Bank7 (BSVN) Q3 FY26 earnings call: guidance and Q&A

Given significant deposit growth and the upcoming Century merger bringing cheap funding, what is the plan for excess liquidity and does it indicate a strong loan pipeline?

The company chose to be conservative with higher deposit balances due to known loan fundings and the pending merger. Excess liquidity will be deployed methodically, supported by a strong loan pipeline and the merger's closing.

“Yes, during the quarter, you know, we experienced, as Thomas L. Travis mentioned, substantial loan paydown. We chose to be conservative from an excess liquidity, higher deposit balance because of the known loan fundings as well as the pending merger and some of that cash that goes out related to that. And so that's kind of the game plan going forward. You know, strong pipeline as well as closing this merger.”

asked by Wood Lay · answered by Kelly Harris

Can you provide NIM guidance pro forma with Century, considering a potential Q4 rate hike?

The Century deal is viewed as neutral to NIM. The company plans to sell Century's bonds to generate cash, which will be methodically deployed. Loan beta was 60% and deposit beta 52% in Q3. For Q4, loan beta is projected at 65-70% with a rate hike, and deposit beta is expected to be less.

“Yes, I think from a deal perspective, we currently view the deal as neutral to our NIM. And we intend to sell some to all of Century's bonds. And depending on when those sales occur, it'll generate a meaningful amount of cash, and we will be methodical about how we deploy that cash. In some scenarios, it'll be more accretive to our margin. In other scenarios, it'll be more neutral to our margin. And from a Bank7 legacy perspective, the loan beta in the quarter was close to 60%. The deposit beta was around 52%. I think, you know, forward-looking, assuming a rate hike in Q4, we anticipate that loan beta being in the 65% to 70% range, and the deposit beta a little bit harder to project, but we assume less.”

asked by Wood Lay · answered by Kelly Harris

Are there any anticipated runoffs in Century's loan portfolio, and how will Century impact Bank7's historical mid-single to low double-digit loan growth trajectory?

There's no day-one plan for runoffs. The company expects to maintain its typical mid-single to low double-digit growth. Century's loan participations will be exited as they mature, providing additional funding. The strong economies and banking team continue to drive deal flow.

“I don't think there's any day 1 plan to specifically run off loan balances. I think you'll hopefully see a steady, similar to what we typically do, and as you just referenced, a 5% mid-single-digit to low double-digit company-wide growth, whichever markets are able to contribute to that consistently. And remember, we still run into these chunky periods of payoffs. And you can't see it in the numbers, but our payoffs this quarter were over $130 million.”

asked by Nathan Race · answered by Unknown Speaker

Century's overhead costs are around $12 million per quarter. What is the timing for realizing the 30% cost saves, especially around systems conversion?

The efficiency ratio will initially increase, but the company is confident it can operate non-interest expense at or below current levels. 75-80% of cost savings are expected immediately in Q1 post-merger, with the remainder by the end of Q2. The system conversion is in July, which will finalize some efficiencies.

“Yes, I mean, I like to look at our previous deal with Cornerstone. I mean, you saw efficiency ratio creep up a couple hundred basis points initially. And then over time, we feel very confident that we can operate non-interest expense at or below where we currently operate ours. I think from the timing of systems conversions, is that more of a Q3?”

asked by Nathan Race · answered by Kelly Harris

Given Bank7's historical mid-90s loan-to-deposit ratio, where do you expect it to go with Century, and will it return to higher levels?

The loan-to-deposit ratio is dynamic, influenced by liquidity, capital, and debt. While it won't operate much below 80%, it may sneak up to 95% depending on circumstances, always ensuring tremendous overnight funding sources for liquidity management.

“I would just say that, similar to our NIM, you probably won't see us operate much below 80% in our in our world. There will be times, depending on all those various factors that I just mentioned, that we may sneak up to that 95% level, um, and, and again, that would just depend on the circumstances as far as capital and liquidity and markets and all the things that we see.”

asked by Jordan Ghent · answered by Thomas Travis