Bank7 Corp.

Welcome to Bank 7 Corp's Third Quarter Earnings Call. Before we get started, I'd like to highlight the legal information and disclaimer on page 22 of the investor presentation. For those who do not have access to the presentation, management is going to discuss certain topics that contain forward-looking information which is based on management's beliefs as well as assumptions made by and information currently available to management. Although management believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to be correct. Such statements are subject to certain risks, uncertainties, and assumptions including, among other things, the direct and indirect effect of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators. Should one or more of these risks materialize or should underlying assumptions prove incorrect, actual results may vary materially from those expected. Also, please note that this conference call contains references to non-GAAP financial measures. You can find reconciliations of these non-GAAP financial measures to GAAP financial measures in an 8 that was filed this morning by the company. Representing the company on today's call, we have Tom Travis, President and CEO, J.T. Phillips, Chief Operating Officer, Jason Estes, Chief Credit Officer, Kelly Harris, Chief Financial Officer. With that, I'll turn the call over to Tom Travis. Please go ahead.

Thank you. Welcome to the call for those who are joining us. For those who have joined us on past earnings calls, we ask that you indulge us a bit here. We're going to take a little more time than we usually do. and we'll reflect on past events and current results. Today we'll start by reflecting on two different anniversaries. Then we'll review and discuss our exceptional third quarter results. The first anniversary we reflect upon is the third quarter of 20 years ago. Some of us on this call lost friends, family members, fellow workers, and first responders. And although it was long ago, those were certainly trying times. We all remember that day, and we'll never forget its effects on all of us, especially our friends back east. I'm sure some of you on this call will never forget either. With that said, we move on to the second anniversary, and that's the three-year anniversary of our IPO. Some of you on today's call were instrumental and helpful to us, whether it's bankers, advisors, or investors, and we're happy to have you with us today. we reflect back to our S-1 and the three-week roadshow and ask ourselves whether we met our representations and achieved the goals set during that time. To that question, we affirmatively know that we have performed in accordance with what we said we would do. We're proud of our results. So let's take a few minutes to review a few items related to that. One question posed to us was whether Bank 7 would be able to maintain its high levels of return on assets and return on equity, while also experiencing strong growth. As you can see from the compounded return data, we have maintained our strong profit levels and have illustrated the ability of our model to continue producing exceptional returns while also experiencing strong growth. In fact, over the three-year period, our total return to shareholders has been 85 percent. And while the future is never guaranteed, at this pace of shareholder value creation, Bank 7 is on track to have doubled your money in slightly more than three years. Our exceptional profits are a real strength, and they're driven by many factors, the cornerstone of which is our relentless focus and commitment to a strong credit risk management discipline, which has produced a high-quality credit book, We have a high level of confidence in this area. Additionally, we have grown our loan book with good yields without compromising our tried and true underwriting principles. Jason Estes, our chief credit officer, is rock solid. His guidance and discipline while working with our lending staff is a real strength for our company. As are our lenders. They are to be congratulated. We knew what we had in this area three years ago and what we continue to have today, and we're excited to continue to build with that team in the future. Another key element that received significant discussion and questions during the roadshow was our strong net interest margin. We were frequently asked two questions. Would we be able to grow and also maintain that margin? And whether our strong net interest margin was a function of too much credit risk. With respect to the first question, we refer to the historical data in our investor presentation as it illustrates our success in maintaining that strong margin, even in the face of unprecedented low interest rates and increased competitive pressures. Our strength in this area is attributable to many factors, with the most important being our strong customer relationships and their recognition of the value of banking with Bank 7. Another factor we consistently discussed was the focus by management and frontline bankers on the importance of core deposits. And we are especially proud to show solid core deposit growth over the last three years while also maintaining a consistent portion of those core deposits in our non-interest-bearing category. With respect to the second question of whether our strong NIM was a function of too much credit risk, as previously mentioned, We point to our years of success with our credit book as we know that our credit underwriting apparatus works as it should and you can achieve dual outcomes of a strong margin and a solid credit book. One last item that was often questioned and discussed during the IPO process related to our strong efficiency ratio and whether we could sustain that as we grew. We repeatedly expressed confidence in our branch-like model and also our strict adherence to processes that maximize efficiencies and how that would keep our costs down even in a high-growth environment. And as the data shows, we've sustained that low efficiency ratio, and we also highlight that our assets per employee metric has continued to improve and remain very strong. In summary, the results we've posted over the last three years highlight how exceptionally well our management team has performed. something we expected from ourselves and promised to deliver to our fellow investors. We also note that we did not surprise anyone with poor or weak financial results, and we're proud that we produced 12 consecutive strong quarters, which is especially noteworthy considering the extraordinary challenges related to the COVID-related economic stress. Now, if we shift gears and we look forward, We recently announced the subsequent event to 3Q, that being the pending acquisition of Cornerstone Bank, which we're excited about. We included a one-page recap in this investor presentation. However, if you're not already aware, we recently filed our 8K and investor presentation, which outlines that transaction and illustrates why we're excited about it. We encourage you to read it. We look forward to working with the new team members who are longtime bankers and people who have illustrated the ability to serve their customers and communities very well. Their credit culture has been strong for a long time. We expect our cultures will blend well together. From a financial perspective, the acquisition increases core deposits by approximately 20%, which is always welcome, as it provides further funding capabilities to us. And once those are fully deployed, we expect a double-digit increase to our earnings per share. We're also comforted by knowing that we deployed our excess capital, yet we are still above what is considered well capitalized and therefore we maintain our capital strength, which of course is rapidly reinforced with our strong earnings. As we wrap up today, we're pleased with our third quarter and excited to move forward executing on our strategy and integrating the new bank into ours. At the risk of sounding like a broken record, and that's okay, I emphasize how exceptional the management team is and how gratifying it is to work with them and all of our team members. Frankly, it's a lot of fun to succeed together and it isn't anything to take for granted. I look forward to working with the fellow team members to continue our high levels of achievement. So with that, we thank you for your participation today and we invite any questions you might have.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Brady Gailey of KBW. Please go ahead.