What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-12 · 173 added, 95 removed, 447 unchanged (37% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included

elsewhere in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2024.

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us,” refer to Bank7 Corp.

consolidated subsidiaries.

Unless the context indicates otherwise, references in this management’s discussion and analysis to “we,” “our,” and “us,” refer to Bank7

and its consolidated subsidiaries.

All references to “the Bank” refer to Bank7, our wholly owned subsidiary.

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As a bank holding company, we generate most of our revenue from interest income on loans and from short-term investments.

The primary source of funding for our loans and short-term investments are deposits held by

our subsidiary, Bank7.

We measure our performance by our return on average equity, earnings per share, capital ratios, efficiency ratio (calculated by dividing noninterest expense by the sum of net interest income on a tax equivalent basis) and

noninterest income.

The primary source of funding for our

loans and short-term investments are deposits held by our subsidiary, Bank7.

We measure our performance by our return on average equity, earnings per share, capital ratios, efficiency ratio (calculated by dividing noninterest expense by the sum of

net interest income on a tax equivalent basis) and noninterest income.

Q2 2025 Overview

We reported total loans of $1.42 billion as of March 31, 2025, an increase of $49.9 million, or 3.6%, from March 31, 2024.

Total deposits were $1.55 billion as of March 31, 2025, a decrease of $28.9 million, or 1.8%,

as compared to March 31, 2024.

Pre-tax net income was $13.7 million, a decrease of $1.2 million, or 7.9%, for the three months ended March 31, 2025 as compared to pre-tax net income of $14.9 million for the same period in 2024.

Return on average assets and return on average equity was 3.20% and 25.47%, respectively for the three months ended March 31, 2025, as compared to 3.40% and 33.97%, respectively, for the same period in 2024.

efficiency ratio for the three months ended March 31, 2025 was 39.45% as compared to 38.29% for the same period in 2024.

We reported total loans of $1.50 billion as of June 30, 2025, an increase of $145.3 million, or 10.7%, from June 30, 2024.

Total deposits were $1.59 billion as of June 30, 2025, an increase of $112.8 million, or

7.6%, as compared to June 30, 2024.

Pre-tax net income was $14.7 million, a decrease of $0.5 million, or 3.6%, for the three months ended June 30, 2025 as compared to pre-tax net income of $15.3 million for the same period in 2024.

Pre-tax net income

was $28.4 million, a decrease of $1.7 million, or 5.7%, for the six months ended June 30, 2025 as compared to pre-tax net income of $30.1 million for the same period in 2024.

Return on average assets and return on average equity was 2.47% and 19.62%, respectively for the three months ended June 30, 2025, as compared to 2.74% and 25.02%, respectively, for the same period in 2024.

average assets and return on average equity was 2.44% and 19.42%, respectively for the six months ended June 30, 2025, as compared to 2.66% and 25.41%, respectively, for the same period in 2024.

Our efficiency ratio for the three months ended June

30, 2025 was 39.95% as compared to 37.72% for the same period in 2024.

Our efficiency ratio for the six months ended June 30, 2025 was 39.44% as compared to 37.63% for the same period in 2024.

Results of Operations

Three Months Ended March 31, 2025 and March 31, 2024

Net Interest Income and Net Interest Margin.

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Net Interest Margin

For the Three Months Ended March 31,

For the Three Months Ended June 30,

(Dollars in thousands)

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Net interest margin

Taxable-equivalent yield of 2.71% as of March 31, 2025, applying a 24.6% effective tax rate

Average loan balances include monthly average nonaccrual loans of $6.7 million and $22.5 million as of March 31, 2025 and March 31, 2024, respectively, are included in loans.

For the first quarter of 2025 compared to the first quarter of 2024:

Taxable-equivalent yield of 2.68% as of June 30, 2025, applying a 24.5% effective tax rate

Average loan balances include monthly average nonaccrual loans of $5.7 million and $11.8 million as of June 30, 2025 and June 30, 2024, respectively, are included in loans.

For the second quarter of 2025 compared to the second quarter of 2024:

Interest income on total loans totaled $29.0 million, an increase of $39,000 or 0.1%;

Yields on our interest-earning assets totaled 7.25%, a decrease of 62 basis points which was primarily attributable to lower loan yields of 54 basis points, and a decrease in yield on taxable debt securities of 122 basis points;

Net interest margin was 4.96% compared to 5.15%.

Net Interest Margin

For the Six Months Ended June, 30

(Dollars in thousands)

Interest-earning assets:

Short-term investments

Debt securities, taxable

Debt securities, tax exempt (1)

Loans held for sale

Total loans (2)

Total interest-earning assets

Noninterest-earning assets

Funding sources:

Interest-bearing liabilities:

Transaction accounts

Time deposits

Total interest-bearing deposits

Total interest-bearing liabilities

Noninterest-bearing liabilities:

Noninterest-bearing deposits

Other noninterest-bearing liabilities

Total noninterest-bearing liabilities

Shareholders' equity

Total liabilities and shareholders' equity

Net interest income

Net interest spread

Net interest margin

Taxable-equivalent yield of 2.69% as of June 30, 2025, applying a 24.6% effective tax rate.

Average loan balances include monthly average nonaccrual loans of $6.2 million and $17.2 million as of June 30, 2025 and June 30, 2024, respectively, are included in loans.

For the first six months of 2025 compared to the same period in 2024:

Interest income on total loans totaled $56.3 million, a decrease of $2.8 million or 4.7%, due to decreased loan yields as discussed below;

Yields on our interest-earning assets totaled 7.26%, a decrease of 56 basis points which was primarily attributable to lower loan yields of 72 basis points, and a decrease in yield on taxable debt securities of 67 basis points;

Net interest margin for the first quarter of 2025 was 4.98% compared to 5.14% for the first quarter of 2024.

Net interest margin was 4.97% compared to 5.15%.

Increases and decreases in interest income and interest expense result from changes in average balances, or volume, of interest-earning assets and interest-bearing liabilities, as well as changes in average interest

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For the Three Months Ended

March 31, 2025 vs 2024

June 30, 2025 vs 2024

Change due to:

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Increase (Decrease) in net interest income

Analysis of Changes in Interest Income and Expenses

For the Six Months Ended

June 30, 2025 vs 2024

Change due to:

(Dollars in thousands)

Increase (decrease) in interest income:

Short-term investments

Debt securities

Total increase (decrease) in interest income

Increase (decrease) in interest expense:

Transaction accounts

Time deposits

Total interest-bearing deposits

Total increase (decrease) in interest expense

Increase (Decrease) in net interest income

Variances attributable to both volume and rate are allocated on a consistent basis between rate and volume based on the absolute value of the variances in each category.

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corresponding entry to an allowance for credit losses, and the noncredit portion is recognized through accumulated other comprehensive income.

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at March 31,

The following table summarizes the maturity distribution schedule with corresponding weighted average taxable equivalent yields of the debt securities portfolio at June 30,

The following table presents securities at their expected maturities, which may differ from contractual maturities.

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and for pledging requirements for public funds:

As of March 31, 2025

After One Year But

After Five Years But

As of June 30, 2025

Within One Year

After One Year But

Within Five Years

After Five Years But

Within Ten Years

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Credit risk is inherent in the business of making loans.

We establish an Allowance for credit losses (“Allowance”) through charges to earnings, which are shown in the statements of comprehensive income as the

provision for credit losses.

The provision for credit losses and level of Allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio, delinquencies,

management’s assessment of the quality of the loan portfolio, and the valuation of problems and the general economic conditions in our market areas.

For the three months ended March 31, 2025 compared to the three months ended March 31, 2024:

We establish an Allowance for credit losses (“Allowance”) through charges to earnings, which are shown in the statements of comprehensive

income as the provision for credit losses.

The provision for credit losses and level of Allowance for each period are dependent upon many factors, including loan growth, net charge-offs, changes in the composition of the loan portfolio,

delinquencies, management’s assessment of the quality of the loan portfolio, and the valuation of problems and the general economic conditions in our market areas.

For the three months ended June 30, 2025 compared to the three months ended June 30, 2024:

There was no provision for credit losses;

The allowance as a percentage of total loans decreased by 9 basis points to 1.22%.

For the six months ended June 30, 2025 compared to the six months ended June 30, 2024:

There was no provision for credit losses;

The allowance as a percentage of total loans decreased by 9 basis points to 1.22%.

Noninterest Income

The following table sets forth the major components of our noninterest income for the three months ended March 31, 2025 and 2024:

The following tables set forth the major components of our noninterest income for the periods indicated:

For the Three Months Ended

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Total noninterest income

Noninterest income for the three months ended March 31, 2025 was $1.8 million compared to $2.0 million for the same period in 2024, a decrease of $251,000, or 12.5%.

Noninterest income for the three months ended June 30, 2025 was $2.7 million compared to $3.2 million for the same period in 2024, a decrease of $464,000, or 14.7%.

The decrease was primarily attributable to income

related to operations of oil and gas assets, see Note 2 of the financial statements.

For the Six Months Ended

(Dollars in thousands)

Noninterest income:

Mortgage lending income

Service charges on deposit accounts

Other income and fees

Total noninterest income

Noninterest income for the six months ended June 30, 2025 was $4.5 million compared to $5.2 million for the same period in 2024, a decrease of $718,000, or 13.9%.

The decrease was primarily attributable to income

related to operations of oil and gas assets, see Note 2 of the financial statements.

Noninterest Expense

The following table sets forth the major components of our noninterest expense for the three months ended March 31, 2025 and 2024.

The following tables set forth the major components of our noninterest expense for the periods indicated:

For the Three Months Ended

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Total noninterest expense

Noninterest expense for the three months ended March 31, 2025 was $8.9 million compared to $9.1 million for the same period in 2024, a decrease of $253,000, or 2.8%.

Noninterest expense for the three months ended June 30, 2025 was $9.7 million compared to $9.1 million for the same period in 2024, an increase of $590,000, or 6.5%.

For the Six Months Ended

(Dollars in thousands)

Noninterest expense:

Salaries and employee benefits

Furniture and equipment

Data and item processing

Accounting, marketing, and legal fees

Regulatory assessments

Advertising and public relations

Travel, lodging and entertainment

Other expense

Total noninterest expense

Noninterest expense for the six months ended June 30, 2025 was $18.6 million compared to $18.3 million for the same period in 2024, an increase of $338,000, or 1.9%.

Financial Condition

The following discussion of our financial condition compares March 31, 2025 and December 31, 2024.

Total assets increased $45.7 million, or 2.6%, to $1.79 billion as of March 31, 2025, compared to $1.74 billion as of December 31, 2024.

The following discussion of our financial condition compares June 30, 2025 and December 31, 2024.

Total assets increased $96.6 million, or 5.6%, to $1.84 billion as of June 30, 2025, compared to $1.74 billion as of December 31, 2024.

Loan Portfolio

The following table presents the balance and associated percentage of each major category in our loan portfolio as of March 31, 2025 and December 31, 2024:

As of March 31,

The following table presents the balance and associated percentage of each major category in our loan portfolio as of June 30, 2025 and December 31, 2024:

As of June 30,

As of December 31,

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The quality and diversification of the loan portfolio is an important consideration when reviewing our financial

As of March 31, 2025, and December 31, 2024, our gross loans were $1.43 billion and $1.40 billion, respectively.

As of June 30, 2025, and December 31, 2024, our gross loans were $1.50 billion and $1.40 billion, respectively.

We have established internal concentration limits in the loan portfolio for Commercial Real Estate (CRE) loans, hospitality loans, energy loans, and construction loans, among others.

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The following tables show the contractual maturities of our gross loans as of the periods below:

As of March 31, 2025

Due after One Year

Due after Five Years

As of June 30, 2025

Due in One Year or Less

Due after One Year

Through Five Years

Due after Five Years

Through Fifteen Years

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As of December 31, 2024

Due after One Year

Due after Five Years

Due in One Year or Less

Due after One Year

Through Five Years

Due after Five Years

Through Fifteen Years

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Commercial real estate - other

Total commerical real estate

Total commercial real estate

Commercial & industrial

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of bankruptcies, criticized and classified loan trends, expected losses on real estate secured loans, new credit products and policies, economic conditions, concentrations of credit risk and the experience and abilities of our lending personnel.

The allowance was $18.2 million at March 31, 2025, compared to $17.9 million at December 31, 2024.

The allowance was $18.2 million at June 30, 2025, compared to $17.9 million at December 31, 2024.

The following table provides an analysis of the activity in our allowance for the periods indicated:

For the Three Months Ended

For the Six Months Ended

(Dollars in thousands)

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category, for the periods indicated:

As of March 31,

As of June 30,

As of December 31,

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Ratio of nonperforming assets to total assets

(1) There are no loans modified to borrowers experiencing financial difficulty included in nonaccrual loans as of March 31, 2025 and December 31, 2024, respectively.

(1) There are no loans modified to borrowers experiencing financial difficulty included in nonaccrual loans as of June 30, 2025 and December 31, 2024, respectively.

The following tables present an aging analysis of loans as of the dates indicated.

As of March 31, 2025

Loans 30-59 days past

Loans 60-89 days past

As of June 30, 2025

Total past due

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As of December 31, 2024

Loans 30-59 days past

Loans 60-89 days past

(Dollars in thousands)

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Outstanding loan balances categorized by internal risk grades as of the periods indicated are summarized as follows:

As of March 31, 2025

As of June 30, 2025

(Dollars in thousands)

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maximum of $250,000, and placed at a network of banks across the United States.

Total deposits as of March 31, 2025 and December 31, 2024 were $1.55 billion and $1.52 billion, respectively.

As of March 31, 2025, and December 31, 2024, brokered deposits were $334.2 million and $336.7 million, respectively.

Total deposits as of June 30, 2025 and December 31, 2024 were $1.59 billion and $1.52 billion, respectively.

As of June 30, 2025, and December 31, 2024, brokered deposits were $371.5 million and $336.7 million, respectively.

Uninsured deposits are defined as the portion of deposit accounts in U.S.

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and are not subject to any federal or state deposit insurance regimes.

Total uninsured deposits were $377.9 million and $354.2 million at March 31, 2025 and December 31, 2024, respectively, as calculated per regulatory guidance.

Total uninsured deposits were $380.3 million and $354.2 million at June 30, 2025 and December 31, 2024, respectively, as calculated per regulatory guidance.

These amounts were

approximately 24.4% and 23.4% of deposits at March 31, 2025 and December 31, 2024, respectively.

approximately 24.0% and 23.4% of deposits at June 30, 2025 and December 31, 2024, respectively.

The following table sets forth deposit balances by certain categories as of the dates indicated and the percentage of each deposit category to total deposits.

As of March 31,

As of June 30,

As of December 31,

Percentage of Total

Percentage of

(Dollars in thousands)

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The following tables set forth the maturity of time deposits as of the dates indicated below:

As of March 31, 2025 Maturity Within:

Three to Six Months

As of June 30, 2025 Maturity Within:

(Dollars in thousands)

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As of December 31, 2024 Maturity Within:

Three to Six Months

(Dollars in thousands)

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funds will supplement these primary sources to the extent necessary to meet additional liquidity requirements on either a short-term or long-term basis.

As of March 31, 2025, we had no unsecured fed funds lines with correspondent depository institutions, with no corresponding amounts advanced.

As of June 30, 2025, we had no unsecured fed funds lines with correspondent depository institutions, with no corresponding amounts advanced.

In addition, based on the values of loans pledged as collateral, we had borrowing availability with the

FHLB of $206.8 million as of March 31, 2025 and $190.9 million as of December 31, 2024, and we had access to approximately $296.7 million in liquidity with the Federal Reserve Bank as of March 31, 2025 and $336.1 million as of December 31, 2024.

FHLB of $223.5 million as of June 30, 2025 and $190.9 million as of December 31, 2024, and we had access to approximately $296.3 million in liquidity with the Federal Reserve Bank as of June 30, 2025 and $336.1 million as of December 31, 2024.

Capital Requirements

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the federal banking regulators about components, risk weightings and other factors.

Qualitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of Common Equity Tier 1 (“CET1”)

capital, Tier 1 capital, total capital to risk-weighted assets, and Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

As of March 31, 2025, the Bank was in compliance with all applicable regulatory requirements and categorized as “well-capitalized” under the prompt corrective action frame work.

There have been

no conditions or events since March 31, 2025 that management believes would change this classification.

The table below presents our applicable capital requirements, as well as our capital ratios as of March 31, 2025 and December 31, 2024.

Company exceeded all regulatory capital requirements and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

Qualitative measures established by regulation to ensure capital adequacy require us to maintain minimum amounts and ratios of CET1 capital, Tier 1 capital, total

capital to risk-weighted assets, and Tier 1 capital to average consolidated assets, referred to as the “leverage ratio.”

As of June 30, 2025, the Bank was in compliance with all applicable regulatory requirements and categorized as “well-capitalized” under the prompt corrective action frame work.

There have been no

conditions or events since June 30, 2025 that management believes would change this classification.

The table below presents our applicable capital requirements, as well as our capital ratios as of June 30, 2025 and December 31, 2024.

exceeded all regulatory capital requirements and the Bank was considered to be “well-capitalized” as of the dates reflected in the tables below.

Basel III Capital Rules

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold

a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

As of March 31, 2025, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.

Under the Basel III Capital Rules, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking

organization must hold a capital conservation buffer composed of CET1 capital above its minimum risk-based capital requirements.

As of June 30, 2025, the Company and the Bank met all capital adequacy requirements under the Basel III Capital Rules.

Conservation Buffer

Minimum to be "Well-

Capitalized" Under Prompt Corrective Action

Capitalized" Under Prompt

Corrective Action

(Dollars in thousands)

As of March 31, 2025

As of June 30, 2025

Total capital (to risk-weighted assets)

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Minimum to be "Well-

Capitalized" Under Prompt Corrective Action

Capitalized" Under Prompt

Corrective Action

(Dollars in thousands)

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Shareholders’ equity provides a source of permanent funding, allows for future growth and provides a cushion to withstand unforeseen adverse developments.

Total shareholders’ equity increased $8.4 million as of March

31, 2025 to $221.7 million, compared to $213.2 million as of December 31, 2024.

Total shareholders’ equity increased

$18.7 million as of June 30, 2025 to $231.9 million, compared to $213.2 million as of December 31, 2024.

Contractual Obligations

The following tables contain supplemental information regarding our total contractual obligations as of March 31, 2025, and December 31, 2024:

Payments Due as of March 31, 2025

Within One Year

One to Three Years

Three to Five Years

The following tables contain supplemental information regarding our total contractual obligations as of June 30, 2025, and December 31, 2024:

Payments Due as of June 30, 2025

Three to Five

(Dollars in thousands)

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Payments Due as of December 31, 2024

Within One Year

One to Three Years

Three to Five Years

Three to Five

(Dollars in thousands)

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Goodwill and Intangibles

Intangible assets totaled $846,000 and goodwill, net of accumulated amortization, totaled $11.2 million as of March 31, 2025, compared to intangible assets of $878,000 and goodwill of $8.5 million as of December 31,

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

Intangible assets totaled $815,000 and goodwill, net of accumulated amortization, totaled $11.2 million as of June 30, 2025, compared to intangible assets of $878,000 and goodwill of $8.5 million as

of December 31, 2024.

acquisition date.

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

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is written

down to its implied fair value.

If the implied fair value of goodwill is lower than its carrying amount, a goodwill impairment is indicated and goodwill is

written down to its implied fair value.

Subsequent increases in goodwill value are not recognized in the accompanying consolidated financial statements.

Other intangible assets consist of core deposit intangible assets and are amortized on a straight-line basis based on an estimated useful life of 10 years.

Such assets are periodically evaluated as to the

recoverability of their carrying values.

Such assets are periodically evaluated as

to the recoverability of their carrying values.

We file a consolidated income tax return.

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Management performs an analysis of our tax positions annually and believes it is more likely than not that all of its tax positions will be utilized in future years.

The Company’s effective tax rate was 24.5% for the second quarter of 2025, which was consistent with the rate of 24.6% for the same period in 2024.

Our effective tax rate differs from the U.S.

federal statutory rate

of 21% primarily due to the effect of state income taxes, tax-exempt income earned on certain loans and investments, and nondeductible expenses.

Fair Value of Financial Instruments

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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-Q

Item 2. Management’s Discussion and Analysis