Bank7 Corp (NASDAQ:BSVN) is a bank holding company headquartered in Oklahoma City, Oklahoma, with a long-standing history of serving the financial needs of business owners and entrepreneurs across its growing footprint. Through its wholly-owned subsidiary, Bank7, the company operates twelve full-service branches in Oklahoma, the Dallas/Fort Worth metropolitan area, and Kansas, catering to the diverse financial requirements of its clientele.
Company History
Established in 1957, Bank7 has a rich heritage of providing exceptional customer service and delivering tailored financial solutions to its community. The company was founded in 2003 as a bank holding company, with Bank7 as its wholly-owned subsidiary. In 2018, Bank7 Corp. went public, listing its shares on the NASDAQ exchange under the ticker symbol BSVN, which provided the company with additional capital to support its growth and expansion efforts. Over the decades, the bank has navigated various economic cycles, weathering challenges with a steadfast commitment to prudent risk management and an unwavering focus on the success of its clients.
Key Milestones
One of the key milestones for Bank7 was successfully navigating the economic downturn in the late 2000s. During this challenging period, the bank remained focused on maintaining strong asset quality and prudent risk management practices, which allowed it to weather the storm and emerge in a position of strength when the economy began to recover. Additionally, Bank7 faced the challenge of a heightened regulatory environment following the financial crisis. The company worked diligently to ensure compliance with all applicable rules and regulations while continuing to serve the needs of its business customers. The bank's strong relationships with regulators and commitment to sound banking practices were instrumental during this time.
Balance Sheet Strength
One of the hallmarks of Bank7's success is its ability to maintain a pristine balance sheet. As of the latest 10-Q filing on November 5, 2024, the company reported total assets of $1.74 billion, with a robust loan portfolio of $1.44 billion and a strong deposit base of $1.52 billion. The bank's non-performing assets ratio stood at a mere 0.44%, underscoring its commitment to credit quality and disciplined underwriting.
Financials
Bank7's financial performance has been nothing short of remarkable. For the nine months ended September 30, 2024, the company reported net income of $34.59 million, a substantial increase from the $27.21 million recorded in the same period of the previous year. This translates to earnings per share of $3.73, up from $2.97 in the prior-year period, a testament to the bank's ability to consistently deliver value to its shareholders.
In the most recent quarter (Q3 2024), Bank7 reported revenue of $33,488,000 and net income of $11,777,000. The company's operating cash flow (OCF) for the quarter stood at $13,362,000, while free cash flow (FCF) was $12,749,000. These figures demonstrate the bank's strong financial performance and ability to generate substantial cash flows.
Net Interest Margin Management
The company's unwavering focus on net interest margin (NIM) management has been a key driver of its financial success. Despite the challenges posed by the interest rate environment, Bank7 has maintained a stable NIM, reporting a figure of 5.10% for the nine months ended September 30, 2024, compared to 5.01% in the same period of 2023. This achievement is a direct result of the bank's disciplined approach to matching its balance sheet and its ability to effectively manage both loan and deposit pricing.
In the fourth quarter of 2024, Bank7 exceeded its own expectations for NIM performance, with the margin increasing despite some expectations for potential compression. However, the bank expects some short-term pressure on NIM due to loan paydowns and excess liquidity in Q4 2024, with the current real-time NIM around 4.50-4.55%.
Capital Management
In addition to its strong financial performance, Bank7 has also demonstrated a commitment to prudent capital management. As of September 30, 2024, the company's total capital ratio stood at 14.11%, well above the regulatory minimum, providing a solid foundation for future growth and strategic initiatives. Notably, the bank's dividend payout ratio of 20% is significantly lower than the industry average of 35%, further underscoring its focus on reinvesting in the business and compounding shareholder value.
Adaptability and Resilience
Despite the challenges posed by the evolving regulatory landscape and the broader economic environment, Bank7 has consistently proven its ability to adapt and thrive. The company's management team has a proven track record of navigating through periods of uncertainty, leveraging its deep understanding of the local markets and its strong relationships with its client base to identify and capitalize on opportunities.
Growth Strategy
Looking ahead, Bank7's growth strategy remains focused on organic expansion, with plans to selectively open additional branches in its target markets. Additionally, the company's strong capital position and liquid balance sheet position it well to pursue strategic acquisitions that align with its long-term objectives and enhance shareholder value.
For 2025, Bank7 expects loan growth to be muted in the first half of the year due to some expected continued paydowns in the energy and hospitality sectors. However, the bank is optimistic about being able to redeploy and grow the loan book, especially in the second half of the year.
Liquidity
Bank7 maintains a strong liquidity position, which is crucial for its ongoing operations and ability to meet customer demands. The company's liquid assets, including cash and cash equivalents, as well as its investment securities portfolio, provide a solid buffer against potential market disruptions or unexpected funding needs. This robust liquidity position also enables Bank7 to take advantage of growth opportunities as they arise, whether through organic expansion or strategic acquisitions.
As of September 30, 2024, Bank7 reported cash holdings of $186.72 million. The bank's current ratio and quick ratio both stood at 589.88, indicating a strong ability to meet short-term obligations. Furthermore, Bank7 had borrowing availability with the Federal Home Loan Bank (FHLB) of $192 million and access to approximately $367.7 million in liquidity with the Federal Reserve Bank as of September 30, 2024, providing additional financial flexibility.
Product Segments
Bank7 Corp operates through two main product segments:
Loans
The bank's loan portfolio is diversified across several categories, including construction development, 1-4 family real estate, commercial real estate - other, commercial and industrial, agricultural, and consumer loans. As of September 30, 2024, the bank's total gross loans stood at $1.44 billion, with commercial real estate - other loans making up the largest portion at 37.2% of the total. The bank's loan portfolio grew by 3.2% year-over-year, driven by increases across most loan categories.
The allowance for credit losses on the loan portfolio was $17.87 million as of September 30, 2024, down from $19.69 million at the end of 2023. The provision for credit losses decreased significantly from $5.64 million in the first nine months of 2023 to $0 in the same period of 2024, as the bank's asset quality improved. The ratio of nonperforming loans to total loans declined from 2.13% at the end of 2023 to 0.54% as of September 30, 2024.
Deposits
Bank7 Corp gathers deposits primarily through its 12 branch locations and online channels. Total deposits were $1.52 billion as of September 30, 2024, down 4.4% from the prior year period. The deposit base consists of noninterest-bearing demand deposits (21.2% of total), interest-bearing transaction deposits (54.4%), savings deposits (7.1%), and time deposits (17.3%). The bank's cost of total interest-bearing deposits increased by 62 basis points year-over-year to 4.10% as of September 30, 2024.
Future Outlook
While Bank7 has not provided explicit forward guidance numbers for 2025, the company's management has expressed confidence in their ability to maintain a healthy NIM and continued strong asset quality, despite the interest rate and economic uncertainty. On the expense front, Bank7 expects core operating expenses of around $8.2 million per quarter in 2025, excluding the declining oil and gas related expenses.
Conclusion
In conclusion, Bank7 Corp is a resilient community bank that has consistently delivered exceptional financial performance and shareholder returns. Its disciplined approach to balance sheet management, unwavering commitment to credit quality, and focus on tailored financial solutions for its clients have positioned the company as a standout in the regional banking landscape. As Bank7 continues to navigate the evolving industry landscape, investors can take comfort in the company's proven track record of success and its promising prospects for the future.