of these non-GAAP financial measures to GAAP financial measures in an 8-K that was filed this morning by the company. Representing the company on today's call, we have Brad Haines, Chairman, Tom Travis, President and CEO, J.T. Phillips, Chief Operating Officer, Jason Estes, Chief Credit Officer, Kelly Harris, Chief Financial Officer, and Paul Timmons, Director of Accounting. With that, I'll turn the call over to Tom Travis.

[Tom Travis, President and CEO at Bank7 Corp]

Thank you. Good morning. Welcome to all those that joined today. Before we move into our financial results, we certainly are aware of the devastation inflicted on the West Coast by those fires on our fellow citizens. Our thoughts and prayers go out to them. As we move into our strong financial results, we're very excited and cautiously optimistic. The results of the recent election have certainly unleashed a robust amount of animal spirits, and it's especially driven, we're especially interested in the many statements from the incoming administration relative to creating a less bureaucratic regulatory environment. We'll see if that happens, but it certainly is encouraging, and the markets have responded to that message in a positive manner. With that said, the current rate of inflation and other economic factors have caused the Fed to possibly pause their interest rate reductions.

[Tom Travis, President and CEO at Bank7 Corp]

Therefore, we continue to acknowledge a bit of uncertainty relative to interest rates. The variability does seem, however, to be contained within a more narrow band. That is our belief. One thing we know for certain, we continue to stress how comforted we are to be operating in this dynamic part of the United States. It's a real blessing. We really are pleased with our fundamental strengths, especially our high levels of capital. And it's not just the higher levels of capital that gives us comfort, because we also have a very strong liquid position, something that we mentioned we further enhanced last year when we added a second liquidity backstop with the Fed. So we now have two meaningful sources of additional liquidity.

[Tom Travis, President and CEO at Bank7 Corp]

We continue to reap the rewards of our disciplined approach to properly matching our balance sheet, something that has proven to be effective for us over a long period of time. And you can see that when you review our NIM stability through various rate cycles. That steady NIM, working in conjunction with our strong asset quality and dedication to expense controls, all work together to drive strong results. We're pleased with our accomplishments as they were achieved through normal operations and, in the case of our strong EPS, not driven by share buybacks. Our dividend payout ratio is still in the 20% range, which is far lower compared to the average dividend payout ratio of 35% that is paid by banks that do pay dividends.

[Tom Travis, President and CEO at Bank7 Corp]

With all that said, we have plenty of room for further increases should we decide to do it, while at the same time being comforted by our ability to rapidly accumulate capital. As majority shareholders, we're pleased with the total shareholder returns produced by our company. And as you can see in the published materials, we've rapidly compound shareholder value much faster than most other institutions. As always, we thank our outstanding team members who work with our loyal customers. We're all aligned, and we're looking forward to a bright future. And it's because of them that we produce our results. So with all that said, we're here and ready to answer any questions that you might have. Thank you.

[Operator]

We will now begin the question and answer session. To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we'll pause momentarily to assemble our roster. The first question comes from Woody Lay with KBW. Please go ahead.

[Woody Lay, VP at KBW]

Hey, good morning, guys.

[Tom Travis, President and CEO at Bank7 Corp]

Good morning.

[Woody Lay, VP at KBW]

Wanted to start on the loan shrinkage you saw in the Q4. It looked like it was mainly driven by the energy and hospitality segments. Any color you could give on the lower balances there? And I guess overall, how are you thinking about growth into 2025?

[Jason Estes, Chief Credit Officer at Bank7 Corp]

Yeah, you can see a lot of those came in somewhat late in the Q4. We had several people exit. They sold businesses or sold specific assets off. And so we have more of that expected in the Q1. I was looking at last year for the full year between energy and hospitality, we had over $160 million of unscheduled principal payoff, right? And so we were able to redeploy throughout the year a good portion of that. And so if you look for the full year, we did have a small amount of loan growth, but we really got nailed with those unscheduled payoffs from those exits in the Q4. And again, there's going to be a little bit more of that in the Q1, but the silver lining is that gives us some room within those two specific categories where we've been.

[Jason Estes, Chief Credit Officer at Bank7 Corp]

If you look back over the last six years as a percentage of the portfolio, I think the energy component is half of what it used to be. So we've got a little bit of room to backfill there. And the similar comments there on the hospitality side, you'll see us redeploy. We've done a nice job of growing the rest of the book. C&I was a highlight. We grew that a little over 5% for the year. And so more of the same build-up, the other segments around those two. But again, I think you'll see us redeploy within those two segments. So return to some level of growth here, hopefully in the first half of the year, but for sure for the full year.

[Woody Lay, VP at KBW]

Yeah, that's helpful. And then I guess outside of those expected paydowns you mentioned in the Q1, I mean, does it feel like loan demand is picking up, or is the uncertainty around the interest rate environment, is that sort of keeping some clients on the sidelines for the time being?

[Jason Estes, Chief Credit Officer at Bank7 Corp]

I would say our deal flows slightly improved, but it never was really bad last year. And I think we were very consistent in our message on the earnings calls, just really reiterating that we're going to really, really, really manage our NIM, okay? And so we're seeing a lot of deals. We're winning probably more than we're losing right now, but we are still drawing a very hard line on where we'll go with loan rates and deposit rates.

[Woody Lay, VP at KBW]

Yeah. I guess that's a good segue into the NIM. I think last earnings call, there were some thoughts that maybe we could see some compression, but the NIM was actually up in the quarter. And I've just been impressed by the loan and deposit data is kind of moving in lockstep with the recent cuts. I mean, to the extent we get more cuts, do you think that's a trend that can continue? And how are you feeling about the margin going forward?

[Jason Estes, Chief Credit Officer at Bank7 Corp]

Thank you for the compliment. We did exceed our own expectations in the quarter and in the full year. I was contemplating this morning, kind of thinking about this coming up. I would just say that when rates move up, we have a slight advantage. When rates move down, we have a slight disadvantage. I would agree that there is some compression on the horizon. I also believe we'll operate in our historical norms, but that's really where we focus every day at the transaction level on doing the absolute best we can in regard to maintaining what I would call a very healthy NIM.

[Tom Travis, President and CEO at Bank7 Corp]

Kelly, you might comment on real-time NIM right now.

[Kelly Harris, CFO at Bank7 Corp]

Yeah, Woody, we did have a couple of ticky-tack things during the quarter that kind of fell in our favor. We had a few loan relationships with non-accrual interest that paid off, and that kind of helped increase core NIM. I think if you excluded those items during the quarter, we'd have been closer to 4.7 ex fees. And then, as Jason mentioned, due to the loan paydowns during the quarter and the excess liquidity, you may see some short-term pressure on NIM. Currently, we're at 4.50, but as we redeploy into higher-earning assets such as loans, you'll see that start to expand again.

[Woody Lay, VP at KBW]

Yeah. Are those sort of one-time interest items that you called out? Is that included in that $1.1 million of loan fee income that y'all highlight in the slides?

[Kelly Harris, CFO at Bank7 Corp]

No, I don't believe so. No, it shouldn't be.

[Tom Travis, President and CEO at Bank7 Corp]

It's going to boost your interest income, right, Kelly?

[Kelly Harris, CFO at Bank7 Corp]

Yes, correct.

[Tom Travis, President and CEO at Bank7 Corp]

And they are one-time, Woody, and it's relatively small amounts, but it goes into the interest income. And it's really a reflection of we're a conservative shop. And if we see a threat of, "Uh-oh, we're not sure if we could have an issue here," I'm not going to say we're too fast on the trigger to put it on non-accrual, but we're very certain when we make those decisions. And sometimes when you, it's happened to us two or three times over the last couple of years. We don't really have many credit issues, but we get on them early. And so it's infrequent, and it's a little disjointed, but it is extraordinary. I think right now, what do we have total on non-accrual?

[Kelly Harris, CFO at Bank7 Corp]

It's not very much.

[Tom Travis, President and CEO at Bank7 Corp]

Not hardly any now, and so I wouldn't expect it to be much, and I think just wrapping up on the NIM, we're very proud of ourselves. We really are, and when you look at, I'm not making any predictions here, but it's almost like I don't believe the 4.7. The real-time is 4.50, 4.55, whatever it is, and I think I'm correct that our 10-year look-back low point is like 4.30 or something, so as Jason said, we're still within our ranges, but it's hard to believe that we can continue to operate where we are, but with that said, it's going to be on the margin. It's going to be narrow. It's going to be subtle. It's not going to be a wild fluctuation that you have seen from a great, great number of other banks out there. I think that's one of our hallmarks.

[Woody Lay, VP at KBW]

Yeah, that's really helpful, Kelly. All right. Well, that's all for me. Thanks for taking my questions.

[Operator]

The next question comes from Nathan Race with Piper Sandler. Please go ahead.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Hey, guys. Good morning. Hope you're doing well.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Good morning.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Just going back to the margin discussion, curious if you guys can shed some additional color on how much additional deposit cost leverage you have, assuming the Fed remains on pause over the next couple of quarters. Obviously, you had nice reductions in deposit costs this quarter, but just curious how much more opportunities there are to reprice CDs lower and what other opportunities there are to bring down non-maturity deposit costs as well.

[Tom Travis, President and CEO at Bank7 Corp]

I would say, Nate, that two things. The CD portfolio is by far the smaller. I think it's $150 million or $180 million, whatever it is, $200 million of the billion. Five in deposits. And so the opportunity to reprice down is pretty limited because of its size, A, and B. That part of the portfolio tends to be a segment that really reads the newspaper and the internet and wants that last five basis points. And so I wouldn't say that would be a major factor at all for us or a meaningful factor. And I would say that also that I think we may have talked about this. It was Q2 or Q3 last year.

[Tom Travis, President and CEO at Bank7 Corp]

And I believe what we said at the time was the first few Fed rate cuts. It's a lot easier always historically to lower your rates and pick up 100% of that beta. And as you get deeper into Fed rate cuts, it becomes a little more challenging. And that view has not changed for us. We're delighted and proud of the fact that our loan and deposit betas have reacted the way they have. But look, notwithstanding our belief that the rates are going to operate in a very narrow band, look, we do recognize. I think the 10 years fluctuated at 100 basis points in the last four months. So I think if there was a 25 basis point cut, it would be more of the same. But I think once you get past that, it becomes more difficult to maintain that deposit beta.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Got it. That's very helpful, and just going back to some of Jason's comments, curious if you maybe comment on what you're seeing in terms of new loan pricing these days?

[Jason Estes, Chief Credit Officer at Bank7 Corp]

Yeah, I think the real time interest is 7.50, 7.55 portfolio-wide. So that kind of gives you a snapshot of the range. And I think that's pretty indicative of what we're seeing on the new stuff coming in. Those two segments I mentioned, energy and hospitality, there may be a slight benefit or increase there depending on the opportunities we can go find. But I think that 7.5 range is pretty good.

[Tom Travis, President and CEO at Bank7 Corp]

I would have predicted you would have said seven and a quarter, Jason.

[Jason Estes, Chief Credit Officer at Bank7 Corp]

Depends on the mix.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Yeah. Got it. That's helpful. Maybe a question for Kelly. Just curious how you're thinking about the expense run rate going forward? Obviously, the impact from the oil and gas assets is continuing to decline. So just curious how you're thinking about the run rate over the course of 2025?

[Kelly Harris, CFO at Bank7 Corp]

Today, just in the short term for Q1, we're anticipating $9.6 million in core or in non-interest expense. $1.4 million relates to oil and gas, and then $8.2 million core.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Okay. And then any just thoughts on kind of any investments you're planning on undertaking this year that may cause some upward pressure to that run rate on a core basis?

[Jason Estes, Chief Credit Officer at Bank7 Corp]

Investments?

[Tom Travis, President and CEO at Bank7 Corp]

Right. No. I think you're going to see more of the same.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Okay. Got it, and maybe one last one for me. You guys continue to have a high-class problem with your excess capital levels, continue to build at really strong clips, so Tom, just curious to get your updated thoughts on how you're thinking about deployment opportunities and just what you're seeing on the M&A front as well?

[Tom Travis, President and CEO at Bank7 Corp]

We're working hard, Nate. We didn't close anything in 2024, and that was very disappointing. I can tell you that we had a lot of activity, some serious looks. We tried really hard, and we were not able to get anything done. And so as we roll into 2025, our mentality has not changed. And we are actively pursuing some opportunities right now. And you know how that goes. And we could have something materialize sooner rather than later. We might not. We're disciplined buyers. We don't just grow just to grow. And so I know that sounds like a word salad probably, but we're trying really, really hard, and we're being very strategic about it. I mean, there are a couple of particular opportunities right now in Texas that if we wanted to, I'm highly confident we could do. Strategically, we're not sure we want to.

[Tom Travis, President and CEO at Bank7 Corp]

And so we're going to continue to work really hard. And the time is certainly right with the currency value, with the excess capital. And sellers obviously benefit from taking our stock, and they get to ride the upside with us. And they also get to defer taxes. And then in some cases, if it's privately owned companies, they get the benefit of liquid investment that they haven't had before and the cash dividends along the way. So there's a lot of compelling reasons for people to join forces with Bank7. And that's been acknowledged to us. And that may help us get a few deals over the finish line. So that's the way we view it.

[Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler]

Okay. Great. Sounds encouraging. I appreciate it, Kelly. Thanks, guys. Congrats on a nice quarter.

[Tom Travis, President and CEO at Bank7 Corp]

Thank you.

[Operator]

Again, if you have a question, please press star, then one. Our next question comes from Matt Olney with Stephens. Please go ahead.

[Matt Olney, Managing Director at Stephens]

Hey, thanks. Want to go back to the comment that Jason made around the loan mix. I heard you mention some paydowns in energy and hospitality in the Q4, but also opportunities to kind of backfill that, those two portfolios in 2025, and I also heard some commentary about some just general C&I growth. So just trying to appreciate if we'll see any material mix shift of that loan portfolio over the next year or two.

[Jason Estes, Chief Credit Officer at Bank7 Corp]

Yeah, I don't think you'll see us deviate from our historical ranges, and when I referred to that energy book, it used to be twice. It's just under 10%, and it used to be just under 20% of our total outstanding loans, and so we're not going back to that high of a percentage, but if you look at the last few years, we've been in that 11 or 12, maybe even 13% range. So there's some room there. Hospitality, it floats kind of between 18%, 23%-24%, and we're closer to the bottom end of the range there. So more of the same on mix, but if you went and looked at our history since being public, you'd see we're at the low end of the range on three key segments, okay, and that's construction, one to four family.

[Jason Estes, Chief Credit Officer at Bank7 Corp]

This was intentional when costs got really, I would say, accelerated over the last several years. A lot of pullback from within our group of customers that they did on their own. And then there was some on our part where we shrunk that segment, right? And then energy fluctuates. It just does. That's the nature of that industry. And then hospitality, we've grown other things around it, and it's given us a little bit of room to backfill.

[Tom Travis, President and CEO at Bank7 Corp]

I would add to that. It's interesting. You have to keep top of mind awareness of what kind of institution we are. And we're the bank for entrepreneurs that have done really well that are constantly developing new verticals or buying companies. And so we're going to always have a little more of that paydown segment. And I don't want to say that we're lumpy because Jason and his staff are excellent at growing our portfolio every year. But we have had historical periods where we've had people that their investments have matured. They've sold and on to the next deal. And so that's part of it. And the other part of it is that, look, we have a wonderful relationship with our regulators. And we just concluded an exam, and everything was great. And we weren't surprised.

[Tom Travis, President and CEO at Bank7 Corp]

With all due respect to the regulators, we don't run our bank based on the regulators. However, with that said, we all need to remember that the environment for, call it mid-2023 up until even the recent months, there has been a heightened, heightened focus and scrutiny on CRE, so you've probably read about it if you focus on it at all, if you listen to the examiners, and it was a reaction to the failures in the spring and the summer of 2023, there definitely, definitely was a pivot and a mandate that came out that said, "Really scrub CRE and liquidity and look at it really, really hard." I think that it may have been a subtle wet blanket over the CRE market, but as I speak to our brethren executive management around the country, it was definitely on the top of everyone's minds.

[Tom Travis, President and CEO at Bank7 Corp]

And I think that it's fair to say that the underwriting standards were a little tougher. And I think that had somewhat of a muted effect on the growth of CRE portfolios across the board. And I don't think we were really any different. And I think as we look today, what's our 100 bucket? Are we 70?

[Jason Estes, Chief Credit Officer at Bank7 Corp]

73.

[Tom Travis, President and CEO at Bank7 Corp]

Yeah. 73. And then if you look at the 300 bucket, we're below that. And I think I would submit to you that for quite a few number of years, there were banks that were. They weren't blowing through stop signs, but they were certainly not as worried about it. And so again, it wasn't a major issue, but it was definitely a contributing factor to a little bit of muted growth.

[Matt Olney, Managing Director at Stephens]

Yeah. No, I appreciate the commentary on the loan growth front. And I guess just kind of following up with that, is it reasonable to assume that in 2025, that loan growth for Bank7 could be similar to what we saw in 2024 to where it's kind of volatile quarter to quarter given some of those paydowns and asset sales? But at the end of the day, we still got to a kind of organic growth level on that low single-digit number. Is that a reasonable expectation for us?

[Tom Travis, President and CEO at Bank7 Corp]

I think it's reasonable. I'd be disappointed if that's where we end up.

[Matt Olney, Managing Director at Stephens]

Okay, and if there was upside on that, is it reasonable to assume that would be more the back half of the year than the front half?

[Tom Travis, President and CEO at Bank7 Corp]

Absolutely. Yep.

[Matt Olney, Managing Director at Stephens]

Okay. Okay. Appreciate that. And then I guess going back to, I think Kelly mentioned that the non-accrual interest was a little bit elevated in the Q4. I don't know if you have the dollar amount of that in front of you so we can kind of normalize that for the Q1.

[Kelly Harris, CFO at Bank7 Corp]

Yeah, Matt, it was around $600,000.

[Matt Olney, Managing Director at Stephens]

Okay. Great. And then just lastly for me on the fees front, any more color you can give as far as expectations for fees in 2025?

[Kelly Harris, CFO at Bank7 Corp]

Yeah. For Q1 combined, $2.4 million, $1.7 million of that related to oil and gas, and then $700,000 for your core fee.

[Tom Travis, President and CEO at Bank7 Corp]

I think his question was moving forward. Am I incorrect about that? Yeah. Just for the Q1, though. I mean, you could. Oh, I see. You're talking about, yeah, this quarter. Okay. I misunderstood.

[Matt Olney, Managing Director at Stephens]

Okay. Great. Thanks, guys. Appreciate the color. And congrats on the year.

[Tom Travis, President and CEO at Bank7 Corp]

Thank you.

[Operator]

This concludes our question and answer session. I would like to turn the conference back over to Tom Travis for any closing remarks.

Participants

Executives

• Kelly Harris, CFO
• Tom Travis, President and CEO

Analysts

• Nathan Race, Managing Director and Senior Research Analyst at Piper Sandler
• Matt Olney, Managing Director at Stephens
• Jason Estes, Chief Credit Officer at Bank7 Corp
• Woody Lay, VP at KBW