Executive Summary / Key Takeaways

• Robust Core Performance: Bank7 Corp. continues to demonstrate strong organic loan and deposit growth, driven by its entrepreneurial focus and strategic presence in dynamic markets across Oklahoma, Texas, and Kansas.
• Exceptional Capital Strength: The company maintains record levels of capital, exceeding all regulatory requirements and positioning it as "well capitalized," providing a significant buffer against economic uncertainties and flexibility for future strategic initiatives.
• Disciplined Margin Management: Despite a volatile interest rate environment, Bank7 has largely maintained its net interest margin within historical ranges, benefiting from a properly matched balance sheet and effective management of loan and deposit betas.
• Prudent Risk Posture: Management's proactive approach to credit risk, including increased provisioning in Q3 2025 due to macro volatility and a consistently clean loan book with low nonaccrual levels, underscores a conservative and resilient operational philosophy.
• Strategic Growth Opportunities: While M&A remains a disciplined pursuit, the company's strong financial position and focus on high single-digit organic loan growth, particularly in the latter half of 2025, present clear avenues for continued value creation.

A Foundation of Entrepreneurial Banking and Strategic Evolution

Bank7 Corp., established in 1901 and headquartered in Oklahoma City, Oklahoma, operates as a bank holding company for its wholly-owned subsidiary, Bank7. The company's core mission revolves around serving business owners and entrepreneurs by delivering fast, consistent, and well-designed loan and deposit products. This focused approach has been a cornerstone of its strategy, enabling it to carve out a competitive niche within the regional banking landscape of Oklahoma, the Dallas/Fort Worth metropolitan area in Texas, and Kansas.

Over the past seven to eight years, Bank7 has strategically diversified its loan portfolio, intentionally reducing its proportional exposure to both the energy and hospitality sectors. Energy exposure, for instance, has decreased to almost half of its previous levels, while the hospitality segment's representation within the total portfolio has also declined. This strategic rebalancing has been complemented by targeted growth in other segments, particularly within the dynamic Dallas/Fort Worth region, reflecting a deliberate effort to broaden its business base and enhance resilience.

The company has also engaged in opportunistic acquisitions to bolster its service offerings. In October 2023, Bank7 acquired proven oil and natural gas properties from HB2 Origination, LLC for $15.10 million, a move aimed at generating specific cash flow. More recently, around the first quarter of 2025, the company made a strategic investment in First American Mortgage LLC, a residential mortgage lending operation. This acquisition was not merely for volume but to establish Bank7 as a "professional mortgage provider," offering a "niche specialized service" to its high-net-worth clients and other customers.

Operational Excellence and Competitive Positioning

Bank7's competitive advantage is rooted not in proprietary technological inventions, but in its operational excellence and the effective application of standard banking technology to deliver superior customer service and efficiency. The company leverages its digital infrastructure and streamlined processes to provide "fast, consistent and well-designed loan and deposit products" to its entrepreneurial client base. This operational model contributes to a historically low efficiency ratio, a key performance indicator that reflects the company's ability to manage noninterest expenses relative to its revenue generation. While the efficiency ratio saw a slight increase to 41.12% for the three months ended September 30, 2025, from 37.87% in the prior year, it remains a testament to the company's disciplined approach to cost control.

In the competitive regional banking arena, Bank7 faces direct competition from established players like BancFirst Corporation (BANF), Prosperity Bancshares, Inc. (PB), Simmons First National Corporation (SFNC), and Independent Bank Group (IBTX). Compared to these rivals, Bank7's strong local network and deep customer relationships provide a significant competitive moat, fostering loyalty and potentially enhancing pricing power in its target markets. Its regulatory licenses also act as a barrier to entry, allowing it to operate efficiently without undue external pressures. However, Bank7's smaller scale compared to some larger regional competitors like PB and BANF can lead to higher operational costs per customer and potentially limit its diversification.

The company's strategic positioning in high-growth areas like Oklahoma City, Tulsa, and Texas, which boast "really strong, diverse economies," provides a fertile ground for its relationship-based banking model. This regional focus, while a potential vulnerability in terms of diversification, is also a strength, allowing for deep market penetration and understanding of local economic dynamics. The company's emphasis on "hedged oil and gas production" within its energy portfolio, with underwriting standards that stress-test at conservative commodity prices (e.g., $45 oil and $2 natural gas, with 60% hedging), demonstrates a tailored and risk-aware approach to specialized lending that differentiates it from more broadly diversified banks.

Financial Performance: A Story of Resilient Growth and Prudent Management

Bank7 Corp. delivered a "very solid quarter" for the period ended September 30, 2025, marked by continued organic expansion. Total assets grew by $151.60 million, or 8.7%, to $1.89 billion as of September 30, 2025, compared to $1.74 billion at December 31, 2024. This growth was primarily fueled by a robust increase in its loan portfolio, which reached $1.54 billion in gross loans as of September 30, 2025, up from $1.40 billion at December 31, 2024. Total deposits also saw significant organic growth, increasing by $121.36 million to $1.64 billion over the same period.

Despite this growth, pre-tax net income for the three months ended September 30, 2025, decreased by $1.3 million, or 8.5%, to $14.2 million, compared to $15.5 million in the prior year. Similarly, for the nine months ended September 30, 2025, pre-tax net income declined by $3 million, or 6.6%, to $42.6 million. This was reflected in a lower return on average assets (ROAA) of 2.33% and return on average equity (ROAE) of 18.11% for the third quarter of 2025, down from 2.73% and 23.67% respectively in the same period of 2024. The decrease in profitability was primarily attributable to a $1.5 million, or 39.9%, decline in noninterest income for the quarter, largely due to "a decrease in income related to operations of oil and gas assets". Noninterest expense also increased by $1 million, or 10.1%, for the quarter.

The company's net interest margin (NIM) remained strong at 5.07% for the three months ended September 30, 2025, and 5.00% for the nine months ended September 30, 2025. Management acknowledges that "if you look at the first rate cut in Q4, you could see further NIM compression slightly down to 4.50," potentially reaching 4.47% with additional rate cuts, assuming the company can maintain pace on the liability side. However, Bank7's "properly matched balance sheet" with a significant portion of floating-rate loans and embedded floors is expected to mitigate severe compression. Loan fee income has been a notable contributor, showing "a bit of outperformance the last couple of quarters" due to a "robust deal market".

Asset Quality and Risk Management

Bank7 maintains a "very clean credit book", a testament to its disciplined underwriting and proactive risk management. As of September 30, 2025, nonaccrual loans decreased to $5.317 million from $7.170 million at December 31, 2024, leading to a favorable decline in the ratio of nonperforming loans to total loans from 0.51% to 0.35%. The allowance for credit losses as a percentage of total loans increased by 2 basis points to 1.26% for the three and nine months ended September 30, 2025.

The increase in the provision for credit losses by $0.7 million for both the three and nine months ended September 30, 2025, was primarily "related to loan growth in the third quarter of 2025". Management explicitly stated that this decision was a "prudent" measure driven by "increased volatility of just the overall credit markets" and continued portfolio growth, rather than specific credit issues. The loan portfolio is diversified across several categories: Commercial Real Estate (CRE) at $870.9 million (56.7% of gross loans), Commercial & Industrial (C&I) at $575.5 million (37.4%), Agricultural at $76.3 million (5%), and Consumer at $14.5 million (0.9%) as of September 30, 2025. Within these, hospitality loans represent 19% ($292.3 million) and energy loans 11% ($168.5 million) of gross total loans. Management emphasizes that all loan types are within their established internal concentration limits.

Liquidity and Capital Strength

Bank7 Corp. stands out for its exceptional capital strength and robust liquidity, which management frequently describes as a "capital fortress." As of September 30, 2025, the company and its subsidiary Bank7 significantly exceeded all regulatory capital adequacy requirements. The Bank was categorized as "well capitalized" by the FDIC, with a Common Equity Tier 1 (CET1) capital ratio of 14.23%, a Tier 1 capital ratio of 14.23%, and a Total Capital ratio of 15.44%. This strong capital base provides a substantial buffer against unforeseen adverse developments and supports future growth initiatives.

Liquidity is further bolstered by access to significant alternative funding sources. As of September 30, 2025, the company had $217.6 million in borrowing availability with the Federal Home Loan Bank (FHLB) and approximately $298.4 million in liquidity with the Federal Reserve Bank. This dual liquidity backstop, enhanced in late 2024, provides maximum flexibility. The company's dividend payout ratio remains low, "still in the 20% range," significantly below the industry average, allowing for rapid capital accumulation and providing "plenty of room for further increases" while compounding shareholder value.

Strategic Outlook and Growth Initiatives

Bank7 Corp.'s outlook is characterized by a commitment to disciplined organic growth and opportunistic strategic expansion. Management targets "high single-digit year-over-year growth" in its loan portfolio, with an expectation that any upside will materialize in the "back half of the year than the front half". This growth is supported by a "good" deal pipeline, though the company remains mindful of "lumpy paydowns" from clients selling assets or businesses, which can create temporary fluctuations.

The acquired oil and gas assets are performing as expected, with management projecting a full recovery of the $16 million cash outlay by "middle of next year" (Q2 2026). While the mortgage business is currently "pretty slow," management anticipates it will "cover itself" and "make a little bit of money," with the strategic intent being to provide a "niche specialized service" to high-net-worth clients. The pipeline for mortgage lending has picked up, but a "high fallout rate" is noted.

On the M&A front, Bank7 remains an active and "disciplined buyer". Management acknowledges the "overhang of the AOCI" (Accumulated Other Comprehensive Income) on many potential sellers, which complicates valuations and deal closures. Despite this, the company is "actively pursuing some opportunities right now," particularly in Texas, seeking strategic combinations that align with its culture and financial discipline. The renewal of its stock repurchase plan in August 2025, authorizing up to 750,000 shares, provides additional capital deployment flexibility, though no shares were repurchased in the first nine months of 2025, reflecting management's preference for maintaining high capital levels in a volatile environment.

Conclusion

Bank7 Corp. presents a compelling investment thesis rooted in its consistent organic growth, exceptional capital strength, and disciplined operational approach. The company's focus on entrepreneurial clients in dynamic regional markets, coupled with its ability to maintain a strong net interest margin and a pristine credit book, underscores its resilience in a volatile economic landscape. While macro uncertainties, including potential tariffs and interest rate fluctuations, warrant caution, Bank7's robust liquidity, record capital levels, and conservative risk management posture provide a solid foundation. The strategic pursuit of organic loan growth and opportunistic, disciplined M&A, alongside a commitment to compounding shareholder value through strong earnings and a low dividend payout, positions Bank7 Corp. as a regional banking powerhouse with a clear path for continued success.