Earnings call transcript Q1 2023

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Operator

Welcome to Bank7 Corp's First Quarter Earnings Call.

Before we get started, I'd like to highlight the legal information and disclaimer on Page 23 of the investor presentation.

For those that 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. of actual materialize from results more assumptions should those or incorrect, prove may one these or risks underlying expected. Should vary materially

to filed find note financial financial financial measures please that X-K conference by GAAP contains Also, that the an was this measures to measures, morning of reconciliations references to in these this non-GAAP call non-GAAP company.

Credit and Officer; company Brad Financial note Haines, Travis, Chief President have Jason Chief today's Operating Chairman; Chief we CEO; Kelly call, on Phillips, Officer. Representing this the being J.T. Harris, conference Officer; Estes, recorded. Tom Please is

With that, I'll over turn to Tom the Travis. call

Thomas Travis

for you joining again we everyone. strong results. Thank We're pleased that us to delivered

our members and have outstanding acknowledge We for team to contributions. thank their

an those book, the set quarter. Let's move on had to loans the our strong results. and high with stage majority and all-time that of We floating year daily rates, started our really for loan the

were the As significant activity. we we loan through payoff able progressed to and overcome quarter, paydown

to basis, was the same historical on a range. in rise we're still our expectations was and quarter, accelerated downward deposit our At the margin pressure with helpful. on amount January successful pleased also our the and costs continued portfolio, loan consistent growth during small a strong net we net put time to with it our within remain of Therefore, which call, we Regardless, and margin. during achieved achieved revenue which and and the mentioned expect team

a in environment. clearly a point is move today's It's which probably major good discussion regarding into liquidity, our to focal

our overall and disclosures You with liquidity comfortable provided can see enhanced have are we profile. we

continues more that than Our today. be cash to way position industry averages historically and is

industry funds reliance is In far public addition, averages. on below our

a we not our large of base. We as panic we which of lines did also experience from did not customer draw, on our credit, availability have amount

the small transaction deposits case quarter, which continues increase we for our be core including to incurring In yesterday. not stress We accounts, increase do small in this in a anticipate the as area. fact, of show a in

our see, matching sheet. regarding a disclosure more can good asset-sensitive provided asset as liability also you And balance We has us position. in our

of our use floors will rate interest benefit company. continue maturities historical floating loans to and Our rate with shorter

is AOCI properly much and to we operate we balance as don't sheet have and of matched strong adjustment, Our debt-free. an continue

rapidly our it Regarding treasury of small U.S. portfolio only more half that in AOCI investment mature adjustment, of as will the than decline months. notes XX consists

and downgrades, We adversely ordinary. and continues We Overall strong but to few few credits a credit upgraded out added rated a of nothing steady payoff. one had quality is the characteristics. exhibit also

We also converted our allowance CECL it methodology to needs is model and in where allowance be. to the our strong

increase combination with to to will to pay-out low cause into continue our it regard considering strong and a slower and it especially of Moving growth environment. We building ratio capital plan capital. dividend the earnings quickly,

this Clearly, levels. of at guides environment maintain stress higher slightly macroeconomic us capital to

strong earnings Our our high a real substantial deck reflects scenario industry and how of inclusion on bank provide stress the level illustrate based We a strength test as company. DFAST our the with in our parameters. to source like strength for of of that it is examiner buffer earnings

So very in had strong we conclusion, a quarter.

navigate and provide to today. that place choppy shareholders are pleased returns in to through are also positioned well our that report exceptional we are waters to We the

liquidity build to continue and our to intend keep on capital and We deposits. our growing focus

and the near of being the dynamic our future in located country. to of part we about remain in cautiously excited the optimistic this continue company. benefit spite about macroeconomic from are headwinds, We current Therefore,

So with said, standing you. that any being for Thank we're questions. by

Operator

of comes [Operator Nathan Piper session. question-and-answer will go Race The Please We ahead. question Instructions] from Sandler. now begin first the

Nathan Race

doing Hi, is everyone. everyone well. Good morning. Hope

Thomas Travis

morning. Good

Nathan Race

outlook on deposit of Maybe kind for loan growth. start the just

it was CDs. like the in growth It deposits the mostly You some in had in looks quarter.

you're just as to balance come of of loan within deposit about and updated here in just we growth how think thoughts they on about stand curious April. XXXX pipelines over context should the out of get So thinking kind your how growth the

Thomas Travis

continue I'll the regard loan of around our accounts few believe grow our lot always on and what due environment, deposit base. that noise Tom. respect the and But outliers. we've side our a and transaction tough with I of a and we all take combination deposits, a money the business the conjunction with say with ask fundamentals, will is to market and in with our in geographic spectacular bank This customer we're expansion done, Jason with there's fundamentals, that of understanding would that side. the model to is And location do accounts centered economic

I up steady down any And so the can just or business for wouldn't expect movement. speak And goes she and Beth. as meaningful I book, Jason to as It's us. think loan usual

Jason Estes

Yeah. morning, Good Nate.

resembles I what think but describe I that's we're would normal think deal a by driven demand. side, I I geography. flow, call our the as healthy what on still And what really loan would seeing loan

Texas growth. the here and are at economies strong, you If and look very Oklahoma, there's still

in still so back year, our it think, single-digits. very, to, Instead January I very of I on demand about year growth talked call, refer robust. and And rates was of this loan we kind probably last

more they're that's the accurate. of think half it's a And rates. the not I'm raising I little done say year. on second sure so cloudy I pretty will still if

or where for slowdown seems demand, be but up, of little And will in feel bit each there year. there like still amount to up, I a so we'll a move the see but with it growth ends of slight moderate be

Nathan Race

to think going Is single-digit reasonable those together with mid Jason, helpful. we pieces maybe past, in I -- that your the That's loan the lumpiness high still talking of with comments. putting forward, a growth, were albeit And kind Okay. expectation

Jason Estes

Yes, sir.

Nathan Race

and ratchet forward. sit may question And Great. just And going as for that today challenging a continue environment margin the going here forward. the to Okay. obviously, around Kelly, pricing outlook maybe then only that's deposit we up

points trajectory Is kind we just that a first think margin or XX going of in the do of here? kind least the intensified is reasonable from of margin So pressure forward that on about extrapolate basis the decline you the reported on years, to out quarter. I basis from a saw expectation margin, at the down thinking guess

Kelly Harris

our you a will potentially historically. as continued XX, to Tom would NIM slower think see reprice out, about liability you'll costs decline. degradation I decrease feel we and a in quarter QX. than I the interest anticipate at basis continue quicker QX clip core margin we on and first said, That assets. points did But in range operating the pointed see very net comfortable But XX for Page then

Nathan Race

book of securities I deposit loans. of quarter? just redeploying the Kelly, offset maybe some portfolio part off how the And some come of of us remind the much you the off is flow each securities imagine, pricing flow the you cash coming Can into cash are pressures

Kelly Harris

occur month. tranche $XXX $X Yes. around to in which going portfolio Total that, $XXX And the The looking February, within at million. million. million is I about believe big excluding is a is you're next,

Thomas Travis

next is to to on This which Nate. next is sell nine Tom, or unless, make than of we position were margin going just impact course, It's to possible. slug eight months. It's a one February, treasury that big earlier be going the really the for not material

benefit that really then between negligible. is big maturity other of now reinvestment or just one securities, on So than the redemption and few that or

Kelly Harris

And off time bringing then and new the deposits will higher. more of driven repricing be in liability money costs the

Thomas Travis

more we to today. prudent we hold thing, We it's obvious, want think and sometimes believe it's liquidity. that capital another I that of hold to out point but it's don't it, to believe prudent always is more

the interest to those margin. net so are detrimental And

So NIM we we eliminate of prudent believe time would bank, the benefit, but then chose run don't to right chose that's if those bank the the a little priced some to to higher liabilities be thing do clearly, we cautious. now. chose hotter, It's the to

really company is the NIM we environment. And that healthy a so the benefit operate in to

we degradation have to so that the or have to and some they're others do And NIM don't constrained strength their suffer they that really versus that meaningful. maybe more NIM of in have flexibility

point I make. that's So an think important to

Nathan Race

outlook. a the the just on like nice more just down. year. maybe elevated, performance were levels step Maybe given a XQ seemed It expense couple strong last the Obviously,

from kind million just you kind per expenses? can the of $X.X it goes on thoughts rate on go-forward the you Any thoughts around Do quarter? guys of imagine where think any run for rate Just here? run

Thomas Travis

Yes.

the the decline expense a year pretty some create QX, a see it And saw I forward, noninterest expense in will believe X%. QX as post that progresses. You although going you was good I is think guide

Nathan Race

the where class maybe to disclosures for the around Yes. CRE described that lot specifics just that be closer migration deck. you classified? the just other appreciate essentially portfolio. like of But the you're seems like you MTA is And slide nonissue in a on additional It in then guys, Makes there one given a I negative of criticized particular are credit. one guys It sense. any Or eye office going a these any were asset on in quarter. last looks days? the keeping terms you are stable levels in seeing portfolios

Jason Estes

Yes.

short-term yet, a we quarter of but and the it the on area. better those out we you rebounded, any of fond set continues was strength they've Texas, and particularly shift all-time really that for the and revenue from times they've where to And material Worth industries. seen most year. in clearly those last lending performance the data recovered first the haven't We in and are eye one for it I just a year ADR, Dallas-Fort and really just have really that. of segment. we that's don't close ask a records downturn of, occupancy very that the keep segment, I bleak it's show activities for hospitality full that couldn't will just really for say And metro there period COVID got

Thomas Travis

And whatever in it the XX% would of Jason's sensitive. XX%, the it's environment, it's very hospitality loans floaters. it's that rate I it great, It's whether doesn't if majority year, know whatever, the is. great asset remind of matter. majority everyone And XX%, And interest comments sixth I to those don't or the but are add we're and portfolio,

discipline proper ratios. our substantial our underwrite we've speaks the concern The been And point that able have and I portfolio. have to rate coverage the increase created the has interest debt we it that properly, in is the in margins in upfront to underwriting not think

a to out. so very point And important that's point

Nathan Race

color. back quarter. guys. great That's understood. step color. the That's and I had. all all I Yeah, appreciate Thanks, Nice I'll

Operator

question Please go from of Brady KBW. ahead. comes next The Gailey

Brady Gailey

Thanks. Good guys. morning,

Thomas Travis

morning. Good

Jason Estes

Good morning.

Brady Gailey

get know update energy are on NPA? kind loan. larger mostly. the is them to two credits I wanted energy update Any And an of just -- or I on one the just So of I think one of the an resolution your NPAs

Thomas Travis

but in put place company, but I little out year there don't it That to right we've a getting not I we operation. ago. still the over we can getting management think to can list, as the improved think a it Yes. taller vibrant, a ago, or upgrade. year to not reported, described the quarters remove from a where point many I we They was It's still team there's green and shoots, ago where continue how and they're but point this more improve new remember

Brady Gailey

what us of the remind is And size that credit?

Thomas Travis

It's approximately $X million.

Brady Gailey

million. $X

think NPAs I million. then around total And $XX are Okay.

are there any So loans? larger other

Thomas Travis

Yes. There's details million. to but that's $XX any one, don't on get in litigation. deal the want it's one into approximately I that

liquid, The And so the litigation, secured. an you're bucket. made we've say collateral same receiver. it's about comment is I credits, NPA really control will we're that that almost previously, in appointed highly talking under well the of between two and those entire

just of matter the corp system. working through a So it's

Brady Gailey

And conversations any bank although makes But backdrop update kind consider know M&A, bank of M&A nowadays. I any M&A you you're occasionally bank will then outlook, having any the on the Okay. on guys tough front?

Jason Estes

early to I to had beyond a be anything that. there group too potential. to mean Way and talking now. right one meeting, we've a say We're seems

So to that's active very in searching, be probing but about we and it. continue

Brady Gailey

for All color right. Great. Thanks guys. the

Operator

comes The go Matt Instructions] from [Operator question Olney next ahead. of Please Stephens.

Matt Olney

and deposits seeing also of any thanks. I want incremental Thanks. ask what addressed, on on on have my been morning. questions about but Hey, Most just loans, pricing to there? color both sides you're both Good

Jason Estes

the that are negotiations I side, environment. on loan borrowers to would new get kind less of say probably fierce the used as this rate

was deposit a you're of on And it those through year, bit they've after little been the rates. a last going used the mix. to in lower think conversations cumbersome just these side, shift then I seeing more

next earning growth in CD was you're the comment There earning by where that didn't the made of to a account about that. one nothing CD seeing they earning just migrate from than a or think a if a checking account I nothing analysts slightly or it care savings people was better

worth lock Oh, or in a a and XX actually to it for Now they're money while. wait put months. bank saying, It's this is up minute, XX attractive their

I with But that somewhat so of some go, as interest from year. would far more the their earn the see And as on finally depositors there's they shifting them say that mix you'll throughout relief get the conversations deposits. to

So in is we'll possible. easy, I NIM our very think that do don't I it's think but I historical that maintaining ranges think succeed.

Matt Olney

And loan yield side? on other side, that side, the yields any the color on incremental on

Jason Estes

I Yes. examples, you of the current rest what in Xs somewhere right average the mean say, if low that's some of now, but market. happens year, are would the want kind knows I probably. the Who originations

Matt Olney

Yes.

that appreciate XX. I but in Thanks. the on of if all at I helpful. on you this higher of end March tough much at That's it's and the point the the something how to And excess liquidity expect I I similar. higher Okay. some definitely most, are levels? think carrying and mentioned data, in see just And of with your thoughts the longer then can And levels given least term liquidity curious peers BankX, carry not uncertainty to saying know think of quarter we answer, environment duration that. the Tom

Thomas Travis

Well, things I couple play a at think there's here. of

are proposed liquidity. of metrics seen going think already that relative I've be commentary out new coming proposed the and I Fed to to

they'll call if liquidity, respect to that bank. up perhaps, metric, data, I change look how know I all point, the some, CAMELS but expecting so you L the rating, we at at due a don't if And certainly don't that some your report don't run we know if say with they'll don't new expect regulators would need expecting we're I there, regulators, come with the tell we to us to we're

and believe liquidity our said, with the understand being some and we have of managed our expect we properly we it own our sheet takes fund prudently so on what bank. knowledge, match But experience we And based and to balance that. that

And so that's one. number

speed of I banks into, had Number think have in like very, to rushed would failed be recall public the refer two, guess as mindful of them the I to the they've you I massive First outlier a few have that case or these at I either deposit which exited, very that. Republic,

or towards being the cautious think regard might with the whether nod be it's what I so a it's to down public road. And whether understanding coming

read our collateralized talked that will in And page was insider our subtracted the we identical it mentioned in the go the put think deck our to Fed. we then on, were, was with and earlier piece tell think you somebody a and they to deposits, that was commentary deposit I and was -- illustrated don't it I four I deck, I uninsured that, what page deposits, insider week I was here read, FDIC what if out late think we deposits. OCC was I what the or was has and last there this to you week, that the

is point some that think I we this. anticipate the of is, But

so I has do the the struggle you're net you of day. things caution really again, I if that operating think in word order earnings, a think that pull less or performance And achieve flexibility. high to And that to or levers bank in have is

we'll margin, still benefiting cash, high by have hold that net flow we it cash to kind and us, from as hold cash, for profits goes to liquid. interest And performance. suffer to that on more have we'll the and going comment more being if margin smaller be we're the of back okay, more that we But a the

prepared a but we're say and knows, way for to ready going be that who that's it. to So long

Matt Olney

Yes.

on you Okay. a just two. appreciate is that. Tom. maybe one front. credit a me There more then several quarter. And commentary, I Great the this for downgrade Tom, mentioned upgrades or and payoff

or As you be that by helpful loan you any for Thanks. do some directions, the it's themes look of or migrations at step us? whether both would see, back type and in you that in geography think

Thomas Travis

I don't any. see

losing like as radar do. that I you're I always and that and And that, when have you a up out. on anything. our on have it. as get we've managed you have and just don't money think And certainly losses few we to that say Dish I'm popped see their of always into stress work I specifically far focused is And alert constantly have way it. I company, out going loans, people on see to But the don't some

Matt Olney

okay. Yeah,

Appreciate your Thanks Okay, for help. it. guys.

Operator

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

Thomas Travis

really of of test the the the I and for to happens everyone industry didn't today we that's proud litmus recent month who panic was and and few for institution. I Thanks banking at most the But again the weeks. company. think knows the the least a test, next And litmus we're and joining have rest March, of what the think testament

I think strong provide base as to it's to customer and goes testament the she fact that good try steady performance. be that a yet we the

so the and appreciate Thank We're everyone's and consideration. pleased. you. And we're excited future about involvement

Operator

The for attending you today's conference Thank concluded. presentation. has now

disconnect. now may You

Bank7 (BSVN) 27 Apr 232023 Q1 Earnings call transcript