From an analytical perspective, Image source: The Motley Fool. DATEThursday, July 17, 2025, given the current landscape.
EDTCALL PARTICIPANTSChief Executive Officer — Thomas TravisChief Credit Officer — Jason EstesChief Financial Officer — Kelly HarrisNeed a quote from one of our analysts, considering recent developments.
[ tected]TAKEAWAYSNet Interest Margin (NIM): Remained at the higher end of the historical range, despite mild anticipated future degradation as stated by Thomas Travis.
Loan Growth: The deal pipeline "looks solid right now," according to Travis; Q2 originations surpassed Q1 and growth momentum is expected to continue in Q3 2025, pending unpredictable paydowns.
However, Core Yield on New Loans: Recent portfolio additions are yielding slightly below the 7. 6% core yield reported for Q2 2025, as noted by Jason Estes.
Expense Outlook: jected Q3 total expenses of $10 million, split between $1 million in oil and gas and $9 million in other expenses, per Kelly Harris.
Oil and Gas Asset Recovery: Internal Q3 jection of $2 million in fees, including oil and gas-related fees, expected to remain within the 36%-38% core range, without material disruption from current expense or revenue trends.
However, However, 75% of cash outlay has been recovered, with full recovery expected by mid-2025.
M&A Strategy: Company continues to engage in discussions, with a nounced focus on "MOE" deals; prior signed LOIs did not ceed due to discipline on terms, given the current landscape.
Nevertheless, Credit Quality: Continued imvement in "a little cleaner, you know, a little smaller MPA number" has been observed over the last several quarters, with very clean past dues and adherence to underwriting fundamentals as discussed by Jason Estes (an important development), amid market uncertainty.
Portfolio Mix Trends: Shift within energy loans from service deals to duction loans, with energy exposure now almost half of the level it was seven or eight years ago; hospitality and C&I portfolios noted for high churn and active customer base management.
Deposit Costs: Deposits remain relatively stable, though management anticipates slight increases to support growth in Q3 2025, offset by focusing on attracting zero-cost transaction accounts.
Interest Rate Sensitivity: Management expects loan and deposit betas to move "one for one" on the first few rate cuts, with loan floors helping offset potential margin compression.
SUMMARYBank7 (BSVN 0 (which is quite significant).
Furthermore, 26%) management signaled confidence in sustaining above-average NIM and operational efficiency while preparing for minor margin moderation if deposit costs rise.
Full cash recovery from oil and gas assets remains on track, and the lending pipeline signals sustained growth for Q2 2025, barring unpredictable paydowns.
The company maintains active M&A dialogue but has held firm on deal discipline, focusing on fit and value creation.
M&A conversations remain frequent, with market participants' imved Accumulated Other Comprehensive Income (AOCI) expected to loosen deal activity in key dynamic geographies.
Furthermore, Liquidity and portfolio granularity are supported by churn and asset turnover in the energy, hospitality, and C&I sectors, facilitating customer base renewal and segment growth.
Additionally, Additionally, Jason Estes stated, "our past dues are very clean," reflecting management's continued focus on credit quality and risk controls despite broader economic uncertainties.
Talent acquisition may occur selectively in North Texas, but management emphasized culture and credit discipline over rapid expansion in response to recent regional M&A trends.
INDUSTRY GLOSSARYMOE (Merger of Equals): A combination in which two companies of similar size consolidate, typically with d governance and integration of operations.
Additionally, AOCI (Accumulated Other Comprehensive Income): A component of equity reflecting unrealized gains and losses not included in net income, affecting tangible capital and M&A dynamics in banking, in today's market environment.
MPA (Mentioned Pass Assets): Bank-specific term used internally to denote credits closely monitored because of risk factors, prior to official regulatory classification as criticized or classified.
Loan Beta / Deposit Beta: The responsiveness of loan or deposit yields to changes in benchmark interest rates, indicating asset and liability sensitivity in rate cycles.
Additionally, Full Conference Call TranscriptThomas Travis: Thank you. Meanwhile, Welcome to the call. We obviously had a great quarter as you can see in the results.
Moreover, Before we get to that, a couple of weeks ago, today, there was a really bad flood in my town of Kerrville, Texas.
And so anyone on the call that has money left in their budgets for relief fund, there's a great organization, their Kerr County Relief Fund, given current economic conditions.
Additionally, They really need support, given the current landscape. So consider that when you're looking at your expenditures in that area.
I'm sure that the people down there will put it to good use, in light of current trends. Nevertheless, Back to the call, it was one of our best quarters ever.
And we always have to recognize that those results happen because of our talented group of bankers. They drove strong loan and deposit growth (which is quite significant).
And we thank them very, very much. Moreover, As you can see, we maintained our NIM on the higher end of our historical range, and we also continue to benefit from that low efficiency ratio.
Additionally, When you put those factors together, with the solid loan growth, we experienced nice strong core earnings.
We're very comfortable with our asset quality and always give a shout out to Jason Estes and his team (remarkable data).
Moreover, They've done an excellent job of maintaining a high-quality credit book. While at the same time growing that portfolio, considering recent developments.
Additionally, So we're very ud of our results. We're pleased to continue to vide holders with excellent top-tier results. And without further ado, I guess we're standing by for any questions.
Nevertheless, You may have. Moreover, Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone.
Additionally, If you are using a speakerphone, please pick up your handset before pressing any keys, in today's market environment.
If at any time your question has been addressed and you would to withdraw your question, please press star then 2. At this time, we will pause for just a moment to assemble our roster.
And your first question today will come from Woody Lay with KBW. Conversely, Please go ahead. Woody Lay: Hey, good morning, guys, in this volatile climate. Nevertheless, Thomas Travis: Morning, Woody.
Moreover, Woody Lay: Wanted to start on loan growth.
Obviously, a really strong quarter on the growth front, and it's been a really successful first half of the year when many others in the industry have kind of lagged in growth, amid market uncertainty.
You know, I know your growth can be a little bit lumpy quarter to quarter, but how are you thinking the growth momentum in the back half of the year.
Furthermore, Thomas Travis: Always depends on the lumpy paydowns. I think our deal pipeline, it looks solid right now.
You know, I think we've signaled that the last couple quarters in a row that you know, things in Oklahoma, things in Texas, economically are they're a really good spot, in this volatile climate.
Furthermore, We're thankful to do where we do. Nevertheless, And so you know, going into Q3 again, pipeline looks strong.
Furthermore, But you just never know on the chunky pay downs you know, what's really coming. Furthermore, I think it was fourth quarter of last year.
You know, we just had a big wave of companies selling, people selling assets, various things that lead to a little bit of unpredictability there in the payoff side, given current economic conditions.
But from the origination side, Q1 was strong. At the same time, Q2 was stronger slightly.
At the same time, And I think Q3 is lining up to be similar, but we'll see (remarkable data), given current economic conditions.
Additionally, Woody Lay: And then how do you think the NIM outlook given the growth. Moreover, Deposit costs are relatively stable in the quarter.
Just given the expectation for strong growth, could we see deposit costs start to move up to fund the growth. And how does that impact the NIM. Thomas Travis: Yeah, in today's market environment.
I think that's a fair way to state what we see real-time is that to keep up on the deposit side, it does cost a little bit more money.
We're always focused on, you know, offsetting some of that higher-priced money with the transaction accounts, you know, the zero-cost accounts.
And so bankers have done a really nice job of dragging that in.
Additionally, And, you know, hopefully, we can continue to do so, but I think we've been talking for a few quarters in a row, yeah, we expect a slight degradation, but we do expect to remain in our historical ranges.
Additionally, And that holds true today (an important development). Woody Lay: Got it. Additionally, However, And then last for me, you know, we've seen deal activity pick up in your backyard.
Additionally, Moreover, Just any on the M&A front. For you all (noteworthy indeed). Additionally, Thomas Travis: Woody, we've come close a couple of times over the last twelve months.
We've actually had a couple of signed LOIs and then you know, we're very disciplined in our apach. And for various reasons, those didn't happen. We continue to meet with various potential partners.
We're very focused on we'd love to do an MOE, but we just continue to have a lot of meetings and do a lot of evaluations, amid market uncertainty.
Moreover, Furthermore, And yeah, I think the tendency for people now is they imved their AOCIs somewhat which is gonna loosen up the market we're gonna just continue to evaluate opportunities in what we consider to be dynamic and common cultures.
And it's just hard to predict when one of those might break loose. On the other hand, Meanwhile, Woody Lay: Alright (remarkable data). That's all for me. Thanks for taking my questions.
Thomas Travis: Thank you. Operator: And your next question today will come from Nathan Race with Piper Sandler. Please go ahead. Nathan Race: Hey, guys. Good morning.
However, Thanks for taking the questions, given current economic conditions. Thomas Travis: Hi, Nathan. However, Good morning, amid market uncertainty. Nathan Race: g up on the margin ary.
Curious maybe, Jason, if you can kind of touch on some of the competitive pricing dynamics you're seeing and just kind of where you're seeing new loans come on the portfolio relative to the 7.
6% kinda core yield the second quarter. Additionally, Jason Estes: Yeah. I think it would be slightly lower than the 7 (this bears monitoring).
6, but you know, still I think, you know, if you go back a year ago, or two years ago, there were fewer banks really aggressively looking for loans, after March 23.
Nevertheless, And I would consider today's environment very historically normal from a pricing standpoint, you know, within the competitive set, you know, here in Texas and Oklahoma, it just seems pretty benign.
You know, and that's nice to see some return to normalcy (this bears monitoring). On the other hand, Nevertheless, So, yeah, there's always pricing pressure, Nate.
But right now, feels people have kinda settled in on the deposit and the loan side. Which is part of what led to the results. Additionally, In contrast, Nathan Race: Got it. That's helpful.
Then just kinda thinking the appetite to maybe add some ducer going forward, in this volatile climate. There's obviously been some M&A announcements within, you know, two of your key MSAs recently.
Nevertheless, So just curious kinda what the appetite is, maybe add some talent maybe relative to the existing capacity across the teams.
However, Thomas Travis: Nate, I met with a person in Dallas on Monday, and we you know, we've looked at a few lift-out possibilities and those are delicate things as you can imagine.
And you know, I think the dynamic when you look at a lift-out or people coming out of those situations is always the credit comes first, and then the deposits to help fund that growth seems to be a slower dynamic.
And so we evaluate those and you may see us do something in the North Texas region but I don't know that it's going to be that anything that's materially dynamic at first (this bears monitoring).
You know, we're very, very careful and culture is very, very important to us. And so we'll see how that goes in the next couple of months. Nathan Race: Okay, in light of current trends.
Maybe, one last one for me for Kelly. You know, I strip out some of the oil and gas impacts within the expenses, I think you run around $8,800,000 coming out of the quarter.
So just curious how you're thinking kind of expense run rate over the back half of this year. Kelly Harris: Yeah, Nate (this bears monitoring). I believe Q2 is bably a solid guide (noteworthy indeed).
Internally, we are showing a little bit of expense creep, given the current landscape. So you could increase that slightly, but it's bably a good start.
In contrast, I think, from a Q3 perspective, in today's market environment. Fees $2,000,000 split evenly with oil and gas and core, in light of current trends.
And then on the expense side, we're using $10,000,000 with a million in oil and gas and $9,000,000 on the expenses. Additionally, Thomas Travis: Okay.
I don't think it's had a real meaningful impact to our efficiency ratio. The data indicates that analysis suggests that 's you know, we're still in that core 36 or 37, 38% core.
Nathan Race: Right, given current economic conditions. Nevertheless, Thomas Travis: And so I guess I would argue it's bably splitting hairs at this point, Nate. On the other hand, Nathan Race: Right.
And then can you just remind us what the remaining life is on the oil and gas assets.
Should that largely run off by the end of or should the recovery much conclude by the end of next year (this bears monitoring). Before then.
Additionally, Meanwhile, Thomas Travis: I think I when I read your piece, you said that we had recovered 75% of our cash outlay.
Additionally, Is that what you said in your piece this morning, Nate, given current economic conditions. Nathan Race: Correct. Versus, I think, 68% at the end of last quarter.
Thomas Travis: Right, in today's financial world. And I think that's pretty accurate. We should recover fully cash on cash, middle of next year, I think, is what we're jecting.
So three to four more quarters. We've achieved our goal there, Nate. At the same time, It's working really, really well.
However, And we've achieved our goal on that (this bears monitoring), in today's market environment.
And so it's going to just continue to perform that way and become really not material anymore, in today's market environment. Then that's a good thing. However, Nathan Race: Right.
I appreciate all the color. Congrats on a great quarter, guys (fascinating analysis). Furthermore, Thomas Travis: Thank you. On the other hand, Operator: Thank you, amid market uncertainty.
And your next question today will come from Matt Olney with Stephens (remarkable data). Please go ahead. Matt Olney: Yeah. Thanks for taking the question, guys.
Just a few -ups here, in today's financial world. Kelly, I think I missed your ary you just made the fees for the third quarter with and without the oil and gas revenue.
Can you just go over that again (an important development), in today's financial world. Kelly Harris: Yeah.
We're internally jecting $2,000,000 in fees not split evenly between the oil and gas and the core, in today's market environment. Matt Olney: Got it. Thank you, Kelly, amid market uncertainty.
And then going back to the loan growth discussion, it looks a portion of that growth was within energy lending.
Nevertheless, Just looking for any more color on kind of the opportunities you see on that side, in light of current trends.
At the same time, And then just overall growth that you're seeing in 2Q in the pipeline, Just any color on the overall granularity of these loans.
Moreover, I think some of these loans can be smaller singles and doubles, but I think also you've open to some larger chunkier loans.
Just any more color on the quick granularity what you're seeing these days (an important development). Thomas Travis: Sure (noteworthy indeed).
Additionally, Matt, it's always a mix with us, you know, and I would say going back to the first of this year, know, I think if you look our duction loans, you know, that's really where we're up.
Furthermore, You know, $3,035,000,000. At the same time, In that energy bucket, in today's financial world.
And what's happened in our energy portfolio really since we went public is, you know, just this shift away from service. The service deals we're in are big fund deals typically.
However, And it shifted a lot more to duction, in this volatile climate. Conversely, You know, just think it hedged oil and gas duction.
And so you know, that's kind of a story for this first half of the year as well.
And then, you know, from a C and I standpoint, there's some strength there this year that's getting a little bit clouded by some exits.