Bank7 Corp. Announces Record 4Q and Full Year 2018 Earnings

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Jan 30, 2019, 09:03 ET

OKLAHOMA CITY, Jan. 30, 2019 /PRNewswire/ -- Bank7 Corp. (NASDAQ: BSVN) ("the Company"), the parent company of Oklahoma City-based Bank7 (the "Bank"), today reported unaudited results for the fiscal quarter and year ended December 31, 2018. "We are pleased to announce record pre-tax income for our 4Q and also for our full year results. Our 4Q and YTD results show continued balance sheet growth, especially in our core deposits. That growth, combined with our excellent efficiency ratio and asset quality, continues to produce outstanding return on average assets and return on average tangible common equity," said Thomas L. Travis, President and CEO of the Company.

Three months ended December 31, 2018 compared to three months ended December 31, 2017:

Pre-tax income of $6.8 million, a 47.83% increase
Adjusted income of $5.9 million, a 138.55% increase
Diluted earnings per share of $0.57, a 68.42% increase
Interest income on loans, including loan fee income, totaled $11.8 million, a 25.43% increase
Average loans of $600.4 million, a 9.29% increase
Net interest margin, excluding loan fee income, of 4.85%, a 34 basis point increase
Adjusted return on average assets of 3.05%, a 162 basis point increase
Adjusted return on average tangible common equity of 27.38%, a 1,295 basis point increase

Twelve months ended December 31, 2018 compared to twelve months ended December 31, 2017

Pre-tax income of $25.8 million, an 8.44% increase
Adjusted income of $20.1 million, a 40.60% increase
Diluted earnings per share of $2.44, a 24.37% increase
Interest income on loans, including loan fee income, totaled $44.3 million, a 6.83% increase
Average loans of $583.8 million, an 8.30% increase
Core deposits of $615.9 million, a 27.22% increase
Net interest margin, excluding loan fee income, of 4.78%, a 19 basis point increase
Efficiency ratio of 37.04%, compared to 37.24%
Adjusted return on average assets of 2.75%, a 58 basis point increase
Adjusted return on average tangible common equity of 25.69%, a 322 basis point increase

Our results for the three and twelve months ended December 31, 2018 were positively impacted by a decrease in the federal tax rate to 21%, from 35%, as a result of the passing of the Tax Cuts and Jobs act at the end of 2017. Both the Bank's and the Company's capital levels continue to be significantly above the minimum levels required to be designated as "well-capitalized" for regulatory purposes. At December 31, 2018 the Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk based capital ratio, and total risk-based capital ratios were 11.26%, 14.78%, 14.78%, and 16.03% respectively for the Bank. At December 31, 2018 the Tier 1 leverage ratio, common equity Tier 1 risk-based capital ratio, Tier 1 risk based capital ratio, and total risk-based capital ratios were 11.13%, 14.61%, 14.61%, and 15.86% respectively for the Company on a consolidated basis. Designation as a well-capitalized institution under regulations does not constitute a recommendation or endorsement by bank regulators.

Pre-tax, pre-provision net income is defined as income before taxes and provision for loan losses. We believe the most directly comparable GAAP financial measure is income before taxes. Disclosure of this measure enables you to compare our operations to those of other banking companies before consideration of taxes and provision expense, which some investors may consider to be a more appropriate comparison given our S Corporation status prior to September 2018. We calculate our adjusted net income, return on average assets, return on average equity, and per share amounts by using a combined C Corporation effective tax rate for federal and state income taxes of 22.2% in 2018 and 40.0% in 2017. This calculation illustrates only the change from our status as a S Corporation into a C Corporation and does not give effect to any other transaction. However, we acknowledge that our non-GAAP financial measures have a number of limitations. As such, you should not view these disclosures as a substitute for results determined in accordance with GAAP, and they are not necessarily comparable to non-GAAP financial measures that other banking companies use. Other banking companies may use names similar to those we use for non-GAAP financial measures we disclose, but may calculate them differently. You should understand how we and other companies each calculate their non-GAAP financial measures when making comparisons. The following reconciliation table provides a more detailed analysis of these non-GAAP financial measures:


	Three months ended December 31,						For the Year Ended December 31,
(Dollars in thousands, except per share data)	2018			2017			2018			2017
Loan interest income (excluding loan fees)
Total loan interest income, including loan fee income	$	11,789		$	9,399		$	44,279		$	41,450
Loan fee income		(1,229)			(732)			(5,121)			(8,331)
Loan interest income excluding loan fee income	$	10,560		$	8,667		$	39,158		$	33,119

Average total loans	$	600,400		$	549,367		$	583,821		$	539,078
Yield on loans (including loan fee income)		7.79	%		6.79	%		7.58	%		7.69	%
Yield on loans (excluding loan fee income)		6.98	%		6.26	%		6.71	%		6.14	%

Net interest margin (excluding loan fees)
Net interest income	$	10,530		$	8,489		$	39,631		$	38,131
Loan fee income		(1,229)			(732)			(5,121)			(8,331)
Net interest income excluding loan fees	$	9,301		$	7,757		$	34,510		$	29,800

Average earning assets	$	760,869		$	682,664		$	721,935		$	649,757
Net interest margin (including loan fee income)		5.49	%		4.93	%		5.49	%		5.87	%
Net interest margin (excluding loan fee income)		4.85	%		4.51	%		4.78	%		4.59	%

Pre-tax, pre-provision net earnings
Net income before income taxes	$	6,753		$	4,568		$	25,796		$	23,789
Plus: Provision (reversal of) for loan losses		(100)			(150)			(200)			(1,246)
Pre-tax, pre-provision net earnings	$	6,853		$	4,718		$	25,996		$	25,035

Adjusted provision for income tax
Net income before income taxes	$	6,753		$	4,568		$	25,796		$	23,789
Total effective adjusted tax rate		12.3	%		45.7	%		22.2	%		40.0	%
Adjusted provision for income taxes	$	833		$	2,086		$	5,719		$	9,509

Adjusted net income
Net income before income taxes	$	6,753		$	4,568		$	25,796		$	23,789
Adjusted provision for income taxes		833			2,086			5,719			9,509
Adjusted net income	$	5,920		$	2,482		$	20,077		$	14,280

Adjusted ratios and per share data
Adjusted net income (numerator)	$	5,920		$	2,482		$	20,077		$	14,280

Average assets (denominator)	$	769,170		$	689,283		$	730,564		$	657,568
Adjusted return on average assets		3.05	%		1.43	%		2.75	%		2.17	%

Average stockholders' equity (denominator)	$	85,790		$	68,236		$	78,148		$	63,558
Adjusted return on average stockholders' equity		27.38	%		14.43	%		25.69	%		22.47	%

Average tangible common equity (denominator)	$	83,763		$	66,009		$	75,484		$	61,254
Adjusted return on average tangible common equity		28.04	%		14.92	%		26.60	%		23.31	%

Weighted average common shares outstanding basic (denominator)		10,187,500			7,287,500			8,105,856			7,287,500
Adjusted net income per common share--basic		0.58			0.34			2.48			1.96

Weighted average common shares outstanding diluted (denominator)		10,322,193			7,287,500			8,238,753			7,287,500
Adjusted net income per common share--diluted		0.57			0.34			2.44			1.96

Tangible assets
Total assets	$	770,511		$	703,594
Less: Goodwill		(1,995)			(2,201)
Tangible assets	$	768,516		$	701,393

Tangible stockholders' equity
Total stockholders' equity	$	88,467		$	69,176
Less: Goodwill		(1,995)			(2,201)
Tangible stockholders' equity	$	86,472		$	66,975

Tangible stockholders' equity
Tangible stockholders' equity (numerator)	$	86,472		$	66,975
Tangible assets (denominator)	$	768,516		$	701,393
Tangible common equity to tangible assets		11.25	%		9.55	%




	Net Interest Margin Excluding Loan Fee Income
	For the Three Months Ended December 31,
	2018							2017
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Short-term investments⁽¹⁾	$	159,215	$	795		1.98	%	$	131,940	$	443		1.33	%
Investment securities⁽²⁾		1,055		—		0.00			1,047		—		0.00
Loans held for sale		199		—		0.00			310		—		0.00
Total loans⁽³⁾		600,400		10,560		6.98			549,367		8,667		6.26
Total interest-earning assets		760,869		11,355		5.92			682,664		9,110		5.72
Noninterest-earning assets		8,301							6,619
Total assets	$	769,170						$	689,283

Funding sources:
Interest-bearing liabilities:
Deposits:
Transaction accounts	$	259,614		1,155		1.77	%	$	201,257		499		0.98	%
Time deposits		196,696		899		1.81			246,543		795		1.28
Total interest-bearing deposits		456,310		2,054		1.79			447,800		1,294		1.15
Other borrowings		—		—		0.00			5,600		59		4.18
Total interest-bearing liabilities		456,310		2,054		1.79			453,400		1,353		1.18

Noninterest-bearing liabilities:
Noninterest-bearing deposits		221,716							163,680
Other noninterest-bearing liabilities		5,354							3,967
Total noninterest-bearing liabilities		227,070							167,647
Shareholders' equity		85,790							68,236
Total liabilities and shareholders' equity	$	769,170						$	689,283

Net interest income excluding loan fee income			$	9,301						$	7,757
Net interest spread excluding loan fee income⁽⁴⁾						4.13	%						4.11	%
Net interest margin excluding loan fee income						4.85	%						4.51	%


(1)	Includes income and average balances for fed funds sold, interest-earning deposits in banks and other miscellaneous interest-earning assets.

(2)	Includes income and average balances for FHLB and FRB stock.

(3)	Non-accrual loans are included in loans.

(4)	Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

	Net Interest Margin Excluding Loan Fee Income
	For the Years Ended December 31,
	2018							2017
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Short-term investments⁽¹⁾	$	136,880	$	2,521		1.84	%	$	109,410	$	1,420		1.30	%
Investment securities⁽²⁾		1,052		—		0.00			1,045		—		0.00
Loans held for sale		182		—		0.00			224		—		0.00
Total loans⁽³⁾		583,821		39,158		6.71			539,078		33,119		6.14
Total interest-earning assets		721,935		41,679		5.77			649,757		34,539		5.32
Noninterest-earning assets		8,629							7,811
Total assets	$	730,564						$	657,568

Funding sources:
Interest-bearing liabilities:
Deposits:
Transaction accounts	$	240,881		3,584		1.49	%	$	242,790		2,214		0.91	%
Time deposits		220,023		3,410		1.55			200,513		2,288		1.14
Total interest-bearing deposits		460,904		6,994		1.52			443,303		4,502		1.02
Other borrowings		3,652		175		4.79			5,740		237		4.13
Total interest-bearing liabilities		464,556		7,169		1.54			449,043		4,739		1.06

Noninterest-bearing liabilities:
Noninterest-bearing deposits		183,750							142,035
Other noninterest-bearing liabilities		4,110							2,932
Total noninterest-bearing liabilities		187,860							144,967
Shareholders' equity		78,148							63,558
Total liabilities and shareholders' equity	$	730,564						$	657,568

Net interest income excluding loan fee income			$	34,510						$	29,800
Net interest spread excluding loan fee income⁽⁴⁾						4.23	%						4.26	%
Net interest margin excluding loan fee income						4.78	%						4.59	%


(1)	Includes income and average balances for fed funds sold, interest-earning deposits in banks and other miscellaneous interest-earning assets.

(2)	Includes income and average balances for FHLB and FRB stock.

(3)	Non-accrual loans are included in loans.

(4)	Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

	Net Interest Margin With Loan Fee Income
	For the Three Months Ended December 31,
	2018							2017
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Short-term investments⁽¹⁾	$	159,215	$	795		1.98	%	$	131,940	$	443		1.33	%
Investment securities⁽²⁾		1,055		—		0.00			1,047		—		0.00
Loans held for sale		199		—		0.00			310		—		0.00
Total loans⁽³⁾		600,400		11,789		7,79			549,367		9,399		6.79
Total interest-earning assets		760,869		12,584		6.56			682,664		9,842		5.72
Noninterest-earning assets		8,301							6,619
Total assets	$	769,170						$	689,283

Funding sources:
Interest-bearing liabilities:
Deposits:
Transaction accounts	$	259,614		1,155		1.77	%	$	201,257		499		0.98	%
Time deposits		196,696		899		1.81			246,543		795		1.28
Total interest-bearing deposits		456,310		2,054		1.79			447,800		1,294		1.15
Other borrowings		—		—		0.00			5,600		59		4.18
Total interest-bearing liabilities		456,310		2,054		1.79			453,400		1,353		1.18

Noninterest-bearing liabilities:
Noninterest-bearing deposits		221,716							163,680
Other noninterest-bearing liabilities		5,354							3,967
Total noninterest-bearing liabilities		227,070							167,647
Shareholders' equity		85,790							68,236
Total liabilities and shareholders' equity	$	769,170						$	689,283

Net interest income excluding loan fee income			$	10,530						$	8,489
Net interest spread excluding loan fee income⁽⁴⁾						4.78	%						4.54	%
Net interest margin excluding loan fee income						5.49	%						4.93	%


(1)	Includes income and average balances for fed funds sold, interest-earning deposits in banks and other miscellaneous interest-earning assets.

(2)	Includes income and average balances for FHLB and FRB stock.

(3)	Non-accrual loans are included in loans.

(4)	Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

	Net Interest Margin With Loan Fee Income
	For the Years Ended December 31,
	2018							2017
	Average Balance		Interest Income/ Expense		Average Yield/ Rate			Average Balance		Interest Income/ Expense		Average Yield/ Rate
	(Dollars in thousands)
Interest-earning assets:
Short-term investments⁽¹⁾	$	136,880	$	2,521		1.84	%	$	109,410	$	1,420		1.30	%
Investment securities⁽²⁾		1,052		—		0.00			1,045		—		0.00
Loans held for sale		182		—		0.00			224		—		0.00
Total loans⁽³⁾		583,821		44,279		7.58			539,078		41,450		7.69
Total interest-earning assets		721,935		46,800		6.48			649,757		42,870		6.60
Noninterest-earning assets		8,629							7,811
Total assets	$	730,564						$	657,568

Funding sources:
Interest-bearing liabilities:
Deposits:
Transaction accounts	$	240,881		3,584		1.49	%	$	242,790		2,214		0.91	%
Time deposits		220,023		3,410		1.55			200,513		2,288		1.14
Total interest-bearing deposits		460,904		6,994		1.52			443,303		4,502		1.02
Other borrowings		3,652		175		4.79			5,740		237		4.13
Total interest-bearing liabilities		464,556		7,169		1.54			449,043		4,739		1.06

Noninterest-bearing liabilities:
Noninterest-bearing deposits		183,750							142,035
Other noninterest-bearing liabilities		4,110							2,932
Total noninterest-bearing liabilities		187,860							144,967
Shareholders' equity		78,148							63,558
Total liabilities and shareholders' equity	$	730,564						$	657,568

Net interest income excluding loan fee income			$	39,631						$	38,131
Net interest spread excluding loan fee income⁽⁴⁾						4.94	%						5.54	%
Net interest margin excluding loan fee income						5.49	%						5.87	%


(1)	Includes income and average balances for fed funds sold, interest-earning deposits in banks and other miscellaneous interest-earning assets.

(2)	Includes income and average balances for FHLB and FRB stock.

(3)	Non-accrual loans are included in loans.

(4)	Net interest spread is the average yield on interest-earning assets minus the average rate on interest-bearing liabilities.

Bank7 Corp.
Consolidated Balance Sheets

	Unaudited as of
Assets	2018				2017
	December 31		September 30		December 31

Cash and due from banks	$	128,090	$	127,248	$	100,054
Interest-bearing time deposits in other banks		31,759		29,767		30,168
Loans, net		592,078		577,111		555,347
Loans held for sale		512		0		388
Premises and equipment, net		7,753		7,767		9,602
Nonmarketable equity securities		1,055		1,055		1,049
Foreclosed assets held for sale		110		110		100
Goodwill and intangibles		1,995		2,046		2,201
Interest receivable and other assets		7,159		6,069		4,685

Total assets	$	770,511	$	751,173	$	703,594

Liabilities and Shareholders' Equity

Deposits
Noninterest-bearing	$	201,159	$	222,675	$	165,911
Interest-bearing		474,743		441,638		459,920

Total deposits		675,902		664,313		625,831

Borrowings		-		-		5,600
Interest payable and other liabilities		6,142		4,095		2,987

Total liabilities		682,044		668,408		634,418

Common stock		102		102		73
Additional paid-in capital		80,275		80,136		6,987
Retained earnings		8,090		2,527		62,116

Total shareholders' equity		88,467		82,765		69,176

Total liabilities and shareholders' equity	$	770,511	$	751,173	$	703,594




Bank7 Corp.
Consolidated Quarterly Statements of Income

	Unaudited as of
	Quarter Ended						Year Ended
	2018				2017		2018		2017
	December 31		September 30		December 31		December 31		December 31
Interest Income
Loans, including fees	$	11,789	$	11,082	$	9,399	$	44,279	$	41,450
Interest-bearing time deposits in other banks		150		147		176		588		592
Interest-bearing deposits in other banks		645		510		268		1,933		828

Total interest income		12,584		11,739		9,843		46,800		42,870

Interest Expense
Deposits		2,054		1,881		1,294		6,994		4,502
Other borrowings		-		57		60		175		237

Total interest expense		2,054		1,938		1,354		7,169		4,739

Net Interest Income		10,530		9,801		8,489		39,631		38,131

Provision for Loan Losses		100		-		150		200		1,246

Net Interest Income After Provision for Loan Losses		10,430		9,801		8,339		39,431		36,885

Noninterest Income
Secondary market income		39		95		50		212		183
Service charges on deposit accounts		86		88		81		347		336
Other		137		136		12		772		916

Total noninterest income		262		319		143		1,331		1,435

Noninterest Expense
Salaries and employee benefits		2,035		2,082		2,011		8,112		7,611
Furniture and equipment		193		182		241		684		831
Occupancy		207		319		285		1,105		1,049
Data and item processing		250		248		233		966		891
Accounting, marketing and legal fees		87		74		69		305		284
Regulatory assessments		146		145		(8)		542		450
Advertising and public relations		140		63		169		553		433
Travel, lodging and entertainment		81		260		269		699		1,041
Other		800		432		645		2,000		1,941

Total noninterest expense		3,939		3,805		3,914		14,966		14,531

Income Before Taxes		6,753		6,315		4,568		25,796		23,789
Income tax expense		1,192		(395)				797		-
Net Income	$	5,561	$	6,710	$	4,568	$	24,999	$	23,789

Basic earnings per common share	$	0.55	$	0.88	$	0.63	$	3.08	$	3.26
Diluted earnings per common share		0.54		0.87		0.63		3.03		3.26
Weighted average common shares outstanding - basic		10,187,500		7,634,239		7,287,500		8,105,856		7,287,500
Weighted average common shares outstanding - diluted		10,322,193		7,669,348		7,287,500		8,238,753		7,287,500

About Bank7 Corp.

We are Bank7 Corp., a bank holding company headquartered in Oklahoma City, Oklahoma. Through our wholly-owned subsidiary, Bank7, we operate seven full-service branches in Oklahoma, the Dallas/Fort Worth, Texas metropolitan area and Kansas. We are focused on serving business owners and entrepreneurs by delivering fast, consistent and well-designed loan and deposit products to meet their financing needs. We intend to grow organically by selectively opening additional branches in our target markets as well as pursue strategic acquisitions.

Conference call

Bank7 Corp. has scheduled a conference call to discuss its fourth quarter 2018 results, which will be broadcast live over the Internet, on Thursday, January 31, 2019 at 4:30 p.m. Eastern Time. To participate in the call, dial 1-888-317-6016, or access it live over the Internet at https://services.choruscall.com/links/bsvn190138-K1.html. For those who cannot listen to the live call, a replay will be available through February 14, 2019 and may be accessed by dialing 1-877-344-7529 and using pass code 10127728. Also, an archive of the webcast will be available shortly after the call at https://services.choruscall.com/links/bsvn190131.html for 1 year.

Cautionary Statements Regarding Forward-Looking Information

This communication contains a number of forward-looking statements. These forward-looking statements reflect Bank7 Corp.'s current views with respect to, among other things, future events and Bank7 Corp.'s financial performance. Any statements about Bank7 Corp.'s expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as "anticipate," "believes," "can," "could," "may," "predicts," "potential," "should," "will," "estimate," "plans," "projects," "continuing," "ongoing," "expects," "intends" and similar words or phrases. Any or all of the forward-looking statements in (or conveyed orally regarding) this presentation may turn out to be inaccurate. The inclusion of or reference to forward-looking information in this presentation should not be regarded as a representation by Bank7 Corp. or any other person that the future plans, estimates or expectations contemplated by Bank7 Corp. will be achieved.

These forward-looking statements are subject to significant uncertainties because they are based upon: the amount and timing of future changes in interest rates, market behavior, and other economic conditions; future laws, regulations, and accounting principles; changes in regulatory standards and examination policies, and a variety of other matters. These other matters include, among other things, the direct and indirect effect of economic conditions on interest rates, credit quality, loan demand, liquidity, and monetary and supervisory policies of banking regulators. Bank7 Corp. has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that Bank7 Corp. believes may affect its financial condition, results of operations, business strategy and financial needs. Bank7 Corp.'s actual results could differ materially from those anticipated in such forward-looking statements as a result of risks, uncertainties and assumptions that are difficult to predict. If one or more events related to these or other risks or uncertainties materialize, or if Bank7 Corp.'s underlying assumptions prove to be incorrect, actual results may differ materially from what Bank7 Corp. anticipates. You are cautioned not to place undue reliance on forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made and Bank7 Corp. undertakes no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as may be required by law. All forward-looking statements herein are qualified by these cautionary statements.

About Non-GAAP Financial Measures

This communication includes certain non-GAAP financial measures, including adjusted net income, adjusted earnings per share, adjusted return on average assets and adjusted return on average shareholders' equity. These non-GAAP financial measures and any other non-GAAP financial measures that we discuss in this presentation should not be considered in isolation, and should be considered as additions to, and not substitutes for or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of Bank7 Corp.'s non-GAAP financial measures as tools for comparison. See the table above in this communication for a reconciliation of the non-GAAP financial measures used in (or conveyed orally during) this communication to their most directly comparable GAAP financial measures.

Contact:

Thomas Travis
President & CEO
(405) 810-8600

SOURCE Bank7 Corp.