Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company’s shares of common stock are traded on The NASDAQ Global Select Market under the symbol “BSVN”. The approximate number of holders of record of the Company’s common stock
as of March 11, 2020 was 4. The Company’s common stock began trading on The NASDAQ Global Select Market on September 20, 2018.
The Company paid quarterly dividends of $0.10 per share with respect to each of the first three quarters of 2020, increasing to $0.11 per share in the fourth quarter. The Company
currently expects to continue quarterly dividends of $0.11 per share in the future. Any future determination to pay dividends and the amount of such dividends on the Company’s common stock will be made by its Board of Directors and will depend on a
number of factors, including
•
historical and projected financial condition, liquidity and results of operations;
•
the Company’s capital levels and requirements;
•
statutory and regulatory prohibitions and other limitations;
•
any contractual restriction on the Company’s ability to pay cash dividends, including pursuant to the terms of any of its credit agreements or other borrowing arrangements;
•
business strategy;
•
tax considerations;
•
any acquisitions or potential acquisitions;
•
general economic conditions; and
•
other factors deemed relevant by the Board of Directors.
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The table below sets forth our market repurchases of Bank7 Corp. common stock during the three months ended December 31, 2020.
Number of
Shares
Purchased
Average Price
Paid Per Share
Number of Shares That
May Yet be Purchased
Under the Program
(Dollars in thousands, except per share data)
October 1, 2020 to October 31, 2020
150,400
$
9.45
764,346
November 1, 2020 to November 30, 2020
46,524
$
9.25
717,822
December 1, 2020 to December 31, 2020
—
—
717,822
For the Three Months Ended December 31, 2020
196,924
$
9.43
717,822
Set forth below is information as of December 31, 2020 regarding equity compensation plans. The plan that has been approved by the shareholders is the 2018 Equity Incentive Plan.
Plan
Number of securities to
be issued upon exercise of outstanding options and rights
Weighted average
exercise price
Number of securities remaining available for issuance under plan
Equity compensation plans approved by shareholders
303,250
$
18.48
694,750
Equity compensation plans not approved by shareholders
––
––
––
COMPANY PERFORMANCE
Presented below is a line graph which compares the percentage in the cumulative total return on the Company’s Common Stock to the cumulative total return of the NASDAQ Stock
Market (U.S. Companies) Index and the NASDAQ Bank Stock Index. The period presented is from September 24, 2018 through December 31, 2020. The graph assumes an investment on September 24, 2018 of $100 in the Company’s Common Stock and in each index,
and that any dividends were reinvested. The values presented for each year during the period represent the cumulative market values of the respective investment. The performance graph represents past performance and should not be considered to be
an indication of future performance.
Item 6. Selected Financial Data
The following table sets forth selected historical consolidated financial and operating data as of and for the years ended December 31, 2020, 2019, and 2018. Selected financial
data as of and for the years ended December 31, 2020, 2019 and 2018 has been derived from our audited consolidated financial statements included elsewhere in this report.
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You should read the following financial data in conjunction with the other information contained in this report, including under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and in the financial statements and related notes included elsewhere in this report.
As of or for the Year Ended
December 31,
2020
2019
2018
(Dollars in thousands, except per share data)
Income Statement Data:
Total interest income
$
53,314
$
51,709
$
46,800
Total interest expense
6,153
9,516
7,169
Net interest income
47,161
42,193
39,631
Provision for loan losses
5,350
-
200
Total noninterest income
1,665
1,308
1,331
Total noninterest expense
17,592
28,432
14,965
Provision for income taxes
6,618
6,844
797
Net income
19,266
8,225
25,000
Balance Sheet Data:
Cash and due from banks
$
153,901
$
117,128
$
128,090
Total loans
836,613
707,304
599,910
Allowance for loan losses
9,639
7,846
7,832
Total assets
1,016,669
866,392
770,511
Interest-bearing deposits
658,945
538,262
474,744
Noninterest-bearing deposits
246,569
219,221
201,159
Total deposits
905,514
757,483
675,903
Total shareholders’ equity
107,319
100,126
88,466
The following table sets forth selected ratios as of and for the years ended December 31, 2020, 2019 and 2018. The performance, asset quality and capital ratios are unaudited and
derived from our audited financial statements as of and for the periods presented. Average balances are unaudited and have been calculated using daily averages.
As of or for the Year Ended
December 31,
2020
2019
2018
(Dollars in thousands, except per share data)
Share and Per Share Data:
Earnings per share (basic)
$
2.05
$
0.81
$
3.08
Earnings per share (diluted)
2.05
0.81
3.03
Dividends per share
0.41
0.60
7.71
Book value per share
11.87
9.96
8.68
Tangible book value per share (1)
11.69
9.78
8.49
Weighted average common shares outstanding–basic
9,378,769
10,145,032
8,105,856
Weighted average common shares outstanding–diluted
9,379,154
10,147,311
8,237,638
Shares outstanding at end of period
9,044,765
10,057,506
10,187,500
Selected Ratios:
Return on average:
Assets
2.03
%
1.03
%
3.53
%
Shareholders’ equity
18.82
8.42
33.01
Yield on earning assets
5.67
6.55
6.48
Yield on loans
6.37
7.58
7.58
Yield on loans (excluding loan fee income) (1)
5.76
6.88
6.71
Cost of funds
0.73
1.37
1.11
Cost of interest-bearing deposits
1.05
1.89
1.52
Cost of total deposits
0.73
1.37
1.08
Net interest margin
5.01
5.35
5.49
Net interest margin (excluding loan fee income) (1)
4.48
4.78
4.78
Noninterest expense to average assets
1.85
3.56
2.05
Efficiency ratio
36.03
65.39
37.04
Loans to deposits
92.39
93.38
88.76
Credit Quality Ratios:
Nonperforming assets to total assets
1.63
%
0.38
%
0.35
%
Nonperforming assets to total loans and OREO
1.98
0.47
0.45
Nonperforming loans to total loans
1.98
0.47
0.44
Allowance for loan losses to nonperforming loans
58.29
235.40
299.50
Allowance for loan losses to total loans
1.15
1.11
1.31
Net charge-offs to average loans
0.432
-0.002
0.004
Capital Ratios (Bank) (2) :
Tangible equity to tangible assets
10.42
11.37
11.25
Common equity tier 1 capital ratio
13.51
14.28
14.78
Tier 1 leverage ratio
10.78
11.65
11.26
Tier 1 risk-based capital ratio
13.51
14.28
14.78
Total risk-based capital ratio
14.75
15.42
16.03
Capital Ratios (Company):
Total shareholders’ equity to total assets
10.56
%
11.56
%
11.48
%
Common equity tier 1 capital ratio
13.50
14.11
14.61
Tier 1 leverage ratio
10.78
11.53
11.13
Tier 1 risk-based capital ratio
13.50
14.11
14.61
Total risk-based capital ratio
14.73
15.25
15.86
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As of or for the Year Ended
December 31,
2020
2019
2018
(Dollars in thousands, except per share data)
Share and Per Share Data:
Earnings per share (basic) – S Corp (1)
$
2.76
$
1.48
$
3.18
Earnings per share (basic) – C Corp (1)
2.05
0.81
2.48
Earnings per share (diluted) – S Corp (1)
2.76
1.48
3.13
Earnings per share (diluted) – C Corp (1)
2.05
0.81
2.44
Dividends per share
0.41
0.60
7.71
Book value per share
11.87
9.96
8.68
Tangible book value per share (2)
11.69
9.78
8.49
Weighted average common shares outstanding–basic
9,378,769
10,145,032
8,105,856
Weighted average common shares outstanding–diluted
9,379,154
10,147,311
8,238,753
Shares outstanding at end of period
9,044,765
10,057,506
10,187,500
Selected Ratios:
Return on average:
Assets – S Corp (1)
2.73
%
1.88
%
3.53
%
Assets – C Corp (1)
2.03
1.03
2.75
Shareholders’ equity – S Corp (1)
25.29
15.44
33.01
Shareholders’ equity – C Corp (1)
18.82
8.42
25.69
Yield on earnings assets
5.67
6.55
6.48
Yield on loans
6.37
7.58
7.58
Yield on loans (excluding loan fee income) (2)
5.76
6.88
6.71
Cost of funds
0.73
1.37
1.11
Cost of interest-bearing deposits
1.05
1.89
1.52
Cost of total deposits
0.73
1.37
1.08
Net interest margin
5.01
5.35
5.49
Net interest margin (excluding loan fee income) (2)
4.48
4.78
4.78
Noninterest expense to average assets
1.85
3.56
2.05
Efficiency ratio
36.03
65.39
37.04
Loans to deposits
92.39
93.38
88.76
Credit Quality Ratios:
Nonperforming assets to total assets
1.63
%
0.38
%
0.35
%
Nonperforming assets to total loans and OREO
1.98
0.47
0.45
Nonperforming loans to total loans
1.98
0.47
0.43
Allowance for loan losses to nonperforming loans
58.29
235.40
299.50
Allowance for loan losses to total loans
1.15
1.11
1.31
Net charge-offs to average loans
0.432
-0.002
-0.004
Capital Ratios:
Total shareholders’ equity to total assets
10.56
%
11.56
%
11.48
%
Tangible equity to tangible assets (2)
10.42
11.37
11.25
Common equity tier 1 capital ratio (3)
13.51
14.28
14.78
Tier 1 leverage ratio (3)
10.78
11.65
11.26
Tier 1 risk-based capital ratio (3)
13.51
14.28
14.78
Total risk-based capital ratio (3)
14.75
15.42
16.03
(1)
Represents a non-GAAP financial measure. For 2018, C Corp amounts were calculated based on a combined effective tax rate of 22.19% as if we had been a C Corp for the full year. For 2019
and 2020, S Corp amounts were calculated using an effective tax rate of 0% as if we had been an S Corp for the full year.
(2)
Represents a non-GAAP financial measure. See “GAAP reconciliation and management explanation of non-GAAP financial measures” for a reconciliation of these measures to their most comparable
GAAP measures.
(3)
Ratios are based on Bank level financial information rather than consolidated information.
GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures
Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional
financial measures discussed in this report as being non-GAAP financial measures. We classify a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the
effect of excluding or including amounts, that are included or excluded, as the case may be, in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our
statements of income, balance sheets or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively either financial measures calculated
in accordance with GAAP, operating measures or other measures that are not non-GAAP financial measures or both.
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The non-GAAP financial measures that we discuss in this report should not be considered in isolation or as a substitute for the most directly comparable or other financial measures
calculated in accordance with GAAP. Moreover, the manner in which we calculate the non-GAAP financial measures that we discuss in this report may differ from that of other companies reporting measures with similar names. It is important to understand
how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this report when comparing such non-GAAP financial measures.
Tangible Book Value Per Share . We calculate (1) tangible equity as total shareholders’ equity less goodwill and other intangibles; and (2)
tangible book value per share as tangible equity divided by our shares outstanding at the end of the relevant period. The most directly comparable GAAP financial measure for tangible book value per share is book value per share.
Tangible Shareholders’ Equity to Tangible Assets. We calculate (1) tangible assets as total assets less goodwill and other intangibles; and
(2) tangible shareholders’ equity to tangible assets as tangible equity (as defined in the preceding paragraph) divided by tangible assets at the end of the relevant period. The most directly comparable GAAP financial measure for tangible
shareholders’ equity to tangible assets is total shareholders’ equity to total assets.
We believe that tangible book value per share and tangible shareholders’ equity to tangible assets are measures that are important to many investors in the marketplace who are
interested in changes from period to period in our shareholders’ equity exclusive of changes in intangible assets. Intangible assets have the effect of increasing total shareholders’ equity while not increasing our tangible book value per share or
tangible shareholders’ equity to tangible assets. The following table reconciles, as of the dates set forth below, total shareholders’ equity to tangible shareholders’ equity, total assets to tangible assets and presents tangible book value per share
compared to book value per share and tangible shareholders’ equity to tangible assets to total shareholders’ equity to total assets:
As of December 31,
2020
2019
2018
(Dollars in thousands, except per share data)
Tangible Shareholders’ Equity:
Total shareholders’ equity
$
107,319
$
100,126
$
88,466
Adjustments:
Goodwill and other intangibles
(1,583
)
(1,789
)
(1,995
)
Tangible shareholders’ equity
$
105,736
$
98,337
$
86,471
Tangible Assets:
Total assets
$
1,016,669
$
866,392
$
770,511
Adjustments:
Goodwill and other intangibles
$
(1,583
)
$
(1,789
)
$
(1,995
)
Tangible assets
$
1,015,086
$
864,603
$
768,516
End of period common shares outstanding
9,044,765
10,057,506
10,187,500
Book value per share
$
11.87
$
9.96
$
8.68
Tangible book value per share
$
11.69
$
9.78
$
8.49
Total shareholders’ equity to total assets
10.56
%
11.56
%
11.48
%
Tangible shareholders’ equity to tangible assets
10.42
%
11.37
%
11.25
%
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Exclusion of loan fee income . We calculate (1) yield on loans (excluding loan fee income) as interest income on loans less loan fee income
divided by average total loans and (2) net interest margin (excluding loan fee income) as net interest income less loan fee income divided by average interest-earning assets. The most directly comparable GAAP financial measure for yield on loans
(excluding loan fee income) is yield on loans and for net interest margin (excluding loan fee income) is net interest margin. The following table reconciles, as of the dates set forth below, yield on loans (excluding loan fee income) to yield on
loans and net interest margin (excluding loan fee income) to net interest margin:
As of or for the Year Ended December 31,
2020
2019
2018
(Dollars in thousands)
Loan interest income (excluding loan fee income):
Interest income on loans, including loan fee income
$
52,450
$
48,200
$
44,279
Adjustments:
Loan fee income
(5,035
)
(4,443
)
(5,121
)
Interest income on loans (excluding loan fee income)
$
47,415
$
43,757
$
39,158
Average total loans
$
823,228
$
636,274
$
584,003
Yield on loans
6.37
%
7.58
%
7.58
%
Yield on loans (excluding loan fee income)
5.76
%
6.88
%
6.71
%
Net interest margin (excluding loan fee income):
Net interest income
$
47,161
$
42,193
$
39,631
Adjustments:
Loan fee income
(5,035
)
(4,443
)
(5,121
)
Net interest income (excluding loan fee income)
$
42,126
$
37,750
$
34,510
Average interest-earning assets
$
940,890
$
789,009
$
721,935
Net interest margin
5.01
%
5.35
%
5.49
%
Net interest margin (excluding loan fee income)
4.48
%
4.78
%
4.78
%
One-time executive stock transfer. We had net income of $8.2 million for the year ended December 31, 2019. On September 5, 2019, our largest
shareholders, the Haines Family Trusts, contributed 656,925 of their shares to the Company, approximately 6.5% of shares outstanding. Subsequently, the Company immediately issued those shares to certain executive officers, which was charged as
compensation expense through the income statement of the Company. As part of this transaction, the Company retired 149,425 shares, or $2.6 million, for income and payroll taxes. This previously announced transaction was a one-time, non-cash expense;
however, because the shares were simultaneously contributed into the Company by the Haines Family Trusts, the transaction had a virtual net-zero impact to shareholders’ equity.
Excluding the one-time, non-cash expense related to the stock transfer outlined above, net income would have been $20.0 million for the year ending December 31, 2019. Illustrated below is a
reconciliation of pro forma net income through the year ended December 31, 2019.
For the Year Ended
December 31,
2020
2019
$ Change
% Change
(Dollars in thousands)
Pro Forma Net Income
Total Interest Income
$
53,314
$
51,709
$
1,605
3.10
%
Total Interest Expense
6,153
9,516
(3,363
)
(35.34
%)
Net Interest Margin
47,161
42,193
4,968
11.77
%
Provision for Loan Losses
$
5,350
$
-
$
5,350
Total Noninterest Income
$
1,665
$
1,308
$
357
27.26
%
Total Noninterest Expense
$
17,592
$
28,432
$
(10,840
)
(38.13
%)
Stock Transfer Compensation Expense (1)
--
(11,796
)
11,796
--
Pro Forma Noninterest Expense
$
17,592
$
16,636
$
956
5.75
%
Pro Forma Pre-Tax Income
$
25,884
$
26,866
$
(982
)
(3.65
%)
Pro Forma Income Tax Expense
$
6,618
$
6,836
$
(218
)
(3.19
%)
Pro Forma Net After-Tax Income
$
19,266
$
20,030
$
(764
)
(3.81
%)
(1)
Compensation expense includes $168,000 in payroll taxes.
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CAUTIONARY NOTE ABOUT FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and
our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,”
“estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These
forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently
uncertain and beyond our control. Accordingly, we caution that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we
believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited
to, the following:
• our ability to effectively execute our expansion strategy and manage our growth, including identifying and consummating
suitable acquisitions;
• business and economic conditions, particularly those affecting our market areas of Oklahoma, the Dallas/Fort Worth
metropolitan area and Kansas, including a decrease in or the volatility of oil and gas prices or agricultural commodity prices within the region;
• the geographic concentration of our markets in Oklahoma, the Dallas/Fort Worth metropolitan area and Kansas;
• high concentrations of loans secured by real estate and energy located in our market areas;
• risks associated with our commercial loan portfolio, including the risk for deterioration in value of the general business
assets that secure such loans;
• risks related to the significant amount of credit that we have extended to a limited number of borrowers;
• our ability to maintain our reputation;
• our ability to successfully manage our credit risk and the sufficiency of our allowance;
• reinvestment risks associated with a significant portion of our loan portfolio maturing in one year or less;
• our ability to attract, hire and retain qualified management personnel;
• our dependence on our management team, including our ability to retain executive officers and key employees and their
customer and community relationships;
• interest rate fluctuations, which could have an adverse effect on our profitability;
• competition from banks, credit unions and other financial services providers;
• system failures, service denials, cyber-attacks and security breaches;
• our ability to maintain effective internal control over financial reporting;
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• employee error, fraudulent activity by employees or customers and inaccurate or incomplete information about our customers
and counterparties;
• increased capital requirements imposed by banking regulators, which may require us to raise capital at a time when capital
is not available on favorable terms or at all;
• costs and effects of litigation, investigations or similar matters to which we may be subject, including any effect on our
reputation;
• severe weather, acts of god, acts of war, pandemics or terrorism;
• impact of COVID-19, the coronavirus, on the United States economy, particularly the hospitality industry;
• compliance with governmental and regulatory requirements, including the Dodd-Frank and Wall Street Consumer Protection Act,
or Dodd-Frank Act, and other regulations relating to banking, consumer protection, securities and tax matters;
• changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax,
trade, monetary and fiscal matters, including the policies of the Federal Reserve and as a result of initiatives of the Trump administration; and
• other factors that are discussed in the section entitled “Risk Factors,” beginning on page 11.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this report. Because of these risks and other
uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this report. In addition, our past results of operations are not
necessarily indicative of our future results. Accordingly, no forward-looking statements should be relied upon, which represent our beliefs, assumptions and estimates only as of the dates on which such forward-looking statements were made. Any
forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as
required by law.