Bank7(US:BSVN)2024-05-15 13:25PART I. FINANCIAL INFORMATION Item 1. Financial Statements The company's unaudited condensed consolidated financial statements for Q1 2024 are presented Unaudited Condensed Consolidated Balance Sheets Total assets reached $1.775 billion as of March 31, 2024, with a slight increase in net loans Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 (unaudited) | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $1,774,983 | $1,771,666 | | Loans, net | $1,354,195 | $1,341,148 | | Available-for-sale debt securities | $151,872 | $169,487 | | Cash and due from banks | $193,218 | $181,042 | | Total Liabilities | $1,594,601 | $1,601,340 | | Total deposits | $1,580,172 | $1,591,391 | | Total Shareholders' Equity | $180,382 | $170,326 | Unaudited Condensed Consolidated Statements of Comprehensive Income Net income for Q1 2024 increased to $11.3 million, driven by higher net interest and noninterest income Q1 2024 vs Q1 2023 Performance (in thousands, except per share data) | Metric | Three months ended March 31, 2024 | Three months ended March 31, 2023 | | :--- | :--- | :--- | | Net Interest Income | $22,010 | $20,006 | | Provision for Credit Losses | $0 | $475 | | Total Noninterest Income | $2,008 | $672 | | Total Noninterest Expense | $9,135 | $7,649 | | Net Income | $11,288 | $9,607 | | Diluted EPS | $1.21 | $1.04 | | Comprehensive Income | $11,744 | $11,363 | Unaudited Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity grew to $180.4 million, primarily due to net income outpacing cash dividends - Retained earnings increased from $79.0 million at the beginning of the period to $88.3 million at the end of Q1 2024, driven by $11.3 million in net income, less $1.9 million in cash dividends declared17268 - The company declared cash dividends of $0.21 per share for the three months ended March 31, 2024, compared to $0.16 per share for the same period in 2023268 Unaudited Condensed Consolidated Statements of Cash Flows The period saw a net cash increase of $12.2 million, led by strong operating and investing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $20,446 | $13,573 | | Net cash provided by (used in) investing activities | $5,233 | $(6,168) | | Net cash (used in) provided by financing activities | $(13,503) | $60,869 | | Net Increase in Cash | $12,176 | $68,274 | Notes to Unaudited Condensed Consolidated Financial Statements Key notes detail accounting policies, a recent asset acquisition, and credit loss methodology - The company is a bank holding company for Bank7, which provides banking services in Oklahoma, Texas, and Kansas2224 - In late 2023, the company acquired proven oil and natural gas properties for $15.1 million, which contributed $1.4 million in revenue in Q1 20243031 - The company adopted the CECL model for credit losses on January 1, 2023, which increased the allowance for credit losses by $250,000 for loans and $500,000 for unfunded commitments upon adoption91 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management analyzes Q1 2024 performance, highlighting income growth and impacts from a new oil and gas operation Q1 2024 Key Performance Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Pre-tax net income | $14.9 million | $12.6 million | | Pre-tax return on average assets | 3.40% | 3.18% | | Pre-tax return on average equity | 33.97% | 34.17% | | Efficiency ratio | 38.29% | 36.62% | - Total loans grew by 7.4% year-over-year to $1.37 billion, and total deposits increased by 5.9% to $1.58 billion as of March 31, 2024177 - The provision for credit losses was $0 for Q1 2024, a decrease of $475,000 from the same period in 2023178 Results of Operations Q1 2024 results show increased net interest income and a stable margin, with oil and gas assets boosting noninterest items - Net interest margin remained consistent at 5.14% for Q1 2024 compared to Q1 2023, as the 74 basis point increase in interest-earning asset yields was offset by higher funding costs191187 - The provision for credit losses decreased from $475,000 in Q1 2023 to $0 in Q1 2024200 - The significant increases in both 'Other' noninterest income (+$1.3 million) and 'Other' noninterest expense (+$1.1 million) were primarily due to the revenues and expenses from the oil and gas assets acquired in Q4 2023202203 Financial Condition The company's financial condition remains strong with $1.77 billion in assets and a stable loan portfolio Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2024 | % of Total | | :--- | :--- | :--- | | Total commercial real estate | $773,326 | 56.1% | | Commercial & industrial | $525,752 | 38.3% | | Agricultural | $62,132 | 4.5% | | Consumer | $15,069 | 1.1% | | Gross loans | $1,376,279 | 100.0% | Nonperforming Assets (in thousands) | Metric | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Nonaccrual loans | $24,345 | $18,941 | | Accruing loans 90+ days past due | $0 | $10,026 | | Total nonperforming assets | $24,345 | $28,967 | | Ratio of nonperforming assets to total assets | 1.37% | 1.64% | - The allowance for credit losses remained flat at $19.7 million at both March 31, 2024 and December 31, 2023215 Liquidity and Capital Resources The company maintains a solid liquidity position and exceeds all 'well-capitalized' regulatory requirements - The company had borrowing availability with the Federal Home Loan Bank (FHLB) of $166.2 million as of March 31, 2024238 Bank Capital Ratios as of March 31, 2024 | Ratio | Actual | 'Well-Capitalized' Minimum | | :--- | :--- | :--- | | Total capital (to risk-weighted assets) | 13.36% | 10.00% | | Tier 1 capital (to risk-weighted assets) | 12.11% | 8.00% | | CET 1 capital (to risk-weighted assets) | 12.11% | 6.50% | | Tier 1 capital (to average assets) | 10.10% | 5.00% | - Total shareholders' equity increased by $10.1 million to $180.4 million as of March 31, 2024, from $170.3 million at year-end 2023243 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate volatility, managed by the ALCO without using derivatives - The company's primary market risk is interest rate volatility, which is managed by the Asset/Liability Committee (ALCO) in accordance with board-approved policies7274 Simulated Change in Net Interest Income (12-Month Horizon, as of March 31, 2024) | Change in Interest Rates (Basis Points) | Percent Change in Net Interest Income | | :--- | :--- | | +400 | 19.08% | | +300 | 15.25% | | +200 | 11.44% | | +100 | 7.61% | Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes in internal control - Based on an evaluation as of March 31, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective82 - No changes occurred in the company's internal control over financial reporting during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, such controls83 PART II. OTHER INFORMATION Item 1. Legal Proceedings Current legal proceedings are not expected to have a material adverse effect on the company's financials - Management is of the opinion that no current legal proceedings would have a material adverse effect on the company's financial statements if determined adversely85 Item 1A. Risk Factors No material changes to the risk factors disclosed in the 2023 Annual Report have occurred - No material changes have occurred in the risk factors previously disclosed in the Annual Report on Form 10-K for December 31, 202386 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds A new share repurchase plan was adopted in October 2023, but no shares were repurchased in Q1 2024 - A new Repurchase Plan was adopted on October 30, 2023, authorizing the repurchase of up to 750,000 shares, with no shares repurchased under this plan during the three months ended March 31, 202487 Item 5. Other Information No officers or directors adopted or terminated Rule 10b5-1 trading arrangements during the first quarter - No officers or directors adopted or terminated a Rule 10b5-1 or Non-Rule 10b5-1 trading arrangement during the three months ended March 31, 202444 Item 6. Exhibits This section lists filed exhibits, including Sarbanes-Oxley certifications and XBRL data files - The exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL instance and taxonomy documents46