Bank7 Corp (BSVN) Q1 2024 Earnings Call Transcript Highlights: Record Performance Amidst ... |

Published: Saturday, April 13, 2024 · 7:03 AM | Updated: Saturday, April 13, 2024 · 7:03 AM

📊 564 views

SHARE

Release Date: April 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Bank7 Corp (BSVN, Financial) posted record earnings and record earnings per share.
The company has maintained strong net interest margin (NIM) due to disciplined balance sheet management and interest rate risk matching.
Cost controls continue to be effectively in place, contributing to positive financial results.
Asset quality remains very good across all verticals, with no issues in the commercial real estate (CRE) portfolio.
Bank7 Corp (BSVN) is actively pursuing potential acquisitions, focusing on core deposits and fundamental banking operations.

Negative Points

There are certain risks and uncertainties, including economic conditions and regulatory policies, that could materially affect future results.
A recent potential acquisition did not materialize, indicating challenges in executing the M&A strategy.
The company is cautious about stock buybacks, balancing the need for capital for potential acquisitions against the benefit of buybacks for shareholders.
The reinvestment of matured treasury funds into a three-month treasury product may not align with a long-term investment strategy.
The company’s loan growth outlook is conservative, prioritizing profitability over growth, which could limit expansion potential.

Q & A Highlights

Q: Can you give some color on where the funds from the treasury maturity in the first quarter went?
A: (Kelly Harris – CFO, EVP) We reinvested around $85 million into a three-month treasury product and then $15 million with the cash.

Q: Do you have the NIM in the month of March post that reinvestment?
A: (Kelly Harris – CFO, EVP) Yes, for NIM, excluding fees for March was 458.

Q: What are your thoughts on your appetite for M&A in the current backdrop?
A: (Tom Travis – President, CEO, & Director) We’re constantly working on potential acquisitions, sticking to our strategy, pursuing core deposits and good fundamental banks. Nothing has changed in our commitment to that.

Q: If an M&A deal feels pushed out, would you look to the buyback as a potential lever to deploy your excess capital?
A: (Tom Travis – President, CEO, & Director) We’ve been disciplined on buybacks, considering the stock’s multiple and maintaining extra capital for potential acquisitions. Absent an acquisition, we may think more favorably about stock buybacks.

Q: Can you give us an idea of the yields on the securities that you purchased?
A: (Kelly Harris – CFO, EVP) The yields were 538 at the end of February, and we picked up 15 basis points in NIM because it was only one month in Q1, it was 5 basis points.

Q: What drove the large step-up in loan yields during the quarter?
A: (Jason Estes – EVP, Chief Credit Officer) It’s due to a $1 million one-time item related to the full collection of a workout loan. It’s a reminder of our commitment to maximizing returns.

Q: Is the expectation to collect 60% of the $16.9 million in asset value from the oil and gas business in 2024 still valid?
A: (Jason Estes – EVP, Chief Credit Officer) Yes, we are spot on with that projection through the first quarter, with $6.4 million of revenue recognized and $5 million of cash collected.

Q: Are you actively shopping those oil and gas assets?
A: (Tom Travis – President, CEO, & Director) It’s a small item on our balance sheet, and we haven’t focused hard on selling off the asset. We may look at that over the next two or three months.

Q: Can you help us think about the fee income and expense run rate going forward with these assets?
A: (Kelly Harris – CFO, EVP) For core non-interest income, $650,000 is a good guide. For non-interest expense, $8.3 million is a better run rate for Q2, excluding the oil and gas activity.

Q: How should we think about the margin trajectory in a higher for longer interest rate environment?
A: (Kelly Harris – CFO, EVP) We feel comfortable operating in a similar range to the core NIM excluding fees in March, which was 4.58%.

Q: How do you anticipate the margin responding to each Fed cut as they occur?
A: (Tom Travis – President, CEO, & Director) We expect to be in our historical ranges, and we should be fine there. We’re close to the end of any cost of funds increases.

Q: What is your updated outlook on loan and deposit growth in 2024?
A: (Jason Estes – EVP, Chief Credit Officer) We value profitability over growth. Expect a single-digit number in loan growth, absent some meaningful change in interest rates.

Q: What did you see in terms of criticized classified trends in the quarter?
A: (Jason Estes – EVP, Chief Credit Officer) It was a great quarter in that regard. We expect to return to our historical levels throughout this year, maybe bleeding into the first quarter of next year.

Q: Can you remind us of the size and geography of acquisition targets you’re looking at?
A: (Tom Travis – President, CEO, & Director) We’re not afraid of larger acquisitions that fit our parameters. We’re looking for targets that have strong liquidity and can be efficiently deployed in Texas and Oklahoma.