Earnings call transcript Q2 2023

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Operator

Good morning, everyone. Welcome to Bank7 Second Quarter 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 the 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. quality, to the uncertainties of of direct on rates, subject among assumptions, economic banking are and interest things, liquidity other and credit regulators. statements certain supervisory and risks, including, conditions monetary Such and demand, policies loan indirect effect

prove those call Should or expected. financial note this conference assumptions Also, references these results to may measures. or should risks please one actual materialize vary contains non-GAAP of underlying more incorrect, materially from that

these of in reconciliations find financial was measures this measures can You the financial GAAP non-GAAP an filed to that X-K company. morning by

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

would to like floor the I Tom turn over to that, Travis. With

Tom Travis

Good morning, year-to-date. our with everyone. pleased We welcome, and quarter and were our Thank pleased with you.

profits have you per share. all to If it boil again to why able and earnings were we record down

that money on plenty fundamentals the into your to are and and and management liquidity sheet should all on It's really just and that have of again. we're position continue liquidity And in executive also in turbulent just the the a no down extra of happy our banking what's continues mindful we're it of going markets balance bankers, the proud fundamentals that we case, focused market, debt, the carrying story banking. excess for with come the to to we're have, team the our of fundamentals, we're of stay we And the and line. front to sticking way relationship

the we're we go just year X as say, quarters, I the way call they of and maybe with if the it. back that so commentary, earnings being And it about pleased shaped style sexy at thought up quarters, it's look not you out kind would. real X think has And prior fancy, of fundamentals but don't said, and

to ranges increase our funding costs continuing historical gone we've that. Fed the up, very rates, the and about have with And our managed but happy within clearly, margin

we're all So have. with take happy Thank calls or to you that being any may you. said, questions all

Operator

[Operator today question Tom Inc. first Instructions] Wendler comes Stephens from Our from

Tom Wendler

We to you quarter. this start maybe color off give some I decrease growth with expectations on for expenses. just saw us the want Can moving forward? expense your

Jason Estes

from We Yes. rate And perspective, slight million. a quarter QX like bit $X.X at going QX. a little the I did in forward, maybe versus have decrease better a second higher run

Tom Wendler

even in nonperforming loan you just the relatively moving around to this allowance Perfect. quarter the kind color your a And of with loans on decreasing some give us step-up flat. then We build? and maybe Can credit. saw reserve remaining balances

Jason Estes

our build. I quarters. out well. to comparing couple Past potential dues last economic of think if that think are the or whenever down, you be I have kind has DNA up there it's Yes, to headwinds believe to see portfolio credit throughout The you're some trends book, just positive we the trends, continue to headwinds held what of you'll very

not oblivious we're goes the economic you're starting and going of I those interest like on, and that's some economy being the So rates in to effects, the what -- year with look data. to the of case, the in that as impact still see we higher think, to

we Fed get the ahead And just next to prudent that. it in what of does meetings, of regardless so the was think couple of

Tom Wendler

than loan your others? last expectations you this some for one balances for grow one growth? color on maybe there’s Can remained just looking then any sort And to if segments And give Loan of us flat you’re me. quarter. more

A –Jason Estes

pretty we’re consistent, think. From Yes. I standpoint, a segment

calls if and as And was same C&I this bit I year growth same a think, you I the a be where doing, the confident feel is more like to little expect future. go last energy, hospitality, see And think back won’t I has still You last that. then in couple hey, the that digits of the as been us stuff this the anticipated, probably and we’ve the growth, year. single year in look, than been, commentary we had far

it’s maybe this will And unchanged, the look overall think in a does a row year. like be good and bit a third call even number I still the turbulent think we little what this was the that’s year some we’re March talked fourth where caused though or like? even about for uncertainty, looking I

Tom Travis

Jason, am I down. that correct construction is actually

A –Jason Estes

It is. It is.

A –Tom Travis

don’t we we expected segment know I point the it would that has our that’s definitely – but lending would. So numbers, that construction out one as slowed

Operator

question next Sandler. Piper Nathan from Our comes Race from

Nathan Race

ex just actually kind increase down outlook first it margin during quarter. saw fees was of came on It the accretion. the than we like looks looks points less the about versus the and in costs first X It quarter. basis deposit what like Question

your of future terms of of expect this get kind perhaps that can the magnitude just XQ we XQ pressure and during to in So expectations of curious year?

Kelly Harris

This is Kelly.

And I the good is X.XX% I'll think number. an fact additional ex-fee that highlight from liquidity. we just a perspective, are carrying

think X.XX% and going Fed But as so an on impact and a you fund NIM that if a number. well. loans, core that a a bit forward as is we could do NIM see week, so up fund shift up is will NIM of cash good some meeting we do The that from I potentially leads little well. next prop And loans, could when have down perspective, up

Tom Travis

That's Kelly? kind of it isn't real time,

Kelly Harris

is. It

Nathan Race

a going to of going Okay. perhaps what ex out subbing broader theoretical forward. a that the are kind see of your you higher kind And over more of rate fees of Got you. longer guys period? larger environment, maybe kind interest question for margin kind longer-term In on NIM

Tom Travis

and believe And don't below of look X.X%. we've said if the with hurdle. transactions walking I And proud X.XX% our and about back ever delighted we're negotiating operate in We're not dipped consistently away or the to I'm of our from within historical you sure team ranges. that going regard meet we've to that efforts history,

not of so today nothing lot they a to And real happens, would if that those ranges. from us it depends And X.XX%, we think it outside today lead to going that there's that I'm but saying And on Fed I go it happens. what of we're believe that X.XX% time to we're operate do. see to going and the

everyone increase think is I expecting a next week. rate

your do you're the dropping take However, think and any if absolute from easily do to loan NIM more, I historical they a to they don't pause going keep more range. then

we'll see. just so And

our it's now next as But at But we out million so of XX% loans daily floaters, and that are ceilings. $XX point when deck, week. the I or have Fed think right clearly, the are our about in we increases

us, for going You're those to few to have within ceiling. be a going historical loans But I at norms. the more we're think

on would from I also X maturity the don't at pick actual effect can note certainly if would We're to that point the instrument. know some points, earnings. but pick position. NIM we we it heavy basis treasury months the what would liquidate And point, today, I chose up do away up, out And carrying we're a that and in pretty so be

some are to going we so And pressure. offset things are NIM that eventually there have that that

Nathan Race

maturity in next quarter large that the correctly, the of that year? in first remember I if securities And book occurs

Tom Travis

it's February. I February, the of end think

Nathan Race

didn't And much about growth. you perhaps thinking It gears, just appear in that had the guys changing energy portfolio particular.

balance the looks quarter. bit like it In first shrank has a versus little fact,

curious well. that opportunities energy perhaps kind your kind touch you So seeing a And across on space? you're just perspective just what could as portfolio you're of seeing quality from of if what in credit

Jason Estes

about be during very I say a because a the credit, Outside pace It's goes large that one I year, there's there of is book, there contraction last a credit deal surprised strong the companies but about there performing in quarter. more for year the think slowed million little with -- $XX that contract energy from primarily as ongoing we Outside will there's book is time. did flow if in the overall, litigation. the and has realm public there's Yes. long can't bank about. that's I that on really of well. that talk line quality quite the bit of out very wouldn't credit, we we

Nathan Race

on large the believe quarter? NPA update I of any second those of kind that large a out loans just of come balances existing nonaccrual Jason, the constitute majority And X

Jason Estes

Yes.

So one it continued consistent, and XX than more has little them a maybe nice improvement had months. of months, now a for XX

we used can shoots. you to the so green call it as there. point. It's And refer this know to even nice it story I recovery if at just a that don't

to may one that we loss, bucket that the don't corp that near that, have future. back. of optimistic get litigation, we're credit, come money again, the then but out through any system expect other well-secured, so And that in work involves to And the

Nathan Race

provide over or are the days feeling expected maturities color the focus the on year office you're investors? in given just generally deck. Okay. the exposure that area on these I overall the Great. the additional real details for this just [series] office can in that an portfolio, Any about how slide so. next appreciate of terms added And kind of And of commercial estate portfolio you

Jason Estes

the unique, we're because And of I other and to at typically an is this is, bigger deal. It it's banks the of compared lot think so a banks don't going majority think, office, to our be downtown our size all. of especially owner-occupied maybe

and almost. used a we on. smaller a These I office there They're We loans. in see to portfolio expect have expected we rapidly, -- single in like any just we that don't think loan of suburban them don't really call ours. that stress amortizing issues are house

Tom Travis

news in new And the and but to in on big Texas also not I some somebody emanates of anything with goes those Coast loan the how to Jason's urban in anybody a a as spectacular and of in horror fun making San Oklahoma -- it the just I'm or York West would just where doesn't you we decides Francisco stories have and have markets, it's I -- you Downtown anything, that's and add a that and of those other is Nate, dominated I and do but it on cities Washington geographies we on know well. illustration and from deal, money what big about. these deal is hasn't it's perfect this markets. it and and the mean all Coast that East New comments about some read to

your you're about like to comments seems me guilty. world nice that anticipated it's we your live hear regardless, in so we it the reinforce concern. And And with in,

we If it's that's why so and God." additional into X "Oh, the questions my went loan, like, disclosures. have you And office anticipated we

point And hear out. it's to you that nice so

it's so news the just than a And comes from. different where world

Nathan Race

in last management priorities. capital just of guys the just build That's quarter. helpful. one it. continuing kind for Tom, And I increased TCE, Obviously, very ratios Got to could ask if regulatory perhaps capital you also on one are

is relative You guys think, to tangible on peers. have, I book what basis premium a currency

quarters a I And about think couple opportunity. a of were talking potential ago, acquisition we

kind get more of So impetus capital would of the there prioritizing on And to these there's deployment. perhaps love that I kind context, exists capital your just given can of that excess you're maybe of hold just how within understand, kind just uncertainty out that macro an to days. thoughts

any along I to So get Tom. just those thoughts would lines, love

Tom Travis

could Well, up that's smart interested been But making and all We've capital clearly a in acquisitions. we I guess And the piling very that that are so we consistent. is we're sorry gosh, much seriousness, could say, so always we're be fact. of money kind quickly. with answer

at the side the We balance right look of sheet.

we in right pursuing opportunities something. could pile the it continue living But do can I guess, and we constantly make there's slopes much that slippery of, exception And And really that a meantime, we it's not could And talking special to to with just about sense. do the so up. do in or going are these dividend now. we're we're

we're So for a capital with while. build the letting comfortable up little plenty

flexibility. have We

I I I XX%. us XX%, is so think think, that And think I and XX%, some KBW. with industry Kelly, our at in payout you of helped somewhere ratio. the ratio, payout dividend did think And the we're in Nate,

Kelly Harris

I bit below think the little with we're that -- a

Tom Travis

and this beast, to that reduce machine find and other I'm maybe we now, I chose to going we'll to ways. is capital as steady we earnings what have to we're if something guess is say, by buy. So goes optionality But for she trying a Nate,

Nathan Race

experiencing lot the opportunities margin No, smaller of understood. some and acquisition of any good well seeing are problem Definitely imagine Are have. a side you Obviously, competitors, days. these on guys. a more you your I is things above of to pressures you

number So if I'm maybe leading just those? an curious to that's to of increased discussions

Tom Travis

people you to now so issue, where institutions that we Well, unfortunately this not many more see their in out for and extend way think worse would. would out I that it changing call just I durations to of AOCI. there stuck are. made -- you them, are for some it I the have they're they're think their them is the because the the zombie think And don't higher decisions stuck unless have but the and able and phenomenon went people sell and But these that they that rates stuff big MTM them and go, banks,

So of lot table. that's be just way for a a off taken going And opportunities the to while. it's that

Operator

comes from question next KBW. Our Gailey Brady from

Brady Gailey

back the media. recently was that to circle credit to wanted in energy just the I

NPAs. doesn't went into that, were could think was if talk guys I this bankrupt. that the and appear was of it you you XXX about that credit size that that I wondering company moved just an energy credit,

quarter will increase? do we that think a more of So third NPA be

Jason Estes

Yes.

So deal, multiple on secured And a there's the don't a books. involved, so We total. lender. here, loan than into is it approximately too senior and the on is million X to other loan club to in $XX get believe value. It's asset we're far litigation say I banks And the our current. going want

that assets on in the at loss expect and the time do a not believe flow produce credit. would we cash be this that We there

being the isn't good with linger. in the is it news bankruptcy this so process, And going credit on this to

being past quarter, don't the it's quarter. could I I but going an fourth it see into issue be fourth an to issue the think

pretty And quickly going here. to have so resolution we're

Brady Gailey

energy natural seeing other gas. gas any your other into of company natural been any Are know here. that then depressed was in borrowers? I pretty I price think And the you Okay. has all nat of gas weaknesses

Tom Travis

the the through banking. this was not we're -- see their Listen, like was see don't answer watch stick management get much dropping people they traps. management liquidity, Brady. And we is operate We teams Tom, fundamentals management ball, the this the company industry of the okay? the no, cycles is that this up This teams just to is in -- and and This operate not. down cycles in caught a that

oversight commodity less just And do so and we'll lot this the a of company. price that. the of it the it management leave with than is to is the the at And

Brady Gailey

M&A. growing. value. like at your trades my And But Okay. look having you compelling very capital you mean, guys up at talked we talked But you capital I final X.XX% relative then excess And question, if at if performing about stock is at piling that's book here, you at, look to about a your valuation. that tangible stock, that the ROE are

buybacks as to capital way share shareholders. do a So back to give ever make sense

Tom Travis

I after company the that just felt based quarter hasn't think quarter that Well, is on performance. like exemplary that the of market year to answer and always we've properly year value fact. after the the That's

wanders see being think that are it into dynamic And with changes, or I hard so to But a to short-term investor. materially. investor change you're It's that long-term that to unless it's a it's said, hard see. going you

a you compounder, stock. really there's not a like And better if

we love capital right? don't And up, share really feel -- we're was pressure so to with any buybacks what because Well, do the our we what's And for quarter. that the the piling XX%, ROE, even XX%. doing.

argument. to much returns. grow the don't and dip But I be the down market equity, still on can Brady, the that that carry I understand for substantial return going into yet a outperform And and But we until we're say company can guess would so yes, to lower on I capital proving we the know the I what to you, it's year. we

or call so it pressure pressure to immediate repurchase guess, near-term have I you really even don't And we shares. that,

it. we way view the of kind that's so And

Operator

ladies questions, gentlemen, this floor no And time, I'd to showing Travis I'm over back like to additional Tom the at for turn remarks. and closing

Tom Travis

that company's your Thanks we've part and the dynamic. We really a participation. been again the bankers we'll And got in country in. we're interest where what of wonderful doing. and to like management the team for keep and We've doing we're of blessed we're at be

you. thank So

Operator

ladies you we'll that, thank conclude and for conference And call We joining. gentlemen, with today's and presentation.

lines. now may disconnect You your

Bank7 (BSVN) 20 Jul 232023 Q2 Earnings call transcript