Image source: The Motley Fool.
Date
Jan. 15, 2026 at 10 a.m. ET
Call participants
- Chief Executive Officer — Thomas L. Travis
- President — Jason E. Estes
- Chief Financial Officer — Kelly J. Harris
Need a quote from a Motley Fool analyst? Email [email protected]
Takeaways
- Loan growth -- Management reported outstanding loan growth, attributing results to high origination volumes and a lighter pace of payoffs in the fiscal fourth quarter ended Dec. 31, 2025, compared to earlier in the year.
- Net interest margin (NIM) -- The company acknowledged slight NIM compression, noting "we were coming off of almost an all-time high," with the historical range cited as $4.35 at the low end and $4.45 as a current reference point; further declines toward historical lows are possible if deeper rate cuts occur.
- Deposit mix and costs -- Current cost of funds is at a $2.40 run rate, with recent inflows of lower-cost deposits helping to offset funding pressures; management said, "Our current cost of funds dipped from [the fiscal fourth quarter]."
- Fee income -- Fiscal fourth-quarter core fee income was $1 million, with an additional $1 million from oil and gas sources, totaling $2 million for the period.
- Expenses -- Core expense for the fiscal fourth quarter was $9.1 million, with an incremental $1 million from oil and gas.
- Organic deposit growth -- The company experienced solid organic deposit growth, which management called "very solid" during prepared remarks.
- Capital accumulation and buyback stance -- Management explained that capital ratios are rising due to strong earnings and stated, "resist the urge to, you know, do any meaningful share buybacks so that we can pile up capital."
- M&A environment -- High pricing expectations for quality deposit franchises and reduced AOCI overhang remain obstacles to acquisitions, with management citing two recently abandoned opportunities after due diligence.
- Asset quality -- Management stated asset quality is "probably better than it's ever been," reinforcing underwriter discipline as nonnegotiable in both organic and acquisitive growth.
- Non-interest-bearing deposits -- The percentage of non-interest-bearing deposits is declining, attributed by management to customer sensitivity to higher rates across account types following recent cycles.
- Oil and gas contribution -- Oil and gas revenue impact is projected to decline gradually over three to four years; management characterized future impact as "a rounding error" and immaterial to overall financials.
Summary
Bank7 (BSVN +0.28%) executives emphasized that fiscal fourth-quarter results reflect continued success in loan origination, disciplined underwriting, and core expense control. Management described accumulating capital as a "high-class problem," citing rising returns and a preference for boosting optionality over immediate share buybacks. Executives directly addressed persistent NIM compression, referencing interest rate floors on loans and the mitigating effect of repricing time deposits. Strategies around merger and acquisition targets remain constrained by elevated seller expectations and market realities, leading to cautious due diligence and several recently declined opportunities.
- Management stated, "we're going to stay very, very disciplined" on both acquisition pricing and underwriting standards as they evaluate opportunities.
- The company acknowledged customer awareness of interest rate movements as a contributing factor to declining non-interest-bearing deposit balances.
- Planned expense management, combined with existing oil and gas revenue run-off, could have a negligible impact on near-term GAAP net income, although management described the oil and gas item as "a nothing burger" for future periods.
- Comments indicate further NIM pressure is expected if additional Federal Reserve rate cuts occur, despite loan floors and repricing deposits providing near-term support.
Industry glossary
- AOCI: Accumulated Other Comprehensive Income; unrealized gains or losses not yet reflected in net income, often impacting regulatory capital in banking.
- MOE: Merger of Equals; a transaction structure in which two firms of similar size combine, typically with shared governance and economic benefit.
- Deposit beta: The ratio of change in a bank’s deposit rates versus the change in a relevant benchmark interest rate, indicating deposit sensitivity to rate moves.
Full Conference Call Transcript
Thomas L. Travis: Thank you. Good morning to everyone. We are delighted with our 2025 results. It seems like a broken record every quarter, but we have to acknowledge the great work done by our bankers and especially this year. The outstanding loan growth, the strong loan fee income, and very solid organic deposit growth is not easy to do. And we are very fortunate to have such a dynamic and professional group of bankers, people that have worked together for a very, very long time. And so always, always appreciate what they do and especially this year.
And at the same time, while they were producing that tremendous growth in the loan fee income, they did it without sacrificing underwriting, and that enables us to really enjoy asset quality that is probably better than it's ever been. And it's also why we felt comfortable not increasing the provision more than we did this year or last year even though we made such tremendous strides in the growth. So just, a real congratulations and shout out to our great team. And at the same time, our operations, IT, finance functions, continue to evolve, and they make our lives easy.
It's something we don't take for granted, so we want to thank and acknowledge the leadership in those functions as well. So we're well positioned to continue performing at a very high level and we're here to answer any questions anyone might have. Thank you.
Operator: Thank you. We will now begin the question and answer session. To withdraw your question, please press star then 2. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. Once again, ladies and gentlemen, that's star then 1 if you have a question. Today's first question comes from Wood Neblett Lay at KBW.
Wood Neblett Lay: Hey, good morning, guys. Morning, Thomas.
Thomas L. Travis: Wanted to start on loan growth, another really strong quarter of growth. I know in the past, you kind of talked about, you know, sometimes growth is lumpy quarter over quarter. But we never really saw the downside in 2025. You know, has payoff activity been lighter than you expected, and how should we think about forward expectations for growth?
Thomas L. Travis: Woody, this is Tom. Before Jason jumps in, I just want to tell you, I love the way you start your piece when you send it out. You know, I opened yours early this morning, and you start out with rock. And I like that. So thank you. Jason will take the question.
Jason E. Estes: Hey, Woody. You know, it's interesting you bring up the payoffs because we study this every quarter. You know, we try and look at originations and payoff volumes. And, you know, not to sound like a broken record, but we're doing a lot of business in Oklahoma and Texas. And those economies, we're just thriving in this part of the country. Okay? And so we had, I would call it, accelerated payoffs throughout the year. There was just so much demand and loan opportunities. And, look, part of it's geography, and part of it is our team. You know?
And so we're over here now with some more scale, and I'll just liken it to the snowball rolling down the hill. Right? And so now, you know, each year when we start, you know, January, and you just know your payoff pace is going to be a lot. Okay? Like, I think we'll have $25 million a month of payoffs this year. So to grow, you know, we need $3.545 billion a month of new funding. And so last year was no exception. I will say that the fourth quarter payoffs were lighter than they'd been in the first, second, and third. You're gonna see some of that come in the first quarter.
Wood Neblett Lay: Yeah. That's helpful color. And then, I mean, I guess, just a follow-up there. Knock on wood, but it feels like the momentum in your local market is continuing to be strong in 2026. I mean, can growth, you know, look like 2025 again in the year ahead? Or would that be a little bit of a stretch?
Jason E. Estes: That sounds like a stretch to me. Where we're seeing the most pressure is pricing-wise, and we are not going to lose our discipline, Woody. So we are, you know, weekly meeting with clients, talking to banks, and we're trying to make sure, you know, we're within market and we are doing our best job of maximizing these loan dollars because we do think that we could grow loans at a similar pace, but you have to fund that, and you have to maintain those margins. And so we're balancing those items.
Wood Neblett Lay: Yeah. And then last year, I just wanted to shift over to the net interest margin. And, you know, got some compression this quarter, which I don't think was a huge surprise given some of the commentary you gave last earnings call. But can you talk about how you expect the margin to trend if we get a couple additional cuts from here and remind us sort of the historical ranges you would expect on the NIM?
Thomas L. Travis: Before Kelly jumps into that, Woody, I would just a quick reminder that the slight compression that we experienced was we were coming off of almost an all-time high. And we tried to signal that last year. We knew we were running at a higher margin still within our historicals, but really way up there in the range. And so we need to be mindful of that. But go ahead, Kelly.
Kelly J. Harris: And, Woody, we had a couple of rate cuts during the quarter, and you can tell in the slides on the deck that we've kind of reached an inflection point where we had a number of loans reach their floors. And so I think if you, on a forward-looking basis, using that with the loan growth, I mean, we feel really good about our current NIM. You know, could it go down slightly? Potentially? We do have some time deposits that are repricing during the quarter that would help offset some of that. And so I think, you know, going within that tight band, $4.45 is a great starting point for us.
Thomas L. Travis: What was our historical low? Was it around $4.15 or $4.20, Kelly?
Kelly J. Harris: $4.35.
Thomas L. Travis: Yeah. Well, listen. If we get 75 basis points of cuts, and we put a lot of material in this deck. I mean, specifically on page 10 is a good illustration. But, you know, we've always said the more the deeper the cuts are, the more challenging it becomes. And our loan floors really help us, but then the depositors at the same time are insisting on higher rates. And so I think we've said in the past, in the recent past, that, you know, it wouldn't surprise us to dip down and touch our historical lows, which is below the number that Kelly said. But, you know, it wouldn't surprise us if it bled down a little further.
Wood Neblett Lay: Got it. Alright. Well, that's all for me. I appreciate all the color.
Operator: Thank you. And our next question today comes from Nathan James Race at Piper Sandler.
Nathan James Race: Hey, Dave. Good morning. Just thinking about the direction of deposit cost going forward. I appreciate the comments earlier around having some opportunities to reduce CD pricing going forward. But wondering if you could speak to the non-maturity side of the deposit equation in terms of, you know, how much additional leverage you have to reduce those deposit costs and what that implies for deposit competition these days.
Kelly J. Harris: Hey, Dave. This is Kelly. Our current cost of funds dipped from Q4. I think the current run rate is $2.40. I think that's going to be really driven off of balance sheet growth. Incoming new deposits. We did pick up a couple of nice deposits, you know, post year-end. Helped reduce that cost of funds. And so I think it's, you know, it ebbs and flows. I don't know if there's really a straight answer to give you.
Nathan James Race: Okay. That's helpful. And maybe for Jason, if you could maybe just speak to some of the deposit competition you're seeing out there. Obviously, you had really strong loan growth in the quarter, so you had to fund that with deposits. But, you know, just curious what you're seeing across the ground.
Jason E. Estes: Yeah. I think it's fair to say the last couple of cuts didn't really flow into deposit betas as strongly as maybe the first couple. And that's not, I don't think, unique to Bank7 Corp. I think that's just kind of across the industry. If you go out to the Internet and just look at what's available, you know, money market, CDs, it's just, you know, clearly you're hitting a point where the depositors are keenly aware now. Right? Interest rates are top of mind. And it was a little bit easier, you know, twelve months ago, eighteen months ago. But as these cuts have taken place, people are just paying attention to it. You know?
And so are we, and we're trying to make sure we're getting our share of market share. So I think, you know, to your point or to your question of what do we see in real time? And it's, I think it's tough, you know, on the deposit side. Those last two cuts didn't really translate into typical betas.
Nathan James Race: Understood. That's really helpful. And then maybe one last question for Tom. Maybe just zooming out a bit. I think 2025 was a tough year. If you just look at the performance of the stock relative to peers. So just curious, you know, you guys are still building capital at nice clips despite even the strong growth you had in the fourth quarter and throughout last year. So just curious if you're thinking more about buybacks to support the stock these days or just more broadly how you're thinking about excess capital?
Thomas L. Travis: Regarding the stock price, we've always, everybody knows on this call and around the world, markets are gonna do what the markets are gonna do, and we really can't control that. Obviously, we can control it a little bit if we wanted to go and repurchase shares, which is not our objective. And we understand it's one of the levers in addition to others, but, you know, we're just focused on producing top-tier results and over time, the market will understand that and the stock price will respond. And I think the proof is in the pudding.
I don't know what page it's on the deck, but if you look at our total shareholder return compared to the major exchange-traded banks or if you want to compare it to the KBW index, we are just top, top, top tier. So there's gonna be quarters and times where we don't look favorable compared to other banks, but that's okay because over time, we're gonna outperform them and the market will understand that.
Nathan James Race: Got it. I appreciate all the color. Thanks, guys.
Operator: Thank you. And as a reminder, if you'd like to ask a question, please press star then 1. Today's next question comes from Jordan Gendt with Stephens.
Jordan Gendt: I just had a question kind of following up on that capital. And regarding M&A. In the past, you guys have mentioned sellers having high pricing valuation expectations. Along with, you know, an AOCI overhang. Are those still some of the biggest headwinds you guys are seeing in getting a deal done, or are you guys seeing more sellers come to the table and willing to negotiate?
Thomas L. Travis: I think the AOCI has slightly come down. Many of the people that were burdened with that, I think they were using hope as a strategy, and they believed, you know, some of the wishful thinking that the rates were gonna come down and reality is really here. And then as it relates to other factors, there is still, if you run across a quality deposit franchise, it's going to be very difficult to buy that kind of operation. I don't want to use the word bargain, but it's just increasingly difficult. And the market is a mature market. It's an efficient market, and it recognizes that value.
So I think all of those things are gonna always be in play. And, you know, we're scouring the countryside. We had a couple of opportunities over the last year in Oklahoma. You know, one, it didn't quite make it at the end. One, we were ready to go, but we didn't, we pulled away after doing our diligence. We had an out-of-market good opportunity that we also pulled away from. And so, you know, there's, it's never the same. But to your question about being able to make things work, we're going to stay very, very disciplined. And, obviously, we're not even gonna, when it comes to asset quality, that's nonnegotiable. Right?
And so, but as it relates to price, the higher quality, the deposit franchise, the long-term deposit relationships that some banks have, that's gonna force you into a higher multiple and there's just nothing you can do about it. So while we're out, you know, talking to people, it's a high-class problem, but the capital is just gonna continue to pile up. And, you know, the good news about that is that it gives you more optionality when you finally do find something.
And so I think for us, it's going to be stay disciplined, resist the urge to, you know, do any meaningful share buybacks so that we can pile up capital and just be prepared for a nice opportunity. And we've mentioned that, you know, we're not opposed to an MOE. And so it's a really good position to be in, but we also understand that we have to fade the heat because the capital's piling up so rapidly that the return on equity has come down.
But the last thing I would say is that return on equity may be coming down, but I don't know what the percentage of banks is, but I bet it's greater than 90% would love to have their capital ratio returns go down to 18% or whatever it is. So why I call it a high-class problem.
Jordan Gendt: Perfect. Thank you for that. And then, kind of one follow-up question on the deposits, particularly the non-interest bearing. It looks like it kind of went down a little bit this quarter, and could you kind of maybe give a little color on that? And then maybe remind us of any seasonality that we should be expecting with the deposit side in 1Q?
Jason E. Estes: Yeah. I think what you're seeing, you know, as those non-interest bearing accounts, that percentage bleeds down. Go back to my comments a minute ago about top-of-mind awareness. You know, when rates were zero, nobody cared if it was a money market account, a savings account, or a checking account because it just didn't matter. And that's changed, you know, with the last rate cycle, and it's just a thing that people are aware of. And we accept that. And we're responding, you know, to what the customer wants in that regard.
Thomas L. Travis: I don't think that we're not heavy in public funds. Those are seasonal with regard to seasonality. Those balances do fluctuate. But other than that, I don't think we have much seasonality in the portfolio.
Jordan Gendt: Okay. Perfect. And then just one more question on kind of the expense and fee guide. If you guys could give any additional commentary on that, on kind of what you're seeing. And then maybe just remind us of how many more quarters we can expect to see impact from the oil and gas revenues?
Thomas L. Travis: As it relates to expense, it's nice and comforting that, you know, two of our three primary coverage people, I read their pieces this morning, and it's nice to see you recognize how good we are at controlling expenses. That's not gonna change. As it relates to the oil and gas, yeah, with all due respect, we think it's a nothing burger. It's a, I don't know if I want to call it a rounding error, but, you know, for the next, unless we were to sell the asset, for the next three or four years, it's just gonna be a gradual decline of any meaningful dollars to be harvested revenue.
And so, you know, and as a reminder, we didn't really agree with our accountants a year and a half ago when they were using, you know, their formulas to recognize the revenue of the oil and gas. And we warned people that from a GAAP perspective that it, we felt like they were front-end loading it too much, and I still think that exists. And so, you know, from a strategic perspective, we've accomplished our goal. We continue to harvest, and we're happy with it. But from a GAAP accounting perspective, it's gonna continue to be a very insignificant portion of the bank. But we do recognize that we might have some fluctuations.
And so from a GAAP perspective, it could negatively impact net income in a small, immaterial way.
Kelly J. Harris: And from a dollar perspective, using Q4 as a fully solid guide, I think it was $9.1 million in core expense, a million in oil and gas, and then similar on the fee income side, a million split a million on the oil and gas, and a million core fee income, $2 million total.
Jordan Gendt: Okay. Very, very similar to Q4. Perfect. Thank you for that answer. And that's it for me.
Operator: Thank you. That concludes the question and answer session. I'd like to turn the conference back over to the company for any closing remarks.
Thomas L. Travis: Thank you, everyone, for your coverage. And any shareholders that are on the line. We're excited about 2026 and our company, and we appreciate the partnership. Thank you.
Operator: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.