Bank7 (BSVN) Q1 2026 Earnings Call Transcript

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Date

Tuesday, April 14, 2026, at 11 a.m. ET

Call participants

• Chief Executive Officer — Thomas L. Travis
• President — Jason E. Estes
• Chief Financial Officer — Kelly J. Harris

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Takeaways

• Average loan growth -- Achieved "moderate single-digit" average loan growth; pace has slowed from prior quarters but remains positive, with management expecting similar performance for the remainder of the year.
• Energy portfolio -- Energy loans comprise "a little over 8%" of the portfolio, marking a 10-year low and reflecting a small, stable portion of overall lending activity.
• Net interest margin (core NIM) -- Modeled to remain in the "4.40% to 4.45%" range, with fee contribution expected to normalize at "28 basis points to 35 basis points," according to Kelly J. Harris.
• Deposit costs -- Management stated, "I do not see a massive fluctuation or any meaningful fluctuation in deposit costs" absent a rate increase, and does not foresee competitive pressure materially impacting deposit pricing in the near term.
• Nonaccrual interest recovery -- Net-up from nonaccrual interest was "a little under $1.1 million" for the quarter, implying a significant portion of the reported margin benefited from recoveries that may not recur.
• Provision for credit losses -- No provision for credit losses was booked, continuing the trend of four out of five quarters with zero provision.
• Nonperforming assets (NPA) -- "Only really material remaining NPA" projected to pay off imminently, expected to reduce NPAs to "$4 million to $5 million," equating to approximately "25 bps" of the portfolio.
• Risk-based capital ratio -- Ended the quarter at "15.96%," with an update that the ratio is "probably over 16%" currently, well above regulatory minimums.
• Expense guidance -- Projected fiscal Q2 (ending June 30, 2026) noninterest expense is expected in the "$9 million to $9.25 million" range.
• Noninterest income guidance -- Projected to be between "$750 thousand, upwards of $850 thousand" in fiscal Q2 (ending June 30, 2026), per Kelly J. Harris.
• Buyback stance -- Thomas L. Travis stated, "share buybacks really do not add franchise value, and it is more of a short-term mechanism," indicating no current intent to pursue buybacks absent a compelling valuation or lack of alternatives.
• M&A strategy -- Management will continue to seek "the right strategic opportunities" for mergers and acquisitions, considering both mergers of equals and acquisitions of smaller partners.
• Energy loan resolution -- The company is "20 months" into its program to recover value from a troubled energy loan, and management now considers the goal "accomplished," expecting this item to be "either gone altogether or diminished quite a bit over the next few months."

Summary

Bank7 (NASDAQ:BSVN) reported moderate single-digit average loan growth that, while slower than previous quarters, is anticipated to continue through the year. Core net interest margin is projected to remain stable within the 4.40%-4.45% range based on management’s modeling, supported by stable deposit costs and ongoing core deposit growth. Nonaccrual interest recoveries materially benefited this quarter's reported margin, with management signaling this is a nonrecurring item. Credit quality remains elevated, with nonperforming assets poised to decline further pending an expected payoff of the final material NPA. The risk-based capital ratio is probably over 16% as of today. Expense and noninterest income guidance point to steady operational performance in the upcoming fiscal quarter ending June 30, 2026.

• The energy loan portfolio, now at a 10-year low as a percentage of total loans, reflects minimal directional risk or strategic importance at this stage.
• Provisioning for credit losses has been absent for the vast majority of recent quarters, reflecting management’s current view of a "clean" credit book, with a slight increase in provisioning only if loan growth accelerates materially or macroeconomic conditions deteriorate.
• M&A remains a stated strategic priority for capital deployment, with management reaffirming interest in both mergers of equals and select acquisitions but expressing no urgency for share repurchases.
• Management confirmed the successful multi-quarter effort to resolve a previously problematic energy loan and indicated this asset will have negligible income impact going forward.

Industry glossary

• Nonaccrual interest recovery: Cash or interest received on loans previously classified as nonaccrual, often considered nonrecurring or one-time income and not expected to persist each period.
• Net interest margin (NIM): A measure of the difference between interest income generated by banks and the amount of interest paid out to lenders, relative to the bank’s interest-earning assets.
• Risk-based capital ratio: A regulatory metric comparing a bank's capital to its assets weighted for credit risk, used to assess financial strength and regulatory compliance.
• Nonperforming assets (NPA): Loans or assets where the borrower is not making interest or principal payments as scheduled; includes nonaccrual loans and other real estate owned.

Full Conference Call Transcript

Thomas L. Travis: Thank you. As you can see, we are happy with our results today. We regularly say, probably a little boring in this area, but we have to thank our team of bankers, and I know some of them listen to these calls, and if you are on the call, thank you. We have a great group that has been together for a few decades, and it is very comforting to have such a strong, deep, broad team. That is why we produce the results that we do.

I suppose it is a little boring for some people quarter after quarter where we are always putting up these fantastic results, but it takes a lot of effort, and we do not take many days off around here, and we do it the right way, and the results speak for themselves. Last quarter, I think the markets were expecting rate cuts in this quarter. Now the market is thinking maybe the rates will go the other way due to the increase in commodity prices associated with the Middle Eastern conflict. Who knows?

The reason I bring it up is that we are really proud of our ability to manage our NIM and to properly mix our balance sheet, and we are not concerned about rates going down or rates going up. We are positioned either way. With all of that said, you can see the major metrics in the deck, and we are here to answer any questions. Thank you.

Operator: We will now begin the question-and-answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If you would like to withdraw the question, please press star then 2.

Operator: At this time, we will pause momentarily to assemble our roster.

Operator: Our first question comes from Nathan James Race with Piper Sandler. Please go ahead.

Analyst: Hi. Good morning. This is Adam Pearl on for Nathan James Race, and thanks for taking my questions.

Thomas L. Travis: Hey, Adam. Good morning.

Analyst: Yeah. So maybe just starting on loan growth, it looks like average loan growth was pretty solid while some payoffs later in the quarter dragged down end-of-period balances. So I am curious if your expectations for loan growth have changed for the remainder of the year and, along with that, if you are seeing any noticeable change in demand within your energy portfolio.

Jason E. Estes: Thanks for the question. This is Jason. I think our goals for the year remain intact. We are still thinking moderate single-digit, but I would say that coming off of the third and fourth quarter we had last year, where we had really robust growth that exceeded expectations in both quarters, we are not at that pace, so I would say it has slightly slowed down, but we had really nice bookings in the first quarter. Just expect the same from us this year. I do think, like last year, we offset really sizable early payoffs throughout last year. That is a routine thing for us.

I think you will see more of that this year, in the second quarter in particular. We expect pretty sizable payoffs, and then we will just offset that with new loan bookings throughout the rest of the year. As it relates to the energy portfolio, I believe it is at a 10-year low. It was a little over 8% of the portfolio.

In the energy space, most of your well-capitalized professional organizations really are not changing a lot as it relates to rushing out to drill, so to speak, just because this spike in energy prices, I do not think anyone believes that there is any stability in oil prices when it goes up due to what is going on in the Middle East. For us, we are opportunistic when those energy loan opportunities come along, but it is not a huge driver for our company. We are active and we like the portfolio we have, but I would not expect the energy piece to be causing a lot of dynamic change one way or the other.

Analyst: Got it. That is super helpful color. Maybe shifting to the net interest margin. Some really nice expansion during the quarter. Wondering if you could provide some color on how you expect the net interest margin ex loan fees to trend assuming rates remain here through 2026.

Kelly J. Harris: Hey, Adam. This is Kelly. We did make some really good progress on the liability side, cost of funds, and that was related to our talented bankers continuing to bring in some quality core deposits. That said, we are modeling core NIM in that same range, 4.40% to 4.45% from a core NIM perspective. On the loan fee side of things, kind of reverting back to the normal of 28 to 35 basis points.

Analyst: Got it. And then lastly for me on capital management, given the strong profitability metrics, you should be building capital at pretty strong clips. I would be curious to hear your updated thoughts on M&A and just overall comfort level in letting capital levels build from here if the right partner does not come along.

Thomas L. Travis: Well, clearly, as we sit here today, I think we ended the quarter at 15.96% on risk-based capital.

Kelly J. Harris: We are probably over 16% today. Who knows?

Thomas L. Travis: The need for us to accumulate more capital is not on the top of our minds, and we are more into growing organically, and then on the M&A side. We have always been active in the M&A space, and for the right strategic opportunities, we are going to continue to pursue those, and we think that would be an efficient use of the capital.

Analyst: Got it. Thanks for taking my questions.

Operator: Our next question comes from Will Jones with KBW. Please go ahead.

Analyst: Yeah. Hey. Thanks. Good morning, guys. Jumping in for Wood Neblett Lay. I wanted to follow up on the margin discussion and specifically just talk about product cost. To Thomas L. Travis, you alluded that the market has all but pulled cuts out of the forecast. Maybe even we see up rates this year, but you guys see the margin more stable in that setting. Specifically with deposit costs, how would you characterize the competitive environment right now? In that scenario, is there a chance we actually see deposit costs trickle up toward the back half of the year just as competitive dynamics increase?

Thomas L. Travis: I do not think you are going to see that. I do not think it is that dynamic, so to speak. It is really kind of a two-part question you ask. I do not see a massive fluctuation or any meaningful fluctuation in deposit costs, and that is absent a rate increase, so I am assuming that there is no rate increase. As far as the margin goes related to that, we provide that in the deck on the stability and the lack of volatility in the margin, so we do not expect anything materially different.

Analyst: Okay. Got it. That is helpful. Could you call out some interest recoveries you saw this quarter? Would you be able to do that so we can think about a clean, more recurring margin run rate this quarter?

Kelly J. Harris: From a core NIM perspective, I think the nonaccrual interest net-up was a little under $1.1 million.

Analyst: And then on a fee perspective, was it closer to $1.07 million? And so, again, that reverts us back to that normalized—

Thomas L. Travis: Core NIM of 4.40% and then 28 to 30-plus basis points on the fee side.

Analyst: Got it. Okay. Very helpful there. I wanted to pivot to the credit discussion. I know there are puts and takes on credit each quarter, very little migration, generally speaking, and asset quality is strong, and you guys have really hit a zero provision for, call it, four out of five quarters. What is the messaging on the provision and reserve levels going forward? It feels like at some point that trend may have to give a little bit. I just wanted to get your views on the provision and where you see the credit story today.

Jason E. Estes: It is a little bit challenging of a question to answer when we really do not know what the economy is going to do for the rest of the year. What we are looking at today—I think our credit book is as clean as it has ever been. There was some migration during the quarter. When you see that nonaccrual interest recovery, those loans were paid in full, and so we had multiple credits transition out with full payoffs. We had a couple of downgrades during the quarter, but on the surface, it looks like the numbers were fairly neutral. I cannot overstate how active we are in managing the loan portfolio from a credit quality standpoint.

Let us say we grow the book again a pretty sizable amount and the economy stays the same—yes, we will have to provision a little bit more. If the loan growth is more timid—think low single digits—then we may not have to provision more. Let us see what is going on. There is quite a conflict going in the Middle East. Does that intrude into our daily lives here in a bigger way? So far, it has been a nonevent, especially within our credit book. We are going to stay true to our fundamentals and do the same things we have done for the last decade.

Thomas L. Travis: I would also add that we have quoted a payoff for this Friday for the only really material remaining NPA that we have. We have a high confidence factor that is going to happen. If that happens, the net effect would be NPAs of somewhere in that $4 million to $5 million range. When you look at $4 million or $5 million on our portfolio, I think that equates to about 25 bps or something like that. To echo Jason E. Estes’s comments, we certainly do not feel any pressure, absent the macro, to build more ACL, loan loss reserve.

Analyst: Yeah. Okay. I appreciate all that context, and I am asking you to look into a crystal ball a little bit there. One last one for me on capital. We have talked about buybacks not really being an efficient use for you guys through your lens. Could you remind us—is that still how you are viewing the buyback, and does it look any more attractive today than it did, say, 90 days ago? Would love your thoughts there.

Thomas L. Travis: Well, look, buybacks—we have often said this—that we are blessed with a very top 1% return on equity in our company. Because of that, we produce really good earnings per share, and we are not driven to reach for increasing EPS by doing share buybacks. We have been beneficiaries of strong earnings and growth. With that said, as we have said the last few quarters, we recognize that we are very, very capital heavy, especially for a company with no debt. At some point, the rubber meets the road. Generally speaking, our view is that share buybacks really do not add franchise value, and it is more of a short-term mechanism.

I am not suggesting that we would never do one. What I am saying is that it has not been a critical need for us in the past. Clearly, if there were ever a time in the future where we felt like buybacks would make sense, it would probably be driven by a good share repurchase price and no other alternatives.

Analyst: That is all fair enough. I appreciate all the color, guys. Thank you.

Operator: Our next question is from Jordan Gendt with Stephens. Please go ahead.

Jordan Gendt: Hey, good morning. Thanks for taking my question. I just had a follow-up on the migration on those downgrades during the quarter. Is there any additional detail you could give on the type of credits they were and the loan type and things like that?

Jason E. Estes: Yes. We had a large builder/developer that we downgraded during the quarter, and that was the one Thomas L. Travis referenced that we think will pay off this week. That is the only industry-specific thing that I could get into.

Jordan Gendt: Okay. Got it. And then just one more follow-up for me around the M&A discussion. Previously you have brought up the idea of doing an MOE. Is that still on the table, or would you be looking more toward downstream partners?

Thomas L. Travis: I think the answer is both. Strategic matters are inherently long term in nature, and we have not deviated from our thinking on that.

Jordan Gendt: Perfect. And then, actually, just one more. Could you touch on the fees and expense guidance going forward and maybe, you know, excluding the oil and gas impact?

Thomas L. Travis: Q2 on the expense side, we are projecting internally in that range of $9 million to $9.25 million. On the fee side—

Kelly J. Harris: Low end is $750 thousand, upwards of $850 thousand. Noninterest income.

Jordan Gendt: Perfect. That is it for me. Thanks for taking my questions.

Operator: Our next question comes from Nathan James Race with Piper Sandler. Please go ahead.

Nathan James Race: Hi. Yes, maybe just a follow-up for Kelly J. Harris, on updated expectations for the impact of fees and expenses from the oil and gas.

Kelly J. Harris: I think it will be continued expense offsetting the income, so not really material to the bottom line, but temporarily grossing up both sides of the P&L.

Thomas L. Travis: And, Nate, this is Thomas L. Travis. As we mentioned last quarter—and I think the last two quarters, perhaps three—we have accomplished our goal. As you recall, the goal was to reduce the hit that we had on an energy loan, and we are delighted with the results. We are, what are we, 20 months into it?

Kelly J. Harris: Yes, 20 months. Twenty months into it.

Thomas L. Travis: We have accomplished our goal. I think that for us to continue to hold that asset is just not something that we would plan to do. As a reminder, we have signaled to the market that we look at it as a cash recovery versus a GAAP income item. If we do exit that portfolio, then we may have a very slight adjustment on the GAAP basis of recognized income, but on a cash basis, we already have accomplished what we wanted to accomplish. I bring all that up to say that it is a really small item. It is a real outlier item.

We are delighted with what we have done and what we have accomplished, and I would expect that to be either gone altogether or diminished quite a bit over the next few months.

Nathan James Race: Got it. Thanks for taking my questions.

Operator: This concludes our question and answer session. I would like to turn the call back over to Thomas L. Travis for any closing remarks.

Thomas L. Travis: Again, thank you for joining the call. We are delighted to be where we are and continue to produce these results. We are mindful of the macro Middle Eastern situation. When the inflation starts fighting as predicted because of the higher oil prices, we are prepared as much as anybody can be for it. In the meantime, it is steady as she goes for Bank7 Corp.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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