Bank7(US:BSVN)2020-11-16 14:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Bank7 Corp.'s unaudited condensed consolidated financial statements, detailing asset growth to $973.4 million and a net income increase to $14.5 million Unaudited Condensed Consolidated Balance Sheets Total assets increased to $973.4 million by September 30, 2020, primarily due to growth in net loans and deposits, with shareholders' equity reaching $105.2 million Balance Sheet Summary (in thousands) | Assets & Liabilities (in thousands) | September 30, 2020 (unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $973,354 | $866,392 | | Loans, net | $869,448 | $699,458 | | Cash and due from banks | $60,718 | $117,128 | | Total Liabilities | $868,124 | $766,266 | | Total deposits | $863,669 | $757,483 | | Total Shareholders' Equity | $105,230 | $100,126 | Unaudited Condensed Consolidated Statements of Income Net income for the nine months ended September 30, 2020, surged to $14.5 million, driven by increased net interest income and reduced noninterest expenses Income Statement Summary (in thousands) | Income Statement (in thousands) | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net Interest Income | $34,962 | $31,536 | | Provision for Loan Losses | $3,300 | $0 | | Total Noninterest Income | $965 | $1,027 | | Total Noninterest Expense | $13,060 | $23,875 | | Net Income (Loss) | $14,527 | $3,723 | | Earnings per common share - diluted | $1.53 | $0.37 | Unaudited Condensed Consolidated Statements of Shareholders' Equity Total shareholders' equity increased to $105.2 million by September 30, 2020, driven by $14.5 million net income, offset by stock repurchases and dividends - During the nine months ended September 30, 2020, the company acquired and canceled 835,254 shares, reducing retained earnings by $7.2 million15 Unaudited Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities was $18.5 million, with investing activities using $167.0 million, leading to a $56.4 million decrease in cash Cash Flow Summary (in thousands) | Cash Flow Activities (in thousands) | Nine Months Ended Sep 30, 2020 | | :--- | :--- | | Net cash provided by operating activities | $18,516 | | Net cash used in investing activities | ($167,015) | | Net cash provided by financing activities | $92,089 | | Decrease in Cash and Due from Banks | ($56,410) | Notes to Unaudited Consolidated Financial Statements These notes detail accounting policies, COVID-19 impact, loan portfolio, and capital adequacy, highlighting $64.3 million in PPP loans and well-capitalized status - Under the Paycheck Protection Program (PPP), the Company originated 333 loans totaling $64.3 million as of September 30, 202050 - During the first nine months of 2020, the Company repurchased 835,254 shares under its share repurchase program at an average price of $8.70 per share24 - As of September 30, 2020, the Company and Bank meet all capital adequacy requirements and the Bank is categorized as well capitalized101102 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, covering strong loan and deposit growth, COVID-19 impact, decreased net interest margin, increased loan loss provision, and reduced noninterest expense Results of Operations Q3 2020 pre-tax income was $6.1 million, a significant improvement from Q3 2019's $5.0 million loss, largely due to the absence of a one-time stock compensation expense - The significant improvement in Q3 2020 results compared to Q3 2019 is largely due to a one-time, non-cash executive stock transaction in Q3 2019, which resulted in a compensation expense of $11.8 million166217 Key Operating Metrics | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Net Interest Margin | 4.81% | 5.27% | | Pre-tax Income (Loss) | $6.1M | ($5.0M) | | Provision for Loan Losses | $1.25M | $0 | - As of September 30, 2020, the company originated 333 PPP loans totaling $64.3 million and recognized $1.1 million of $1.8 million in associated origination fees as interest income169 Financial Condition Total assets grew 12.3% to $973.4 million, driven by organic growth and PPP loans, with nonperforming assets increasing to $20.5 million - Total assets increased by $107.0 million (12.3%) to $973.4 million as of September 30, 2020, primarily due to strong organic loan and deposit growth and the addition of PPP loans221 Financial Condition Highlights (in millions) | Metric | Sep 30, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Gross Loans | $883.2M | $708.7M | | Allowance for Loan Losses | $11.1M | $7.8M | | Total Nonperforming Assets | $20.5M | $3.3M | | Ratio of nonperforming assets to total assets | 2.11% | 0.38% | - Substandard loans increased by $23.4 million to $34.5 million as of September 30, 2020, primarily related to downgrades in commercial real estate, agricultural, and commercial & industrial relationships247 Liquidity and Capital Resources The company maintains solid liquidity with $65.3 million in FHLB borrowing availability, and the Bank remains well-capitalized with a 14.10% Total capital ratio - The company had borrowing availability with the FHLB of $65.3 million as of September 30, 2020265 Bank Capital Ratios | Bank Capital Ratios | Sep 30, 2020 | Well-Capitalized Minimum | | :--- | :--- | :--- | | CET 1 capital to risk-weighted assets | 12.85% | 6.50% | | Tier 1 capital to risk-weighted assets | 12.85% | 8.00% | | Total capital to risk-weighted assets | 14.10% | 10.00% | | Tier 1 leverage ratio | 10.72% | 5.00% | Critical Accounting Policies and Estimates Critical accounting policies include Allowance for Loan Losses, Goodwill, and Income Taxes, with an interim goodwill impairment analysis yielding no charge despite COVID-19 stress - The allowance for loan losses is a critical estimate based on historical loss experience, adjusted for current trends, economic conditions, and specific loan evaluations284285 - An interim goodwill impairment qualitative analysis, prompted by decreased stock price and market capitalization due to COVID-19, resulted in no impairment charge286 Item 3. Quantitative and Qualitative Disclosures About Market Risk No significant changes in market risk disclosures have occurred since the Annual Report on Form 10-K for the year ended December 31, 2019 - There have been no significant changes in the company's market risk disclosures since December 31, 2019295 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2020296 - No material changes occurred during the nine months ended September 30, 2020, that affected internal control over financial reporting297 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in routine legal actions, but management believes no current proceedings would have a material adverse effect on financial statements - The company is party to routine legal actions but does not believe any existing proceedings would have a material adverse effect on its financial statements299 Item 1A. Risk Factors No material changes to previously disclosed risk factors were reported from the 2019 Annual Report on Form 10-K and the Q1 2020 Form 10-Q - No material changes were reported from the risks disclosed in the 2019 Annual Report on Form 10-K and the Q1 2020 Form 10-Q300 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 835,254 shares at an average price of $8.56 under its expanded stock repurchase program, with 164,746 shares remaining Stock Repurchase Activity | Period | Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | March 2020 | 793,094 | $8.59 | | April 2020 | 28,395 | $7.28 | | May 2020 | 9,765 | $9.69 | | September 2020 | 4,000 | $8.96 | | Total for Nine Months | 835,254 | $8.56 | - As of September 30, 2020, 164,746 shares remained available for purchase under the board-authorized stock repurchase program301302 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including certifications from executive officers and XBRL financial data files Signatures The report is duly signed and authorized by Thomas L. Travis, President and CEO, and Kelly J. Harris, SVP and CFO