Bank7 Corp Q2 2024 Earnings Call Transcript

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

Question: Woody Lay - Keefe, Bruyette & Woods, Inc. - Analyst : Hey, good morning, guys. So the core NIM, if you exclude the loan fees, came a little bit better than what I was expecting. I know that $100 million of noninterest-bearing deposits came out midway through the quarter. But what do you think is a good run rate for that core NIM over the back half of the year?

Question: Woody Lay - Keefe, Bruyette & Woods, Inc. - Analyst : Got it. And then maybe turning to the loan growth. I know on a quarter-to-quarter basis, it can be a little lumpy sometimes. You mentioned some fundings being pushed out. Is that a reflection of customers waiting on potential rate cuts. Is it other factors? And a follow-up question, it sounds like the growth next quarter could be strong. Jason Estes - Bank7 Corp - Executive Vice President, Chief Credit Officer, President and Chief Credit Officer of the Bank Yeah. I think it's a combination of a lot of factors, Woody, and this is Jason. We continue to see customers sell businesses, take advantage of maybe equity raises. And so that led to some increased payoffs during the quarter that Tom referred to in his comments. So when you have those lumpy paydowns, even though our new funding's in the quarter, they were what I would describe as pretty average, with June being particularly stronger. We think we'll grow again in the third quarter. But if you go back, I would say 18 months, we've kind of been signaling that, hey, listen, a high single-digit loan growth is kind of what we expect. And again, I feel really good about that for the full year. And so as you mentioned going quarter to quarter, you can see some blip, spikes, peaks, valleys, whatever you want to call them. Just if you look over the course of the year, I feel really good about that high single digit. But the other side of that -- and we've talked about this previously as well -- you really have to remember we're so focused on maintaining profit margins. We do sacrifice growth for that. And I think this quarter is a really, really good example of that and we like that. Some investors may not. But that's how we're going to continue to operate. And we just think it's the right thing to do.

Question: Nathan Race - Piper Sandler & Co. - Analyst : Yeah. Hi, guys. Good morning. Thanks for taking the question. I was wondering if you could just update us in terms of where you guys stand on the oil and gas assets that you acquired late last year in terms of specifically how we should think about the fee income and expenses associated with those assets going forward?

Question: Nathan Race - Piper Sandler & Co. - Analyst : Go ahead.

Question: Nathan Race - Piper Sandler & Co. - Analyst : Right.

Question: Nathan Race - Piper Sandler & Co. - Analyst : Right. And to your point, Tom, it's a relatively small piece, but just is there any interest, so to speak, in other people acquiring these assets? Or is the plan just to retain these assets on balance sheet from operations technology (multiple speakers)

Question: Nathan Race - Piper Sandler & Co. - Analyst : Got it. Very helpful. And then just maybe staying on credit and switching to the hospitality book, curious what you guys are seeing just in terms of NOI levels across your client base. Obviously, it seems like a lot of those loans are tied to floating rates. So just curious how a lot of those clients are dealing with the higher cost of debt these days? Jason Estes - Bank7 Corp - Executive Vice President, Chief Credit Officer, President and Chief Credit Officer of the Bank Yeah. So the -- remember, just a reminder to everybody, the hospitality activity in our portfolio is largely concentrated in Texas and specifically the Dallas-Fort Worth metro. And business as usual there for first quarter, NOIs were up slightly from last year. And we really don't have the second quarter data yet. But based on performance and conversations with borrowers, I expect second quarter to probably be all-time high NOIs. And so business as usual in the Texas hospitality industry.

Question: Nathan Race - Piper Sandler & Co. - Analyst : Okay, great. And then just one last one for me perhaps for Kelly on the NIM going forward. Obviously, you guys are asset-sensitive. So just curious how we should think about the margin impact from each 25 bit cut.

Question: Nathan Race - Piper Sandler & Co. - Analyst : Yeah. And just to clarify, it seems like that long-term average is about 4.5%. Is that kind of what you guys are referencing?

Question: Jordan Ghent - Stephens Inc. - Analyst : Hey, good morning. My question is just on the charge-offs. I know you mentioned that is for the quarters, the remnants of the larger charge-offs historically. But kind of going forward, where are you guys expecting to see charge-off levels? Are they kind of normalized? Or do you expect them to be a little bit lower? Jason Estes - Bank7 Corp - Executive Vice President, Chief Credit Officer, President and Chief Credit Officer of the Bank Yeah. I would say lower than the last few quarters definitely in return and kind of a historical -- just look over a 10-year period and come up with a very small number and roll that forward. There's not -- the credit quality is as good as it's been since really the last 7 or 8, 9, 10 years. So feeling really good about the loan book and asset quality.