Bank7 (NASDAQ:BSVN) Corp reported its third-quarter earnings, acknowledging a challenging credit event that negatively affected the quarter's results, but expressing confidence in the company's fundamentals. The company also provided an outlook for the coming quarters, including expectations for loan and deposit growth, net interest margin (NIM), and expense growth.
Key takeaways from the call include:
- Bank7 Corp experienced a significant credit event that is currently in litigation, which negatively impacted the Q3 results. The borrower is in bankruptcy, and the company expects to increase its allowance for credit losses in the fourth quarter.
- Despite the credit event, the company remains optimistic about its fundamentals and plans to continue compounding equity.
- The company anticipates a more normalized NIM of around $450 in the coming quarters.
- Loan growth for the year is projected to be in the mid single-digits, with a slight contraction expected in the fourth quarter.
- Bank7 Corp is facing challenges with deposit growth due to competitive pressures but continues to target deposits through credit needs and transactions.
- The company expects the resolution of the troubled credit to occur in the second quarter of next year.
- Expense growth for 2024 is projected to be around 5%, potentially higher due to new branch construction.
During the earnings call, the company also discussed potential additional impairment of around $14.5 million in pretax pre-provision earnings. It reassured investors that the company's fundamentals remain strong despite the credit challenges. Bank7 Corp (NASDAQ:BSVN) also highlighted its disciplined approach to managing expenses, noting that it has not increased money market and CD rates to attract deposits.
Tom Travis, a representative of the company, projected an increase for 2024, potentially higher due to the construction of new branches. However, the impact of this construction on depreciation expenses is not expected until the end of 2025. Jason Estes, another representative, noted a gradual improvement in credit quality over the last few quarters, except for one outlier credit issue. Travis expressed confidence in the company's low nonperforming operating numbers and attributed the outlier credit issue to a unique circumstance. He emphasized that the company's fundamentals are strong and they will continue to deliver returns for shareholders.
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