Bank7(BSVN) - 2021 Q4 - Annual Report

Part I Business Bank7 Corp is a bank holding company with $1.4 billion in assets, focusing on commercial lending in Oklahoma, Texas, and Kansas Company Snapshot (as of December 31, 2021) | Metric | Value | | :--- | :--- | | Total Assets | $1.4 billion | | Total Loans | $1.0 billion | | Total Deposits | $1.2 billion | | Total Shareholders' Equity | $127.4 million | | Full-Service Branches | 12 | - On December 9, 2021, the company acquired Watonga Bancshares, Inc., adding branches in Watonga, Geary, and Mustang, Oklahoma[13] - The Bank's primary lending focus is on commercial real estate, hospitality, energy, and commercial and industrial (C&I) loans[16] - The company's strategic success is driven by developing deep commercial customer relationships, disciplined growth, leveraging executive experience, process automation, and investing in people and technology[18] - The company and its bank subsidiary are extensively regulated by federal and state agencies, including the Oklahoma Banking Department (OBD), the Federal Reserve, the FDIC, and the CFPB[31][32] - As of December 31, 2021, the Bank's capital ratios exceeded minimum requirements under the Basel III Capital Rules and it was deemed 'well-capitalized'[38][46] Risk Factors The company faces risks from geographic concentration, significant credit exposure to volatile industries, and a controlling shareholder structure - The business is heavily dependent on the economies of Oklahoma and the Dallas/Fort Worth metropolitan area[95][96] Credit Exposure Concentrations (as of December 31, 2021) | Industry | Loan Amount | % of Total Loans | | :--- | :--- | :--- | | Energy | $98.5 million | 9.6% | | Hospitality | $198.4 million | 19.2% | - The company's Regulatory Commercial Real Estate (CRE) loans represented 302.47% of total Bank capital, exceeding the 300% supervisory criterion, which could expose the institution to additional regulatory scrutiny[105] - The 20 largest borrowing relationships totaled approximately $405 million in commitments, representing 32.7% of total outstanding commitments, while the 20 largest deposit relationships accounted for 23.2% of total deposits[111][113] - The Haines Family Trusts control approximately 51.2% of the company's common stock, giving them the ability to determine the outcome of all matters requiring shareholder approval[149] - The company is a 'controlled company' under NASDAQ rules, exempting it from requirements such as having a majority of independent directors and fully independent compensation and nominating committees[150][151] Unresolved Staff Comments There are no unresolved staff comments - Not applicable[157] Properties The company operates twelve branches across Oklahoma, Kansas, and Texas, with its corporate headquarters in Oklahoma City - The company's corporate office is at 1039 N.W. 63rd Street, Oklahoma City, Oklahoma[158] - The Bank operates twelve branches: eight in Oklahoma, two in Kansas, and two in the Dallas/Fort Worth area, with four of these locations being leased[158] Legal Proceedings Current litigation is not expected to have a material adverse effect on the company's financial condition or operations - Management does not believe any present litigation will have a material adverse effect on the business, consolidated financial condition, or results of operations[160] Mine Safety Disclosures This item is not applicable to the company - Not applicable[161] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's stock trades on NASDAQ under 'BSVN', with a quarterly dividend increased to $0.12 per share in Q4 2021 - The company's common stock trades on The NASDAQ Global Select Market under the symbol 'BSVN'[163] - The company paid quarterly dividends of $0.11 per share for the first three quarters of 2021 and increased it to $0.12 per share in the fourth quarter, with an expectation to continue this rate[164] Equity Compensation Plan Information (as of December 31, 2021) | Plan Category | Securities to be issued upon exercise | Weighted-average exercise price | Securities remaining available for future issuance | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by shareholders | 436,993 | $17.41 | 615,873 | [Reserved] This item is reserved and contains no information Management's Discussion and Analysis of Financial Condition and Results of Operations Pre-tax net income grew 16.2% in 2021, driven by asset growth from an acquisition and improved net interest margin - On December 9, 2021, the Company acquired Watonga Bancshares, Inc. for $29.3 million in cash, adding total assets of $267.3 million and total deposits of $243.5 million[186] 2021 vs. 2020 Performance Highlights | Metric | 2021 | 2020 | Change | | :--- | :--- | :--- | :--- | | Pre-tax Net Income | $30.9 million | $25.9 million | +16.2% | | Pre-tax ROAA | 2.96% | 2.73% | +23 bps | | Pre-tax ROAE | 26.41% | 25.29% | +112 bps | | Efficiency Ratio | 36.76% | 36.03% | +73 bps | Year-End Balance Sheet Growth (2021 vs. 2020) | Metric | Dec 31, 2021 | Dec 31, 2020 | Change | | :--- | :--- | :--- | :--- | | Total Loans | $1.03 billion | $839.1 million | +22.9% | | Total Deposits | $1.22 billion | $905.5 million | +34.5% | - Net interest margin increased to 5.12% for the year ended 2021, compared to 5.01% in 2020, benefiting from a 50.4% decrease in interest expense on deposits[197][202] - The provision for loan losses decreased to $4.2 million in 2021 from $5.4 million in 2020[207] - Nonperforming loans as a percentage of total loans decreased to 1.01% at year-end 2021 from 1.98% at year-end 2020[238] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate volatility, with the balance sheet positioned to benefit from rising rates - The primary component of market risk for the company is interest rate volatility, managed by the Asset/Liability Committee (ALCO)[309][312] Interest Rate Sensitivity Analysis (as of December 31, 2021) | Change in Interest Rates (Basis Points) | Simulated % Change in Net Interest Income (12-Month Horizon) | | :--- | :--- | | +400 | 32.34% | | +300 | 23.63% | | +200 | 14.88% | | +100 | 6.07% | | -100 | -5.38% | Financial Statements and Supplementary Data This section contains the audited consolidated financial statements, which received an unqualified opinion from BKD, LLP - The independent registered public accounting firm, BKD, LLP, issued an unqualified opinion on the consolidated financial statements[325] Consolidated Statement of Income Highlights (Year Ended Dec 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Net Interest Income | $53,236 thousand | $47,161 thousand | | Provision for Loan Losses | $4,175 thousand | $5,350 thousand | | Noninterest Income | $2,250 thousand | $1,665 thousand | | Noninterest Expense | $20,397 thousand | $17,592 thousand | | Net Income | $23,159 thousand | $19,266 thousand | | Diluted EPS | $2.55 | $2.05 | Consolidated Balance Sheet Highlights (As of Dec 31) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Total Assets | $1,350,549 thousand | $1,016,669 thousand | | Net Loans | $1,018,085 thousand | $826,974 thousand | | Total Deposits | $1,217,471 thousand | $905,514 thousand | | Total Shareholders' Equity | $127,408 thousand | $107,319 thousand | - Note 2 details the acquisition of Watonga Bancshares, Inc. on December 9, 2021, for $29.3 million in cash, resulting in the recognition of $7.5 million in goodwill and a $1.3 million core deposit intangible[398][399] - Note 13 confirms the Bank was categorized as 'well capitalized' under the regulatory framework for prompt corrective action as of December 31, 2021, with a Total capital to risk-weighted assets ratio of 12.54% and a CET1 ratio of 11.53%[491][496] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no changes in or disagreements with accountants on accounting and financial disclosure - None[550] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[551] - Management determined that the company maintained effective internal control over financial reporting as of December 31, 2021, based on the COSO framework[553] - No significant changes were made to the company's internal control over financial reporting during the fourth quarter of 2021[556] Other Information There is no other information to report - None[557] Part III Information on governance, compensation, and ownership is incorporated by reference from the 2022 Proxy Statement Directors, Executive Officers and Corporate Governance Information is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders - The required information is incorporated by reference from the Proxy Statement (Schedule 14A) for the 2022 Annual Meeting of Shareholders[560] Executive Compensation Information is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders - The required information is incorporated by reference from the Proxy Statement (Schedule 14A) for the 2022 Annual Meeting of Shareholders[561] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders - The required information is incorporated by reference from the Proxy Statement (Schedule 14A) for the 2022 Annual Meeting of Shareholders[562] Certain Relationships and Related Transactions, and Director Independence Information is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders - The required information is incorporated by reference from the Proxy Statement (Schedule 14A) for the 2022 Annual Meeting of Shareholders[563] Principal Accountant Fees and Services Information is incorporated by reference from the Proxy Statement for the 2022 Annual Meeting of Shareholders - The required information is incorporated by reference from the Proxy Statement (Schedule 14A) for the 2022 Annual Meeting of Shareholders[564] Part IV Exhibits, Financial Statement Schedules This section lists the exhibits filed with the report and notes the omission of financial statement schedules - The index to Consolidated Financial Statements is located on page 51 of the report[566] - Financial statement schedules have been omitted as they are not applicable or the required information is included in the financial statements or notes[567] - A list of exhibits filed with the Form 10-K is provided, including corporate governance documents, equity incentive plans, and required CEO/CFO certifications[567][568][569]