Bank7 Corp.

Welcome to Bank 7 Corp's first quarter earnings call. Before we get started, I'd like to highlight the legal information and disclaimer on page 23 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. To find reconciliations of these non-GAAP financial measures to GAAP financial measures in an 8-K that was filed this morning by the company. Representing the company on today's call, we have Brad Haynes, Chairman, Tom Travis, President and CEO, J.T. Phillips, Chief Operating Officer, Jason Estes, Chief Credit Officer, Kelly Harris, Chief Financial Officer. Please note this conference is being recorded. With that, I'll turn the call over to Tom Travis.

Thank you for joining us, everyone. We're pleased that we again delivered strong results. We have to acknowledge and thank our team members for their outstanding contributions. Let's move on to our results. We started the year with an all-time high loan book, and the majority of those loans had daily floating rates, and that really set the stage for our strong quarter. As we progressed through the quarter, we were able to overcome significant loan pay down and payoff activity. Therefore, on a net basis, the loan team was successful and achieved a small amount of growth in the portfolio, which was also helpful. At the same time, and consistent with expectations we mentioned during our January call, deposit costs accelerated and continued to rise during the quarter, which put downward pressure on our margin. Regardless, we still achieved strong net revenue and we're pleased with our margin and expect it to remain within our historical range. It's probably good to move into a discussion regarding our liquidity, which clearly is a major focal point in today's environment. You can see we have provided enhanced disclosures and we are comfortable with our overall liquidity profile. Our cash position is historically more than industry averages and continues to be that way today. In addition, our reliance on public funds is far below industry averages. We also have a large amount of availability on our lines of credit, which we did not draw as we did not experience panic from our customer base. In fact, we show a small increase in deposits for the quarter, including a small increase in our core transaction accounts, which continues to be the case as of yesterday. We do not anticipate incurring stress in this area. We also provided more disclosure regarding our asset sensitive balance sheet. And as you can see, our asset liability matching has us in a good position. Our historical use of floating rate loans with interest rate floors and shorter maturities will continue to benefit our company. Our balance sheet is properly matched and strong as we don't have much of an AOCI adjustment and we continue to operate debt free. Regarding our small AOCI adjustment, it will rapidly decline as more than half of the investment portfolio consists of U.S. Treasury notes that mature in only 10 months. Overall, credit quality is steady and continues to exhibit strong characteristics. We upgraded a few adversely rated credits and also had one pay off. We added a few downgrades, but nothing out of the ordinary. We also converted our allowance methodology to the CECL model, and our allowance is strong and where it needs to be. Moving into capital, with regard to capital, we plan to continue building it, and the combination of our strong earnings and low dividend payout ratio will cause it to increase quickly, especially considering a slower growth environment. Clearly, this environment of macroeconomic stress guides us to maintain capital at slightly higher levels. Our high level of earnings is a real source of strength for our company. We like to illustrate that strength in the deck with the inclusion of our stress test scenario as it reflects how our strong earnings provides a substantial buffer based on industry and bank examiner DFAS parameters. So in conclusion, we had a very strong quarter. We are pleased to provide exceptional returns to our shareholders and also report that we are well positioned to navigate through the choppy waters that are in place today. We intend to continue to build capital and keep our focus on liquidity and growing our deposits. We continue to benefit from being located in this dynamic part of the country. Therefore, in spite of the current macroeconomic headwinds, we remain cautiously optimistic about the near future and are excited about our company. So with that being said, we're standing by for any questions. Thank you.

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. The first question comes from Nathan Race of Piper Sandler. Please go ahead.