Bank7 Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Wood Lay - Keefe, Bruyette & Woods North America - Analyst : Hey, good morning, guys. Wanted to start on loan growth. I was positively surprised by the growth you saw in the quarter. It looks like it came mostly from the hospitality portfolio, just any color on the growth you recognize in the quarter and just given all the macro uncertainty, how should we think about growth from here? Jason Estes - Bank7 Corp - Executive Vice President, Chief Credit Officer, President and Chief Credit Officer of the Bank Yeah. It was a good quarter. As you noted, hospitality kind of stuck out, but there was some strength in the C&I bookings as well that was masked by some payoffs. And so, when you're looking at this every 90 days, sometimes the numbers don't tell the full story, but we were really pleased with what was booked and it was a little more diverse than maybe what ends up in the final numbers there because of those payoffs. But we come into April in the second quarter with a really nice deal flow, a good backlog of things in the works and what's going on here the past few weeks in the economy. We really don't know what that's going to do to new bookings, but we really felt great through the first quarter and into April with really strong loan demand. And as Tom mentioned, these markets that we operate in Oklahoma City and Tulsa, and Texas. I mean, these are just high growth areas, really strong diverse economies, and we're grateful that's where we loan money.

Question: Wood Lay - Keefe, Bruyette & Woods North America - Analyst : Yeah. That's helpful. And then going back to your opening comments that I think you called out the consumers becoming a little more cautious, and we're all a little in the dark on the eventual impact of the tariffs. But looking at the hospitality portfolio, it has a really strong track record. But any trends you're seeing over the past 90 days with occupancy rates or bookings that might point to any overall consumer trends.

Question: Wood Lay - Keefe, Bruyette & Woods North America - Analyst : Got it. And then last for me, markets very volatile on a day-to-day basis, but longer term, can you just remind us how you're thinking about share buybacks, just looking back in history, you all are active in 2020, but that came with the price well below tangible book value. So just any thoughts on share buyback strategy?

Question: Wood Lay - Keefe, Bruyette & Woods North America - Analyst : Yeah. Well, it's an enviable position to be in. All right, that's all for me. Thanks for taking my questions.

Question: Matthew Olney - Stephens Inc. - Analyst : Hey, thanks. Good morning. I think you guys already addressed the question around the hospitality portfolio. I guess, I'd be curious also about the energy portfolio. I think it's around 9%, 10% of your overall loans. I'm just curious how you think about energy commodity prices and the risk to your borrowers. I think you guys gave us a good segmentation on the types of energy borrowers on slide 14. I'd just be curious about how you see the risk to the commodity price on each of these types of borrowers. Thanks.

Question: Matthew Olney - Stephens Inc. - Analyst : And then I guess sticking with credit. Good to see that the NPAs moved lower in the first quarter. Just any color on that movement and then anything to call out on the substandard loan levels as of March 31? Jason Estes - Bank7 Corp - Executive Vice President, Chief Credit Officer, President and Chief Credit Officer of the Bank No. We're pleased with where the book is overall. We always want to be perfect. But the book's very clean. Migration, nothing alarming in any of the trends, for loan grades. Past dues are very, very low based on historical levels. And so if the economy does really start going into a severe deep recession, we certainly enter it with a very clean credit book and very strong capital levels, plenty of loan loss reserve, and a nice run rate to sustain us. So credit book's very clean.

Question: Nathan Race - Piper Sandler Companies - Analyst : Bigger picture question. It's obviously fluid times, and a lots changed over the past week or so. But as you're talking to clients and going through their financials and so forth, do you have any sense across your commercial client base? To what extent some of their product inputs are relying upon, international economies? And then on the other end of the equation, to what degree are some of their clients related on international exports as well? Jason Estes - Bank7 Corp - Executive Vice President, Chief Credit Officer, President and Chief Credit Officer of the Bank I think it's safe to say that if the tariffs are really broad-based, it'll be challenging for large slots of bank clients, commercial, businesses, commercial clients. But the people that we've been talking to that they're looking for different ways to find a different supplier from a different region that's not going to be impacted as much by the tariffs. And business people, entrepreneurs, they're very creative in protecting their interests which is protecting our interests. And so I have found the larger companies are very proactive. Some of the smaller companies, they're going to be looking for solutions provided by whatever countries end up being the least expensive to do business with. And thankfully, a lot of these are long time operators and they've got multiple sources of finding materials or services. And we're very -- I guess we're paying very close attention to these things. But it's also very early and it's very fluid. So I can't say they have final solutions, but they're certainly looking into solutions. And that's across the board. I think what's probably been more noticeable on immediate impact were some of the disruptions to money coming out of the government. We've had multiple clients that have made comments about, hey, we may need to rely on a line of credit here due to payment delays coming out of whether it's direct government payment or quasi-government through some kind of quasi-government entity or some other arm that is fed by the government. And so those have smoothed out. But that initial DOGE effort was impactful. Can't say that we actually did have to extend any credit into that, but there were certainly some conversations.

Question: Nathan Race - Piper Sandler Companies - Analyst : Maybe changing gears a little bit. Kelly, any thoughts on just kind of the trajectory of oil and gas related revenue and expenses going forward and kind of what that implies for your expense run rate going forward this year?

Question: Nathan Race - Piper Sandler Companies - Analyst : One last one for me. Tom, you mentioned maybe some distressed acquisition opportunities could emerge. And you guys continue to have the good problem of kind of how your excess capital levels are increasing. So just curious to get your kind of thoughts on the M&A environment today. We saw one announcement in your backyard I believe last week. But just kind of any thoughts on how you're looking at potential acquisition opportunities going forward?