What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-24 compared with 2022-03-31 · 427 added, 411 removed, 838 unchanged (50% of the section changed)

Financial Statements

and Supplementary Data

Financial Statements and Supplementary Data

Consolidated Financial Statements Index

6 unchanged sentences

Notes to Consolidated Financial Statements

Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Shareholders, Board of Directors, and Audit Committee

City, Oklahoma

Oklahoma City, Oklahoma

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Bank7 Corp.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated

statements of comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, referred to as the “financial statements”).

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of

comprehensive income, shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, referred to as the “financial statements”).

In our opinion, the

consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in

the three-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and its cash flows for each of

the years in the three-year period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent

with respect to the Company in accordance with the U.S.

Our responsibility is to express an opinion on the Company’s financial statements based

on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect

to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about

whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and

performing procedures that respond to those risks.

As part of our

audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we

express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and

significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe our audits provide a reasonable basis for our opinion.

(Formerly, BKD,LLP)

/s/ FORVIS, LLP

We have served as the Company’s auditor since 2011

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Interest-bearing time deposits in other banks

Available-for-sale debt securities

Loans, net of allowance for loan losses of $ 14,734 and $ 10,316 at December 31, 2022 and December 31, 2021, respectively

Loans held for sale, at fair value

Loans held for sale

Premises and equipment, net

Available-for-sale debt securities

Nonmarketable equity securities

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Total deposits

Income taxes payable

Interest payable and other liabilities

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shares issued and outstanding:

9,071,417 and 9,044,765 at December 31,

2021 and December 31, 2020 respectively

9,131,973 and 9,071,417 at December 31, 2022 and December

31, 2021 respectively

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total shareholders’ equity

Total liabilities and shareholders’ equity

See Notes to Consolidated Financial Statements

See accompanying notes to Consolidated Financial Statements

Consolidated Statements of Comprehensive Income

(Dollar amounts in thousands, except per share data)

Twelve Months Ended

Year ended December 31,

Interest Income

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Noninterest Income

Secondary market income

Mortgage lending income

Loss on sales, prepayments, and calls of available-for-sale debt securities

Service charges on deposit accounts

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Other Comprehensive Income

Unrealized gains on securities, net of tax benefit of $ 29,000

Reclassification adjustment for gains included in net income

Other comprehensive gain, net of tax benefit of $ 29,000

Unrealized gains(losses) on securities, net of tax benefit of $ 2.8

million, $ 0 , and $ 0

for the years ended December 30, 2022 , 2021 , and 2020 , respectively

Reclassification adjustment for realized loss included in net income net of tax of $ 31 ,

$ 0 , and $ 0

the years ended 2022 , 2021 ,

and 2020 , respectively

Other comprehensive (loss) income

Comprehensive Income

See Notes to Consolidated Financial Statements

See accompanying notes to Consolidated Financial Statements

Consolidated Statements of Shareholders’ Equity

(Dollar Amounts in thousands, except share data)

Twelve Months Ended

(Dollar amounts in thousands, except per share data)

Common Stock (Shares)

Balance at beginning of period

Exercise of employee stock options

Shares issued for restricted stock units

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Balance at beginning of period

Shares purchased and retired

Stock-based compensation expense

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Common stock acquired and canceled

Cash dividends declared ($ 0.45 , $ 0.41 , $ 0.60 per share) December 31, 2021 and 2020, respectively)

Cash dividends declared ($ 0.52 , $ 0.45 , $ 0.41 per share)

December 31, 2022, 2021, and 2020, respectively

Balance at end of period

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income(Loss)

Balance at beginning of period

Net unrealized gain

Comprehensive income(loss)

Balance at end of period

Total Shareholders’ equity

See Notes to Consolidated Financial Statements

See accompanying notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows

(Dollar amounts in thousands)

For the Twelve Months Ended December 31,

Year Ended December 31,

Operating Activities

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Gain on sales of loans

Net loss on sale of available for sale debt securities

Stock-based compensation expense

(Gain) loss on sale of premises and equipment

Gain on sale of premises and equipment

Cash receipts from the sale of loans originated for sale

Cash disbursements for loans originated for sale

Gain on sale of other real estate owned

Deferred income tax (benefit)

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Purchases of interest-bearing time deposits in other banks

Proceeds from sale of securities available-for-sale

Maturities, prepayments and calls of securities available-for-sale

Proceeds from sale of available-for-sale debt securities

Maturities, prepayments and calls of available-for-sale debt securities

Purchases of available-for-sale debt securities

Net change in loans

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Change in nonmarketable equity securities

Proceeds from sale of foreclosed assets

Net cash used in investing activities

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Cash distributions

Net cash settlement of equity compensation

Common stock issued for restricted stock units

Net cash provided by financing activities

Increase in Cash and Due from Banks

Net Increase/(Decrease) in Cash and Due from Banks

Cash and Due from Banks, Beginning of Period

4 unchanged sentences

Dividends declared and not paid

Non-cash stock contribution

Measurement period goodwill adjustment

Supplemental Disclosure of Investing Activities

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Fair value of liabilities assumed in acquisition

See Notes to Consolidated Financial Statements

See accompanying notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

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Nature of Operations

(the “Company”), formerly known as Haines Financial Corp, is a bank holding company whose principal activity is the ownership and

management of its wholly owned subsidiary, Bank7 (the “Bank”).

The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers located in Oklahoma, Kansas, and Texas.

subject to competition from other financial institutions.

(the “Company”) is a bank holding company whose principal activity is the ownership and management of its wholly owned subsidiary,

Bank7 (the “Bank”).

The Bank is primarily engaged in providing a full range of banking and financial services to individual and corporate customers located in Oklahoma, Texas, and Kansas.

The Bank is subject to competition from other financial

institutions.

The Company is subject to the regulation of certain federal agencies and undergoes periodic examinations by those regulatory authorities.

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All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain amounts

from 2020 and 2019 have been reclassified to conform with the 2021 presentation.

These reclassifications were not material to the Company’s financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”)

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period.

and expenses during the reporting period.

Actual results could differ from those estimates.

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The Company considers all liquid investments with original maturities of three months or less to be cash equivalents.

Included in cash and cash

equivalents is $ 270 ,000 restricted cash related to the acquisition of Watonga Bancshares, Inc.

Included in cash and

cash equivalents is $ 267 ,000 restricted cash related to the acquisition of Watonga Bancshares, Inc.

Interest-Bearing Time Deposits in Other Banks

Interest-bearing time deposits in other banks totaled $ 5.5 million and $ 3.2 million at December 31, 2022 and December 31, 2021 respectively, and have

original maturities generally ranging from one to five years , and are carried at cost.

original maturities generally ranging from one to five years .

Available-for-Sale Debt Securities

Available-for-sale debt securities are carried at fair value with unrealized gains and losses excluded from earnings and reported separately in

other comprehensive income.

Available-for-sale debt securities are carried at fair value with unrealized gains and losses excluded from earnings and reported separately

in other comprehensive income.

The Company currently has no securities designated as trading or held-to-maturity.

Interest income is

recognized at the coupon rate adjusted for amortization and accretion of premiums and discounts.

Discounts are accreted into interest income over the estimated life of the related security and premiums are amortized against income to the earlier

of the call date or weighted average life of the related security using the interest method.

income is recognized at the coupon rate adjusted for amortization and accretion of premiums and discounts.

Discounts are accreted into interest income over the estimated life of the related security and premiums are amortized against income to

the earlier of the call date or weighted average life of the related security using the interest method.

Gains and losses on the sale of securities are recorded on the trade date and are determined using the specific identification method.

They are included

in non-interest income or expense and, when applicable, are reported as a reclassification adjustment in other comprehensive income.

are included in noninterest income or expense and, when applicable, are reported as a reclassification adjustment in other comprehensive income.

Notes to Consolidated Financial Statements

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fair value of individual available-for-sale securities below their cost that are other-than-temporary result in write-downs of the individual securities to their fair value.

The Company monitors the investment security portfolio for impairment

on an individual security basis and has a process in place to identify securities that could potentially have a credit impairment that is other than temporary.

This process involves analyzing the length of time and the extent to which the fair

value has been less than the amortized cost basis, the market liquidity for the security, the financial condition and near-term prospects of the issuer, expected cash flows, and the Company’s intent and ability to hold the investment for a

period of time sufficient to recover the temporary impairment.

The Company monitors the investment security portfolio for

impairment on an individual security basis and has a process in place to identify securities that could potentially have a credit impairment that is other than temporary.

This process involves analyzing the length of time and the extent to

which the fair value has been less than the amortized cost basis, the market liquidity for the security, the financial condition and near-term prospects of the issuer, expected cash flows, and the Company’s intent and ability to hold the

investment for a period of time sufficient to recover the temporary impairment.

A decline in value due to a credit event that is considered other-than-temporary is recorded as a loss in noninterest income.

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All interest accrued but not collected for loans that are placed on nonaccrual or charged off are reversed against interest income.

on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future

payments are reasonably assured.

interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual.

Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current

and future payments are reasonably assured.

Loans acquired through business combinations are required to be carried at fair value as of the date of the combination.

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unrealized losses, if any, are recognized through a valuation allowance by charges to noninterest income.

Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination of

the loan and are recognized in noninterest income upon the sale of the loan.

Gains and losses on loan sales are recorded in noninterest income and direct loan origination costs and fees are deferred at origination

of the loan and are recognized in noninterest income upon the sale of the loan.

Allowance for Loan Losses

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Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio,

adverse situations that may affect the borrower’s ability to repay and estimated value of any underlying collateral and prevailing economic conditions.

This evaluation is inherently subjective as it requires estimates that are susceptible to

significant revision as more information becomes available.

portfolio, adverse situations that may affect the borrower’s ability to repay and estimated value of any underlying collateral and prevailing economic conditions.

This evaluation is inherently subjective as it requires estimates that are

susceptible to significant revision as more information becomes available.

Notes to Consolidated Financial Statements

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Management determines the significance of payment delays and payment

shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the

shortfall in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest

rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral-dependent.

the shortfall in relation to the principal and interest owed.

Impairment is measured on a loan-by-loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective

interest rate, the loan’s obtainable market price or the fair value of the collateral if the loan is collateral-dependent.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience

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Premises and equipment are stated at cost, less accumulated depreciation.

Depreciation is charged to operating expense and is computed using the

straight-line method over the estimated useful lives of the assets.

Depreciation is charged to operating expense and is computed using

the straight-line method over the estimated useful lives of the assets.

Maintenance and repairs are charged to expense as incurred while improvements are capitalized.

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Intangible assets totaled $ 1.3

million and goodwill, net of accumulated amortization totaled $ 8.5 million for the year ended December 31, 2021, compared to intangible

assets of $ 572 ,000 and goodwill, net of accumulated amortization of $ 1.0 million for the year ended December 31, 2020.

The increase is due to core deposit intangible acquired and goodwill recognized as a result of the acquisition of Watonga

Bancshares, Inc.

million and goodwill, net of accumulated amortization totaled $ 8.6 million for the year ended December 31, 2022, compared to

intangible assets of $ 1.6 million and goodwill, net of accumulated amortization of $ 8.5 million for the year ended December 31, 2021.

The decrease in intangible assets is due to amortization of core deposit intangibles and the increase in goodwill

recognized is due to the resolution of contractual obligations, assessment of fair value of premises and equipment, and tax provision adjustments that relate to the acquisition of Watonga Bancshares, Inc.

on December 9, 2021.

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value of

the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill resulting from a business combination represents the excess of the fair value of the consideration transferred over the fair value

of the net assets acquired and liabilities assumed as of the acquisition date.

Goodwill is tested annually for impairment or more frequently if other impairment indicators are present.

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Notes to Consolidated Financial Statements

The Company uses a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements tax positions taken or

expected to be taken on a tax return.

The Company uses a comprehensive model for recognizing, measuring, presenting, and disclosing in the financial statements tax positions taken

or expected to be taken on a tax return.

A tax position is recognized as a benefit only if it is ‘‘more likely than not’’ that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur.

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2022, 2021 and 2020, the Company recognized no interest and penalties.

We or one of our subsidiaries file income tax returns in the U.S.

The Company or one

of its subsidiaries file income tax returns in the U.S.

federal jurisdiction and various state jurisdictions.

We are no longer

subject to U.S.

We are no longer subject to U.S.

federal or state tax examinations for years before 2019.

Comprehensive Income

Comprehensive income includes all changes in stockholders' equity during a period, except those resulting from transactions with stockholders.

Comprehensive income includes all changes in stockholders’ equity during a period, except those resulting from transactions with

stockholders.

Besides net income, other components of the Company’s comprehensive income includes the after tax effect of changes in the net unrealized gain/loss on debt securities available-for-sale.

The Company's policy is to release material stranded tax

effects included in accumulated other comprehensive income on a specific identification basis.

The Company’s policy is to release

material stranded tax effects included in accumulated other comprehensive income on a specific identification basis.

Reclassifications

Certain reclassifications have been made to the 2021 consolidated financial statements to conform to the 2022 consolidated financial statement

presentation.

These reclassifications had no effect on net earnings.

Revenue Recognition

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Service and transaction fees on depository accounts

Customers often pay certain fees to the bank to access the cash on deposit including certain non-transactional fees such as account maintenance

or dormancy fees, and certain transaction based fees such as ATM, wire transfer, or foreign exchange fees.

Customers often pay certain fees to the bank to access the cash on deposit including certain non-transactional fees such as account

maintenance or dormancy fees, and certain transaction based fees such as ATM, wire transfer, or foreign exchange fees.

Revenue is recognized when the transactions occur or as services are performed over primarily monthly or quarterly periods.

typically received in the period the transactions occur, or in some cases, within 90 days of the service period.

Payment is typically received in the period the transactions occur, or in some cases, within 90 days of the service period.

Interchange Fees

3 unchanged sentences

Interchange fees are settled and recognized on a daily or monthly basis.

Interchange fees are included with noninterest income and recorded net of related expenses as the Bank acts as an agent, introducing the customer transactions to the

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

Standards Adopted During Current Period:

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).

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The guidance in the ASU is effective for annual reporting periods beginning after December 15, 2021.

Additionally, a modified retrospective transition approach is

required for a leases existing at the earliest comparative period presented.

Management is in the process of planning implementation of this ASU;

however, it is not expected to have a significant impact on the Company’s financial condition,

results of operation, or capital position, but will impact the presentation on the balance sheet of the Company’s current operating leases.

The Company will adopt this ASU in the fourth quarter of 2022.

Additionally, a modified retrospective approach is required for

leases existing at the earliest comparative period presented.

The Company adopted this new standard on January 1, 2022, using a modified retrospective transition approach and recognized right-of-use lease assets and related lease liabilities

totaling $ 2.2 and $ 2.2

million, respectively.

The Company elected to apply certain practical adoption expedients provided under the updates whereby it did not reassess initial direct costs for any existing leases.

No cumulative-effect adjustment was recognized as the amount was not material, and the impact on our results of operations and cash flows was

also not material.

No prior periods were adjusted.

See Note (19) for the financial position impact and additional disclosures.

Standards Not Yet Adopted:

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).

The ASU requires the replacement of the current

incurred loss model with an expected loss model, referred to as the current expected credit loss (CECL) model.

The guidance in the ASU is effective for reporting periods beginning after December 15, 2022 with a cumulative-effect adjustment to

retained earnings required for the first reporting period.

Management is in the process of planning implementation, and has established a committee to assist in implementation and evaluation.

The Company will adopt this ASU in the first quarter

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) which provides relief for companies preparing for discontinuation

of interest rates such as the London Interbank Offered Rate (“LIBOR”).

On March 5, 2021, the U.K.

Financial Conduct Authority (“FCA”) announced that the majority of LIBOR rates will no longer be published after December 31, 2021, although a

number of key settings will continue until June 2023, to support the rundown of legacy contracts only.

As a result, LIBOR should be discontinued as a reference rate.

The main provisions for contract modifications include optional relief by

allowing the modification as a continuation of the existing contract without additional analysis and other optional expedients regarding embedded features.

ASU 2020-04 was effective upon issuance and generally can be applied through December 31,

The adoption of ASU 2020-04 did not significantly impact the financial statements.

The guidance in the ASU is effective for

reporting periods beginning after December 15, 2022 with a cumulative-effect adjustment to retained earnings required for the first reporting period.

The ASU requires a financial asset measured at amortized cost basis to be presented at the net

amount expected to be collected.

The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the

collectability of the reported amount.

The ASU requires enhanced disclosures related to the significant estimates and judgements used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s

In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration.

The ASU will be effective for the Company on January 1, 2023.

believes under current assumptions the adoption will result in an immaterial change in our allowance for loan loss.

The Company is currently finalizing the execution of its implementation controls and processes, the ultimate impact of the

adoption of the ASU as of January 1, 2023 could differ from its current assumptions.

Furthermore, the ASU will necessitate that the Company establish an allowance for expected credit losses for certain debt securities and other financial

The Company expects to adopt the standard in the first quarter of 2023.

Legislative and Regulatory Developments

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law.

It contains substantial tax and

spending provisions intended to address the impact of the COVID-19 pandemic.

The goal of the CARES Act is to prevent a severe economic downturn through various measures, including direct financial aid to American families and economic stimulus to

significantly impacted industry sectors.

The CARES Act also includes a range of other provisions designed to support the U.S.

economy and mitigate the impact of COVID-19 on financial institutions and their customers, including through the

authorization of various programs and measures that the U.S.

Department of the Treasury, the Small Business Administration, the Federal Reserve Board, and other federal banking agencies may or are required to implement.

Further, in response to

the COVID-19 outbreak, the Federal Reserve Board has implemented or announced a number of facilities to provide emergency liquidity to various segments of the U.S.

economy and financial market.

In April 2020, the Company began originating loans to qualified small businesses under the Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA).

PPP loans are fully guaranteed

by the SBA and thus have a zero percent risk weight under applicable risk-based capital rules.

As of December 31, 2021, the Company had 43

PPP loans with balances totaling $ 18.7 million, and 166 PPP loans with balances totaling $ 44.9 million as of December 31, 2020.

The Company recognized

$ 2.3 million in fee income during the year ended December 31, 2021, with $ 269,000 remaining to be recognized, as compared to $ 1.4 million recognized

and $ 442,000 to be recognized as of December 31, 2020 .

In April 2020, the Company began originating loans to qualified small businesses under the Paycheck Protection Program (PPP) administered by

the Small Business Administration (SBA).

PPP loans are fully guaranteed by the SBA and thus have a zero percent risk weight under applicable risk-based capital rules.

As of December 31, 2022, the Company had two PPP loans with balances totaling $ 2.6

million, and 43 PPP loans with balances totaling $ 18.7 million as of December 31, 2021.

The Company recognized $ 219 ,000 in fee income during the

year ended December 31, 2022, with $ 50,000 remaining to be recognized, as compared to $ 2.3 million recognized and $ 269,000 to be recognized as of

December 31, 2021.

Notes to Consolidated Financial Statements

The extent to which the COVID-19 pandemic impacts the Company’s business, liquidity, asset valuations, results of operations, and financial

condition, as well as its regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities and other third

parties in response to the pandemic.

Moreover, the effects of the COVID-19 pandemic may have a material adverse effect on all or a combination of valuation impairments on the Company's intangible assets, loans, or deferred tax assets.

Recent Events, Including Mergers and Acquisitions

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On December 9, 2021, the Company acquired 100 % of the outstanding equity of Watonga Bancshares, Inc.

(“Watonga”), the bank holding company for Cornerstone Bank, for $ 29.3

million in cash.

(“Watonga”), the bank holding company for Cornerstone Bank, for $ 29.3 million in cash.

Immediately following the acquisition, Watonga was dissolved and Cornerstone Bank merged with and into Bank7.

A preliminary summary of the fair value of assets acquired and liabilities assumed from Watonga are as follows:

A summary of the fair value of assets acquired and liabilities assumed from Watonga are as follows:

(in thousands)

2 unchanged sentences

Cash and cash equivalents

Investment securities available-for-sale

Available-for-sale debt securities

Federal funds sold

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Consideration transferred

With the acquisition of the Watonga, the Company continues to expand in the Oklahoma market and increases the Company’s core

None of the goodwill associated with the acquisition is expected to be deductible for income tax purposes.

All goodwill was allocated to the Company’s only reporting unit, which is the Company as a whole.

Notes to Consolidated Financial Statements

The Company engaged a third-party specialist to develop the fair value estimate of Watonga’s loan portfolio as of the

acquisition date in accordance with ASC 820.

Inputs and assumptions used in the fair value estimate of the loan portfolio, includes interest rate, servicing, credit and liquidity risk, and required equity return.

The fair value of loans was

calculated using a discounted cash flow analysis based on the remaining maturity and repricing terms.

Cash flows were adjusted by estimating future credit losses and the rate of prepayments.

Projected monthly cash flows were then discounted to

present value using a risk-adjusted market rate for similar loans.

There was no carryover of Watonga’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value as of the acquisition

Goodwill increased $ 124 ,000

for the twelve months ended December 31, 2022, respectively, related to the resolution of contractual obligations, assessment of the fair value of premises and equipment, and tax provision adjustments.

The Company engaged a

third-party specialist to develop the fair value estimate of Watonga’s loan portfolio as of the acquisition date in accordance with ASC 820.

Inputs and assumptions used in the fair value estimate of the loan portfolio, includes interest rate,

servicing, credit and liquidity risk, and required equity return.

The fair value of loans was calculated using a discounted cash flow analysis based on the remaining maturity and repricing terms.

Cash flows were adjusted by estimating future credit

losses and the rate of prepayments.

Projected monthly cash flows were then discounted to present value using a risk-adjusted market rate for similar loans.

There was no carryover of Watonga’s allowance for loan losses associated with the loans that were acquired, as the loans were initially recorded at fair value as of the acquisition date.

None of the acquired loans were deemed purchased-credit impaired as of the acquisition date.

The core deposit intangible asset recognized is being amortized over its estimated useful life of approximately 10 years.

The fair value of retail demand and interest-bearing deposit accounts was assumed to approximate the carrying value as these accounts have no

stated maturity and are payable on demand.

The fair value of time deposits was estimated by discounting the contractual future cash flows using market rates offered for time deposits of similar remaining maturities.

The Company has determined the above noted acquisition constitutes a business combination as defined by ASC Topic 805, which

establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired and the liabilities assumed.

The Company has recorded the assets purchased and liabilities

assumed at their estimated fair value in accordance with ASC Topic 805.

The core deposit

intangible asset recognized is being amortized over its estimated useful life of approximately 10 years.

The fair value of retail

demand and interest-bearing deposit accounts was assumed to approximate the carrying value as these accounts have no stated maturity and are payable on demand.

The fair value of time deposits was estimated by discounting the contractual future

cash flows using market rates offered for time deposits of similar remaining maturities.

The Company has

determined the above noted acquisition constitutes a business combination as defined by ASC Topic 805, which establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the

identifiable assets acquired and the liabilities assumed.

The Company has recorded the assets purchased and liabilities assumed at their estimated fair value in accordance with ASC Topic 805.

As of the acquisition

date, the Company evaluated $ 117.3 million of net loans ($ 118.5 million gross loans less $ 1.2 million discount) purchased in conjunction with the acquisition of

Watonga Bancshares, Inc.

date, the Company evaluated $ 117.3 million of net loans ($ 118.5 million gross loans less $ 1.2 million discount) purchased

in conjunction with the acquisition of Watonga Bancshares, Inc.

in accordance with the provisions of FASB ASC Topic 310-20, Nonrefundable Fees and Other Costs.

As of December 31, 2021, the net loan balance of the ASC Topic 310-20 purchased loans is $ 114.6 million ($ 115.8 million gross loans

less $ 1.2 million discount).

The fair value discount is being accreted into interest income over the weighted average life of the loans

using a constant yield method.

The Company acquired $ 86.2 million in available-for-sale debt securities ($ 86.6

less $ 375 ,000 discount) valued at fair value as of the acquisition date.

As of the acquisition

date, the Company acquired $ 8.4 million ($ 6.9

million, plus $ 1.5 million premium) of premises and equipment evaluated at appraised value

The fair values of assets acquired and liabilities assumed are preliminary and based on valuation estimates and assumptions.

accounting for business combinations require estimates and judgments regarding expectations of future cash flows of the acquired business, and the allocations of those cash flows to identifiable tangible and intangible assets.

The estimates and

assumptions underlying the preliminary valuations are subject to collection of information necessary to complete the valuations (specifically related to projected financial information) within the measurement periods, which are up to one year from

the acquisition date.

Although the Company does not currently expect material changes to the initial value of net assets acquired, the Company continues to evaluate assumptions related to the valuation of the assets acquired and liabilities assumed.

Any adjustments to our estimates of purchase price allocation will be made in the periods in which the adjustments are determined, and the cumulative effect of such adjustments will be calculated as if the adjustments had been completed as of the

acquisition date.

Notes to Consolidated Financial Statements

As of December 31, 2022, the net loan balance of the ASC Topic 310-20 purchased loans

is $ 63.0 million ($ 63.8

million gross loans less $ 743,000 discount).

The fair value discount is being accreted into interest income over the weighted average

life of the loans using a constant yield method.

Summary of Unaudited Pro Forma Information

The following table presents unaudited pro-forma information as if the acquisition of Watonga had occurred on January 1, 2020.

This pro-forma information gives effect

to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles and related income tax effects and is based on our historical results for the periods presented.

Transaction-related

costs related to each acquisition are not reflected in the pro-forma amounts.

The pro-forma information does not necessarily reflect the results of operations that would have occurred had the Company acquired Watonga at the beginning of fiscal year

This pro-forma

information gives effect to certain adjustments, including purchase accounting fair value adjustments, amortization of core deposit and other intangibles and related income tax effects and is based on our historical results for the periods

Transaction-related costs related to each acquisition are not reflected in the pro-forma amounts.

The pro-forma information does not necessarily reflect the results of operations that would have occurred had the Company acquired

Watonga at the beginning of fiscal year 2020.

Cost savings are also not reflected in the unaudited pro-forma amounts.

Actual from Acquisition Date

through December 31, 2021

Actual from Acquisition

December 31, 2021

Pro-Forma for Year Ended December 31,

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Pro-forma earnings per share:

Acquisition costs, which primarily consists of professional services, are expensed as incurred as a component of non-interest

The Company incurred total acquisition costs of $ 712 ,000 during the year ended December 31, 2021.

Subsequent Events

Subsequent to year-end, the Company completed the sale of a bank building acquired in the acquisition of Watonga Bancshares on

March 17, 2022 for the amount of $ 3.73 million.

The Company evaluated subsequent events through the date the consolidated financial statements were issued.

There were no

subsequent events requiring recognition or disclosure.

Notes to Consolidated Financial Statements

Restriction on Cash and Due from Banks

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commons shares outstanding during each period, adjusted for the effect of dilutive potential common shares, such as restricted stock awards and nonqualified stock options, calculated using the treasury stock method.

Notes to Consolidated Financial Statements

The following table shows the computation of basic and diluted earnings per share:

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Earnings per common share

Nonqualified stock options outstanding of 264,000 , 185,250 and 163,000 as

of December 31, 2021, 2020 and 2019, respectively, have not been included in diluted earnings per share because to do so would have been antidilutive for the periods presented.

The following have not been included in diluted earnings per share because to do so would have been antidilutive for the periods presented:

Nonqualified stock

options outstanding of 5,000 , 264,000 , and 185,250 as of December 31, 2022, 2021, and 2020,

respectively;

Restricted stock units outstanding of 0 , 0 , and 10,000 as of December 31, 2022, 2021, and 2020,

respectively.

Notes to Consolidated Financial Statements

Debt Securities

The following table summarizes the amortized cost and fair value of debt securities available-for-sale at December 31, 2021 and the corresponding amounts of gross

unrealized gains and losses recognized in accumulated other comprehensive income:

The following table summarizes the amortized cost and fair value of debt securities available-for-sale at December 31, 2022 and December 31, 2021, and the

corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income:

(in thousands)

Amortized Cost

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Gross Unrealized

Available-for-sale

Available-for-sale as of December 31, 2022

Federal agencies

1 unchanged sentence

State and political subdivisions

Corporate debt securities

Total available-for-sale

Total debt securities

(in thousands)

Amortized Cost

Gross Unrealized

Available-for-sale as of December 31, 2021

Federal agencies

Mortgage-backed securities (1)

State and political subdivisions

Corporate debt securities

Total available-for-sale

Total debt securities

(1) All of our mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S.

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government-sponsored entities.

The amortized cost and estimated fair value of investment securities at December 31, 2021, by contractual maturity, are shown below.

The expected life of mortgage-backed

securities will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans with or without call or prepayment penalties.

(2) Included in mortgage-backed securities is

$ 27.90 million of residential mortgage-backed securities and $ 15.05 million of commerical mortgage-backed securities.

Notes to Consolidated Financial Statements

The amortized cost and estimated fair value of investment securities at December 31, 2022 and December 31, 2021, by contractual maturity, are shown below.

life of mortgage-backed securities will differ from contractual maturities because borrowers may have the right to call or prepay the underlying mortgage loans with or without call or prepayment penalties.

(in thousands)

Amortized Cost

Available-for-sale

Available-for-sale as of December 31, 2022

Due in one year or less

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Total available-for-sale

(1) All of our mortgage-backed securities and collateralized mortgage obligations are issued and/or guaranteed by U.S.

government agencies or U.S.

government-sponsored entities.

There were no holdings of securities of any issuer in an

amount greater than 10% of stockholders equity at December 31, 2021

There were no realized gains and losses from the sale

of investment securities for the year ended December 31, 2021.

(in thousands)

Amortized Cost

Available-for-sale as of December 31, 2021

Due in one year or less

Due after one year through five years

Due after five years through ten years

Due after ten years

Mortgage-backed securities

Total available-for-sale

There were no holdings of securities of any issuer in

an amount greater than 10% of stockholders equity at December 31, 2022.

The following table presents a summary of realized gains and losses from the sale, prepayment and call of debt securities for the twelve months ended December 31,

2022 and December 31, 2021.

December 31, 2022

December 31, 2021

(in thousands)

Proceeds from sales, prepayments and calls

Gross realized gains on sales, prepayments and calls

Gross realized losses on sales, prepayments and calls

Total realized (losses), net

The following table details book value of pledged securities as of December 31, 2022:

(in thousands)

Book value of pledged securities

Notes to Consolidated Financial Statements

The following table details gross unrealized losses and fair values of investment securities aggregated by investment category and length of time that the individual

securities have been in a continuous unrealized loss position at December 31, 2021.

As of December 31, 2021, the Company had the ability and intent to hold the debt securities classified as available-for-sale for a period of time sufficient for a

recovery of cost.

The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying debt securities were acquired as a result of the acquisition of Watonga Bancshares, Inc.

on December 9, 2021.

The fair value of those debt securities having unrealized losses is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline.

Management has no intent or requirement to

sell before the recovery of the unrealized loss;

therefore, no impairment loss was realized in the Company’s consolidated statement of

comprehensive income.

securities have been in a continuous unrealized loss position at December 31, 2022 and December 31, 2021.

As of December 31, 2022, the Company had the ability and intent to hold the debt securities classified as available-for-sale for a period of

time sufficient for a recovery of cost.

The unrealized losses are due to increases in market interest rates over the yields available at the time the underlying debt securities were purchased and acquired.

The fair value of those debt securities

having unrealized losses is expected to recover as the securities approach their maturity date or repricing date, or if market yields for such investments decline.

Management has no intent or requirement to sell before the recovery of the

unrealized loss;

therefore, no impairment loss was realized in the Company’s consolidated statement of comprehensive income.

Less than Twelve Months

3 unchanged sentences

Gross Unrealized

(in thousands, except number of securities)

Available-for-sale

(in thousands)

Available-for-sale as of December 31, 2022

Federal agencies

Mortgage-backed securities

State and political subdivisions (1)

Corporate debt securities

Total available-for-sale

Less than Twelve Months

Twelve Months or Longer

Gross Unrealized

(in thousands)

Available-for-sale as of December 31, 2021

Federal agencies

Mortgage-backed securities

State and political subdivisions (1)

Corporate debt securities

Total available-for-sale

(1) Of our state and political subdivisions securities $ 25.02 million are rate BBB+ or better and $ 3.34 million are not rated.

Notes to Consolidated Financial Statements

Loans and Allowance for Loan Losses

A summary of loans at December 31, 2022 and December 31, 2021, are as follows (dollars in thousands):

Notes to Consolidated Financial Statements

Construction & development

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Less deferred loan fees

Included in the commercial &

industrial loan balance at December 31, 2021 and December 31, 2020, are $ 18.7 million and $ 44.9 million of loans that were originated under the SBA PPP program, respectively.

Included in the

commercial & industrial loan balance at December 31, 2022 and December 31, 2021, are $ 2.6 million and $ 18.7 million of loans that were originated under the SBA PPP program, respectively.

Notes to Consolidated Financial Statements

The following table presents, by portfolio segment, the activity in the

allowance for loan losses for the years ended December 31, 2021, 2020, and 2019 (dollars in thousands):

The following table presents, by portfolio segment, the

activity in the allowance for loan losses for the years ended December 31, 2022, 2021, and 2020 (dollars in thousands):

Construction &

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Ending balance

Individually evaluated for

Collectively evaluated for

Individually evaluated for impairment

Collectively evaluated for impairment

Ending balance

Individually evaluated for

Collectively evaluated for

Individually evaluated for impairment

Collectively evaluated for impairment

December 31, 2021

1 unchanged sentence

Ending balance

Individually evaluated for

Collectively evaluated for

Individually evaluated for impairment

Collectively evaluated for impairment

Ending balance

Individually evaluated for

Collectively evaluated for

Individually evaluated for impairment

Collectively evaluated for impairment

Notes to Consolidated Financial Statements

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impacted by economic conditions within the Company’s market areas that might impact either property values or a borrower’s personal income.

Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large

number of borrowers.

Commercial real estate loans in this category typically involve larger principal amounts and are repaid primarily from the cash flow of a borrower’s principal business operation, the sale of the real estate or income

independent of the loan purpose.

Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a

large number of borrowers.

income independent of the loan purpose.

Credit risk in these loans is driven by the creditworthiness of a borrower, property values, the local economy and other economic conditions impacting a borrower’s business or personal income.

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The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation.

Credit risk in these loans is driven by

creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Agricultural – Loans secured by agricultural assets are generally made for the purpose of

acquiring land devoted to crop production, cattle or poultry or the operation of a similar type of business on the secured property.

Sources of repayment for these loans generally include income generated from operations of a business on the

property, rental income or sales of the property.

Credit risk in these loans may be impacted by crop and commodity prices, the creditworthiness of a borrower, and changes in economic conditions which might affect underlying property values and

the local economies in the Company’s market areas.

Consumer – The consumer loan portfolio consists of various term and line of credit loans

such as automobile loans and loans for other personal purposes.

Credit risk in these loans is driven

by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

Agricultural – Loans secured by agricultural assets are generally made for the purpose

of acquiring land devoted to crop production, cattle or poultry or the operation of a similar type of business on the secured property.

Sources of repayment for these loans generally include income generated from operations of a business on

the property, rental income or sales of the property.

Credit risk in these loans may be impacted by crop and commodity prices, the creditworthiness of a borrower, and changes in economic conditions which might affect underlying property

values and the local economies in the Company’s market areas.

Consumer – The consumer loan portfolio consists of various term and line of credit

loans such as automobile loans and loans for other personal purposes.

Repayment for these types of loans will come from a borrower’s income sources that are typically independent of the loan purpose.

Credit risk is driven by consumer economic

factors, such as unemployment and general economic conditions in the Company’s market area and the creditworthiness of a borrower.

Credit risk is driven by consumer

economic factors, such as unemployment and general economic conditions in the Company’s market area and the creditworthiness of a borrower.

Notes to Consolidated Financial Statements

Loan grades are numbered 1 through 4.

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conditions, or deficiencies in loan documentation, or other risk issues determined by the Lending Officer, Commercial Loan Committee (CLC), or Credit Quality Committee (CQC) warrant a heightened sense and frequency of monitoring.

Notes to Consolidated Financial Statements

Grade 3 (Special Mention) – These loans must have observable weaknesses or evidence of imprudent handling or structural issues.

The weaknesses require close attention

and the remediation of those weaknesses is necessary.

The weaknesses require close

attention and the remediation of those weaknesses is necessary.

No risk of probable loss exists.

2 unchanged sentences

defined weaknesses relative to cash flow, collateral, financial condition, or other factors that might jeopardize repayment of all of the principal and interest on a timely basis.

There is the possibility that a future loss will occur if

weaknesses are not remediated.

There is the possibility that a future loss will occur

if weaknesses are not remediated.

The Company evaluates the definitions of loan grades and the allowance for loan losses methodology on an ongoing basis.

No changes were made to

either during the period ended December 31, 2021.

The following table presents the credit risk profile of the

Company’s loan portfolio based on internal rating category as of December 31, 2021 and December 31, 2020 (dollars in thousands):

No changes were made

to either during the period ended December 31, 2022.

Notes to Consolidated Financial Statements

The following table presents the credit risk profile of

the Company’s loan portfolio based on internal rating category as of December 31, 2022 and December 31, 2021 (dollars in thousands):

Construction &

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Commercial & industrial (1)

(1) The $ 9.92

million that is greater than 90 days past due consists of a single loan that is well collateralized and for which collection is being diligently pursued.

December 31, 2021

18 unchanged sentences

These concessions could include a reduction in interest rate on the loan, payment extensions, forgiveness of principal, forbearance or other actions intended to maximize collection.

Included in certain

loan categories in the impaired loans are troubled debt restructurings that were classified as impaired.

At December 31, 2021, the Company had $ 1.4

million of commercial real estate loans that were classified as troubled-debt restructurings and impaired and $ 1.6 million of

commercial real estate, $ 10.9 million of commercial and industrial, and $ 469 ,000 of agricultural loan modifications as of December 31, 2020.

There were no newly modified troubled-debt restructurings during the year ended December 31, 2021.

The modification of the terms of the TDR loan included a reduction of the stated interest rate of

the loan to a stated rate of interest lower than the current market rate for new debt with similar risk.

certain loan categories in the impaired loans are troubled debt restructurings that were classified as impaired.

At December 31, 2022, the Company had $ 1.2 million of commercial real estate loans, compared to $ 1.4 million of

commercial real estate loans that were classified as troubled-debt restructurings and impaired as of December 31, 2021.

There were no

newly modified troubled-debt restructurings during the year ended December 31, 2022.

There were no troubled-debt restructurings modified in the past twelve months that subsequently defaulted for the year ended December 31, 2022.

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Total nonperforming loans

(1) $ 1.4 million and $ 12.98 million of TDRs

as of December 31, 2021 and December 31, 2020, respectively, are included in the nonaccrual loans balance in the line above.

(1) $ 1.2 million of TDRs as of December 31, 2022 and $ 1.4

million as of December 31, 2021, are included in the nonaccrual loans balance.

Notes to Consolidated Financial Statements

The CARES Act includes a provision that permits a financial institution to elect to suspend temporarily troubled debt restructuring accounting

under ASC Subtopic 310-40 in certain circumstances (“section 4013”).

To be eligible under section 4013, a loan modification must be (1) related to COVID-19;

(2) executed on a loan that was not more than 30 days past due as of December 31, 2019;

and (3) executed between March 1, 2020, and the earlier of (A) 60 days after the date of termination of the National Emergency or (B) January 1, 2022.

In response to this section of the CARES Act, the federal banking agencies issued a revised

interagency statement on April 7, 2020 that, in consultation with the Financial Accounting Standards Board, confirmed that for loans not subject to section 4013, short-term modifications made on a good faith basis in response to COVID-19 to

borrowers who were current prior to any relief are not troubled debt restructurings under ASC Subtopic 310-40.

This includes short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms,

or delays in payment that are insignificant.

Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented.

As of December 31, 2021, one loan totaling $ 3.1 million was

modified, related to COVID-19, which was not considered a troubled debt restructuring.

Premises and Equipment

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Goodwill and Core Deposit Intangibles

The Company recorded $ 7.5 million of goodwill as a result of the acquisition of Watonga

Bancshares, Inc.

on December 9, 2021.

The gross carrying amount and accumulated amortization of recognized intangible assets at December 31, 2021 and 2020, were (dollars in

The following is a summary of goodwill and intangible assets (dollars in thousands):

Gross Carrying Amount

Accumulated Amortization

As of December 31, 2022

Core deposit intangibles

Gross Carrying Amount

Accumulated Amortization

As of December 31, 2021

Core deposit intangibles

See Note 2 for discussion on the $ 124 ,000

in adjustments to Goodwill as of the year-ended December 31, 2022.

Amortization expense for intangible assets

totaled $ 307 ,000, $ 183 ,000

and $ 206 ,000 for the years ended December 31, 2022, 2021 and 2020, respectively.

Estimated amortization expense for each of the

remaining life is as follows (dollars in thousands):

Notes to Consolidated Financial Statements

Amortization expense

for intangible assets totaled $ 183 ,000 for the year ended December 31, 2021 and $ 206 ,000 for the years ended 2020, and 2019.

Estimated amortization expense for the following five years is as follows (dollars in thousands):

Interest-Bearing Deposits

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At December 31, 2022, the scheduled maturities of interest-bearing time deposits were as follows (dollars in thousands):

Notes to Consolidated Financial Statements

As of December 31, 2022, 2021, and 2020 brokered deposits were $ 261.3 million, $ 273.8 million, and $ 427.0 million , respectively, of

these $ 261.3 million, $ 273.8

million, and $ 427.0 million , respectively, were reciprocal deposits .

The (benefit)/provision for

4 unchanged sentences

Total income tax provision

Notes to Consolidated Financial Statements

The provision for income taxes for the years ended December 31, 2022, 2021 and 2020 differs from the federal rate of 21 % due to the following:

4 unchanged sentences

Permanent Differences

Return to provision and deferred true ups

FIN 48 Activity

Provision for income taxes

Notes to Consolidated Financial Statements

Deferred tax assets

4 unchanged sentences

Non-accrual Loans

Deferred Compensation

Deferred Revenue

Discounts and premiums on assets acquired

Deferred compensation

Net unrealized loss on securities available for sale

Accrued expenses

Lease liabilities

Total deferred tax assets

3 unchanged sentences

Prepaid Expenses

Net unrealized (loss) on available for sale securities

Right of Use Asset

Net unrealized gains on securities available for sale

Total deferred tax liabilities

Net deferred tax assets

Notes to Consolidated Financial Statements

In assessing the Company’s ability to realize deferred tax assets, management considers whether it is more likely than not that some portion

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A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):

Notes to Consolidated Financial Statements

For the Year Ended December 31,

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penalties related to uncertain tax positions reflected in the consolidated statements of income for the years ended December 31, 2022, 2021, and 2020.

Notes to Consolidated Financial Statements

Letters of Credit

2 unchanged sentences

Outstanding letters of credit to secure these public funds at December 31, 2022 and 2021 were $ 800,000 and $ 600,000 , respectively.

Loans with a collateral

value of approximately $ 78.7 million were used to secure the letters of credit.

Loans with a collateral value of

approximately $ 130.0 million and $ 78.7

million were used to secure the letters of credit at December 31, 2022 and 2021, respectively.

Advances and Borrowings

2 unchanged sentences

The Bank had no advances from the FHLB at December 31, 2022 or 2021.

Notes to Consolidated Financial Statements

Shareholders’ Equity

1 unchanged sentence

The RP initially authorized the repurchase of up to 500,000 shares of the Company’s common stock.

On March 13, 2020, the Company’s Board of Directors approved a 500,000 share expansion, and on November 2, 2020, approved a 750,000

share expansion to the RP, for a total of 1,750,000 shares authorized under the RP.

All shares repurchased under the RP have been

retired and not held as treasury stock.

On March 13, 2020, the Company’s Board of Directors approved a 500,000 share expansion, and on November 2, 2020, approved a 750,000 share expansion to the RP, for a total of 1,750,000 shares authorized under the RP.

shares repurchased under the RP have been retired and not held as treasury stock.

The RP expired on September 5, 2021.

On October 28, 2021, the Company adopted a new Repurchase Plan (the “New RP”) that authorizes the repurchase of up to 750,000 shares of the Company’s stock.

Stock repurchases under the New RP will take place pursuant to a Rule 10b5-1 Plan with pricing and purchasing parameters established by

There were no repurchases after the new adoption as of December 31, 2021.

Stock repurchases under the New RP will take place pursuant to a Rule 10b5-1 Plan with pricing and purchasing

parameters established by management.

There were no repurchases as of December 31, 2022.

A summary of the activity under the RP is as follows:

3 unchanged sentences

Shares remaining to be repurchased

Notes to Consolidated Financial Statements

The Company and Bank are subject to risk-based capital guidelines issued by the federal banking agencies.

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management believes have changed the Bank’s category.

Notes to Consolidated Financial Statements

In April 2020, we began originating loans to qualified small businesses under the PPP administered by the SBA.

4 unchanged sentences

pledged as collateral to the PPP Facility will be included.

The PPP loans of $ 18.74 million we originated are included in the

calculation of our leverage ratio as of December 31, 2021 as we did not utilize the PPP Facility for funding purposes.

Notes to Consolidated Financial Statements

The Company’s and Bank’s actual capital amounts and ratios are presented in the following table (dollars in thousands):

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The Basel III Capital Rules require the Bank and the Company to comply with four minimum capital standards:

a Tier 1 leverage ratio of at least

a Tier 1 leverage ratio of at

a CET1 to risk-weighted assets of 4.5%;

1 unchanged sentence

and a total capital to risk-weighted assets of at least 8.0%.

The calculation of all types of regulatory capital is subject to definitions,

deductions and adjustments specified in the regulations.

The calculation of all types of regulatory capital is subject to

definitions, deductions and adjustments specified in the regulations.

Notes to Consolidated Financial Statements

6 unchanged sentences

under the Basel III Capital Rules on a fully phased-in basis.

Notes to Consolidated Financial Statements

The Bank is subject to certain restrictions on the amount of dividends that it may declare without prior regulatory approval.

4 unchanged sentences

their affiliates (related parties) approximating $ 132,000 and $ 0 , respectively.

A summary of these loans is as follows (dollars in thousands):

Year ended December 31, 2021

Year ended December 31, 2020

The Bank leases office and retail banking space in Woodward, Oklahoma from Haines Realty Investments Company, LLC, a related party of the

Lease expense totaled $ 175,000 , $ 177,000 and $ 184,000 for the years ended December 31, 2021, 2020 and 2019, respectively.

addition, payroll and office sharing arrangements were in place between the Company and certain of its affiliates.

Lease expense totaled $ 155,000 , $ 175,000 and $ 177,000 for the years ended December 31, 2022, 2021 and 2020,

respectively.

In addition, payroll and office sharing arrangements were in place between the Company and certain of its affiliates.

Notes to Consolidated Financial Statements

Employee Benefits

6 unchanged sentences

and $ 230,000 , respectively.

Notes to Consolidated Financial Statements

Stock-Based Compensation

The Company adopted a nonqualified incentive stock option plan (the “Bank7 Corp.

2018 Equity Incentive Plan”) in September 2018 and amended the

2018 Equity Incentive Plan”) in September 2018 and amended

the Bank7 Corp.

2018 Equity Plan on May 20, 2020 adding an additional 507,500 shares to the plan.

The Bank7 Corp.

2018 Equity Incentive

Plan will terminate in September 2028, if not extended.

Incentive Plan will terminate in September 2028, if not extended.

Compensation expense, net of settlement of shares for payroll withholding related to the Plan for the years ended December 31, 2022, 2021 and 2020 totaled $ 1,384,000 , $ 862,000 and $ 771,000 , respectively.

1 unchanged sentence

shares available for future grants as of December 31, 2022.

On September 5, 2019, our largest shareholders, the Haines Family Trusts, contributed approximately 6.5 % of their shares ( 656,925 shares) to the Company.

Subsequently, the Company immediately issued those shares to certain executive officers, which was charged as compensation expense of $ 11.8

million, including payroll taxes, through the income statement of the Company.

Additionally, at the discretion of the employees receiving shares to assist in paying tax withholdings, 149,425 shares were withheld and subsequently canceled, resulting in a charge to retained earnings of $ 2.6 million.

The Company grants to employees and directors restricted stock units (RSUs) which vest ratably over either three or five years and stock options

which vest ratably over four years .

All RSUs and stock options are granted at the fair value of the common stock at the time of the

The Company grants to employees and directors restricted stock units (RSUs) which vest ratably over either three or five years and stock

options which vest ratably over four years .

All RSUs and stock options are granted at the fair value of the common stock at the

time of the award.

The RSUs are considered fixed awards as the number of shares and fair value are known at the date of grant and the fair value at the grant date is amortized over the vesting and/or service period.

2 unchanged sentences

The following table is a summary of the stock option activity under the Bank7 Corp.

2018 Equity Incentive Plan (dollar amounts in thousands, except per share data):

2018 Equity Incentive Plan (dollar amounts in thousands, except per share

Exercise Price

Contractual Term

Twelve Months Ended December 31, 2021

Year Ended December 31, 2022

Outstanding at December 31, 2021

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Exercisable at December 31, 2022

Twelve Months Ended December 31, 2020

Exercise Price

Contractual Term

Year Ended December 31, 2021

Outstanding at December 31, 2020

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The fair value of each option is expensed over its vesting period.

Notes to Consolidated Financial Statements

The following table shows the assumptions used for

1 unchanged sentence

For the Year Ended

December 31, 2021

December 31, 2020

Risk-free interest rate

2 unchanged sentences

Expected term

Weighted average grant date fair value

Notes to Consolidated Financial Statements

The following table summarizes share information about RSUs for the years ended December 31, 2022 and 2021:

Date Fair Value

Twelve Months Ended December 31, 2021

Year Ended December 31, 2022

Outstanding at December 31, 2021

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End of the period balance

Twelve Months Ended December 31, 2020

Year Ended December 31, 2021

Outstanding at December 31, 2020

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years, and the RSU expense is expected to be recognized over a weighted average period of 2.32 years.

Notes to Consolidated Financial Statements

Disclosures about Fair Value of Assets and Liabilities

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quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated

by observable market data for substantially the full term of the assets or liabilities

Notes to Consolidated Financial Statements

or other inputs that are observable or can be

corroborated by observable market data for substantially the full term of the assets or liabilities

Unobservable inputs supported by little or no market activity and significant to the fair value of the assets or liabilities

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Available-for-sale securities:

Debt securities classified as available-for-sale, as discussed in Note 5, are reported at fair value utilizing Level 2 inputs.

For those debt securities classified as Level 2, the Company obtains fair value measurements from an

independent pricing service.

Debt securities classified as available-for-sale are reported at fair value utilizing Level 2 inputs.

For those debt securities classified as Level 2, the Company obtains fair value measurements from an independent pricing

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, the U.

Treasury yield curve, live trading levels, trade execution data for similar securities,

market consensus prepayments speeds, credit information and the bond’s terms and conditions, among other things.

Treasury yield curve, live trading levels, trade execution data for similar securities, market consensus

prepayments speeds, credit information and the bond’s terms and conditions, among other things.

Nonrecurring Measurements

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the reported fair value is described below.

Notes to Consolidated Financial Statements

Collateral-Dependent Impaired Loans, Net of Allowance for Loan Losses

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environment that may affect the fair value.

Values of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by executive management and loan

administration.

Values of the collateral underlying collateral-dependent loans are obtained when the loan is determined to be collateral-dependent and subsequently as deemed necessary by executive management and

loan administration.

Values are reviewed for accuracy and consistency by executive management and loan administration.

The ultimate collateral values are reduced by discounts to consider lack of marketability and estimated cost to sell if repayment

or satisfaction of the loan is dependent on the sale of the collateral.

Notes to Consolidated Financial Statements

The ultimate collateral values are reduced by discounts to consider lack of marketability and estimated cost to sell if

repayment or satisfaction of the loan is dependent on the sale of the collateral.

Unobservable (Level 3) Inputs

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Collateral-dependent impaired loans

Appraisals from

comparable properties

Appraisals from comparable properties

Estimated cost to sell

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Collateral-dependent impaired loans

Appraisals from

comparable properties

Appraisals from comparable properties

Estimated cost to sell

Notes to Consolidated Financial Statements

The estimated fair values of the Company's financial instruments that are reported at amortized

cost in the Company's consolidated balance sheets, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value, are as follows :

estimated fair values of the Company’s financial instruments that are

reported at amortized cost in the Company’s consolidated balance sheets, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value, are as follows :

Fair Value Measurements

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Cash and due from banks

Federal funds sold

Interest-bearing time deposits in other banks

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Cash and due from banks

Federal funds sold

Interest-bearing time deposits in other banks

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Interest payable

Notes to Consolidated Financial Statements

The following methods were used to estimate the fair value of all other financial instruments recognized in the accompanying consolidated

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The carrying amount approximates fair value.

Notes to Consolidated Financial Statements

Loans and Mortgage Loans Held for Sale

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Deposits include demand deposits, savings accounts, NOW accounts and certain money market deposits.

The carrying amount approximates fair value.

The carrying amount approximates fair

The fair value of fixed-maturity time deposits is estimated using a discounted cash flow calculation that applies the rates currently offered for deposits of similar remaining maturities.

Commitments to Extend Credit, Lines of Credit and Standby Letters of Credit

The fair values of unfunded commitments are estimated using the fees currently charged to enter into similar agreements, taking into account the

remaining terms of the agreements and the present creditworthiness of the counterparties.

The fair values of standby letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost to

terminate or otherwise settle the obligations with the counterparties at the reporting date.

The fair values of unfunded commitments are estimated using the fees currently charged to enter into similar agreements, taking into account

the remaining terms of the agreements and the present creditworthiness of the counterparties.

The fair values of standby letters of credit and lines of credit are based on fees currently charged for similar agreements or on the estimated cost

to terminate or otherwise settle the obligations with the counterparties at the reporting date.

The estimated fair values of the Company’s commitments to extend credit, lines of credit and standby letters of credit were not material at December

31, 2022 or December 31, 2021.

Notes to Consolidated Financial Statements

Financial Instruments with Off-Balance Sheet Risk

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essentially the same as that involved in extending loan facilities to customers.

Notes to Consolidated Financial Statements

Significant Estimates and Concentrations

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At December 31, 2022, goodwill of $ 8.6 million was recorded on the consolidated balance sheet.

Notes to Consolidated Financial Statements

Operating Leases

The Company leases certain of its branch facilities and office equipment under operating leases.

Rental expense for these leases was $ 799,000 , $ 837,000 and $ 770,000 for the years ended December 31, 2021, 2020, and 2019 respectively.

Future minimum rental commitments of branch facilities and office equipment due under non-cancelable operating leases at December 31, 2021,

were as follows (dollars in thousands):

On January 1, 2022, the Company adopted ASU No.

2016-02, Leases (Topic 842), which requires the recognition of the Company’s

operating leases on its balance sheet.

See Note (1) for additional information.

The Company has operating leases, which primarily consist of office space in buildings, ATM locations, equipment and land on which it owns certain buildings.

Rental expense on all operating leases, including those rented on a monthly or temporary basis were as follows (Dollars in

Year Ending December 31:

As of December 31, 2022, a right of use lease asset included in interest receivable and other assets on the balance sheet totaled $ 2.0

million, and a related lease liability included in accrued interest payable and other liabilities on the balance sheet totaled $ 2.1 million.

As of December 31, 2022, our operating leases have a weighted-average remaining lease term of 12.5 years and a weighted-average discount rate of 3.6

Future minimum rental commitments of branch facilities and office equipment due under non-cancelable operating leases at

December 31, 2022, were as follows (dollars in thousands):

Total lease payments

Less imputed interest

Operating lease liability

Notes to Consolidated Financial Statements

Parent-only Financial Statements

Parent-only Financial Statements (dollars in thousands)

Condensed Balance Sheets

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Total liabilities and shareholders’ equity

Notes to Consolidated Financial Statements

Condensed Statements of Comprehensive Income

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Income before Taxes

Income tax expense

Net Income Available to Common Shareholders

Other Comprehensive Income

Unrealized gains on

securities, net of tax benefit of $ 29,000

Reclassification adjustment for gains included in net income

Other comprehensive gain, net of tax benefit of $ 29,000

Equity in other comprehensive (loss) income of subsidiary

Other comprehensive gain(loss)

Comprehensive Income

Notes to Consolidated Financial Statements

Condensed Statements of Cash Flows

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Equity in undistributed net income

Accounts payable and accrued expenses

Other current assets and liabilities

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Dividends declared and not paid

Notes to Consolidated Financial Statements

Selected Quarterly Financial Data (Unaudited)

The following tables summarize the unaudited condensed results of operations for each of the quarters during the fiscal years ended December

31, 2021 and 2020:

For the three months ended

September 30,

Net interest income

Provision for loan losses

Noninterest income

Noninterest expense

Income before income taxes

Income tax expense

For the three months ended

September 30,

Net interest income

Provision for loan losses

Noninterest income

Noninterest expense

Income before income taxes

Income tax expense

(1) The quarterly EPS amounts, when added, may not coincide with the full fiscal year EPS reported on the Consolidated Statements

of Income due to differences in the computed weighted average shares outstanding as well as rounding differences.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data