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CAUTIONARY NOTE ABOUT FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements. These forward-looking statements reflect our current views with
respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,”
“continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a
future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of
which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that
are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the
forward-looking statements.
There are or will be important factors that could cause our actual results to differ materially from those indicated in these
forward-looking statements, including, but not limited to, the following:
• our ability to effectively execute our expansion strategy
and manage our growth, including identifying and consummating suitable acquisitions;
• business and economic conditions, particularly those
affecting our market areas of Oklahoma, the Dallas/Fort Worth metropolitan area and Kansas, including a decrease in or the volatility of oil and gas prices or agricultural commodity prices within the region;
• the geographic concentration of our markets in Oklahoma, the
Dallas/Fort Worth metropolitan area and Kansas;
• high concentrations of loans secured by real estate and
energy located in our market areas;
• risks associated with our commercial loan portfolio,
including the risk for deterioration in value of the general business assets that secure such loans;
• risks related to the significant amount of credit that we
have extended to a limited number of borrowers;
• our ability to maintain our reputation;
• our ability to successfully manage our credit risk and the
sufficiency of our allowance;
• reinvestment risks associated with a significant portion of
our loan portfolio maturing in one year or less;
• our ability to attract, hire and retain qualified management
personnel;
• our dependence on our management team, including our ability
to retain executive officers and key employees and their customer and community relationships;
• interest rate fluctuations, which could have an adverse
effect on our profitability;
• competition from banks, credit unions and other financial
services providers;
• system failures, service denials, cyber-attacks and security
breaches;
• our ability to maintain effective internal control over
financial reporting;
• employee error, fraudulent activity by employees or
customers and inaccurate or incomplete information about our customers and counterparties;
• increased capital requirements imposed by banking
regulators, which may require us to raise capital at a time when capital is not available on favorable terms or at all;
• costs and effects of litigation, investigations or similar
matters to which we may be subject, including any effect on our reputation;
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• severe weather, acts of god, acts of war or terrorism;
• compliance with governmental and regulatory requirements,
including the Dodd-Frank and Wall Street Consumer Protection Act, or Dodd-Frank Act, and other regulations relating to banking, consumer protection, securities and tax matters;
• changes in the laws, rules, regulations, interpretations or
policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters, including the policies of the Federal Reserve and as a result of initiatives of the Trump administration; and
• other factors that are discussed in the section entitled
“Risk Factors,” beginning on page 20.
The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in
this report. Because of these risks and other uncertainties, our actual future results, performance or achievements, or industry results, may be materially different from the results indicated by the forward-looking statements in this report. In
addition, our past results of operations are not necessarily indicative of our future results. Accordingly, no forward-looking statements should be relied upon, which represent our beliefs, assumptions and estimates only as of the dates on which such
forward-looking statements were made. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information,
future developments or otherwise, except as required by law.
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Item 1. Business
Company Overview
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 metropolitan area and Kansas. We were formed in 2004 in connection with our acquisition of First National Bank of Medford, which was renamed Bank7 (the “Bank”). We are focused on
serving business owners and entrepreneurs by delivering fast, consistent and well-designed banking solutions. As of December 31, 2018, we had total assets of $770.5 million, total loans of $599.9 million, total deposits of $675.9 million and total
shareholders’ equity of $88.5 million.
Since our acquisition of the Bank in 2004 through December 31, 2018, we have grown from approximately $24 million to over $770 million in
total assets through a combination of organic growth and acquisitions. In 2014, we expanded our operations into Kansas with the acquisition of Montezuma State Bank, which had approximately $107 million in assets.
Products and Services
We are a full-service commercial bank. We focus on the development of deep business relationships with our commercial customers and their
principals. We also focus on providing customers with exceptional service and meeting their banking needs through a wide variety of commercial and retail financial services.
We have a particular focus in the following loan categories (i) commercial real estate lending, (ii) hospitality lending, (iii) energy
lending, and (iv) commercial and industrial. We also provide consumer lending services to individuals for personal and household purposes, including secured and unsecured term loans and home improvement loans. Consumer lending services include (i)
residential real estate loans and mortgage banking services, (ii) personal lines of credit, (iii) loans for the purchase of automobiles, and (iv) other installment loans.
We also offer deposit banking products, including (i) commercial deposit services, commercial checking, money market, and other deposit
accounts, and (ii) retail deposit services such as certificates of deposit, money market accounts, checking accounts, negotiable order of withdrawal accounts, savings accounts, and automated teller machine access.
Strategic Focus
Our success is driven by:
• the development of deep business relationships with our
commercial customers and their principals;
• disciplined growth without compromising our asset quality or
credit culture;
• drawing upon years of executive level experience at
multi-billion dollar banks;
• efficiencies gained by adherence to automated and repeatable
processes; and
• investing in our people and technology.
We will continue to focus on daily execution, making sound credit decisions and maintaining cost discipline, which have been the hallmark
of our success. Our customers will remain our top priority as we focus on efficiently providing tailored banking products and services to business owners and entrepreneurs, with a goal of generating robust growth and delivering exceptional returns to
our shareholders. Additionally, our bank will continue to position itself for future growth both organically and through strategic acquisitions.
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Cost Discipline and Efficiency
We constantly monitor expenditures, and, when appropriate, we use automation, technology and repeatable processes to drive profitability
through industry leading efficiencies. We operate as few branches as practical, and the branches we do operate are smaller and more cost efficient than many of our peers’ branches. The Bank’s efficiency ratio for the year ended December 31, 2018 was
the fourth lowest efficiency ratio among all 150 commercial banks with between $500 million and $5 billion in total assets headquartered in Texas, Oklahoma or Kansas, according to data obtained through S&P Global. As we continue to grow, we
expect our utilization of automation, technology, and repeatable processes will continue to drive efficiencies throughout the Bank. Combining talented people with process automation will enable us to scale even further, and will also enable us to
deliver consistently superior customer service.
Organic Growth
Much of our historic asset growth has been driven organically and within our current markets, in particular the Dallas/Fort Worth
metropolitan area and Oklahoma City, contain ample opportunities for us to grow our customer base and increase our loans and deposits. Although our expansion with brick and mortar branches will be limited, we believe operating strategically placed
branches will be important, and therefore we will continue to selectively build our presence in key markets. We also intend to continually enhance our internet and mobile banking products to remain competitive in the marketplace.
Acquisitions
We have experience with and have benefited from acquisitions, and we intend to pursue acquisitive growth as a public company. In 2011, we
acquired First State Bank in Camargo, Oklahoma from the Federal Deposit Insurance Corporation, or FDIC, and in 2014, we acquired Montezuma State Bank, a bank with $107 million in assets. Our acquisition focus will initially be on banks within
communities along the I-35 corridor, which is a natural business connector between Oklahoma City and the Dallas/Fort Worth metropolitan area. However, we may pursue opportunities in other Oklahoma and Texas markets if there is a strategic and
cultural fit. We plan to focus on banks with stable, low-cost core deposits that would maintain or enhance our current funding mix.
Markets
We are headquartered in Oklahoma City, Oklahoma, and we operate three additional branches in Oklahoma. We also operate one branch in the
Dallas/Fort Worth metropolitan area and two branches in southwest Kansas.
Competition
The banking and financial services industry is highly competitive, and we compete with a wide range of financial institutions within our
markets, including local, regional and national commercial banks and credit unions. We also compete with mortgage companies, trust companies, brokerage firms, consumer finance companies, mutual funds, securities firms, insurance companies,
third-party payment processors, financial technology, or Fintech, companies and other financial intermediaries for certain of our products and services. Some of our competitors are not subject to the regulatory restrictions and level of regulatory
supervision applicable to us.