UNITED STATES

SECURITIES AND

EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

FORM

~~FORM~~ 10-Q

☒Q~~UARTERLY~~

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, ~~2019~~2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to

______

Commission file number~~001-39028~~

001-39028

CROSSFIRST BANKSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)

Kansas

26-3212879

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11440 Tomahawk Creek Parkway

Leawood

66211

(Address of principal executive offices)

(Zip Code)

(

913

)

901-4516



~~Kansas~~		~~26-3212879~~
~~(State or other jurisdiction of incorporation or organization)~~		~~(I.R.S. Employer Identification No.)~~

~~11440 Tomahawk Creek Parkway~~
~~Leawood~~	KS	~~66211~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~

(~~913~~) ~~312-6822~~

(Registrant’s telephone number,

including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:



~~Title of each class~~	~~Trading Symbol~~	~~Name of each exchange on which registered~~
~~Common Stock, par value $0.01 per share~~	~~CFB~~	Title of each class Trading Symbol Name of each exchange on which registered Common Stock, par value $0.01 per share CFB The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required

to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),

and

(2) has been subject to such filing requirements for the past 90 days.

Yes☐ No ☒

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive

Data File required to be submitted pursuant to

Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or

for such shorter period that the registrant

was required to submit such files). ~~Yes~~ ☒ No ☐

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated

filer, a non-accelerated filer, a smaller reporting

company, or an emerging growth company. See the definitions of “large accelerated

filer,” “accelerated filer,” “smaller reporting

company,” and ~~‘‘emerging~~“emerging growth ~~company’’~~ company”

in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to

use the extended transition period for

complying with any new or revised financial accounting standards provided

pursuant to Section 13(a) of the Exchange Act.☐

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule ~~12b-2~~12b

-2 of the Exchange Act). Yes☐ No ☒

☐

☒

~~APPLICABLE ONLY TO CORPORATE ISSUERS:~~

As of ~~November 11, 2019~~,October 28, 2023, the registrant had~~51,969,203~~

49,296,927

shares of common stock, par value $0.01, outstanding.

~~CrossFirst Bankshares, Inc.~~CROSSFIRST BANKSHARES, INC.

Form 10-Q

for the Quarter Ended September 30, ~~2019~~

2023

Index

Part I. Financial Information



~~Part I. Financial Information~~
	Item 1.	~~Financial Statements~~
		~~Forward-Looking Information~~	4
		~~Consolidated Balance Sheets - Unaudited~~	5
		~~Consolidated Statements of Income - Unaudited~~	6
		~~Consolidated Statements of Other Comprehensive Income (Loss) - Unaudited~~	7
		~~Consolidated Statements of Stockholders’ Equity - Unaudited~~	8
		~~Consolidated Statements of Cash Flows - Unaudited~~	10
		~~Notes to~~ Consolidated Financial Statements ~~- Unaudited~~
		~~Note 1: Nature of Operations and Summary of Significant Accounting Policies~~	12
		~~Note 2: Earnings Per Share~~	15
		~~Note 3: Securities~~	16
		~~Note 4: Loans and Allowance for Loan Losses~~	19
		~~Note 5: Derivatives and Hedging~~	26
		~~Note 6: Interest-Bearing Deposits and Borrowings~~	28
		~~Note 7: Change in Accumulated Other Comprehensive Income (AOCI)~~	28
		~~Note 8: Regulatory Matters~~	29
		~~Note 9: Revenue from Contracts with Customers~~	30
		~~Note 10: Equity-Based Compensation~~	31
		~~Note 11: Income Tax~~	31
		~~Note 12: Disclosures about Fair Value of Financial Instruments~~	32
		~~Note 13: Commitments and Credit Risk~~	37
		~~Note 14: Legal and Regulatory Proceedings~~	37
	~~Item 2.~~	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	38
		~~Recent Developments~~	38
		~~Selected Financial Data (unaudited)~~	39
		~~GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures~~	40
		~~Results of Operations~~	44
		~~Summary~~	44
		~~Net Interest Income~~	45
		~~Provision for Loan Losses~~	47
		~~Non-Interest Income~~	48
		~~Non-Interest Expense~~	49
		~~Income Taxes~~	50
		~~Analysis of Financial Condition~~	50
		~~Balance Sheet Summary~~	50
		~~Security Portfolio~~	51
		~~Loans Portfolio~~	51
		~~Allowance for Loan Losses (‘‘ALLL’’)~~	52
		~~Nonperforming Assets and Other Asset Quality Metrics~~	53
		~~Deposits and Other Borrowings~~	54
		~~Liquidity~~	54
		~~Contractual Obligations~~	55
		~~Capital Resources and Off-Balance Sheet Arrangements~~	55
		~~Critical Accounting Policies~~	56
	~~Item 3.~~	~~Quantitative and Qualitative Disclosures about Market Risk~~	56
	~~Item 4.~~	~~Controls and Procedures~~	58

~~Part II. Other Information~~
	~~Item 1.~~	~~Legal Proceedings~~	58
	~~Item 1A.~~	~~Risk Factors~~	58
	~~Item 2.~~	~~Unregistered Sales of Equity Securities and Use of Proceeds~~	58
	~~Item 3.~~	~~Defaults Upon Senior Securities~~	59
	~~Item 4.~~	~~Mine Safety Disclosures~~	59
	~~Item 5.~~	~~Other Information~~	59
	~~Item 6.~~	~~Exhibits~~	60

~~Signatures~~

~~Table of Contents~~

Forward-Looking Information

Consolidated Statements of Financial Condition – Unaudited

~~This~~4

Consolidated Statements of Operations – Unaudited

Consolidated Statements of Comprehensive Income (Loss) – Unaudited

Consolidated Statements of Stockholders’Equity – Unaudited

Consolidated Statements of Cash Flows – Unaudited

Notes to Consolidated Financial Statements – Unaudited

Item 2. Management’s Discussion and Analysis of Financial Condition andResults of Operations

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

Part II. Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 5. Other Information

Item 6. Exhibit Index

Signature

Table of Contents

Forward-Looking Information

All statements contained in this quarterly report ~~may contain~~on Form 10-Q that do not directly and exclusively

relate to historical facts

constitute forward-looking ~~statements that reflect our current views with respect to, among other things, future events and our financial performance.~~statements. These statements are often, but not always, made through the

use of words or phrases such as ‘‘

“may,~~’’ ‘‘might,’’ ‘‘should,’’ ‘‘could,’’ ‘‘predict,’’ ‘‘~~” “might,” “could,” “predict,”

“potential,~~’’ ‘‘believe,’’ ‘‘~~” “believe,”

“expect,~~’’ ‘‘continue,’’ ‘‘~~” “continue,”

“will,~~’’ ‘‘~~”

“anticipate,~~’’ ‘‘~~”

“seek,~~’’ ‘‘estimate,’’ ‘‘~~” “estimate,”

“intend,~~’’ ‘‘~~”

“plan,~~’’ ‘‘strive,’’ ‘‘projection,’’ ‘‘~~” “projection,”

“goal,~~’’ target,’’ ‘‘outlook,’’ ‘‘~~” “target,” “outlook,”

“aim,~~’’ ‘‘would,’’ ‘‘annualized’’~~ ” “would,” “annualized,” “position”

and ~~‘‘outlook,’’~~ “outlook,”

or the negative ~~version~~ of ~~those~~these words

or other comparable words or phrases of a future or forward-looking nature. For

example, our forward-looking statements include

statements regarding our business plans, expectations, or opportunities

for growth; the impact of the acquisition of Canyon

Bancorporation, Inc. and Canyon Community Bank, N.A. (collectively

“Canyon”); our expense management initiatives and the results

expected to be realized from those initiatives; our anticipated financial results, expenses,

cash requirements and sources of liquidity; and

our capital allocation strategies and plans.

Unless we state otherwise or the context otherwise requires, references in this Form 10-Q

to “we,” “our,”

“us,” and the

“Company” refer to CrossFirst Bankshares, Inc., and its consolidated subsidiaries. References

in this Form 10-Q to “CrossFirst Bank”

and the “Bank”

refer to CrossFirst Bank, our wholly owned consolidated bank subsidiary.

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 you that any such forward-looking statements are not ~~guarantees~~ a guarantee

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. Such possible events~~statements

due to a number of factors, including, without

limitation: impacts on us and our clients of a decline in general business and economic conditions

and any regulatory responses thereto,

including uncertainty and volatility in the financial markets; interest rate

fluctuations; our ability to effectively execute our growth

strategy and manage our growth, including identifying and consummating suitable

mergers and acquisitions, entering new lines of

business or offering new or enhanced services or products; our ability to successfully

integrate Canyon; fluctuations in fair value of our

investments due to factors ~~include:~~outside of our control; our ability to successfully

manage credit risk and the sufficiency of our allowance;

geographic concentration of our markets; economic impact on our commercial real estate

and commercial-based loan portfolios,

including declines in commercial and residential real estate values; an increase in

non-performing assets; our ability to attract, hire and

retain key personnel; maintaining and increasing customer deposits, funding availability,

liquidity and our ability to raise and maintain

sufficient capital; competition from banks, credit unions and other financial services

providers; the effectiveness of our risk management

framework; accounting estimates; our ability to maintain effective internal control

over financial reporting; our ability to keep pace with

technological changes; cyber incidents or other failures, disruptions or security breaches; employee

error, fraud committed against the

Company or our clients, or incomplete or inaccurate information about clients and

counterparties; mortgage markets; our ability to

maintain our reputation; costs and effects of litigation; environmental liability; risk exposure

from transactions with financial

counterparties; severe weather, natural disasters, pandemics;

acts of war or terrorism or other external events; changes in ~~economic conditions~~laws, rules,

regulations, interpretations or policies relating to financial institutions, including stringent

capital requirements, higher FDIC insurance

premiums and assessments, consumer protection laws and privacy laws; volatility in

our stock price; or risks inherent with proposed

business acquisitions and the ~~Company’s market area, changes~~failure to achieve projected synergies.

Additional discussion of these and other risk factors can be found in ~~policies by regulatory agencies, governmental legislation and regulation, fluctuations in interest rates, changes in liquidity requirements, demand~~

our Annual Report on Form 10-K for ~~loans in~~ the Company’s market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, and such other factors as discussed in our prospectus (File No. 333-232704)fiscal year ended December 31, 2022 (“2022 Form 10-K”), ~~dated August 14, 2019,~~ filed with the Securities and

Exchange Commission ~~(‘‘SEC’’~~(“SEC”) ~~pursuant to Rule 424(b) of~~on March 3, 2023, and in our other filings with the ~~Securities Act of 1933,~~SEC.

Except as ~~amended (the ‘‘Securities Act’’), on August 15, 2019, related to our initial public offering.~~

~~We undertake~~required by law, the Company undertakes no obligation to update or

revise forward-looking statements to reflect

changed assumptions, the occurrence of unanticipated events or ~~publicly release the~~ changes in our business,

results of ~~any revision to these forward-looking statements, except as required by law.~~operations or financial condition over

time. Given these risks and uncertainties, readers are cautioned not to place undue reliance

on such forward-looking statements.



		4

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CROSSFIRST BANKSHARES, INC.

~~CONSOLIDATED BALANCE SHEETS~~Consolidated Statements of Financial Condition – Unaudited

September 30, 2023

December 31, 2022

(Dollars in thousands)

Assets

Cash and cash equivalents

233,191

300,138

Available-for-sale securities - taxable

345,708

198,808

Available-for-sale securities - tax-exempt

404,779

488,093

Loans, net of unearned fees

5,945,753

5,372,729

Allowance for credit losses on loans

71,556

61,775

Loans, net of the allowance for credit losses on loans

5,874,197

5,310,954

Premises and equipment, net

70,245

65,984

Restricted equity securities

4,396

12,536

Interest receivable

35,814

29,507

Foreclosed assets held for sale

1,130

Goodwill and other intangible assets, net

32,293

29,081

Bank-owned life insurance

70,367

69,101

Other

108,489

95,754

Total assets

7,179,479

6,601,086

Liabilities and stockholders’

equity

Deposits

Non-interest-bearing

1,028,974

1,400,260

Savings, NOW and money market

3,558,994

3,305,481

Time

1,743,653

945,567

Total deposits

6,331,621

5,651,308

Federal Home Loan Bank advances

88,531

218,111

Other borrowings

18,059

35,457

Interest payable and other liabilities

98,217

87,611

Total liabilities

6,536,428

5,992,487

Stockholders’

equity

Preferred stock, $

0.01

par value:

Authorized -

15,000

shares, issued -

7,750

shares at

September 30, 2023 and

shares at December 31, 2022

Common stock, $

0.01

par value:

Authorized -

200,000,000

shares, issued -

53,285,789

and

53,036,613

shares at September 30, 2023 and December 31, 2022,

respectively

533

530

Treasury stock, at cost:

September 30, 2019 December 31, 2018
(Unaudited)
(Dollars in thousands)
Assets
Cash and cash equivalents $ 128,126
$ 216,541
Available for sale securities - taxable 323,531
296,133
Available for sale securities - tax-exempt 409,562
367,545
Premises and equipment, held for sale —
3,444
Loans, net of allowance for loan losses of $42,995 and $37,826 at September 30, 2019 and December 31, 2018, respectively 3,586,797

3,022,921
Premises and equipment, net 71,314
74,945
Restricted equity securities 16,053
14,525
Interest receivable 15,909
14,092
Foreclosed assets held for sale 2,471
—
Deferred tax asset 7,429
16,316
Goodwill and other intangible assets, net 7,720
7,796
Bank-owned life insurance 65,228
63,811
Other 17,173
9,146
Total assets $ 4,651,313

$ 4,107,215
Liabilities and stockholders’ equity
Deposits
Non-interest bearing $ 513,832
$ 484,284
Savings, NOW and money market 1,922,522
1,714,136
Time 1,221,754
1,009,677
Total deposits 3,658,108

3,208,097
Federal funds purchased and repurchase agreements 49,810
75,406
Federal Home Loan Bank advances 307,804
312,985
Other borrowings 912
884
Interest payable and other liabilities 32,244
19,507
Total liabilities 4,048,878
3,616,879
Stockholders’ equity
Redeemable preferred stock, $0.01 par value, $25 liquidation value:
authorized - 5,000,000 shares, issued - 0 and 1,200,000 shares at September 30, 2019 and December 31, 2018, respectively —
12
Common stock, $0.01 par value:
authorized - 200,000,000 shares, issued - 51,969,203 and 45,074,322 shares at September 30, 2019 and December 31, 2018, respectively 520
451
Additional paid-in capital 518,816
454,512
Retained earnings 65,282
38,567
Other (84 ) (196 )
Accumulated other comprehensive income (loss) 17,901
(3,010 )
Total stockholders’ equity 602,435

490,336
Total liabilities and stockholders’ equity $ 4,651,313
$ 4,107,215
3,990,753

and

4,588,398

shares held at September 30, 2023

and December 31, 2022, respectively

(58,195)

(64,127)

Additional paid-in capital

542,191

530,658

Retained earnings

254,855

206,095

Accumulated other comprehensive loss

(96,333)

(64,557)

Total stockholders’ equity

643,051

608,599

Total liabilities and stockholders’

equity

7,179,479

6,601,086



~~See Notes to Consolidated Financial Statements (unaudited)~~		5

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

~~CONSOLIDATED STATEMENTS OF INCOME~~Consolidated Statements of Operations – Unaudited

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands except per share data)

Interest Income

Loans, including fees

103,631

59,211

292,231

149,266

Available-for-sale securities - ~~UNAUDITED~~taxable

3,089

1,119

7,560

3,250

Available-for-sale securities - tax-exempt

3,365

3,905

10,730

11,442

Deposits with financial institutions

2,444

1,193

6,067

1,714

Dividends on bank stocks

127

122

753

478

Total interest income

112,656

65,550

317,341

166,150

Interest Expense

Deposits

56,297

14,909

141,685

23,152

Fed funds purchased and repurchase agreements

Federal Home Loan Bank Advances

1,003

898

7,128

3,302

Other borrowings

224

590

Total interest expense

57,529

15,855

149,454

26,631

Net Interest Income

55,127

49,695

167,887

139,519

Provision for Credit Losses

3,329

3,334

10,390

4,844

Net Interest Income after Provision for Credit Losses

51,798

46,361

157,497

134,675

Non-Interest Income

Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
(Dollars in thousands except per share data)
Interest Income
Loans, including fees $ 49,327
$ 34,012
$ 142,319
$ 89,262
Available for sale securities - Taxable 1,991
2,200
6,646
5,729
Available for sale securities - Tax-exempt 2,969
3,586
8,820
11,622
Deposits with financial institutions 970
723
2,452
2,481
Dividends on bank stocks 272
254
801
718
Total interest income 55,529
40,775
161,038
109,812
Interest Expense

Deposits 18,003
9,999
51,421
26,639
Fed funds purchased and repurchase agreements 74
287
501
628
Advances from Federal Home Loan Bank 1,629
1,468
4,739
4,308
Other borrowings 37
53
112
184
Total interest expense 19,743
11,807
56,773
31,759
Net Interest Income 35,786
28,968
104,265
78,053
Provision for Loan Losses 4,850
3,000
10,550
9,000
Net Interest Income after Provision for Loan Losses 30,936
25,968
93,715
69,053
Non-Interest Income

Service charges and fees (rebates) on customer accounts 72
(100 ) 441
506
Gain on sale of available for sale securities 34

195
467

608
Impairment of premises and equipment held for sale —

(171 ) (424 )
(171 )
Gain on sale of loans 49

25
207

618
Income from bank-owned life insurance 476
513
1,416
1,511
Swap fee income, net 1,879

253
2,415

299
ATM and credit card interchange income 476

301
1,312

827
Other non-interest income 226

169
695

690
Total non-interest income 3,212

1,185
6,529

4,888
Non-Interest Expense

Salaries and employee benefits 14,256
12,652
43,296
43,689
Occupancy 2,080
2,132
6,301
6,199
Professional fees 427
766
1,923
2,421
Deposit insurance premiums 302
823
2,020
2,411
Data processing 649
528
1,868
1,470
Advertising 580
527
1,770

1,982
Software and communication 900

630
2,407

1,958
Depreciation and amortization 413

516
1,320

1,306
Other non-interest expense 1,565

1,301
4,858

4,153
Total non-interest expense 21,172

19,875
65,763

65,589
Net Income Before Taxes 12,976
7,278
34,481
8,352
Income tax expense (benefit) 2,592
924
5,308
(904 )
Net Income $ 10,384
$ 6,354
$ 29,173
$ 9,256
Basic Earnings Per Share⁽¹⁾
$ 0.22
$ 0.15
$ 0.63
$ 0.23
Diluted Earnings Per Share⁽¹⁾
$ 0.21
$ 0.15
$ 0.61
$ 0.22
⁽¹⁾ Share data has been adjusted to reflect a 2-for-1 stock split effected in the form of a dividend on December 21, 2018.

Service charges and fees on customer accounts

2,249

1,566

6,188

4,520

ATM and credit card interchange income

1,436

1,326

3,913

5,513

Gain on sale of loans

739

2,131

Income from bank-owned life insurance

437

405

1,266

1,200

Swap fees and credit valuation adjustments, net

(7)

231

123

Other non-interest income

1,063

490

2,452

1,566

Total non-interest income

5,981

3,780

16,181

12,922

Non-Interest Expense

Salaries and employee benefits

22,017

18,252

68,700

53,288

Occupancy

3,183

2,736

9,211

7,851

Professional fees

1,945

580

5,533

2,453

Deposit insurance premiums

1,947

903

5,359

2,355

Data processing

904

877

3,203

2,849

Advertising

593

796

1,994

2,247

Software and communication

1,898

1,222

5,204

3,689

Foreclosed assets, net

128

(30)

Other non-interest expense

2,945

3,057

9,980

10,559

Core deposit intangible amortization

922

2,546

Total non-interest expense

36,354

28,451

111,858

85,319

Net Income Before Taxes

21,425

21,690

61,820

62,278

Income tax expense

4,562

4,410

12,802

12,625

Net Income

16,863

17,280

49,018

49,653

Basic Earnings Per Common Share

0.34

0.35

1.00

Diluted Earnings Per Common Share

0.34

0.35

0.99

~~See Notes to Consolidated Financial Statements (unaudited)~~

See Notes to Consolidated Financial Statements – Unaudited

~~CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS)~~ Consolidated Statements of Comprehensive Income (Loss) – Unaudited

(Dollars in thousands)

Less: income tax expense (benefit)

Less: reclassification adjustment for realized (losses) gains

included in income, net of income tax

Less: reclassification adjustment for interest income included in

income, net of income tax

Other comprehensive loss

~~See Notes to Consolidated Financial Statements (unaudited)~~

See Notes to Consolidated Financial Statements – Unaudited

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY~~Consolidated Statements of Stockholders’

Equity – Unaudited

(Dollars in thousands)

Balance at June 30, 2022

Other comprehensive loss - ~~UNAUDITED~~available-for-

Other comprehensive loss - cash flow

Issuance of shares from equity-based

Open market common share repurchases

Stock-based compensation

Balance at September 30, 2022

(Dollars in thousands)

Balance at June 30, 2023

Other comprehensive loss - available-for-

Other comprehensive loss - cash flow

Preferred dividends $

Issuance of shares from equity-based

Acquisition - purchase accounting

Stock-based compensation

Balance September 30, 2023

(Dollars in thousands)

Balance at December 31, 2021

Adoption of ASU 2016-13

Other comprehensive loss - available-for-

Other comprehensive loss

- cash flow

Accumulated
Additional Other
Preferred Stock Common Stock Paid in Retained Comprehensive
Shares Amount
Shares⁽¹⁾

Amount⁽¹⁾
Capital
Earnings⁽¹⁾
Other Income (Loss) Total
(Dollars in thousands)
Balance at June 30, 2018 1,200,000
$ 12
35,496,278
$ 355
$ 321,544
$ 25,778
$ (191 ) $ (4,961 ) $ 342,537
Net income —
—
—
—
—
6,354
—
—
6,354
Change in unrealized depreciation on available-for-sale securities —
—
—
—
—
—
—
(5,120 ) (5,120 )
Issuance of shares —
—
5,031,110
50
69,733
(25 ) —
—
69,758
Issuance of shares from equity-based awards —
—
—
—
—
—
—
—
—
Retired shares —
—
(265,908 ) (3 ) (2,534 ) (1,253 ) —
—
(3,790 )
Preferred dividends declared —
—
—
—
—
(525 ) —
—
(525 )
Employee receivables from sale of stock —
—
—
—
2
—
(1 ) —
1
Share-based compensation —
—
—
—
527
—
—
—
527
Employee stock purchase plan additions —
—
—
—
38
—
—
—
38
Balance at September 30, 2018 1,200,000
$ 12
40,261,480
$ 402
$ 389,310
$ 30,329
$ (192 ) $ (10,081 ) $ 409,780
-

Issuance of shares from equity-based

Open market common share repurchases

Employee receivables from sale of stock

Stock-based compensation

Balance at September 30, 2022

⁽¹⁾ ~~Share data has been adjusted to reflect a 2-for-1 stock split effected in the form of a dividend on December 21, 2018.~~



~~See Notes to Consolidated Financial Statements (unaudited)~~		8

See Notes to Consolidated Financial Statements – Unaudited

(Dollars in thousands)

Balance at December 31, 2022

Other comprehensive loss - available-for-

Other comprehensive loss

- cash flow

Issuance of preferred shares

Preferred dividends $

Issuance of shares from equity-based

Warrants exercised, cash settled

Acquisition - purchase accounting

Stock-based compensation

Balance September 30, 2023

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED - CONTINUED~~Consolidated Statements of Cash Flows – Unaudited

Nine Months Ended

September 30,

2023

2022

(Dollars in thousands)

Operating Activities

Net income

49,018

49,653

Adjustments to reconcile net income to cash provided by operating activities:

Accumulated
Additional Other
Preferred Stock Common Stock Paid in Retained Comprehensive
Shares Amount
Shares⁽¹⁾

Amount⁽¹⁾
Capital
Earnings⁽¹⁾
Other Income (Loss) Total
(Dollars in thousands)
Balance at December 31, 2017 1,200,000
$ 12
30,686,256
$ 307
$ 256,108
$ 23,950
$ (256 ) $ 7,026
$ 287,147
Net income —
—
—
—
—
9,256
—
—
9,256
Change in unrealized depreciation on available-for-sale securities —
—
—
—

—
—
(17,107 ) (17,107 )
Issuance of shares —
—
9,557,054
95
132,868
(48 ) —
—
132,915
Issuance of shares from equity-based awards —
—
284,078
3
(1,653 ) (1 ) —
—
(1,651 )
Retired shares —
—
(265,908 ) (3 ) (2,534 ) (1,253 ) —
—
(3,790 )
Preferred dividends declared —
—
—
—
—
(1,575 ) —
—
(1,575 )
Employee receivables from sale of stock —
—
—
—
8
—
64
—
72
Share-based compensation —
—
—
—
4,386
—
—
—
4,386
Employee stock purchase plan additions —
—
—
—
127
—
—
—
127
Balance at September 30, 2018 1,200,000
$ 12
40,261,480
$ 402
$ 389,310
$ 30,329
$ (192 ) $ (10,081 ) $ 409,780

Depreciation and amortization

7,041

3,716

Provision for credit losses

10,390

4,844

Accretion of discounts on loans

(2,029)

Accretion of discounts and amortization of premiums on securities

2,378

3,259

Equity based compensation

3,711

3,304

Gain on disposal of fixed assets

(67)

Loss on sale of foreclosed assets and related impairments

Gain on sale of loans

(2,131)

Origination of loans held for sale

(36,972)

Proceeds from sales of loans held for sale

39,775

Deferred income taxes

(1,208)

1,713

Net increase in bank owned life insurance

(1,266)

(1,200)

Net realized (gains) losses on available-for-sale securities

(3)

Dividends on FHLB stock

(745)

(505)

Changes in:

Interest receivable

(5,612)

(4,530)

Other assets

2,132

4,568

Other liabilities

6,691

(2,989)

Net cash provided by operating activities

71,183

61,876

Investing Activities

Balance at December 31, 2018 1,200,000
$ 12
45,074,322
$ 451
$ 454,512
$ 38,567
$ (196 ) $ (3,010 ) $ 490,336
Net income —
—
—
—
29,173
—
—
29,173
Change in unrealized appreciation on available-for-sale securities —
—
—
—

—
—
20,842
20,842
Issuance of shares —
—
6,851,213
68
88,869
—
—
—
88,937
Issuance of shares from equity-based awards —
—
53,668
1
(246 ) —
—
—
(245 )
Retired shares (1,200,000 ) (12 ) (10,000 ) —
(30,088 ) (55 ) —

(30,155 )
Preferred dividends declared —
—
—
—
—
(175 ) —
—
(175 )
Employee receivables from sale of stock —
—
—
—
5
—
112
—
117
Share-based compensation —
—
—
—
3,569
—
—
—
3,569
Employee receivables from sale of stock —
—
—
—
36
—
—
—
36
Adoption of ASU 2016-01 —
—
—
—
—
(69 ) —
69
—
Adoption of ASU 2018-07 —
—
—
—
2,159
(2,159 ) —
—
—
Balance at September 30, 2019 —
$ —
51,969,203
$ 520
$ 518,816
$ 65,282
$ (84 ) $ 17,901
$ 602,435

⁽¹⁾ ~~Share data has been adjusted to reflect a 2-for-1~~Net change in loans

(470,706)

(425,494)

Purchases of available-for-sale securities

(152,158)

(82,305)

Proceeds from maturities of available-for-sale securities

18,890

29,587

Proceeds from sale of available-for-sale securities

67,230

Proceeds from the sale of foreclosed assets

1,050

237

Purchase of premises and equipment

(6,953)

(1,878)

Proceeds from the sale of premises and equipment and related

insurance claims

Purchase of restricted equity securities

(10,290)

(6,957)

Proceeds from sale of restricted equity securities

21,006

10,111

Net cash activity from acquisition

19,279

Net cash used in investing activities

(512,585)

(476,699)

Financing Activities

Net (decrease) increase in demand deposits, savings, NOW and

money market accounts

(264,944)

178,134

Net increase in time deposits

779,701

125,784

Net increase in fed funds purchased and repurchase agreements

505

Net decrease in federal funds sold

(20,000)

Proceeds from Federal Home Loan Bank advances

22,414

50,000

Repayment of Federal Home Loan Bank advances

(77,295)

(149,000)

Net (repayments) proceeds of Federal Home Loan Bank line of credit

(72,468)

67,748

Proceeds from issuance of preferred shares, net of issuance cost

7,750

Issuance of common shares, net of issuance cost

171

Proceeds from employee stock ~~split effected~~purchase plan

402

364

Repurchase of common stock

(30,981)

Acquisition of common stock for tax withholding obligations

(937)

(995)

Settlement of warrants

(418)

Dividends paid on preferred stock

(258)

Net decrease in ~~the form~~employee receivables

Net cash provided by financing activities

374,455

241,231

Decrease in Cash and Cash Equivalents

(66,947)

(173,592)

Cash and Cash Equivalents, Beginning of ~~a dividend on December 21, 2018.~~Period

300,138

482,727

Cash and Cash Equivalents, End of Period

233,191

309,135

Supplemental Cash Flows Information

Interest paid

137,281

25,648

Income taxes paid

17,614

10,545



~~See Notes to Consolidated Financial Statements (unaudited)~~		9

CROSSFIRST BANKSHARES, INC.

~~CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED~~

Notes to Consolidated Financial Statements – Unaudited

Note 1:

Nature of Operations and Summary of Significant Accounting Policies



~~See Notes to Consolidated Financial Statements (unaudited)~~		10

~~Table of Contents~~

~~CROSSFIRST BANKSHARES, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED~~



~~See Notes to Consolidated Financial Statements (unaudited)~~		11

Organization and Nature of Operations

CrossFirst Bankshares, Inc. (the ~~‘‘Company’’~~“Company”)~~, a Kansas corporation, was incorporated in~~ ~~December 2017. Prior to incorporation, the Company was registered as a limited liability company under the name CrossFirst Holdings, LLC. The Company~~ is a bank holding company

whose principal activities are the ownership and

management of its wholly-owned ~~subsidiaries,~~subsidiary, CrossFirst Bank (the ~~‘‘Bank’’~~

“Bank”) ~~and CFSA, LLC (“CFSA”), which holds title to certain assets.~~. In addition, the Bank has

three

subsidiaries including

CrossFirst Investments, Inc. ~~(‘‘CFI’’~~(“CFI”) ~~is a wholly-owned subsidiary of the Bank,~~, which holds investments in marketable ~~securities.~~

securities, CFBSA I, LLC and CFBSA II, LLC.

The Bank is primarily engaged in providing a full range of banking and financial services

to individual and corporate customers

through its full-service branches in: (i) Leawood, Kansas; (ii) Wichita, Kansas; (iii) Kansas City,

Missouri; (iv) Oklahoma City,

Oklahoma; (v) Tulsa, Oklahoma; (vi) Dallas, Texas; (vii) Fort Worth, Texas; (viii) Frisco, Texas; (ix) Phoenix, Arizona; (x) Colorado

Springs, Colorado; (xi) Denver, Colorado; (xii) Clayton, New Mexico; and (xiii) Tucson, Arizona.

Basis of Presentation

The ~~Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (‘‘GAAP’’). The~~accompanying interim unaudited consolidated financial statements serve to

update the CrossFirst Bankshares, Inc. Annual

Report on Form 10-K for the year ended December 31, 2022 and include the accounts of the ~~Company;~~ Company,

the Bank, CFI, CFBSA I, LLC

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

CFBSA II, LLC. The ~~consolidated interim financial statements are~~accompanying unaudited and certain information and footnote disclosures presented in accordance with GAAP have been condensed or omitted and should be read in conjunction with the Company’s consolidated financial statements, and notes thereto, for the six-months ended June 30, 2019 and year ended December 31, 2018 included in the Company’s prospectus, dated August 14, 2019, filed with the Securities and Exchange Commission (‘‘SEC’’) pursuant to Rule 424(b) of the Securities Act of 1933, as amended, on August 15, 2019, related to the Company’s initial public offering (the ‘‘IPO Prospectus’’).

In the opinion of management, the interim financial statements include all adjustments all of which are of a normal, recurring nature necessary for the fair presentation of the financial position, results of operations, and cash flows of the Company and the disclosures made are adequate to make the interim financial information not misleading. The consolidated financial statements have been prepared in accordance with ~~GAAP for interim financial information~~U.S.

generally accepted accounting principles (“GAAP”) and ~~the instructions to Form 10-Q adopted by the SEC.~~where

~~There have been no significant changes~~applicable, with general practices in the ~~accounting policies~~ banking industry or guidelines

prescribed by bank regulatory agencies. However, they may not include all information

and notes necessary to constitute a complete set

of ~~the Company since June 30, 2019, the most recent date~~ financial statements ~~were provided within~~under GAAP applicable to annual periods and accordingly should be read

in conjunction with the ~~IPO Prospectus. The~~ financial

information contained in the Company's most recent Annual Report on Form 10-K. The unaudited consolidated financial

statements ~~and footnotes for the period ended June 30, 2019 included~~

reflect all adjustments which are, in the ~~Company’s IPO Prospectus should be referred~~opinion of management, necessary for a fair statement

of the results presented. All such

adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated

consolidation. Certain reclassifications of prior years' amounts are

made whenever necessary to ~~in connection with these unaudited interim consolidated financial statements.~~conform to current period presentation.

~~Operating~~The results of operations for the interim ~~periods disclosed herein~~period are not necessarily indicative of the results

that may be expected for athe full year or any

other interim period. All amounts are in thousands, except share data, or as otherwise noted.

GAAP requires management to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses,

and

disclosures of contingent assets and liabilities. By their nature, estimates are based

on judgment and available information. Management

has made significant estimates in certain areas, such as the fair values of financial instruments,

and the allowance for credit losses

(“ACL”). Because of the inherent uncertainties associated with any estimation process

and future ~~period.~~changes in market and economic

~~Use~~conditions, it is possible that actual results could differ significantly from those estimates.

The Company's significant accounting policies followed in the preparation of ~~Estimates~~the unaudited

consolidated financial statements are

disclosed in Note 1 of the audited financial statements and notes for the year ended December

31, 2022 and are contained in the

Company's Annual Report on Form 10-K for that period.

There have been no significant changes to the application of significant

accounting policies since December 31, 2022

Related Party Transactions

The Bank extends credit and receives deposits from related parties. In management’s

opinion, the loans and deposits were made

in the ordinary course of business and made on similar terms as those prevailing at the time

with other persons. Related party loans

totaled $

million and $

million while related party deposits totaled $

million and $

million at September 30, 2023 and

December 31, 2022, respectively.

Table of Contents

Note 2:

Acquisition Activities

On August 1, 2023, the Company completed its acquisition of Canyon Bancorporation, Inc. and Canyon Community Bank,

N.A.

(collectively, “Canyon”) whereby Canyon Bancorporation,

Inc. was ultimately merged with and into CrossFirst Bankshares, Inc. and

Canyon Community Bank, N.A. was merged with and into CrossFirst Bank (the

“Tucson acquisition”). Pursuant to the merger

agreement executed in April 2023, the Company paid approximately $

9.1

million of cash consideration and issued

597,645

shares of

Company common stock, and the Company and the Bank assumed all of the assets and liabilities

of the Canyon entities with which they

merged by operation of law. The acquisition added one full-service branch within Arizona to the Company’s

footprint thereby deepening

our Arizona franchise.

Tucson acquisition-related costs totaled $

2.2

million and $

2.3

million for the three- and nine-months ended September 30, 2023,

respectively, including a Day 1 CECL provision expense of $

0.9

million. Acquisition-related costs in connection with the acquisition of

Farmers & Stockmens Bank (the “Colorado/New Mexico acquisition”) totaled

1.7

million for the nine-months ended September 30,

2023.

Acquisition-related costs were included in the Company’s

consolidated statements of operations.

The results of both acquisitions

mentioned above are included in the results of the Company subsequent to the acquisition

dates and reported in this quarterly report on

Form 10-Q.

The Company ~~has identified accounting policies and estimates~~determined that ~~due to~~ the ~~difficult, subjective or complex judgments and assumptions inherent~~Tucson acquisition constitutes a business combination as

defined in ~~those policies and estimates and the potential sensitivity~~Accounting Standard

Codification (“ASC”) Topic 805, Business Combinations. Accordingly, as of the ~~Company’s financial statements to those judgments and assumptions, are critical to an understanding~~date of the ~~Company’s financial condition~~acquisition, the Company recorded

the

assets acquired and ~~results~~liabilities assumed at fair value. The Company determined fair values

in accordance with the guidance provided in

ASC Topic 820, Fair Value Measurements and Disclosures. In many cases, the determination of ~~operations.~~these fair values

required management

to make estimates about discount rates, future expected cash flows, market conditions and

other future events that are highly subjective

in nature and subject to change. Actual results could differ ~~from those estimates.~~materially. The ~~Allowance for Loan~~ Company has made the determination of fair values using the

best information available at the time; however, purchase accounting is not complete

and ~~Lease Losses, Investment Securities Impairment, Deferred Tax Asset,~~ the assumptions used are subject to change

and, ~~Fair Value~~ if changed, could have a material effect on the Company's financial position and results

of ~~Financial Instruments are particularly susceptible to significant change.~~operations.

~~Change~~

Table of Contents

The table below summarizes preliminary net assets acquired (at fair value) and consideration

transferred in ~~Presentation Due to Stock Split~~connection with the

~~On December 18, 2018,~~Tucson acquisition:

August 1, 2023

(Dollars in thousands)

Assets:

Cash and cash equivalents

28,366

Available-for-sale securities

38,084

Loans, net of unearned fees

105,668

Premises and equipment

1,335

Restricted equity securities

1,810

Interest receivable

695

Core deposit intangible

4,459

Other

1,277

Total assets acquired

181,694

Liabilities:

Total deposits

165,399

Other borrowings

1,050

Interest payable and other liabilities

500

Total liabilities assumed

166,949

Identifiable net assets acquired

14,745

Consideration:

Cash

9,087

Stock

6,957

Total consideration

16,044

Goodwill

1,299

In connection with the Tucson acquisition, the Company ~~announced~~recorded $

1.3

million of goodwill. The amount of goodwill recorded

reflects the expanded market presence, synergies and operational efficiencies that

are expected to result from the acquisition. The

following is a ~~2-for-1 stock split, effected~~description of the methods used to determine the fair values of significant

assets and liabilities presented above:

Cash and cash equivalents

—The carrying amount of these assets was deemed a reasonable estimate of fair value based

on the

short-term nature of these assets.

Loans, net

—The fair value of loans was based on a discounted cash flow methodology. 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.

Core deposit intangibles

—The Company identified customer relationships, in the form of ~~a dividend, effective December 21, 2018. Share data~~core deposit intangibles,

as an

identified intangible asset. Core deposit intangibles derive value from the expected

future benefits or earnings capacity attributable to the

acquired core deposits. The core deposit intangible was valued by identifying the expected future benefits of

the core deposits and ~~per share data were retroactively adjusted for~~

discounting those benefits back to present value. The core deposit intangible will be

amortized over its estimated useful life of

approximately

10 years

using the ~~periods presented to reflect~~sum of the ~~change in capital structure.~~years’ digits accelerated method.

~~Cash Equivalents~~

Table of Contents

Deposits

—By definition, the fair value of demand and saving deposits equals the amount

payable. For time deposits acquired, the

Company utilized an income approach, discounting the contractual cash flows on the instruments

over their remaining contractual lives

at prevailing market rates.

The fair value of the acquired assets and liabilities noted in the table may change during the

provisional period, which may last up

to twelve months subsequent to the acquisition date. The Company ~~had $85.0~~ may obtain additional information to refine

the valuation of the

acquired assets and liabilities and adjust the recorded fair value.

Accounting for acquired loans

Loans acquired are recorded at fair value with no carryover of the related allowance

for credit losses. Purchased-credit

deteriorated loans (“PCD”) are loans that have experienced more than insignificant

credit deterioration since origination and are

recorded at the purchase price. Management determined that past due loans, adversely risk

rated, on non-accrual or considered a

troubled-debt restructured loan constituted insignificant credit deterioration. The sum of the loan’s

purchase price and the allowance for

credit losses becomes its initial amortized cost basis. The difference between the initial amortized

cost basis and the par value of the loan

is a noncredit discount or premium, which is amortized into interest income over the

life of the loan.

Non-PCD loans have not experienced a more than insignificant deterioration

in credit quality since origination. The difference

between the fair value and outstanding balance of the non-PCD loans is recognized

as an adjustment to interest income over the lives of

the loan.

A Day 1 CECL allowance for credit losses on the non-PCD loans was recorded through provision for credit loss expense within

the consolidated statements of operations. At the date of acquisition, of the $

105.7

million of ~~cash and cash equivalents at the Federal Reserve Bank~~loans acquired from Canyon, $

26.0

million, or

% of ~~Kansas City~~Canyon’s loan portfolio, were accounted

for as ~~of September 30, 2019. The reserve required at September 30, 2019 was approximately $63.3 million. In addition, the~~

PCD loans.



		12



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~Company is at times required to place cash collateral with~~The following table provides a ~~third party~~summary of PCD loans purchased as part of ~~its back-to-back swap agreements. At September 30, 2019, approximately $18.2 million was required~~the Tucson

acquisition as ~~cash collateral.~~of the acquisition date:

~~Initial Public Offering~~

~~On August 19, 2019, the Company completed its initial public offering of common shares. The Company issued and sold 5,750,000 common shares~~

Total

(Dollars in thousands)

Unpaid principal balance

28,159

PCD allowance for credit loss at ~~a public offering~~acquisition

(329)

(Discount) premium on acquired loans

(1,809)

Purchase price of $14.50 per share. After deducting the underwriting discounts and offering expenses, the Company received total net proceeds of $75.6 million from the initial public offering. In addition, certain selling stockholders participated in the offering and sold an aggregate of 1,261,589 common shares at a public offering price of $14.50 per share. The Company did not receive any proceeds from the sales of shares by the selling stockholders.PCD loans

On September 17, 2019, the underwriters partially exercised their option to purchase additional shares. The Company issued and sold 844,362 common shares at a public offering price of $14.50 per share. After deducting the underwriting discounts and offering expenses, the Company received total net proceeds of $11.4 million.$

As of September 30, 2019, the Company qualified as an emerging growth company (‘‘EGC’’) under the Jumpstart Our Business Startups Act of 2012 (the ‘‘JOBS Act’’). An EGC may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. Amongst the reductions and reliefs, the Company elected to extend the transition period for complying with new or revised accounting standards affecting public companies. This means that the financial statements the Company files or furnishes, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as the Company remains an EGC or until the Company affirmatively and irrevocably opt out of the extended transition period under the JOBS Act.26,021

~~Recent Accounting Pronouncements~~

~~The Company has implemented the following Accounting Standards Updates (‘‘ASU’’) during 2019:~~

Table of Contents



		13



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~



~~Standard~~	~~Date of Adoption~~	~~Description~~	~~Effect on Financial Statements or Other Significant Matters~~
~~ASU 2016-01 -~~ ~~Financial Instruments-Overall (Subtopic 825-10)~~	~~January 2019~~	Required equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. Emphasized the existing requirement to use exit prices to measure fair value for disclosure purposes and clarifies that entities should not make use of practicability exceptions in determining the fair value of loans.	~~The Company transferred $68.7 thousand from accumulated other comprehensive loss to retained earnings in January 2019.~~ ~~There was no impact to the income statement on the adoption date.~~
~~ASU 2014-09 -~~ ~~Revenue from Contracts with Customers~~	~~January 2019~~	~~Amended guidance related to revenue from contracts with customers.~~ The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Replaced nearly all existing revenue recognition guidance, including industry-specific guidance, established a new control-based revenue recognition model, changed the basis for deciding when revenue is recognized over time or at a point in time, provided new and more detailed guidance on specific topics and expands and improves disclosures about revenue.	The accounting update did not materially impact the financial statements or recognition of revenues. The update did not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other GAAP, which comprises a significant portion of the Company’s revenue stream. In addition, the Company’s non-interest income is generated by customer transactions or through the passage of time and as a result the pattern or timing of income recognition was not impacted.

~~The Company has updates to the following ASUs that have not yet been adopted. A complete list of recent, applicable accounting pronouncements was provided in the IPO Prospectus:~~

Note 3:



		14



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~


~~Note 2:~~	~~Earnings Per Share~~

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

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(Dollars in thousands)
Earnings per Share
Net income $ 10,384
$ 6,354
$ 29,173
$ 9,256
Less: preferred stock dividends —
525
175
1,575
Net income available to common stockholders $ 10,384
$ 5,829
$ 28,998
$ 7,681
Weighted average common shares⁽¹⁾
48,351,553
37,790,614
46,239,021
33,918,540
Earnings per share $ 0.22
$ 0.15
$ 0.63
$ 0.23
Dilutive Earnings Per Share
Net income available to common stockholders $ 10,384
$ 5,829
$ 28,998
$ 7,681
Weighted average common shares⁽¹⁾
48,351,553
37,790,614
46,239,021
33,918,540
Effect of dilutive shares⁽¹⁾
812,996 988,010 842,706 1,133,888
Weighted average dilutive common shares⁽¹⁾
49,164,549
38,778,624
47,081,727
35,052,428
Diluted earnings per share $ 0.21
$ 0.15
$ 0.61
$ 0.22

SARs, RSUs, RSAs, PRSUs, PSSs not included because to do so would be antidilutive⁽¹⁾
541,556
442,452
507,167
273,180

¹ Share data has been adjusted to reflect a 2-for-1 stock split effected in the form of a dividend on December 21, 2018.



		15



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~


~~Note 3:~~	~~Securities~~

~~Available-for-Sale Debt and Equity~~ Securities

The amortized cost and approximate fair values, together with gross unrealized gains and

losses, of period end available-for-sale ~~debt and equity~~

securities consisted of the following:

September 30, 2019
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Approximate Fair Value
(Dollars in thousands)
Available-for-sale debt securities
Mortgage-backed - GSE residential $ 158,897
$ 2,009
$ 192
$ 160,714
Collateralized mortgage obligations - GSE residential 147,917
1,002
244
148,675
State and political subdivisions 398,963
21,051
5
420,009
Corporate bonds 1,444
92
—
1,536
Total available-for-sale debt securities 707,221
24,154
441
730,934
Equity securities
Mutual funds 2,179
—
20
2,159
Total equity securities 2,179
—
20
2,159
Total available-for-sale securities $ 709,400
$ 24,154
$ 461
$ 733,093

December 31, 2018
Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Approximate Fair Value
(Dollars in thousands)
Available-for-sale debt securities
Mortgage-backed - GSE residential $ 131,215
$ 162
$ 2,090
$ 129,287
Collateralized mortgage obligations - GSE residential 154,110
287
1,771
152,626
State and political subdivisions 378,595
3,908
4,445
378,058
Corporate bonds 1,613
70
26
1,657
Total available-for-sale debt securities 665,533
4,427
8,332
661,628
Equity securities
Mutual funds 2,141
—
91
2,050
Total equity securities 2,141
—
91
2,050
Total available-for-sale securities $ 667,674
$ 4,427
$ 8,423
$ 663,678

September 30, 2023

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Approximate

Fair Value

(Dollars in thousands)

Available-for-sale securities

U.S. Treasury securities

14,797

14,803

Mortgage-backed - GSE residential

336,020

37,976

298,044

Collateralized mortgage obligations - GSE residential

19,780

1,056

18,724

State and political subdivisions

489,976

79,624

410,442

Corporate bonds

9,740

1,266

8,474

Total available-for-sale securities

870,313

119,922

750,487

December 31, 2022

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Approximate

Fair Value

(Dollars in thousands)

Available-for-sale securities

Mortgage-backed - GSE residential

197,243

232

25,166

172,309

Collateralized mortgage obligations - GSE residential

11,629

743

10,886

State and political subdivisions

551,007

929

57,440

494,496

Corporate bonds

9,762

552

9,210

Total available-for-sale securities

769,641

1,161

83,901

686,901

The carrying value of securities pledged as collateral was ~~$36.6~~ $

million and ~~$108.6~~ $

million at September 30, ~~2019~~2023 and December 31, ~~2018,~~

2022, respectively.

As of September 30, 2023 and December 31, 2022, the available-for-sale securities

had $

million and $



		16

million, respectively, of



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~The~~accrued interest, excluded from the amortized cost basis, and ~~fair value~~presented in “interest receivable

”

on the consolidated statements of ~~available-for-sale debt securities at September 30, 2019, by contractual maturity, are shown below:~~

financial condition.

September 30, 2019
Within After One to After Five to After
One Year Five Years Ten Years Ten Years Total
(Dollars in thousands)
Available-for-sale debt securities
Mortgage-backed - GSE residential⁽¹⁾

Amortized cost $ —
$ —
$ 1,411
$ 157,486
$ 158,897
Estimated fair value —
—
1,471
159,243
160,714
Collateralized mortgage obligations - GSE residential⁽¹⁾

Amortized cost —
—
2,876
145,041
147,917
Estimated fair value —
—
3,011
145,664
148,675
State and political subdivisions
Amortized cost —
3,580
40,410
354,973
398,963
Estimated fair value —
3,674
43,071
373,264
420,009
Corporate bonds
Amortized cost —
—
1,444
—
1,444
Estimated fair value —
—
1,536
—
1,536
Total available-for-sale debt securities
Amortized cost —

3,580

46,141

657,500

707,221
Estimated fair value $ —

$ 3,674

$ 49,089

$ 678,171

$ 730,934
⁽¹⁾ Actual maturities may differ from contractual maturities because issuers may have the rights to call or prepay obligations with or without prepayment penalties.

The following tables ~~show~~summarize the gross realized gains and losses from sales or

maturities of available-for-sale securities:

For the Three Months Ended

For the Nine Months Ended

September 30, 2023

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Loss

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Gain

(Dollars in thousands)

Available-for-sale securities

(128)

(60)

335

(332)

Table of Contents

For the Three Months Ended

For the Nine Months Ended

September 30, 2022

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Loss

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Loss

(Dollars in thousands)

Available-for-sale securities

(5)

(4)

(46)

(43)

The following table shows available-for-sale securities gross unrealized losses,

the number of securities that are in an unrealized

loss position, and fair value of the Company’s

investments with unrealized losses, ~~that are not deemed to be other-than-temporarily impaired,~~ aggregated by investment class and length

of time

that individual securities have been in a continuous unrealized loss position at

September 30, ~~2019~~2023 and December 31, ~~2018:~~2022:

September 30, 2023

Less than 12 Months

12 Months or More

Total

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

(Dollars in thousands)

Available-for-sale

securities

U.S. Treasury

securities

Mortgage-backed -

GSE residential

166,408

7,398

131,637

30,578

298,045

37,976

Collateralized

mortgage obligations

- GSE residential

5,255

282

8,786

774

14,041

1,056

State and political

subdivisions

119,719

5,433

112

277,722

74,191

213

397,441

79,624

325

Corporate bonds

4,333

667

4,141

599

8,474

1,266

Total temporarily

impaired securities

295,715

13,780

142

422,286

106,142

292

718,001

119,922

434

December 31, 2022

Less than 12 Months

12 Months or More

Total

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

(Dollars in thousands)

Available-for-sale

securities

Mortgage-backed -

GSE residential

91,929

10,410

66,036

14,756

157,965

25,166

Collateralized

mortgage obligations

- GSE residential

10,636

733

251

10,887

743

State and political

subdivisions

350,884

36,697

266

52,519

20,743

403,403

57,440

306

Corporate bonds

9,210

552

9,210

552

Total temporarily

impaired securities

462,659

48,392

330

118,806

35,509

581,465

83,901

387

Table of Contents

September 30, 2019
Less than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities
(Dollars in thousands)
Available-for-Sale Debt Securities
Mortgage-backed - GSE residential $ 3,988
$ 4
1
$ 27,889
$ 188
5
$ 31,877
$ 192
6
Collateralized mortgage obligations - GSE residential 48,851
149
6
9,792
95
10
58,643
244
16
State and political subdivisions 2,952
4
3
146
1
1
3,098
5
4
Corporate bonds —
—
0
—
—
0
—
—
0
Total temporarily impaired debt securities $ 55,791
$ 157
10
$ 37,827
$ 284
16
$ 93,618
$ 441
26

Based on the Company’s evaluation at each respective

period end, we recorded



		17



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

December 31, 2018
Less than 12 Months 12 Months or More Total
Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities Fair Value Unrealized Losses Number of Securities
(Dollars in thousands)
Available-for-Sale Debt Securities
Mortgage-backed - GSE residential $ 66,232
$ 369
10
$ 44,280
$ 1,721
11
$ 110,512
$ 2,090
21
Collateralized mortgage obligations - GSE residential 4,639
42
1 68,362
1,729
20 73,001
1,771
21
State and political subdivisions 85,181
1,210
68 97,721
3,235
74 182,902
4,445
142
Corporate bonds 723
26
1
—
—
0
723
26
1
Total temporarily impaired debt securities $ 156,775
$ 1,647
80
$ 210,363
$ 6,685
105
$ 367,138
$ 8,332
185

credit loss impairment during the nine-months

ended September 30, 2023 or the year ended December 31, 2022.

The unrealized losses onin the Company’s ~~investments in state and political subdivisions~~

investment portfolio were

caused by interest rate ~~changes and adjustments in credit ratings. The contractual terms~~changes.

As of those investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. The unrealized losses on the Company’s investments in collateralized mortgage-backed securities and corporate bonds were caused by interest rate changes and market assumptions about prepayment speeds.

~~The Company expects to recover the amortized cost basis over the term of the securities, excluding a previously disclosed impaired security. Because~~September 30, 2023 the Company does not intend to sell the investments in loss positions,

and it

is not more likely than not the Company will be required to sell the investments before recovery

of their amortized cost ~~basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired (‘‘OTTI’’) at September 30, 2019.~~basis.

~~Gross gains of $506.2 thousand~~The amortized cost, fair value, and ~~$2.0 million and gross losses of $39.4 thousand and $1.4 million resulting from sales~~weighted average yield of available-for-sale securities ~~were realized for the nine-months ended~~ at

September 30, ~~2019~~2023, by contractual

maturity, are shown below:

September 30, 2023

Within

After One to

After Five to

After

One Year

Five Years

Ten Years

Total

(Dollars in thousands)

Available-for-sale securities

U.S. Treasury securities

(1)

Amortized cost

14,797

Estimated fair value

14,803

Weighted average yield

(2)

5.11

Mortgage-backed - GSE residential

(1)

Amortized cost

1,007

334,999

336,020

Estimated fair value

891

297,140

298,044

Weighted average yield

(2)

4.88

2.39

3.59

3.58

Collateralized mortgage obligations -

GSE residential

Amortized cost

2,267

17,513

19,780

Estimated fair value

2,117

16,607

18,724

Weighted average yield

(2)

2.77

4.93

4.68

State and ~~2018, respectively.~~political subdivisions

Amortized cost

744

5,022

93,874

390,336

489,976

Estimated fair value

752

4,989

90,036

314,665

410,442

Weighted average yield

(2)

3.81

4.42

3.09

2.71

2.80

Corporate bonds

Amortized cost

143

9,597

9,740

Estimated fair value

139

8,335

8,474

Weighted average yield

(2)

4.22

5.71

5.69

Total available-for-sale securities

Amortized cost

15,541

5,179

106,745

742,848

870,313

Estimated fair value

15,555

5,141

101,379

628,412

750,487

Weighted average yield

5.05

4.41

3.32

3.16

3.21

(1)

Actual maturities may differ from contractual maturities because issuers

may have the rights to call or prepay obligations with or

without prepayment penalties.

(2)

Yields are calculated based on amortized cost using 30/360 day basis.

Tax-exempt securities are not tax effected.

Equity Securities

Equity securities consist of ~~Community Reinvestment Act mutual funds.~~$

million of private equity investments and $

million of restricted equity securities. The private

equity investments are included in “other”

assets on the consolidated statements of financial condition.

The Company elected a measurement alternative for its private equity investments

that did not have a readily determinable fair

value and did not qualify for the practical expedient to estimate fair value using the net asset value per

share.

A cost basis was

calculated for the equity investments.

The recorded balance will adjust for any impairment or any observable price changes

for an

identical or similar investment of the ~~equity securities was $2.2 million and $2.1 million at~~same issuer. No such events occurred during the three

or nine-month period ended September 30, ~~2019 and December 31, 2018, respectively. Prior to January 1, 2019, equity securities were stated at fair value with unrealized gains and losses reported as a separate component~~

2023.

Table of accumulated other comprehensive income, net of tax. A net unrealized loss of $68.7 thousand had been recognized in accumulated other comprehensive income as of December 31, 2018. On January 1, 2019, the unrealized loss was reclassified out of accumulated other comprehensive income and into retained earnings with subsequent changes in fair value being recognized in other non-interest income. Contents

The following is a summary of the ~~recorded fair value and the~~ unrealized and realized gains and losses on equity securities

recognized in net ~~income on available-for-sale equity securities:~~

September 30, 2019
Three months ended Nine months ended
(Dollars in thousands)
Net gains recognized during the period on equity securities $ 16
$ 72
Less: net gains recognized during the period on equity securities sold during the period —
—
Unrealized gain recognized during the reporting period on equity securities still held at the reporting date $ 16
$ 72
income:

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands)

Net gains (losses) recognized during the reporting period on equity securities

(87)

114

(261)

Less: net gains recognized during the reporting period on equity securities sold

during the reporting period

Unrealized gains (losses) recognized during the reporting period on equity

securities still held at the reporting date

(87)

(261)



		18

Table of Contents

Note 4:

Loans and Allowance for Credit Losses

The table below shows

the loan portfolio composition including carrying value by segment as of the dates

shown. The carrying value of loans is net of discounts, fees, costs,

and fair value marks of $

million and $

million as of September 30, 2023 and December 31, 2022, respectively.



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~


~~Note 4:~~	~~Loans and Allowance for Loan Losses~~

~~Categories~~

September 30, 2023

December 31, 2022

Amount

% of Loans

Amount

% of Loans

(Dollars in thousands)

Commercial and industrial

2,056,171

1,974,932

Energy

214,166

173,218

Commercial real estate - owner-occupied

583,442

437,119

Commercial real estate - non-owner-occupied

2,592,684

2,314,600

Residential real estate

456,047

439,367

Consumer

43,243

33,493

Loans, net of unearned fees

5,945,753

100

5,372,729

100

Less: allowance for credit losses on loans

(71,556)

(61,775)

Loans, net of the allowance for credit losses on loans

5,874,197

5,310,954

Accrued interest of $

million and $

million at September 30, ~~2019~~2023 and December 31, ~~2018 include:~~2022, respectively, presented

in “interest receivable” on the consolidated statements

of financial condition is excluded from the carrying value disclosed in the above table.

September 30, 2019 December 31, 2018
(Dollars in thousands)
Commercial $ 1,312,647
$ 1,134,414
Energy 396,132
358,283
Commercial real estate 993,153
846,561
Construction and land development 527,582
440,032
Residential real estate 365,435
246,275
Equity lines of credit 22,192
20,286
Consumer installment 21,552
23,528
Gross loans 3,638,693

3,069,379
Less: Allowance for loan losses 42,995
37,826
Less: Net deferred loan fees and costs 8,901

8,632
Net loans $ 3,586,797
$ 3,022,921

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believesCompany aggregates the loan ~~balance is not collectible. Subsequent recoveries, if any, are credited~~portfolio by similar credit risk characteristics. Effective

with the second quarter of 2023, we revised the reported loan segments to better

reflect how management monitors the portfolio, assesses credit risk and evaluates

the ACL.

All prior period disclosures have been revised to reflect the changes to the ~~allowance.~~loan

segments. The loan segments are described in additional detail below:

●

Commercial and Industrial

- The category includes loans and lines of credit to commercial and industrial clients for use

in property, plant, and equipment

purchases, business operations, expansions and for working capital

needs. Loan terms typically require amortizing payments that decrease the outstanding

loan

balance while the lines of credit typically require interest-only payments

with maturities ranging from one- to three-years. Lines of credit allow the borrower

to draw

down and repay the line of credit based on the client’s

cash flow needs. Repayment is primarily from the cash flow of a borrower’s

principal business operation.

Credit risk is driven by creditworthiness of a borrower and the economic conditions.

●

Energy

- The category includes loans to oil and natural gas customers for use in financing

working capital needs, exploration and production activities, and

acquisitions. The loans are repaid primarily from the conversion of crude oil and natural gas to cash. Credit risk is driven

by creditworthiness of a borrower and the

economic conditions that impact the cash flow stability from business operations. Energy

loans are typically collateralized with the underlying oil and gas reserves.

●

Commercial Real Estate – Owner-Occupied

- The category includes relationships where we are usually the primary provider of financial

services for the company

and/or the principals and the primary source of repayment is through the cash flows generated

by the borrowers’

business operations. Owner-occupied commercial

real estate loans are typically secured by a first lien mortgage on real property plus assignments

of all leases related to the properties. Credit risk may be impacted by

the creditworthiness of a borrower, property values and the local economies in the borrower

’s market areas.

●

Commercial Real Estate – Non-Owner-Occupied

- The category includes loans that typically involve larger principal amounts and repayment of these loans is

generally dependent on the leasing income generated from tenants. These are viewed primarily as cash

flow loans and secondarily as loans secured by real estate.

Table of Contents

Additionally, the category includes construction and land development loans

that are based upon estimates of costs and estimated value of the completed

project.

Independent appraisals and a financial analysis of the developers and property owners

are completed. Sources of repayment include secondary market

permanent

loans, sales of developed property or an interim loan commitment from the Company

until permanent financing is obtained. These

loans are higher risk than other

real estate loans due to their ultimate repayment being sensitive to interest rate changes,

general economic conditions, and the availability of long-term financing.

The ~~allowance~~category also includes loans that are secured by multifamily properties.

Repayment of these loans is primarily dependent on occupancy rates and rental income.

Credit risk for non-owner occupied commercial real estate loans may be impacted

by the creditworthiness of a borrower, property values and the local

economies in

the borrower’s market areas.

●

Residential Real Estate

- The category includes loans that are generally secured by owner-occupied 1-4 family residences

Repayment of these loans is primarily

dependent on the personal income and credit rating of the borrowers. We also offer open-

and closed-ended home equity loans, which are loans generally secured by

second lien positions on residential real estate.

Credit risk in these loans can be impacted by economic conditions

within or outside the borrower’s market areas that

might impact either property values or a borrower’s personal income.

●

Consumer

- The category includes personal lines of credit and various term loans such as automobile

loans and loans for other personal purposes. Repayment is

primarily dependent on the personal income and credit rating of the borrowers. Credit

risk is driven by consumer economic factors (such as unemployment and

general economic conditions in the borrower’s

market area) and the creditworthiness of a borrower.

Allowance for Credit Losses

The Company’s CECL committee meets at least quarterly to

oversee the ACL methodology. The committee estimates the ACL

using relevant available information, from

internal and external sources, relating to past events, current conditions, and reasonable

and supportable forecasts. The ACL represents the Company’s current estimate of lifetime

credit losses inherent in the loan portfolio at the statement of financial condition date. The ACL is adjusted for expected prepayments when appropriate and excludes expected

extensions, renewals, and modifications.

The ACL is the sum of three components: (i) asset specific / individual loan reserves; (ii) quantitative (formulaic or pooled) reserves; and (iii) qualitative

(judgmental)

reserves.

Asset Specific -

When unique qualities cause a loan’s exposure

to loss to be inconsistent with the pooled reserves, the loan is individually evaluated.

Individual reserves are

calculated for loans that are risk-rated substandard and on non-accrual and loans that are risk

-rated doubtful or loss that are greater than a defined dollar threshold. Reserves on asset

specific loans may be based on collateral, for collateral-dependent loans, or on quantitative

and qualitative factors, including expected cash flow, market sentiment, and

guarantor

support.

Quantitative

- The Company used the cohort method, which identifies and captures the balance of a pool of loans

with similar risk characteristics as of a particular time to

form a cohort. The cohort is then tracked for losses over the remaining life of loans or until the pool

is ~~evaluated on~~exhausted. The Company used a ~~regular basis by management and is based upon management’s periodic review~~lookback period of approximately six-years to

establish the cohort population. By using the historical data timeframe, the Company can

establish a historical loss factor for each of its ~~ability~~loan segments.

Table of Contents

Qualitative

– The Company uses qualitative factors to ~~collect~~adjust the ~~loans~~historical loss factors for current conditions. The

Company primarily uses the following qualitative factors:

◾

The nature and volume of changes in ~~light~~risk ratings;

◾

The volume and severity of ~~historical experience, the~~past due loans;

◾

The volume of non-accrual loans;

◾

The nature and volume of the loan portfolio, ~~adverse situations that may affect~~including the ~~borrower’s ability~~existence, growth, and effect of

any concentrations of credit;

◾

Changes in the Institute of Supply Management’s Purchasing

Manager Indices (“PMI”) for services and manufacturing;

◾

Changes in collateral values;

◾

Changes in lending policies, procedures, and quality of loan reviews;

◾

Changes in lending staff; and

◾

Changes in competition, legal and regulatory environments

In addition to ~~repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible~~the current condition qualitative adjustments, the Company uses the Federal

Reserve’s unemployment forecast to ~~significant revision as more information becomes available.~~

adjust the ACL based on forward looking

guidance. The allowance consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers unclassified loansFederal Reserve’s unemployment

forecast extends three-years and is ~~based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process and loan categories. Other adjustments may be made~~eventually

reverted to the ~~allowance for pools~~mean of ~~loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.~~

~~The following tables summarize the activity in the allowance for loan losses~~six percent by ~~portfolio segment and disaggregated based on the Company’s impairment methodology. The allocation in one portfolio segment does not preclude its availability to absorb losses in other segments:~~

year 10.

Commercial Energy Commercial Real Estate Construction and Land Development Residential Real Estate Equity Lines of Credit Consumer Installment Total
(Dollars in thousands)
Three months ended September 30, 2019
Allowance for loan losses
Beginning balance $ 22,975
$ 7,300
$ 7,533
$ 2,602
$ 2,138
$ 155
$ 149
$ 42,852
Provision charged to expense 3,535
1,077
(249 ) 414
82
5
(14 ) 4,850
Charge-offs (1,700 ) (3,000 ) —
—
—
—
(8 ) (4,708 )
Recoveries 1
—
—
—
—
—
—
1
Ending balance $ 24,811
$ 5,377
$ 7,284
$ 3,016
$ 2,220
$ 160
$ 127
$ 42,995



		19



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Commercial Energy Commercial Real Estate Construction and Land Development Residential Real Estate Equity Lines of Credit Consumer Installment Total
(Dollars in thousands)
Three months ended September 30, 2018
Allowance for loan losses
Beginning balance $ 11,739
$ 7,957
$ 6,584
$ 2,530
$ 1,103
$ 170
$ 114
$ 30,197
Provision charged to expense 1,102
1,184
315
137
261
4
(3 ) 3,000
Charge-offs (97 ) —
—
—
—
—
—
(97 )
Recoveries 439
—
—
—
—
—
1
440
Ending balance $ 13,183
$ 9,141
$ 6,899
$ 2,667
$ 1,364
$ 174
$ 112
$ 33,540

Commercial Energy Commercial Real Estate Construction and Land Development Residential Real Estate Equity Lines of Credit Consumer Installment Total
(Dollars in thousands)
Nine months ended September 30, 2019
Allowance for loan losses
Beginning balance $ 16,584
$ 10,262
$ 6,755
$ 2,475
$ 1,464
$ 159
$ 127
$ 37,826
Provision charged to expense 11,166
(2,461 ) 529
541
756
1
18
10,550
Charge-offs (2,954 ) (3,000 ) —
—
—
—
(19 ) (5,973 )
Recoveries 15
576
—
—
—
—
1
592
Ending balance $ 24,811
$ 5,377
$ 7,284
$ 3,016
$ 2,220
$ 160
$ 127
$ 42,995

Commercial Energy Commercial Real Estate Construction and Land Development Residential Real Estate Equity Lines of Credit Consumer Installment Total
(Dollars in thousands)
Nine months ended September 30, 2018
Allowance for loan losses
Beginning balance $ 11,378
$ 7,726
$ 4,668
$ 1,200
$ 905
$ 122
$ 92
$ 26,091
Provision charged to expense 2,031
2,671
2,231
1,467
459
77
64
9,000
Charge-offs (681 ) (1,256 ) —
—
—
(25 ) (45 ) (2,007 )
Recoveries 455
—
—
—
—
—
1
456
Ending balance $ 13,183
$ 9,141
$ 6,899
$ 2,667
$ 1,364
$ 174
$ 112
$ 33,540



		20



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Commercial Energy Commercial Real Estate Construction and Land Development Residential Real Estate Equity Lines of Credit Consumer Installment Total
(Dollars in thousands)
September 30, 2019
Ending balance
Individually evaluated for impairment $ 10,398
$ 854
$ 343
$ —
$ 219
$ —
$ —
$ 11,814
Collectively evaluated for impairment $ 14,413
$ 4,523
$ 6,941
$ 3,016
$ 2,001
$ 160
$ 127
$ 31,181
Allocated to loans:
Individually evaluated for impairment $ 66,162
$ 10,226
$ 16,544
$ —
$ 2,537
$ —
$ —
$ 95,469
Collectively evaluated for impairment $ 1,246,485
$ 385,906
$ 976,609
$ 527,582
$ 362,898
$ 22,192
$ 21,552
$ 3,543,224
Ending balance $ 1,312,647
$ 396,132
$ 993,153
$ 527,582
$ 365,435
$ 22,192
$ 21,552
$ 3,638,693

Commercial Energy Commercial Real Estate Construction and Land Development Residential Real Estate Equity Lines of Credit Consumer Installment Total
(Dollars in thousands)
December 31, 2018
Ending balance
Individually evaluated for impairment $ 5,814
$ 3,108
$ 473
$ —
$ 5
$ —
$ —
$ 9,400
Collectively evaluated for impairment $ 10,770
$ 7,154
$ 6,282
$ 2,475
$ 1,459
$ 159
$ 127
$ 28,426
Allocated to loans:
Individually evaluated for impairment $ 78,147
16,250
$ 15,227
$ —
$ 2,027
$ —
$ —
$ 111,651
Collectively evaluated for impairment $ 1,056,267
$ 342,033
$ 831,334
$ 440,032
$ 244,248
$ 20,286
$ 23,528
$ 2,957,728
Ending balance $ 1,134,414
$ 358,283
$ 846,561
$ 440,032
$ 246,275
$ 20,286
$ 23,528
$ 3,069,379

Internal Credit Risk ~~Profile~~

Ratings

The Company ~~analyzes its loan portfolio based~~uses a weighted average risk rating factor to adjust the historical

loss factors for current events. Risk ratings incorporate the criteria utilized

by regulatory

authorities to describe criticized assets, but separate various levels of risk concentrated

within the regulatory “Pass” category. Risk ratings are established for loans at origination

and

are monitored on an ~~internal~~ongoing basis. The rating ~~category (grades 1 - 8), portfolio segment~~assigned to a loan reflects the risks posed by the borrower

’s expected performance and ~~payment activity. These categories~~the transaction

’s structure. Performance metrics

used to determine a risk rating include, but are ~~utilized~~not limited to, ~~develop the associated allowance for loan losses.~~cash flow adequacy, liquidity,

and collateral. A

description of the loan ~~grades and segments~~risk ratings follows:

Loan Grades

•

●

Pass (risk rating 1-4)

- The category includes loans that are considered satisfactory. The category includes borrowers that generally maintain

good liquidity and

financial condition, or the credit is currently protected with sales trends remaining

flat or declining. Most ratios compare favorably with industry norms and Company

policies. Debt is programmed and timely repayment is expected.

●

Special Mention (risk rating 5)

- The category includes borrowers that generally exhibit adverse trends in operations or an imbalanced

position in their balance

sheet that has not reached a point where repayment is jeopardized. Credits are currently protected

but, if left uncorrected, the potential weaknesses may result in

deterioration of the repayment prospects for the credit or in the Company’s

credit or lien position at a future date. These credits are not adversely classified and do not

expose the Company to enough risk to warrant adverse classification.

●

Substandard (risk rating 6)

- The category includes borrowers that generally exhibit well-defined weakness(es) that jeopardize

repayment. Credits are inadequately

protected by the current worth and paying capacity of the obligor or of the collateral pledged. A distinct possibility exists that the Company will sustain some loss if

deficiencies are not corrected. Loss potential, while existing in the aggregate amount of

substandard assets, does not have to exist in individual assets classified

substandard. Substandard loans include both performing and non-performing loans and

are broken out in the table below.

●

Doubtful (risk rating 7)

- The category includes borrowers that exhibit weaknesses inherent in a substandard credit

and characteristics that these weaknesses make

collection or liquidation in full highly questionable or improbable based

on existing facts, conditions, and values. Because of reasonably specific pending

factors,

which may work to the advantage and strengthening of the assets, classification as a loss is

deferred until its more exact status may be determined.

Table of Contents

●

Loss (risk rating 8)

- Credits that are considered uncollectible or of such little value that their continuance as a bankable

asset is not warranted.

~~Pass & Watch~~ (risk rating 1 - 4) - Considered satisfactory. Includes borrowers that generally maintain good liquidity and financial condition or the credit is currently protected with sales trends remaining flat or declining. Most ratios compare favorably with industry norms and Company policies. Debt is programmed and timely repayment is expected.

•

~~Special Mention~~ (risk rating 5) - Borrowers generally exhibit adverse trends in operations or an imbalanced position in their balance sheet that has not reached a point where repayment is jeopardized. Credits are currently protected but, if left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the credit or in the Company’s credit or lien position at a future date. These credits are not adversely classified and do not expose the Company to enough risk to warrant adverse classification.

•

~~Substandard~~ (risk rating 6) - Credits generally exhibit a well-defined weakness(es) that jeopardize repayment. Credits are inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged. A distinct possibility exists that the Company will sustain some loss if deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard.

•

~~Doubtful~~ (risk rating 7) - Credits which exhibit weaknesses inherent in a substandard credit with the added characteristic that these weaknesses make collection or liquidation in full highly questionable and improbable based on existing facts, conditions and values. Because of reasonably specific pending factors, which may work to the advantage and strengthening of the assets, classification as a loss is deferred until its more exact status may be determined.


•	~~Loss~~ ~~(risk rating 8) - Credits which are considered uncollectible or of such little value that their continuance as a bankable asset is not warranted.~~

~~Loan Portfolio Segments~~


•	~~Commercial~~ - Includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. Repayment is primarily from the cash flow of a borrower’s principal business operation. Credit risk is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

•

~~Energy~~ - Includes loans to oil and natural gas customers for use in financing working capital needs, exploration and production activities, and acquisitions. The loans in this category are repaid primarily from the conversion of crude oil and natural gas to cash. Credit risk is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations.

•

~~Commercial Real Estate~~ - Loans typically involve larger principal amounts, and repayment of these loans is generally dependent on the successful operations of the property securing the loan or the business conducted on the property securing the loan. These are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Credit risk may be impacted by the creditworthiness of a borrower, property values and the local economies in the company’s market areas.

•

~~Construction and Land Development~~ - Loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. Sources of repayment include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk may be impacted by the creditworthiness of a borrower, property values and the local economies in the company’s market areas.

•

~~Residential Real Estate~~ - The loans are generally secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within or outside 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 many borrowers.

•

~~Equity Lines of Credit~~ - The loans are revolving lines of credit extended to consumers secured through a first or second mortgage on their personal residence. Repayment is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans may be impacted by economic conditions within the company’s market areas that may impact either property values or a borrower’s personal income.

•

~~Consumer Installment~~ - The loan portfolio consists of various term and line of credit loans such as automobile loans and loans for other personal purposes. Repayment comes 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.

The following tables present the credit risk profile of the Company’s

loan portfolio based on an internal rating ~~category (grades 1 - 8), portfolio segment~~categories and ~~payment activity:~~loan segments as of September 30,

2023 and

December 31, 2022:

Pass & Watch Special Mention Substandard Doubtful Loss Total
(Dollars in thousands)
September 30, 2019
Commercial $ 1,217,280
$ 29,350
$ 66,017
$ —
$ —
$ 1,312,647
Energy 378,533
10,342
2,580
4,677
—
396,132
Commercial real estate 976,262
7,529
8,402
960
—
993,153
Construction and land development 527,582
—
—
—
—
527,582
Residential real estate 362,625
273
2,537
—
—
365,435
Equity lines of credit 22,192
—
—
—
—
22,192
Consumer installment 21,552
—
—
—
—
21,552
$ 3,506,026
$ 47,494
$ 79,536
$ 5,637
$ —
$ 3,638,693

Pass & Watch Special Mention Substandard Doubtful Loss Total
(Dollars in thousands)
December 31, 2018
Commercial $ 1,056,505
$ —
$ 73,824
$ 4,085
$ —
$ 1,134,414
Energy 339,720
5,376
13,187
—
—
358,283
Commercial real estate 831,290
6,950
7,209
1,112
—
846,561
Construction and land development 440,032
—
—
—
—
440,032
Residential real estate 244,178
70
2,027
—
—
246,275
Equity lines of credit 20,286
—
—
—
—
20,286
Consumer installment 23,528
—
—
—
—
23,528
$ 2,955,539
$ 12,396
$ 96,247
$ 5,197
$ —
$ 3,069,379

The Company evaluates the loan risk grading system definitions, portfolio segment definitions and allowance for loan loss methodology on an ongoing basis. No significant changes were made to either during the past year.

As of September 30, 2023

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial and industrial

Pass

320,587

268,333

205,175

61,917

42,458

26,244

964,811

48,584

1,938,109

Special mention

13,314

5,650

11,072

204

30,308

6,184

66,794

Substandard - accrual

1,408

546

271

787

831

19,252

17,111

40,274

Substandard - non-

accrual

10,785

185

10,994

Doubtful

Total

335,309

274,529

216,315

62,244

43,449

27,105

1,025,156

72,064

2,056,171

Energy

Pass

7,075

174

206,384

125

213,758

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

408

Total

7,075

174

206,792

125

214,166

Commercial real estate

- owner-occupied

Pass

41,733

92,985

129,798

62,822

46,925

37,629

89,539

37,584

539,015

Special mention

10,187

7,396

2,746

2,178

798

7,310

580

31,195

Substandard - accrual

3,041

5,892

1,639

857

1,528

13,028

Substandard - non-

accrual

204

Doubtful

Total

54,961

100,381

138,640

66,639

48,580

45,010

89,539

39,692

583,442



		21

Table of Contents

As of September 30, 2023

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial real estate - non-owner-

occupied

Pass

392,980

876,727

291,711

162,183

83,502

61,611

561,670

91,198

2,521,582

Special mention

19,682

114

16,234

4,102

40,164

Substandard - accrual

10,443

7,530

3,625

309

439

22,346

Substandard - non-

accrual

8,448

144

8,592

Doubtful

Total

403,423

896,409

307,689

166,066

99,736

66,022

561,670

91,669

2,592,684

Residential real estate

Pass

29,272

85,249

84,931

113,631

38,427

64,493

30,418

446,421

Special mention

647

3,540

176

4,363

Substandard - accrual

253

1,320

3,125

207

176

5,081

Substandard - non-

accrual

182

Doubtful

Total

29,525

85,896

89,791

116,932

38,634

64,493

30,594

182

456,047

Consumer

Pass

10,737

6,429

533

235

140

25,068

43,211

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Total

10,737

6,429

533

235

146

25,068

43,243



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Table of Contents

As of September 30, 2023

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Total

Pass

795,309

1,336,798

712,148

400,796

211,547

190,117

1,877,890

177,491

5,702,096

Special mention

23,501

33,375

17,358

2,500

17,236

11,448

30,308

6,796

142,522

Substandard - accrual

15,145

546

14,810

8,686

1,851

1,211

19,428

19,078

80,755

Substandard - non-

accrual

8,652

168

10,785

367

19,972

Doubtful

408

Total

833,955

1,370,719

752,968

412,150

230,634

202,776

1,938,819

203,732

5,945,753

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial and industrial

Pass

465,963

281,166

55,934

50,445

48,595

20,648

890,109

19,089

1,831,949

Special mention

2,531

23,055

14,573

2,951

4,947

49,861

98,045

Substandard - accrual

290

677

1,647

1,330

740

299

10,805

21,166

36,954

Substandard - non-

accrual

104

1,383

6,479

7,972

Doubtful

Loss

Total

468,784

305,002

72,154

54,732

55,665

21,045

957,254

40,296

1,974,932

Energy

Pass

7,585

306

228

162,834

171

171,124

Special mention

Substandard - accrual

1,476

Substandard - non-

accrual

Doubtful

618

Loss

Total

7,585

306

228

164,928

171

173,218

Commercial real estate

- owner-occupied

Pass

79,695

127,489

56,607

49,620

28,143

20,299

28,814

14,024

404,691

Special mention

17,292

6,603

452

1,330

2,486

2,469

30,730

Substandard - accrual

403

1,295

1,698

Substandard - non-

accrual

Doubtful

Loss

Total

96,987

134,092

57,462

50,950

28,241

24,080

28,814

16,493

437,119

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial real estate

- non-owner-occupied

Pass

827,420

442,176

200,090

101,827

49,834

73,940

458,297

111,322

2,264,906

Special mention

5,931

7,727

114

6,460

1,853

2,429

9,852

34,366

Substandard - accrual

10,545

310

607

253

992

12,849

Substandard - non-

accrual

2,479

Doubtful

Loss

Total

843,896

452,692

200,811

101,909

56,354

76,046

460,726

122,166

2,314,600

Residential real estate

Pass

77,416

84,158

121,078

45,265

37,395

34,852

31,892

432,056

Special mention

253

3,272

187

226

3,938

Substandard - accrual

3,148

3,182

Substandard - non-

accrual

191

Doubtful

Loss

Total

77,703

87,430

124,413

45,491

37,395

34,852

31,892

191

439,367

Consumer

Pass

7,917

1,347

2,611

265

129

21,173

33,448

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Loss

Total

7,917

1,347

2,643

265

142

21,173

33,493

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Total

Pass

1,465,996

936,642

436,548

247,422

164,096

149,745

1,593,119

144,606

5,138,174

Special mention

26,007

40,657

15,326

4,507

11,513

4,425

52,290

12,362

167,087

Substandard - accrual

10,869

987

5,837

1,412

805

1,847

12,281

22,158

56,196

Substandard - non-

accrual

2,583

1,383

6,479

191

10,642

Doubtful

618

Loss

Total

1,502,872

980,869

457,711

253,347

177,797

156,029

1,664,787

179,317

5,372,729

Table of Contents

Loan Portfolio Aging Analysis

The following tables present the Company’s

loan portfolio aging analysis ~~of the recorded investment in loans~~ as of September 30, ~~2019~~2023 and December 31, ~~2018:~~

2022:

30-59 Days Past Due 60-89 Days Past Due 90 Days or More Total Past Due Current Total Loans Receivable Loans >= 90 Days and Accruing
(Dollars in thousands)
September 30, 2019
Commercial $ 42,039
$ 2,785
$ 1,101
$ 45,925
$ 1,266,722
$ 1,312,647
$ —
Energy 7,122
—
5,319
12,441
383,691
396,132
642
Commercial real estate 317
—
93
410
992,743
993,153
—
Construction and land development 12,345
—
—
12,345
515,237
527,582
—
Residential real estate 68
—
2,012
2,080
363,355
365,435
—
Equity lines of credit —
—
—
—
22,192
22,192
—
Consumer installment 50
—
—
50
21,502
21,552
—
$ 61,941
$ 2,785
$ 8,525
$ 73,251
$ 3,565,442
$ 3,638,693
$ 642

30-59 Days Past Due 60-89 Days Past Due 90 Days or More Total Past Due Current Total Loans Receivable Loans >= 90 Days and Accruing
(Dollars in thousands)
December 31, 2018
Commercial $ 1,040
$ —
$ 4,137
$ 5,177
$ 1,129,237
$ 1,134,414
$ —
Energy 1,994
—
9,218
11,212
347,071
358,283
—
Commercial real estate —
425
2,253
2,678
843,883
846,561
—
Construction and land development —
—
—
—
440,032
440,032
—
Residential real estate 28
194
—
222
246,053
246,275
—
Equity lines of credit —
—
—
—
20,286
20,286
—
Consumer installment —
—
—
—
23,528
23,528
—
$ 3,062
$ 619
$ 15,608
$ 19,289
$ 3,050,090
$ 3,069,379
$ —

~~Impaired Loans~~

A loan is considered impaired, in accordance with the impairment accounting guidance (ASC 310-10-35-16), when based on current information and events, it is probable the Company will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming loans but also include loans modified in troubled debt restructurings where concessions have been granted to borrowers experiencing financial difficulties. The intent of concessions is to maximize collection.

Groups of loans with similar risk characteristics are collectively evaluated for impairment based on the group’s historical loss experience adjusted for changes in trends, conditions and other relevant factors that affect repayment of the loans.

As of September 30, 2023

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial and industrial

30-59 days

1,488

2,089

3,673

60-89 days

593

235

4,360

181

5,369

Greater than 90 days

11,162

13,605

24,873

Total past due

593

235

17,010

15,875

33,915

Current

335,255

274,481

216,239

62,220

42,856

26,870

1,008,146

56,189

2,022,256

Total

335,309

274,529

216,315

62,244

43,449

27,105

1,025,156

72,064

2,056,171

Greater than 90 days

and accruing

543

13,605

14,254

Energy

30-59 days

60-89 days

Greater than 90 days

408

Total past due

408

Current

7,075

174

206,384

125

213,758

Total

7,075

174

206,792

125

214,166

Greater than 90 days

and accruing



		22

Table of Contents

As of September 30, 2023

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial real estate

- owner-occupied

30-59 days

5,892

232

6,124

60-89 days

Greater than 90 days

204

Total past due

6,096

232

6,328

Current

54,961

100,381

132,544

66,639

48,348

45,010

89,539

39,692

577,114

Total

54,961

100,381

138,640

66,639

48,580

45,010

89,539

39,692

583,442

Greater than 90 days

and accruing

Commercial real estate - non-owner-occupied

30-59 days

4,511

1,775

249

6,535

60-89 days

7,530

144

7,674

Greater than 90 days

6,029

Total past due

4,511

1,775

13,559

144

249

20,238

Current

398,912

894,634

294,130

165,922

99,736

66,022

561,421

91,669

2,572,446

Total

403,423

896,409

307,689

166,066

99,736

66,022

561,670

91,669

2,592,684

Greater than 90 days

and accruing

Residential real estate

30-59 days

60-89 days

Greater than 90 days

1,320

176

1,496

Total past due

1,320

176

1,510

Current

29,525

85,882

88,471

116,932

38,634

64,493

30,418

182

454,537

Total

29,525

85,896

89,791

116,932

38,634

64,493

30,594

182

456,047

Greater than 90 days

and accruing

1,320

176

1,496



Table of Contents 29 As of ~~Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~The following tables present impaired loans for the periods ended~~ September 30, 2023

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Consumer

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

10,737

6,380

514

235

146

25,068

43,175

Total

10,737

6,429

533

235

146

25,068

43,243

Greater than 90 days

and accruing

Total

30-59 days

4,565

1,854

5,911

232

1,737

2,089

16,412

60-89 days

7,530

144

593

235

4,360

181

13,045

Greater than 90 days

7,629

11,746

13,605

33,010

Total past due

4,565

1,886

21,070

168

825

235

17,843

15,875

62,467

Current

829,390

1,368,833

731,898

411,982

229,809

202,541

1,920,976

187,857

5,883,286

Total

833,955

1,370,719

752,968

412,150

230,634

202,776

1,938,819

203,732

5,945,753

Greater than 90 days

and accruing

1,396

719

13,605

15,750

Table of Contents

As of December 31, ~~2018:~~2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Unpaid
Recorded Balance Principal Balance Specific Allowance
(Dollars in thousands)
September 30, 2019
Loans without a specific valuation
Commercial $ 25,770
$ 25,770
$ —
Energy 2,969
2,969
—
Commercial real estate 12,501
12,501
—
Construction and land development —
—
—
Residential real estate 2,195
2,195
—
Equity lines of credit —
—
—
Consumer installment —
—
—
Loans with a specific valuation
Commercial 40,392
40,392
10,398
Energy 7,257
7,257
854
Commercial real estate 4,043
4,043
343
Construction and land development —
—
—
Residential real estate 342
342
219
Equity lines of credit —
—
—
Consumer installment —
—
—
Total
Commercial 66,162
66,162
10,398
Energy 10,226
10,226
854
Commercial real estate 16,544
16,544
343
Construction and land development —
—
—
Residential real estate 2,537
2,537
219
Equity lines of credit —
—
—
Consumer installment —
—
—
$ 95,469
$ 95,469
$ 11,814
Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial and industrial

30-59 days

4,784

1,049

2,814

8,667

60-89 days

980

430

1,465

Greater than 90 days

143

1,383

7,063

8,614

Total past due

4,982

1,383

1,061

10,857

430

18,746

Current

468,764

300,020

72,147

54,726

54,282

19,984

946,397

39,866

1,956,186

Total

468,784

305,002

72,154

54,732

55,665

21,045

957,254

40,296

1,974,932

Greater than 90 days

and accruing

584

630

Energy

30-59 days

60-89 days

Greater than 90 days

618

Total past due

618

Current

7,585

306

228

164,310

171

172,600

Total

7,585

306

228

164,928

171

173,218

Greater than 90 days

and accruing

Commercial real estate

- owner-occupied

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

96,987

134,092

57,462

50,950

28,241

24,080

28,814

16,493

437,119

Total

96,987

134,092

57,462

50,950

28,241

24,080

28,814

16,493

437,119

Greater than 90 days

and accruing

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial real estate

- non-owner-occupied

30-59 days

4,293

1,180

5,473

60-89 days

Greater than 90 days

Total past due

4,293

1,180

5,473

Current

839,603

452,692

200,811

100,729

56,354

76,046

460,726

122,166

2,309,127

Total

843,896

452,692

200,811

101,909

56,354

76,046

460,726

122,166

2,314,600

Greater than 90 days

and accruing

Residential real estate

30-59 days

3,867

3,907

60-89 days

Greater than 90 days

120

Total past due

3,987

4,027

Current

77,703

83,443

124,413

45,481

37,395

34,852

31,862

191

435,340

Total

77,703

87,430

124,413

45,491

37,395

34,852

31,892

191

439,367

Greater than 90 days

and accruing

120

Consumer

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

7,917

1,347

2,641

265

137

21,173

33,486

Total

7,917

1,347

2,643

265

142

21,173

33,493



		23

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Total

30-59 days

4,313

8,651

1,190

1,049

2,844

18,047

60-89 days

980

430

1,472

Greater than 90 days

263

1,383

7,681

9,352

Total past due

4,313

8,969

1,196

1,388

1,061

11,505

430

28,871

Current

1,498,559

971,900

457,702

252,151

176,409

154,968

1,653,282

178,887

5,343,858

Total

1,502,872

980,869

457,711

253,347

177,797

156,029

1,664,787

179,317

5,372,729

Greater than 90 days

and accruing

159

584

750



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Unpaid
Recorded Balance Principal Balance Specific Allowance
(Dollars in thousands)
December 31, 2018
Loans without a specific valuation
Commercial $ 40,151
$ 40,151
$ —
Energy 2,789
2,789
—
Commercial real estate 7,059
7,059
—
Construction and land development —
—
—
Residential real estate 1,964
1,964
—
Equity lines of credit —
—
—
Consumer installment —
—
—
Loans with a specific valuation
Commercial 37,996
37,996
5,814
Energy 13,461
13,461
3,108
Commercial real estate 8,168
8,168
473
Construction and land development —
—
—
Residential real estate 63
63
5
Equity lines of credit —
—
—
Consumer installment —
—
—
Total
Commercial 78,147
78,147
5,814
Energy 16,250
16,250
3,108
Commercial real estate 15,227
15,227
473
Construction and land development —
—
—
Residential real estate 2,027
2,027
5
Equity lines of credit —
—
—
Consumer installment —
—
—
$ 111,651
$ 111,651
$ 9,400

~~The table below shows interest income recognized during the three- and nine-month periods ended September 30, 2019 and September 30, 2018 for impaired loans held at the end of each period:~~

Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
(Dollars in thousands)
Commercial $ 386
$ 402
$ 862
$ 1,110
Energy 98
93
324
369
Commercial real estate 200
88
613
291
Construction and land development —
—
—
—
Residential real estate 8
17
17
52
Equity lines of credit —
—
—
—
Consumer installment —
—
—
—
Total interest income recognized $ 692
$ 600
$ 1,816
$ 1,822

Table of Contents



		24



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

The table below shows the average balance of impaired loans during the three- and nine-month periods ended September 30, 2019 and September 30, 2018 by loan category for impaired loans held at the end of each period:

Three months ended Nine months ended
September 30, September 30,
2019 2018 2019
(Dollars in thousands)
Commercial $ 54,410
$ 27,671
$ 49,265
$ 26,849
Energy 13,623
17,683
15,091
18,992
Commercial real estate 16,690
8,055
16,528
8,101
Construction and land development —
—
—
—
Residential real estate 2,538
2,046
2,354
2,059
Equity lines of credit —
—
—
—
Consumer installment —
—
—
—
Total average impaired loans $ 87,261
$ 55,455
$ 83,238
$ 56,001

Non-accrual Loan Analysis

Non-accrual ~~Loans~~

~~Nonperforming~~ loans are loans for which the Company does not record interest income. The

accrual of interest on ~~mortgage and commercial~~ loans is discontinued at the time the loan is 90 days past due

unless the credit is well secured and in process of collection. Past due status is based

on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged

off at

an earlier date, if collection of principal or interest is considered doubtful.

All interest accrued but not collected for loans that are placed on non-accrual or charged off are reversed against interest income. The 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. The following ~~table presents~~ tables present

the Company’s non-accrual loans

by loan segments at September 30, 2023 and December

31, 2022:

As of September 30, 2023

Amortized Cost Basis by Origination Year and On Nonaccrual

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Total

Nonaccrual

Loans

Nonaccrual

Loans with no

Allowance

(Dollars in thousands)

Commercial and industrial

10,777

185

10,994

6,720

Energy

408

Commercial real estate -

owner-occupied

204

Commercial real estate -

non-owner-occupied

8,448

144

8,592

Residential real estate

182

Consumer

Total

8,660

168

11,185

367

20,380

16,106

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and On Non-accrual

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Total

Nonaccrual

Loans

Nonaccrual

Loans with no

Allowance

(Dollars in thousands)

Commercial and industrial

104

1,383

6,479

7,984

Energy

618

Commercial real estate -

owner-occupied

Commercial real estate -

non-owner-occupied

2,479

Residential real estate

191

Consumer

Total

2,583

1,383

7,097

191

11,272

We recognized

interest income on non-accrual loans during the three- and nine-months

ended September 30, 2023.

For the three-and nine-months ended September 30, 2022, the

interest income recognized on non-accrual loans was $

0.9

million and $

1.3

million, respectively.

Table of Contents

Allowance for Credit Losses

The following table presents the activity in the allowance for credit losses and allowance

for credit losses on off-balance sheet credit exposures by portfolio segment

for the

three- and nine-months ended September 30, 2023:

For the Three Months Ended September 30, 2023

Commercial

and Industrial

Energy

Commercial

Real Estate -

Owner-

occupied

Commercial

Real Estate -

Non-owner-

occupied

Residential

Real Estate

Consumer

Total

(Dollars in thousands)

Allowance for Credit Losses:

Beginning balance

28,929

4,914

6,361

23,981

3,268

114

67,567

PCD allowance for credit loss at acquisition

217

329

Charge-offs

(1,418)

Recoveries

147

149

Provision (release)

2,977

(573)

678

775

187

(15)

4,029

Day 1 CECL provision expense

194

643

900

Ending balance

30,744

4,343

7,294

25,616

3,460

71,556

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures:

Beginning balance

449

496

205

6,496

7,713

Provision (release)

(264)

(322)

(1,070)

(3)

(1,600)

Ending balance

185

174

264

5,426

6,113

The ACL increased $

4.0

million during the quarter and included provision of $

4.0

million due to changes in credit quality, economic factors, an increase in specific reserves

and loan growth.

Net charge-offs totaled $

1.3

million, primarily due to one commercial and industrial loan that was previously reserved.

The quarter also included increases of $

0.3

million for reserves on PCD loans and $

0.9

million of Day 1 CECL provision expense on non-PCD loans related to the Tucson acquisition.

The reserve on unfunded commitments

decreased $

1.6

million due to a decrease in unfunded commitments in the quarter.

Table of Contents

For the Nine Months Ended September 30, 2023

Commercial

and Industrial

Energy

Commercial

Real Estate -

Owner-

occupied

Commercial

Real Estate -

Non-owner-

occupied

Residential

Real Estate

Consumer

Total

(Dollars in thousands)

Allowance for Credit Losses:

Beginning balance

26,803

4,396

5,214

21,880

3,333

149

61,775

PCD allowance for credit loss at acquisition

217

329

Charge-offs

(3,798)

(5)

(3,803)

Recoveries

151

139

290

Provision (release)

7,479

(192)

1,825

2,876

122

(45)

12,065

Day 1 CECL provision expense

194

643

900

Ending balance

30,744

4,343

7,294

25,616

3,460

71,556

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures:

Beginning balance

319

787

221

7,323

8,688

Provision (release)

(134)

(613)

(1,897)

(3)

(2,575)

Ending balance

185

174

264

5,426

6,113

The ACL increased $

9.8

million during the nine-months ended September 30, 2023 and included provision of $

12.1

million due to loan growth, changes in credit quality,

economic factors and an increase in specific reserves.

Net charge-offs were $

3.5

million, primarily due to four commercial and industrial loans.

The year-to-date increase also

included increases of $

0.3

million for reserves on PCD loans and $

0.9

million of Day 1 CECL provision expense as noted above.

The reserve on unfunded commitments decreased

2.6

million due to a decrease in unfunded commitments.

Table of Contents

The following tables presents the Company’s gross

charge-offs by year of origination for the three- and nine-months ended

September 30, 2023:

For the Quarter Ended September 30, 2023

Gross Charge-offs by Origination Year

Gross Charge-offs

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Gross

Charge-

offs

(Dollars in thousands)

Commercial and industrial

1,262

143

1,418

Energy

Commercial real estate - owner-occupied

Commercial real estate - non-owner-occupied

Residential real estate

Consumer

Total

1,262

143

1,418

For the Nine Months Ended September 30, 2023

Gross Charge-offs by Origination Year

Gross Charge-offs

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Gross

Charge-

offs

(Dollars in thousands)

Commercial and industrial

581

1,358

1,262

518

3,798

Energy

Commercial real estate - owner-occupied

Commercial real estate - non-owner-occupied

Residential real estate

Consumer

Total

581

1,363

1,262

518

3,803

Table of Contents

Collateral Dependent Loans:

Collateral dependent loans are loans for which the repayment is expected to be provided

substantially through the operation or

sale of the collateral and the borrower

is experiencing financial difficulty. The following table presents the amortized cost balance

loans considered collateral dependent by loan segment and collateral type

as of September 30, 2023 and December 31, ~~2018:~~2022:

September 30, 2019 December 31, 2018
(Dollars in thousands)
Commercial $ 34,201
$ 4,781
Energy 4,677
9,219
Commercial real estate 2,680
3,517
Construction and land development —
—
Residential real estate 2,068
301
Equity lines of credit —
—
Consumer installment —
—
Total non-accrual loans $ 43,626
$ 17,818

As of September 30, 2023

Loan Segment and Collateral Description

Amortized Cost of

Collateral Dependent

Loans

Related Allowance for

Credit Losses

Amortized Cost of

Collateral Dependent

Loans with no related

Allowance

(Dollars in thousands)

Commercial and industrial

All business assets

11,010

2,149

6,712

Energy

Oil and natural gas properties

408

Commercial real estate - owner-occupied

Commercial real estate properties

204

Commercial real estate - non-owner-

occupied

Commercial real estate properties

6,029

Residential real estate

Residential real estate properties

Consumer

Vehicles & other personal assets

17,651

2,149

13,353

As of December 31, 2022

Loan Segment and Collateral Description

Amortized Cost of

Collateral Dependent

Loans

Related Allowance for

Credit Losses

Amortized Cost of

Collateral Dependent

Loans with no related

Allowance

(Dollars in thousands)

Commercial and industrial

All business assets

7,981

Energy

Oil and natural gas properties

618

Commercial real estate - owner-occupied

Commercial real estate properties

Commercial real estate - non-owner-

occupied

Commercial real estate properties

Residential real estate

Residential real estate properties

Consumer

Vehicles & other personal assets

8,728

8,689

Loan Modifications

The Company considers loans to borrowers experiencing financial difficulties to be

troubled loans.

Effective January 1, 2023, the

Company adopted ASU 2022-02, which eliminates the accounting guidance for troubled debt restructurings (“TDR

”) and requires an

entity evaluate whether loan modifications represent a new loan or a

continuation of an existing loan.

Such troubled debt modifications

(“TDM”) may include principal forgiveness, interest rate reductions, other-than-insignificant

-payment delays, term extensions or any

combination thereof.

The Company adopted this accounting standard on a prospective basis.

Table of Contents

During the three- and nine-months ended September 30, 2023, the Company

modified

four

and

seven

loans, respectively, with an

amortized cost basis at September 30, 2023 of $

9.2

million to facilitate repayment that are considered TDMs.

The following table

presents, by loan segment, the amortized cost basis as of the date shown for

modified loans to borrowers experiencing financial

difficulty:

September 30, 2023

Term Extension

Amortized Cost Basis

% of Loan Class

(Dollars in thousands)

Commercial and industrial

4,674

0.2

Commercial real estate - owner-occupied

4,569

1.0

Total Loans

9,243

The following schedule presents the payment status by loan class, as of September

30, 2023, of the amortized cost basis of loans

that have been modified since January 1, 2023:

September 30, 2023

Current

(Dollars in thousands)

Commercial and industrial

4,674

Commercial real estate - owner-occupied

4,569

Total Loans

9,243

The Company had no TDMs that were modified and had defaulted on their modified terms

during the nine-months ended

September 30, 2023. For purposes of this disclosure, the Company considers “default

”

to mean 90 days or more past due on principal or

interest. The allowance for credit losses related to TDMs on non-accrual status is determined by individual evaluation,

including

collateral adequacy, using the same process as loans on non-accrual status

which are not classified as TDMs.

The following schedule presents the financial effect of the modifications

made to borrowers experiencing financial difficulty as of

September 30, 2023:

September 30, 2023

Financial Effect

Term Extension

Commercial and industrial

Added a weighted average

1.2

years to the life of loan, which reduced

monthly payment amounts

Commercial real estate - owner-occupied

Added a weighted average

0.5

years to the life of loan, which reduced

monthly payment amounts

Troubled Debt Restructurings

~~Restructured loans are those~~Prior to the adoption of ASU 2022-02, TDRs were extended to borrowers who ~~are~~were experiencing financial difficulty and

who ~~have~~ had

been granted a ~~concession.~~concession, excluding loan modifications as a result of the COVID

-19 pandemic. The modification of terms typically ~~includes~~

included the extension of maturity, reduction or deferment of monthly payment, or

reduction of the stated interest rate.

The outstanding balance of TDRs recognized prior to the adoption of ASU 2022-02 was $

28.1

million and $

30.5

million as of

September 30, 2023 and December 31, 2022, respectively.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses for off-balance sheet credit exposures

unless the obligation is unconditionally

cancellable by the Company. The ACL on off-balance sheet credit exposures is adjusted as a provision (release) for credit loss expense.



		25

Table of Contents

The estimate is calculated for each loan segment and includes consideration of the likelihood

that funding will occur and an estimate of

the expected credit losses on commitments expected to be funded over its estimated life.

For each pool of contractual obligations

expected to be funded, the Company uses the reserve rate established for the related

loan pools. The $

million and $

million allowance

for credit losses on off-balance sheet credit exposures at September 30,

2023 and December 31, 2022, respectively, are included in

“interest payable and other liabilities”

on the statements of financial condition.

The following categories of off-balance sheet credit exposures have been identified:

Loan commitments – include revolving lines of credit, non-revolving

lines of credit, and loans approved that are not yet funded. Risks

inherent to revolving lines of credit often are related to the susceptibility of an individual or

business experiencing unpredictable cash

flow or financial troubles, thus leading to payment default. The primary risk associated

with non-revolving lines of credit is the

diversion of funds for other expenditures.

Letters of credit – are primarily established to provide assurance to the beneficiary

that the applicant will perform certain obligations

arising out of a separate transaction between the beneficiary and applicant. If the obligation

is not met, it gives the beneficiary the right

to draw on the letter of credit.



~~Table~~ Note 5: Leases The Company’s leases primarily include bank branches located in Kansas City, Missouri; Tulsa, Oklahoma; Dallas, Texas; Frisco, Texas; Phoenix, Arizona; Denver, Colorado and Colorado Springs, Colorado. The remaining lease terms on these branch leases range from less than one year to eighteen years with certain options to renew. Renewal terms can extend the lease term between five years and twenty years . The exercise of lease renewal options is at the Company’s sole discretion. When it is reasonably certain that the Company will exercise its option to renew or extend the lease term, that option is included in the estimated value of the right of use (“ROU”) asset and lease liability. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. As of ~~Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~The table below presents loans restructured during the three- and nine-months ended~~ September 30, ~~2019 and 2018, including~~2023, the ~~post-modification outstanding balance~~Company recognized one finance lease and the ~~type~~remaining Company leases are

classified as

operating leases.

The ROU asset is included in “other assets” on the consolidated statements of ~~concession made:~~financial

Three Months Ended Nine Months Ended
September 30, 2019 September 30, 2018 September 30, 2019 September 30, 2018
(Dollars in thousands)
Commercial
- Deferred payment $ —
$ —
$ —
$ 61
- Reduction of monthly payment —
—
994
—
- Extension of maturity date —
—
30,005
300
Energy
- Reduction of monthly payment —
—
—
2,972
Commercial real estate
- Reduction of monthly payment —
—
3,767
—
- Interest rate reduction —
1,153
—
2,256
Total troubled debt restructurings $ —
$ 1,153

$ 34,766

$ 5,589

condition, and was $

million and $

million at September 30, 2023 and December 31, 2022, respectively. Certain adjustments

to the ROU asset may be required for items

such as initial direct costs paid or incentives received. The lease liability is located in “Interest

payable and other liabilities”

on the

consolidated statements of financial condition and was $

million and $

million at September 30, 2023 and December 31, 2022,

respectively.

As of September 30, ~~2019~~2023, the remaining weighted-average lease term is

11.2

years, and the weighted-average discount rate was

2.56

% utilizing the Company’s incremental Federal

Home Loan Bank (“FHLB”) borrowing rate for borrowings of a similar term at the

date of lease commencement.

The following table presents components of operating lease expense in the accompanying

consolidated statements of operations

for the three-and nine-month periods ended September 30, 2023 and

2022:

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands)

Finance lease amortization of right-of-use asset

212

161

Finance lease interest on lease liability

204

115

Operating lease expense

726

603

2,189

1,932

Variable lease expense

487

297

1,368

855

Short-term lease expense

Total lease expense

1,356

1,043

3,988

3,078

Table of Contents

Future minimum commitments due under these lease agreements as of September

30, 2023 are as follows:

Operating Leases

Finance Lease

(Dollars in thousands)

Remainder of 2023

1,292

122

2024

3,289

490

2025

3,309

490

2026

3,350

490

2027

3,340

528

Thereafter

12,619

8,296

Total lease payments

27,199

10,416

Less imputed interest

3,490

2,959

Total

23,709

7,457

Supplemental cash flow information –

Operating cash flows paid for operating lease amounts included in the

measurement of

lease liabilities were $

2.7

million and $

2.2

million for the nine-months ended September 30, 2023 and 2022, respectively. Operating

cash flows paid for finance lease amounts included in the measurement of lease liabilities

was $

0.4

million and $

0.2

million for the nine-

months ended September 30, 2023 and 2022, respectively. During the nine-months

ended September 30, 2023, the Company did

record any ROU assets that were exchanged for operating lease liabilities.

Note 6:

Goodwill and Core Deposit Intangible

In connection with the Tucson acquisition, the Company recorded goodwill of $

1.3

million during the three-months ended

September 30, 2023.

Goodwill is measured as the excess of the fair value of consideration paid over

the fair value of net assets

acquired. In accordance with GAAP, the Company performs annual tests to identify impairment

of goodwill and more frequently if

events or circumstances indicate a potential impairment may exist.

goodwill impairment was recorded during the nine-months ended

September 30, 2023.

The Company recorded a core deposit intangible (“CDI”) of $

4.5

million during the three-months ended September 30, 2023, as

part of the Tucson acquisition. The Company is amortizing the CDI from the Colorado/New Mexico acquisition

and the Tucson

acquisition over their estimated useful lives of approximately

years using the sum of the years’ digits accelerated method. The

Company recognized core deposit intangible amortization expense of $

0.9

million and $

2.5

million for the three- and nine-month

periods ended September 30, 2023,

respectively.

The gross carrying amount of goodwill and the gross carrying amount and accumulated

amortization of the CDI at September 30,

2023 and December 31, ~~2018, the Company had $896 thousand and $0, respectively,~~2022 were:

Gross Carrying

Amount

Accumulated

Amortization

Net Carrying

Amount

(Dollars in ~~commitments to borrowers whose terms have been modified in troubled debt restructurings. As of~~ thousands)

September 30, ~~2019,~~2023

Goodwill

14,135

Core deposit intangible

21,938

3,780

18,158

Total goodwill and intangible assets

36,073

3,780

32,293

December 31, 2022

Goodwill

12,836

Core deposit intangible

17,479

1,234

16,245

Total goodwill and intangible assets

30,315

1,234

29,081

Table of Contents

The following table shows the ~~modifications related to~~estimated future amortization expense for the troubled debt restructurings above did not impact the allowance for loan losses because the loans were previously impaired and evaluated on an individual basis or enough collateral was obtained to provide an additional commitment. The restructured loans had a total specific valuation allowance of $8.8 million and $2.4 million CDI

as of September 30, ~~2019~~2023:

Amount

Years ending December 31,

(Dollars in thousands)

For the three months ending December 31, 2023

958

For the year ending December 31, 2024

3,569

For the year ending December 31, 2025

3,155

For the year ending December 31, 2026

2,739

For the year ending December 31, 2027

2,325

Note 7:

Derivatives and Hedging

The Company is exposed to certain risks

arising from both its business operations and economic conditions, including

interest

rate, liquidity, and credit risk.

The Company uses derivative financial instruments as part of its risk management

activities to manage

exposures that arise from business activities that result in the receipt or payment of future

known and uncertain cash amounts, the value

of which are determined by interest rates.

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate derivatives to add stability to interest income and expense

and to manage its exposure to interest

rate movements. To

accomplish this objective, the Company uses interest rate swaps and collars as part of its interest rate

risk

management strategy. Interest

rate swaps designated as cash flow hedges involve the receipt of variable amounts from

a counterparty in

exchange for the Company making fixed-rate payments over the life of the

agreements without exchange of the underlying notional

amount. Interest rate collars designated as cash flow hedges involve payments

of variable-rate amounts if interest rates rise above the

cap strike rate on the contract and the receipt of variable-rate amounts if interest rates

fall below the floor strike rate on the contract.

During 2023, such derivatives were used to hedge the variable cash flows associated

with existing variable-rate debt and loan assets.

Previously, five swaps that

were entered into in 2021 were terminated during the third quarter of 2022;

however, the amortization of the

gains on these instruments began in 2023 based on the original effective dates of these

swaps. Derivatives designated and that qualify as

cash flow hedges include

five

instruments with a notional amount of $

340

million and

one

instrument with a notional amount of

250

million at September 30, 2023 and December 31, ~~2018,~~2022, respectively.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain

or loss on the derivative is recorded

in Accumulated Other Comprehensive Income (Loss) (“AOCI”) and subsequently reclassified into interest income or

expense in the

same period(s) during which the hedged transaction affects earnings. Amounts reported in AOCI related to derivatives will be

reclassified to interest income and expense as interest payments are received and

made on the Company’s variable-rate

assets and debt.

The ~~balance of restructured loans is provided below~~Company currently estimates that $

2.7

million will be reclassified as ~~of September 30, 2019 and December 31, 2018. In addition, the balance of those loans that are in default at any time~~a decrease to net interest income during the ~~past~~next twelve ~~months at September 30, 2019 and December 31, 2018~~

months.

The Company is ~~provided below:~~hedging its exposure to the variability in future cash flows for forecasted

transactions over a maximum period of

5.6

September 30, 2019 December 31, 2018
Number of Loans Outstanding Balance
Balance 90 days past due at any time during previous 12 months⁽¹⁾
Number of Loans Outstanding Balance
Balance 90 days past due at any time during previous 12 months⁽¹⁾
(Dollars in thousands)
Commercial 7 $ 36,865
$ —
6 $ 5,022
$ 55
Energy 2 2,969
—
2 3,631
—
Commercial real estate 3 4,947
—
2 1,382
—
Construction and land development — —
—
— —
—
Residential real estate — —
—
1 237
—
Equity lines of credit — —
—
— —
—
Consumer installment — —
—
— —
—
Total restructured loans 12 $ 44,781
$ —
11 $ 10,272
$ 55
⁽¹⁾ Default is considered to mean 90 days or more past due as to interest or principal.

years.

Non-designated Hedges


~~Note 5:~~	~~Derivatives and Hedging~~

Derivatives not designated as hedges are not speculative and result from a service ~~the Company provides~~ provided

to clients. The Company executes

interest rate swaps with customers to facilitate their respective risk management strategies.

Those interest rate swaps are simultaneously

hedged by offsetting derivatives that the Company executes with a ~~third party,~~third-party, such that

the Company minimizes its net risk exposure

resulting from such transactions. ~~As the interest~~Interest rate derivatives associated



		26



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~associated~~ with this program do not meet the strict hedge accounting

requirements and changes in the fair value of both the customer derivatives and the offsetting derivatives

are recognized directly in ~~earnings.~~

During the quarter ended September 30, 2019, the Company changed an input associated with the fair market value related to derivatives not designated as hedges. The model utilized to calculate the non-performance risk, also known as theearnings.

Table of Contents

Swap fees earned upon origination and credit valuation ~~adjustment, or CVA, was adjusted from~~adjustments that represent

the risk of a ~~more conservative~~counterparty’s default ~~methodology to a review~~

are reported

on the statements of ~~the historical defaults recognized by the Company. Management believes this change better aligns with the Company’s credit methodology and underwriting standards.~~

~~As a result of the change in methodology, the Company increased~~operations as swap fee income, ~~net by approximately $800 thousand, related to~~ net. The effect of the Company’s

derivative financial instruments gain (loss) is

reported on the statements of cash flows within “other assets”

and “other liabilities”.

These

and

swaps ~~closed on or before June 30, 2019. If no defaults occur for derivatives not designated as hedges, the change in methodology will lower future swap fee income, net by the same amount.~~had an aggregate notional amount of $

~~As of~~350

million and $

421

million at September 30, ~~2019~~2023 and

December 31, ~~2018,~~2022, respectively.

Fair Values

of Derivative Instruments on the ~~Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships:~~Consolidated Statements of Financial

September 30, 2019 December 31, 2018
Product Number of Instruments Notional Amount Number of Instruments Notional Amount
(Dollars in thousands)
Back-to-back swaps 46 $ 308,960
20 $ 77,709

Condition

The table below presents the fair value of the Company’s

derivative financial instruments and their classification on the ~~Balance Sheet~~

consolidated statements of financial condition as of September

30, ~~2019~~2023 and December 31, ~~2018:~~2022:

Asset Derivatives Liability Derivatives
Balance Sheet September 30, December 31, Balance Sheet September 30, December 31,
Location 2019 2018 Location 2019 2018
(Dollars in thousands)
Derivatives not designated as hedging instruments
Interest rate products Other assets $ 13,735
$ 1,051
Other liabilities $ 13,782
$ 1,136

Asset Derivatives

Liability Derivatives

Statement of

Financial

Condition

September 30,

December 31,

Statement of

Financial

Condition

September 30,

December 31,

Location

2023

2022

Location

2023

2022

(Dollars in thousands)

Interest rate products:

Derivatives

designated as hedging

instruments

Other assets

and Interest

receivable

217

Interest payable

and other

liabilities

10,035

5,403

Derivatives not

designated as hedging

instruments

Other assets

and Interest

receivable

12,468

11,038

Interest payable

and other

liabilities

12,473

11,039

Total

12,685

11,038

22,508

16,442

The table below presents the effect of ~~the Company’s derivative financial instruments that are not designated as hedging instruments are reported~~cash flow hedge accounting on ~~the Statements of~~Accumulated Other Comprehensive Income ~~as swap fee income, net. The effect of~~(Loss)

for the ~~Company’s derivative financial instruments gain~~

three- and ~~loss are reported on the Statements of Cash Flows within other assets and other liabilities.~~

~~The tables below show a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of~~nine-months ended September 30, ~~2019~~2023 and ~~December 31, 2018:~~

2022.

September 30, 2019
(Dollars in thousands)
Gross Amounts Not Offset in the Statement of Financial Position
Gross Amounts of Recognized Assets and Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets presented in the Statement of Financial Position Financial Instruments Cash Collateral Received Net Amount
Offsetting of derivative assets
Derivatives $ 13,735
$ —
$ 13,735
$ —
$ —
$ 13,735
Offsetting of derivative liabilities
Derivatives $ 13,782
$ —
$ 13,782
$ —
$ —
$ 13,782

Location of

Gain or (Loss)

Recognized

from

Accumulated

Other

Comprehensive

Income into

Earnings

Gain or

(Loss)

Recognized

in OCI on

Derivative

Gain or

(Loss)

Recognized

in OCI

Included

Component

Gain or

(Loss)

Recognized

in OCI

Excluded

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Included

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Excluded

Component

(Dollars in thousands)

For the Three Months Ended September 30, 2023

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Income

(2,333)

Interest Rate Products

Interest Expense

Total

(2,289)

For the Three Months Ended September 30, 2022

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Income

(6,891)

Interest Rate Products

Interest Expense

(185)

Total

(7,076)



		27

Table of Contents

Location of

Gain or (Loss)

Recognized

from

Accumulated

Other

Comprehensive

Income into

Earnings

Gain or

(Loss)

Recognized

in OCI on

Derivative

Gain or

(Loss)

Recognized

in OCI

Included

Component

Gain or

(Loss)

Recognized

in OCI

Excluded

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Included

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Excluded

Component

(Dollars in thousands)

For the Nine Months Ended September 30, 2023

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Income

(4,632)

Interest Rate Products

Interest Expense

251

102

Total

(4,381)

102

For the Nine Months Ended September 30, 2022

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Income

(6,891)

Interest Rate Products

Interest Expense

3,855

Total

(3,036)



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

December 31, 2018
(Dollars in thousands)
Gross Amounts Not Offset in the Statement of Financial Position
Gross Amounts of Recognized Assets and Liabilities Gross Amounts Offset in the Statement of Financial Position Net Amounts of Assets presented in the Statement of Financial Position Financial Instruments Cash Collateral Received Net Amount
Offsetting of derivative assets
Derivatives $ 1,051
$ —
$ 1,051
$ 72
$ —
$ 979
Offsetting of derivative liabilities
Derivatives $ 1,136
$ —
$ 1,136
$ 72
$ —
$ 1,064

~~The net presentation above can be reconciled to the tabular disclosure of fair value.~~

As of September 30, ~~2019,~~2023 and December 31, 2022, the Company had

minimum collateral ~~posting~~ thresholds with certain of its derivative ~~counter-parties~~

counterparties and ~~had posted~~has received collateral of $18.2 million. If the Company had breached any of these provisions at September 30, 2019, it could have been required to settle its obligations under the agreements at their termination value of $13.8 million.$

2.2


~~Note 6:~~	~~Interest-Bearing Deposits and Borrowings~~

million and $

4.9

million, respectively.

Note 8:

Time Deposits and Borrowings

The scheduled maturities, excluding interest, of the Company’s

borrowings at September 30, ~~2019~~2023 were as follows:

September 30, 2019
Within One Year One to Two Years Two to Three Years Three to Four Years Four to Five Years After Five Years Total
(Dollars in thousands)
Time deposits $ 822,439
$ 216,486
$ 105,559
$ 52,055
$ 25,215
$ —
$ 1,221,754
Fed funds purchased & repurchase agreements 49,810
—
—
—
—
—
49,810
FHLB borrowings 24,000
76,500
16,500
39,704
—
151,100
307,804
Trust preferred securities⁽¹⁾
—
—
—
—
—
912
912
$ 896,249
$ 292,986
$ 122,059
$ 91,759
$ 25,215
$ 152,012
$ 1,580,280

September 30, 2023

Within One

Year

One to Two

Years

Two to

Three Years

Three to

Four Years

Four to Five

Years

After Five

Years

Total

(Dollars in thousands)

Time deposits

1,612,087

126,478

1,795

2,833

460

1,743,653

Fed funds purchased &

repurchase agreements

1,555

FHLB borrowings

2,172

11,359

7,500

52,500

15,000

88,531

Line of credit

7,500

SBA secured borrowing

7,901

Trust preferred securities

(1)

1,103

1,615,814

145,337

1,795

10,333

52,960

24,004

1,850,243

(1)

The contract value of the trust preferred securities is ~~$2.5~~ $

2.6

million and is currently being accreted to the maturity date of 2035.

Table of Contents


~~Note 7:~~	~~Change in Accumulated Other Comprehensive Income (AOCI)~~

Note 9:

Change in Accumulated Other Comprehensive Income (Loss)

Amounts reclassified from AOCI and the affected line items in the consolidated ~~Statements~~statements of ~~Income~~operations during the ~~three~~ three-

and ~~nine months~~

nine-month periods ended September 30, ~~2019~~2023 and ~~2018,~~2022, were as follows:

Three Months Ended Nine Months Ended
September 30, September 30, Affected Line Item in the
2019 2018 2019 2018 Statements of Income
(Dollars in thousands)
Unrealized gains on available-for-sale securities $ 34
$ 195
$ 467
$ 608
Gain on sale of available for sale securities
Amount reclassified before tax 34
195
467
608

Less: tax effect 9
47
115
149
Income tax expense
Net reclassified amount $ 25
$ 148
$ 352
$ 459

Three Months Ended

Nine Months Ended

September 30,

Affected Line Item in the

2023

2022

2023

2022

Statements of Operations

(Dollars in thousands)

Realized (losses) gains on available-for-sale

securities

(60)

(4)

(43)

Other non-interest income

Less: tax (benefit) expense effect

(14)

(1)

(11)

Income tax expense

Realized (losses) gains on available-for-sale

securities, net of income tax

(46)

(3)

(32)

Interest income on cash flow hedges

102

Interest expense - Deposits

Less: tax expense effect

Income tax expense

Interest income on cash flow hedges, net of

tax

Total reclassified amount

(3)

(32)



		28

Note 10:

Regulatory Matters



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~


~~Note 8:~~	~~Regulatory Matters~~

The Company and the Bank are subject to various regulatory capital requirements administered

by the federal banking agencies.

Failure to meet minimum capital requirements can initiate certain

mandatory and possibly additional discretionary actions by regulators

that, if undertaken, could have a direct material effect on the Company’s

consolidated financial statements. Management believes that,

as of September 30, ~~2019,~~2023, the Company and the Bank ~~meet~~met all capital adequacy requirements

to which they are subject.

The capital rules require the Company to maintain a

2.5

% capital conservation buffer with respect to Common Equity Tier I

capital, Tier I capital to risk-weighted assets, and total capital to risk-weighted assets, which is included

in the column “Required to be

Considered Adequately Capitalized”

within the table below. A

financial institution with a conservation buffer of less than the required

amount is subject to limitations on capital distributions, including dividend

payments and stock repurchases, as well as certain

discretionary bonus payments to executive officers.

The Company and the Bank opted to exclude AOCI from the regulatory capital calculations. As a result, changes in AOCI, net of

tax, do not impact the Company’s or

Bank’s regulatory capital ratios.

Table of Contents

The Company’s and the Bank’s

actual capital amounts and ratios as of September 30, ~~2019~~2023 and December 31, ~~2018~~

2022 are presented

in the following table:

Actual Minimum Capital Required - Basel III Phase-In Schedule Minimum Capital Required - Basel III Fully Phase-In Required to be Considered Well Capitalized
Amount Ratio Amount Ratio Amount Ratio Amount Ratio
(Dollars in thousands)
September 30, 2019
Total Capital to Risk-Weighted Assets
Consolidated $ 618,407
13.9 % $ 467,160
10.5 % $ 467,160
10.5 % N/A
N/A
Bank 567,667
12.8
467,085
10.5
467,085
10.5
$ 444,843
10.0 %
Tier I Capital to Risk-Weighted Assets
Consolidated 575,412
12.9
378,177
8.5
378,177
8.5
N/A
N/A
Bank 524,672
11.8
378,117
8.5
378,117
8.5
355,875
8.0
Common Equity Tier 1 to Risk-Weighted Assets
Consolidated 574,500
12.9
311,440
7.0
311,440
7.0
N/A
N/A
Bank 524,672
11.8
311,390
7.0
311,390
7.0
289,148
6.5
Tier I Capital to Average Assets
Consolidated 575,412
12.6
183,152
4.0
183,152
4.0
N/A
N/A
Bank $ 524,672
11.5 % $ 183,109
4.0 % $ 183,109
4.0 % $ 228,886
5.0 %
December 31, 2018
Total Capital to Risk-Weighted Assets
Consolidated $ 521,111
13.5 % $ 380,873
9.9 % $ 404,979
10.5 % N/A
N/A
Bank 481,287
12.5
380,369
9.9
404,443
10.5
$ 385,184
10.0 %
Tier I Capital to Risk-Weighted Assets
Consolidated 483,285
12.5
303,734
7.9
327,840
8.5
N/A
N/A
Bank 443,461
11.5
303,332
7.9
327,406
8.5
308,147
8.0
Common Equity Tier 1 to Risk-Weighted Assets
Consolidated 453,049
11.7
245,880
6.4
269,986
7.0
N/A
N/A
Bank 443,461
11.5
245,555
6.4
269,629
7.0
250,369
6.5
Tier I Capital to Average Assets
Consolidated 483,285
12.4
155,538
4.0
155,538
4.0
N/A
N/A
Bank $ 443,461
11.4 % $ 155,420
4.0 % $ 155,420
4.0 % $ 194,275
5.0 %

Actual

Required to be Considered

Well Capitalized

Required to be Considered

Adequately Capitalized

(1)

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

September 30, 2023

Total Capital to Risk-Weighted Assets

Consolidated

783,978

10.9

N/A

755,561

10.5

Bank

786,328

10.9

719,146

10.0

755,104

10.5

Tier I Capital to Risk-Weighted Assets

Consolidated

706,889

9.8

N/A

611,645

8.5

Bank

709,239

9.9

545,317

8.0

611,274

8.5

Common Equity Tier 1 to Risk-Weighted Assets

Consolidated

698,036

9.7

N/A

503,708

7.0

Bank

709,239

9.9

467,445

6.5

503,402

7.0

Tier I Capital to Average Assets

Consolidated

706,889

9.9

N/A

286,589

4.0

Bank

709,239

9.9

358,262

5.0

286,610

4.0

December 31, 2022

Total Capital to Risk-Weighted Assets

Consolidated

715,416

10.5

N/A

714,162

10.5

Bank

714,300

10.5

679,793

10.0

713,783

10.5

Tier I Capital to Risk-Weighted Assets

Consolidated

644,953

9.5

N/A

578,131

8.5

Bank

643,837

9.5

543,835

8.0

577,824

8.5

Common Equity Tier 1 to Risk-Weighted Assets

Consolidated

643,892

9.5

N/A

476,108

7.0

Bank

643,837

9.5

441,866

6.5

475,855

7.0

Tier I Capital to Average Assets

Consolidated

644,953

10.3

N/A

249,270

4.0

Bank

643,837

10.3

311,623

5.0

249,299

4.0



		29

(1)

Represents the minimum capital required for capital adequacy under Basel III.

Includes capital conservation buffer of

2.5



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~


~~Note 9:~~	~~Revenue from Contracts with Customers~~

~~The Company adopted ASU 2014-09, ‘‘Revenue from Contracts with Customers (Topic 606)’’~~ and its related amendments as of January 1, 2019 using the modified retrospective approach. The implementation had no material impact on the measurement or recognition of revenue of either current or prior periods.

The categories are selected based on the nature, amount, timing, and uncertainty of revenue and cash flows. The following presents descriptions of revenue categories within the scope of ASU 2014-09 (ASC 606):

~~Service charges and fees (rebates) on customer accounts -~~ This segment consists of monthly fees for the services rendered on customer deposit accounts, including maintenance charges, overdraft fees, and processing fees. The monthly fee structures are typically based on type of account, volume, and activity. The customer is typically billed monthly and pays the bill from their deposit account. The Company satisfies the performance obligation related to providing depository accounts monthly as transactions are processed and deposit service charge revenue is recorded.

~~ATM and credit card interchange income -~~ This segment consists of fees charged for use of the Company’s ATMs, as well as, an interchange fee with credit card and debit card service providers. ATM fees and interchange fees are based on the number of transactions, as well as, the underlying agreements. Customers are typically billed monthly. The Company satisfies the performance obligation related to ATM and interchange fees monthly as transactions are processed and revenue is recorded.

~~International fees -~~ This segment consists of fees earned from foreign exchange transactions and preparation of international documentation. International fees are based on underlying agreements that describe the Company’s performance obligation and the related fee. Customers are typically billed and cash is received once the service or transaction is complete. The Company satisfies the performance obligation related to international fees monthly as transactions are processed and revenue is recorded.

~~Other fees -~~ This segment consists of numerous, smaller fees such as wire transfer fees, check cashing fees, and check printing fees. Other fees are typically billed to customers on a monthly basis. Performance obligations for other fees are satisfied at the time that the service is rendered.

~~The following table disaggregates the non-interest income subject to ASU 2014-09 by category:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(Dollars in thousands)
Non-interest income subject to ASU 2014-09
Service charges and fees (rebates) on customer accounts $ 72
$ (100 ) $ 441
$ 506
ATM and credit card interchange income 476
301
1,312
827
International fees 199
160
506
579
Other fees 12
10
104
30
Total non-interest income from contracts with customers 759
371
2,363
1,942
Non-interest income not subject to ASU 2014-09
Other non-interest income 2,453
814
4,166
2,946
Total non-interest income $ 3,212
$ 1,185
$ 6,529
$ 4,888

Note 11:

Stock-Based Compensation



		30



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~


~~Note 10:~~	~~Equity-Based Compensation~~

The Company issues stock-based compensation in the form of ~~nonvested~~ non-vested

restricted stock,

restricted stock units and stock

appreciation rights under the 2018 Omnibus Equity Incentive ~~Plan.~~Plan (as amended, the

“Omnibus Plan”). The Omnibus Plan will expire on

the tenth anniversary of its effective date. In addition, the Company has an Employee

Stock Purchase ~~Plan that was indefinitely suspended effective April 1, 2019.~~Plan. The aggregate number of

shares authorized for future issuance under the Omnibus Plan is ~~2,275,721~~

1,328,538

shares as of September 30, ~~2019.~~2023.

Table of Contents

The table below summarizes the stock-based compensation for the three- and nine-months-ended

September 30, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands)

Stock appreciation rights

168

262

Performance-based stock awards

305

200

839

611

Restricted stock units and awards

807

763

2,575

2,336

Employee stock purchase plan

129

Total stock-based compensation

1,208

1,069

3,711

3,304

Performance-Based Restricted Stock Units

The Company awards performance-based restricted stock units (“PBRSUs”) to key officers

of the Company. The PBRSUs

typically cliff-vest at the end of

three years

based on attainment of certain performance metrics developed by the Compensation

Committee. The ultimate number of shares issuable under each performance award

is the product of the award target and the award

payout percentage given the level of achievement. The award payout percentages by level of achievement range

between

% of target

and

150

% of target.

During the nine-month period ended September 30, 2023, the Company granted

128,005

PBRSUs. The performance metrics

include three-year cumulative earnings per share and relative total shareholder

return.

The following table summarizes the status of and changes in the PBRSUs:

Performance-Based Restricted

Stock Unit Awards

Number of Shares

Weighted-Average

Grant Date Fair Value

Unvested, January 1, 2023

134,286

14.52

Granted

128,005

14.13

Vested

(20,736)

13.55

Forfeited

(7,227)

14.90

Unvested, September 30, 2023

234,328

14.38

Unrecognized stock-based compensation related to the performance awards issued through

September 30, 2023 was $

2.1

million

and is expected to be recognized over

2.1

years.

Restricted Stock Units and Restricted Stock Awards

The Company issues time-based restricted stock units (“RSUs”)

and restricted stock awards (“RSAs”) to provide incentives to

key officers, employees, and non-employee directors. Awards are typically granted annually as determined by the

Compensation

Committee. The service-based RSUs typically vest in equal amounts over

three years

. The service-based RSAs typically cliff-vest after

one year

The following table summarizes the status of and changes in the RSUs and RSAs:

Restricted Stock Units and Awards

Number of Shares

Weighted-Average

Grant Date Fair Value

Unvested, January 1, 2023

416,980

14.13

Granted

333,979

13.20

Vested

(226,721)

13.60

Forfeited

(44,620)

14.33

Unvested, September 30, 2023

479,618

13.62

Table of Contents

Unrecognized stock-based compensation related to the RSUs and RSAs issued through September

30, 2023 was $

4.8

million and

is expected to be recognized over

1.9

years.

Note 12:

Stock Warrants

The Company had

80,000

outstanding, fully vested warrants to purchase common stock at a strike price of $

5.00

per share as of

December 31, 2022. During the nine-month period ended September 30,

2023, the remaining, fully vested

80,000

warrants were

exercised and cash settled resulting in a reduction to additional paid in capital of $

0.4

million. There were

outstanding warrants as of

September 30, 2023.

Note 13:

Stockholders’ Equity

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

Three Months Ended

Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands except per share data)

Earnings per Common Share

Net Income

16,863

17,280

49,018

49,653

Less: preferred stock dividends

155

258

Net income available to common stockholders

16,708

17,280

48,760

49,653

Weighted average common shares

49,214,653

49,266,811

48,867,144

49,755,184

Earnings per common share

0.34

0.35

1.00

Diluted Earnings per Common Share

Net Income

16,863

17,280

49,018

49,653

Less: preferred stock dividends

155

258

Net income available to common stockholders

16,708

17,280

48,760

49,653

Weighted average common shares

49,214,653

49,266,811

48,867,144

49,755,184

Effect of dilutive shares

265,454

454,682

317,666

525,409

Weighted average dilutive common shares

49,480,107

49,721,493

49,184,810

50,280,593

Diluted earnings per common share

0.34

0.35

0.99

Stock-based awards not included because to do so would be

antidilutive

881,351

529,336

914,519

334,725

Dividends of $

155

thousand and $

258

thousand related to the Series A

Non-Cumulative Perpetual Preferred Stock were declared

and paid during the three- and nine-months ended September 30, ~~2019 and 2018:~~2023, respectively.

In October 2023, the Board of Directors declared a

quarterly dividend on Series A Non-Cumulative Perpetual Preferred Stock in the amount of $

20.00

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 2019 2018
(Dollars in thousands)
Stock appreciation rights $ 446
$ 220
$ 977
$ 1,905
Performance based restricted units and stock 159
28
409
524
Restricted stock units 510
280
1,528
1,957
Restricted stock awards 209
—
656
—
Employee stock purchase plan —
38
36
127
Total stock-based compensation $ 1,324
$ 566
$ 3,606
$ 4,513

per share to be payable on

December


~~Note 11:~~	~~Income Tax~~

~~A reconciliation of the income tax expense (benefit) at the statutory rate to the Company’s actual income tax expense (benefit) is shown below:~~15, 2023

Three months ended Nine months ended
September 30, September 30,
2019 2018 2019 2018
(Dollars in thousands)
Computed at the statutory rate (21%) $ 2,725
$ 1,529
$ 7,241
$ 1,754
Increase (decrease) resulting from
Tax-exempt income (722 ) (860 ) (2,147 ) (2,754 )
Nondeductible expenses 71
87
208
261
State tax credit —
—
(1,361 ) —
State income taxes 566
124
1,526
245
Equity based compensation (5 ) —
(66 ) (400 )
Other adjustments (43 ) 44
(93 ) (10 )
Actual tax expense (benefit) $ 2,592
$ 924
$ 5,308
$ (904 )

to shareholders of record as of

November 30, 2023

Note 14:



		31



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~The tax effects~~Disclosures about Fair Value of ~~temporary differences related to deferred taxes shown on the consolidated Balance Sheets are presented below:~~Financial Instruments

September 30, 2019 December 31, 2018
(Dollars in thousands)
Deferred tax assets
Net unrealized loss on securities available-for-sale $ —
$ 986
Allowance for loan losses 10,637
9,358
Lease incentive 306
329
Impairment of available for sale securities 498
498
Valuation allowance on real estate —
396
Loan fees 2,202
2,135
Net operating loss carryover 370
398
Accrued expenses 105
1,927
Deferred compensation 2,317
1,838
Alternative minimum tax credits —
2,365
State tax credit 3,517
2,506
Other 63
79
20,015
22,815
Deferred tax liability
Fair market value adjustments - trust preferred securities (350 ) (356 )
Net unrealized gain on securities available-for-sale (5,812 ) —
FHLB stock basis (936 ) (739 )
Premises and equipment (4,301 ) (5,019 )
Other (1,187 ) (385 )
(12,586 ) (6,499 )
Net deferred tax asset $ 7,429
$ 16,316


~~Note 12:~~	~~Disclosures about Fair Value of Financial Instruments~~

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between

market participants at the measurement date. Fair value measurements

must maximize the use of observable inputs and minimize the use

of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:


~~Level 1~~	~~Quoted prices in active markets for identical assets or liabilities~~


~~Level 2~~	Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; 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.


~~Level 3~~	~~Unobservable inputs supported by little or no market activity and significant to the fair value of the assets or liabilities.~~

Level 1

Quoted prices in active markets for identical assets or liabilities.

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

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.

Level 3

Unobservable inputs supported by little or no market activity and significant to the fair

value of the assets or liabilities.

Table of Contents



		32



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Recurring Measurements

The following ~~tables present~~list presents the ~~fair value measurements of~~ assets and liabilities recognized in the accompanying

consolidated ~~Balance Sheets~~statements of financial

condition measured at fair value on a recurring basis and the level within the fair value

hierarchy in which the fair value measurements

fall at September 30, ~~2019~~2023 and December 31, ~~2018:~~2022:

September 30, 2019
Fair Value Measurements Using
Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3)
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential $ 160,714
$ —
$ 160,714
$ —
Collateralized mortgage obligations - GSE residential 148,675
—
148,675
—
State and political subdivisions 420,009
—
420,009
—
Corporate bonds 1,536
—
1,536
—
Mutual funds 2,159
—
2,159
—
Derivative assets 13,735
—
13,735
—
Derivative liabilities $ 13,782
$ —
$ 13,782
$ —

December 31, 2018
Fair Value Measurements Using
Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3)
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential $ 129,287
$ —
$ 129,287
$ —
Collateralized mortgage obligations - GSE residential 152,626
—
152,626
—
State and political subdivisions 378,058
—
378,058
—
Corporate bonds 1,657
—
1,657
—
Mutual funds 2,050
—
2,050
—
Derivative assets 1,051
—
1,051
—
Derivative liabilities $ 1,136
$ —
$ 1,136
$ —

Fair Value Description

Valuation

Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis and recognized in the Company’s accompanying consolidated balance sheets.Hierarchy

~~Available-for-Sale~~Level

Where Fair

Value Balance

Can Be Found

Available-for-

Sale Securities

Where quoted market prices are available in an active market, securities are

classified within Level 1 of the valuation hierarchy. If quoted market prices

are not available, then fair values are estimated by using quoted prices

securities with similar characteristics or independent asset pricing services

and pricing models, the inputs of which are market-based or independently

sourced market parameters, including, but not limited to, yield curves,

interest rates, volatilities, prepayments, defaults, cumulative loss projections

and cash flows. ~~Such securities are classified in~~

Level 2 ~~of the valuation hierarchy.~~

Note 3:

Securities



		33



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Derivatives

Fair value of the interest rate swaps is obtained from independent pricing

services based on quoted market prices for similar derivative contracts.

~~Nonrecurring~~Level 2

Note 7:

Derivatives and

Hedging

Non-recurring Measurements

The following tables present assets measured at fair value on a ~~nonrecurring~~non-recurring basis and

the level within the fair value hierarchy in

which the fair value measurements fall at September 30, ~~2019~~2023 and

December 31, ~~2018:~~2022:

September 30, 2023

Fair Value Measurements Using

Fair Value

Quoted Prices in Active

Markets for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Unobservable

Inputs (Level 3)

(Dollars in thousands)

Collateral-dependent loans

17,651

September 30, 2019
Fair Value Measurements Using
Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3)
(Dollars in thousands)
Collateral-dependent impaired loans $ 40,220
$ —
$ —
$ 40,220
Premises and equipment held-for-sale —
—
—
—
Foreclosed assets held for sale $ 2,471
$ —
$ —
$ 2,471

December 31, 2018
Fair Value Measurements Using
Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Unobservable Inputs (Level 3)
(Dollars in thousands)
Collateral-dependent impaired loans $ 50,288
$ —
$ —
$ 50,288
Premises and equipment held-for-sale 3,444
—
3,444
—
Foreclosed assets held for sale $ —
$ —
$ —
$ —

December 31, 2022

Fair Value Measurements Using

Fair Value

Quoted Prices in Active

Markets for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Unobservable

Inputs (Level 3)

(Dollars in thousands)

Collateral-dependent impaired loans

8,728

Foreclosed assets held-for-sale

1,745

Following is a description of the valuation methodologies and inputs used for assets

measured at fair value on a ~~nonrecurring~~ non-recurring

basis and recognized in the accompanying consolidated ~~balance sheets.~~statements of financial

condition.

~~Collateral-dependent Impaired~~Collateral-Dependent Loans,

Net of ~~ALLL~~ACL

The estimated fair value of collateral-dependent ~~impaired~~ loans is based on the appraised

fair value of the collateral, less estimated cost to

sell. If the fair value of the collateral is below the loan’s

amortized cost, the ACL is netted against the loan balance. Collateral-dependent ~~impaired~~

loans are classified within Level 3 of the fair value hierarchy.

The Company considers the appraisal or evaluation as the starting point for determining

fair value and then considers other

factors and events in the environment that may affect the fair value. The impaired loans had a carrying value of $52.0 million and $59.7 million and were reduced by specific valuation allowance allocations totaling $11.8 million and $9.4 million at September 30, 2019 and December 31, 2018, respectively.

Appraisals of the collateral underlying ~~collateral-dependent~~collateral dependent loans are

Table of Contents

obtained when the loan is determined to be ~~collateral-dependent~~collateral dependent and subsequently as deemed

necessary by the Office of the Chief Credit

Officer.

Appraisals are reviewed for accuracy and consistency by management. Appraisers are selected from the ~~Office~~list of ~~the Chief Credit Officer.~~approved

appraisers maintained by management. The appraised 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. These discounts and estimates

are developed

by the Office of the Chief Credit Officer by comparison to historical results.

~~Premises and Equipment~~Foreclosed Assets Held-for-Sale

The ~~estimated~~ fair value of ~~premises and equipment held-for-sale~~foreclosed assets-held-for-sale is based on the appraised fair value of the ~~collateral, less estimated cost to sell.~~



		34



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

~~Foreclosed Assets Held-for-Sale~~

~~The estimated fair value of foreclosed assets held-for-sale is based on the appraised fair value of the~~ collateral, less estimated cost to sell.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable

inputs used in ~~nonrecurring~~non-recurring Level 3 fair value

measurements at September 30, ~~2019~~2023 and December 31, ~~2018:~~2022:

September 30, 2023

Fair Value

Valuation Techniques

Unobservable

Inputs

Range

(Weighted Average)

(Dollars in thousands)

Market comparable

properties

Marketability

discount

Collateral dependent loans

17,651

(

September 30, 2019
Fair Value Valuation Techniques Unobservable Inputs Range (Weighted Average)
(Dollars in thousands)
Collateral-dependent impaired loans $ 40,220
Market comparable properties Marketability discount
10% - 15%
(12%)
Foreclosed assets held for sale $ 2,471
Market comparable properties Marketability discount 25%

December 31, 2018
Fair Value Valuation Techniques Unobservable Inputs Range (Weighted Average)
(Dollars in thousands)
Collateral-dependent impaired loans $ 50,288
Market comparable properties Marketability discount 10% - 15%
(12%)
Foreclosed assets held for sale $ —

December 31, 2022

Fair Value

Valuation Techniques

Unobservable

Inputs

Range

(Weighted Average)

(Dollars in thousands)

Market comparable

properties

Marketability

discount

100

Collateral dependent loans

8,728

(

Market comparable

properties

Marketability

discount

Foreclosed assets held-for-sale

1,745

(

Table of Contents

The following tables present the estimated fair values of the Company’s

financial instruments at September 30, ~~2019~~2023 and

December 31, ~~2018:~~

2022:

September 30, 2019
Carrying Fair Value Measurements
Amount Level 1 Level 2 Level 3 Total
(Dollars in thousands)
Financial Assets
Cash and cash equivalents $ 128,126
$ 128,126
$ —
$ —
$ 128,126
Available-for-sale securities 733,093
—
733,093
—
733,093
Loans, net of allowance for loan losses 3,586,797
—
—
3,607,276
3,607,276
Restricted equity securities 16,053
—
—
16,053
16,053
Interest receivable 15,909
—
15,909
—
15,909
Derivative assets 13,735
—
13,735
—
13,735
$ 4,493,713
$ 128,126
$ 762,737
$ 3,623,329
$ 4,514,192
Financial Liabilities
Deposits $ 3,658,108
$ 513,832
$ —
$ 3,162,740
$ 3,676,572
Federal funds purchased and repurchase agreements 49,810
—
49,809
—
49,809
Federal Home Loan Bank advances 307,804
—
311,583
—
311,583
Other borrowings 912
—
2,054
—
2,054
Interest payable 4,643
—
4,643
—
4,643
Derivative liabilities 13,782
—
13,782
—
13,782
$ 4,035,059
$ 513,832
$ 381,871
$ 3,162,740
$ 4,058,443



		35



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

December 31, 2018
Carrying Fair Value Measurements
Amount Level 1 Level 2 Level 3 Total
(Dollars in thousands)
Financial Assets
Cash and cash equivalents $ 216,541
$ 216,541
$ —
$ —
$ 216,541
Available-for-sale securities 661,628
—
661,628
—
661,628
Loans, net of allowance for loan losses 3,022,921
—
—
3,027,930
3,027,930
Restricted equity securities 14,525
—
—
14,525
14,525
Interest receivable 14,092
—
14,092
—
14,092
Derivative assets 1,051
—
1,051
—
1,051
$ 3,930,758
$ 216,541
$ 676,771
$ 3,042,455
$ 3,935,767
Financial Liabilities
Deposits $ 3,208,097
$ 484,284
$ —
$ 2,696,212
$ 3,180,496
Federal funds purchased and repurchase agreements 75,406
—
75,404
—
75,404
Federal Home Loan Bank advances 312,985
—
298,017
—
298,017
Other borrowings 884
—
2,022
—
2,022
Interest payable 2,868
—
2,868
—
2,868
Derivative liabilities 1,136
—
1,136
—
1,136
$ 3,601,376
$ 484,284
$ 379,447
$ 2,696,212
$ 3,559,943

~~Following is a description of the valuation methodologies and inputs used for assets and liabilities measured at fair value categorized within level 2 or level 3 above and not yet disclosed:~~

~~Loans~~

~~The Company adopted ASU 2016-01 on January 1, 2019. In accordance with its requirements, the fair value of loans as of~~ September 30, 2019 was measured using an exit price notion. Methodologies utilized for this financial statement period are as follows: (i) Income Approach: Fair value is determined based on a discounted cash flow analysis. The discounted cash flow analysis was based on the contractual maturity of the loan and market indications of rates, prepayment speeds, defaults and credit risk; and (ii) Asset Approach: Fair value is determined based on the estimated values of the underlying collateral or individual analysis of receipts. This provides a better indication of value than the contractual income streams as these loans are not performing or exhibit strong signs indicative of non-performance. Fair value has been established in accordance with ASC 820, 2023

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

(Dollars in thousands)

Financial Assets

Cash and ~~Disclosures, and is intended to represent the price that would be received in an orderly transaction between market participants as~~cash equivalents

233,191

Available-for-sale securities

750,487

Loans, net of the measurement date. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, at least one significant assumption not observable in the market was utilized. These unobservable assumptions reflect estimates that market participants would use in pricing the asset or liability. Inputs to these valuation techniques are subjective in nature, involve uncertainties and require significant judgment and therefore cannot be determined with precision. Accordingly, the fair value estimates presented are not necessarily indicative of the amounts to be realized in a current market exchange.allowance for credit losses

For December 31, 2018, fair value was estimated by discounting the future cash flows using the market rates at which similar notes would be made to borrowers with similar credit ratings and for the same remaining maturities. The market rates used were based on current rates the Company would impose for similar loans and reflect a market participant assumption about risks associated with nonperformance, illiquidity, and the structure and term of the loans along with local economic and market conditions.5,874,197

5,820,212

Restricted ~~Equity Securities~~equity securities

~~Fair value is estimated at book value due to restrictions that limit the sale or transfer of such securities.~~4,396



		36



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

4,396

Interest ~~Receivable and Payable~~receivable

~~The carrying amount approximates fair value. The carrying amount is determined using the interest rate, balance and last payment date.~~35,814

35,814

Equity securities

5,202

Derivative assets

12,315

Financial Liabilities

Deposits

Fair value of term deposits is estimated by discounting the future cash flows using rates of similar deposits with similar maturities. The estimated fair value of demand, transaction, savings and money market deposits is the book value since rates are regularly adjusted to market rates and amounts are payable on demand at the reporting date.$

6,331,621

1,028,974

5,301,120

Federal Home Loan Bank ~~Advances~~advances

88,531

81,569

Other borrowings

18,059

18,630

Interest payable

17,885

Derivative liabilities

22,198

December 31, 2022

Carrying

Fair ~~value is estimated by discounting the future~~Value Measurements

Amount

Level 1

Level 2

Level 3

(Dollars in thousands)

Financial Assets

Cash and cash ~~flows using rates~~equivalents

300,138

Available-for-sale securities

769,641

686,901

Loans, net of ~~similar advances with similar maturities. These rates were obtained from current rates offered by FHLB.~~allowance for loan losses

~~Fed Funds Purchased and Repurchase Agreements~~5,310,954

~~Fair value for fed~~-

5,307,607

Restricted equity securities

12,536

Interest receivable

29,507

Equity securities

2,870

Derivative assets

11,038

Financial Liabilities

Deposits

5,651,308

1,400,260

4,142,673

Federal funds purchased ~~is book value. Fair value of~~and repurchase agreements ~~estimated by discounting the future cash flows using rates of similar maturities.~~

74,968

Federal Home Loan Bank advances

143,143

135,086

Other ~~Borrowings~~borrowings

Fair value of the Company’s line of credit with another financial institution is estimated at book value due to its short-term nature. The estimated fair value for the Trust Preferred Securities is based on current borrowing rates currently available to the Company, considering the size and quality of the credit and liquidity of the debt as a security.35,457

36,529

Interest payable

5,713

Derivative liabilities

16,442

Table of Contents


~~Note 13:~~	~~Commitments and Credit Risk~~

Note 15:

Commitments and Credit Risk

Commitments

The Company had the following commitments at September 30, ~~2019~~

2023 and December 31, ~~2018:~~2022:

September 30, 2019 December 31, 2018
(Dollars in thousands)
Commitments to originate loans $ 176,598
$ 190,997
Standby letters of credit 35,699
32,439
Lines of credit 1,255,764
1,174,166
Future lease commitment 19,054
19,054
Total $ 1,487,115
$ 1,416,656


~~Note 14:~~	~~Legal and Regulatory Proceedings~~

~~General Litigation~~

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. It is the opinion of management the disposition or ultimate resolution of such claims and lawsuits will not have a material adverse effect on the consolidated financial position, result of operations and cash flows of the Company.

September 30, 2023

December 31, 2022

(Dollars in thousands)

Commitments to originate loans

141,208

134,961

Standby letters of credit

72,056

66,889

Lines of credit

2,156,380

2,705,730

Future lease commitments

5,833

1,888

Commitments related to investment funds

4,798

3,403

2,380,275

2,912,871



		37

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF ~~OPERATIONS~~

OPERATIONS

The following management's discussion and analysis of our financial condition and

results of operations should be read in

conjunction with ~~the~~our consolidated financial statements and related

notes ~~and with the statistical information and financial data appearing in this report~~ as ~~well as in The Company’s prospectus (File No. 333-232704) filed with the Securities & Exchange Commission (‘‘SEC’’) pursuant to Rule 424(b)~~ of ~~the Securities Act of 1933, as amended, on August 15, 2019, related to The Company’s initial public offering (the ‘‘IPO Prospectus’’). Results of operations~~and for the three-

and ~~nine-month periods ended September 30, 2019 are not necessarily indicative of results to be attained for any other period.~~

Unless we state otherwise or the context otherwise requires, references in the below section to ‘‘we,’’ ‘‘our,’’ ‘‘us,’’ ‘‘ourselves,’’ ‘‘our company,’’ and the ‘‘Company’’ refer to CrossFirst Bankshares, Inc., a Kansas corporation, its predecessors and its consolidated subsidiaries. References to ‘‘CrossFirst Bank’’ and the ‘‘Bank’’ refer to CrossFirst Bank, a Kansas chartered bank and our wholly-owned consolidated subsidiary.

On December 21, 2018, we effected a two-for-one split of our common stock in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of December 19, 2018. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this Form 10-Q.

~~Recent Developments~~

We completed our initial public offering on August 19, 2019 in which we issued and sold 6,594,362 common shares including 844,362 shares pursuant to the underwriters’ partial exercise of their overallotment option. The common shares were sold at an initial public offering price of $14.50 per share. After deducting the underwriting discounts and offering expenses, the Company received total net proceeds of $87.0 million. The shares began trading on the Nasdaq Global Select Market under the symbol ‘‘CFB.’’

~~During the third quarter ended September 30, 2019, we accomplished the following:~~

~~Increased total assets $178.1 million or 4.0% during the quarter to $4.7 billion, driven by a $162.4 million or 4.7% increase in our loan portfolio.~~

~~Increased quarterly net income $945.0 thousand or 10.0% on a linked quarter basis, resulting in a quarterly return on average assets of 0.89% and return on average equity of 7.58%.~~

~~Achieved an efficiency ratio of 54.3% during the quarter.~~

~~Increased diluted earnings per share (‘‘EPS’’) 40% to $0.21 for the quarter from the same period in 2018.~~

~~Increased year-to-date 2019 diluted EPS to $0.61, an increase of 177% from the same period in 2018.~~



		38

~~Table of Contents~~

~~Selected Financial Data (unaudited)~~

~~Selected financial data for and as of our previous five quarters and for and as of the~~ nine-months ended September 30, ~~2019~~

2023, and ~~2018 is presented below:~~with our 2022 Form 10-K, which includes our audited consolidated financial

statements and related notes as of December 31,

2022 and 2021 and for the years ended December 31, 2022, 2021

and 2020. This discussion and analysis contains forward-looking

statements that involve risks, uncertainties and assumptions that may cause actual results

to differ materially from management's

expectations. Factors that could cause such differences are discussed in the section entitled

“Cautionary Note Regarding Forward-

Looking Statements”

located elsewhere in this quarterly report and in Item 1A “Risk Factors”

in our 2022 Form 10-K and should be

read herewith.

Performance Measures

As of or For the Quarter Ended

As of or For the Nine Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

2023

2022

Return on average assets

(1)

0.94

0.93

0.97

0.77

1.19

0.95

1.18

Adjusted return on average

assets

(1)(2)

1.04

1.00

1.04

1.15

1.19

1.03

1.21

Return on average common

equity

(1)

10.19

10.00

10.54

8.04

11.18

10.24

10.59

Adjusted return on average

common equity

(1)(2)

11.26

10.81

11.30

12.03

11.22

11.12

10.82

Earnings per common share - basic

0.34

0.33

0.25

0.35

1.00

Earnings per common share -

diluted

0.34

0.33

0.24

0.35

0.99

Adjusted earnings per common

share - diluted

(1)

0.37

0.35

0.36

0.35

1.08

1.01

Efficiency ratio

(3)

59.49

62.02

60.81

62.40

53.20

60.77

55.97

Adjusted efficiency ratio -

FTE

(2)(3)(4)

55.17

57.27

56.42

55.01

52.25

56.28

54.21

Ratio of equity to assets

8.96

9.15

9.36

9.22

9.93

8.96

9.93

(1)

Interim periods annualized

Third Second First Fourth Third Nine Months Ended
Quarter Quarter Quarter Quarter Quarter September 30,
2019 2019 2019 2018 2018 2019 2018
Per Common Share Data
Basic earnings per share $ 0.22
$ 0.21
$ 0.20
$ 0.22
$ 0.15
$ 0.63
$ 0.23
Diluted earnings per share 0.21
0.20
0.20
0.22
0.15
0.61
0.22
Book value per share 11.59
11.00
10.63
10.21
9.43
11.59
9.43
Tangible book value per share⁽¹⁾
$ 11.44
$ 10.83
$ 10.46
$ 10.04
$ 9.24
$ 11.44
$ 9.24
Selected Operating Ratios
Yield on securities - tax equivalent⁽²⁾
3.19 % 3.42 % 3.59 % 3.61 % 3.58 % 3.40 % 3.62 %
Yield on loans 5.53
5.66
5.75
5.56
5.35
5.64
5.25
Yield on interest-earning assets⁽²⁾
5.00
5.18
5.25
5.08
4.81
5.14
4.65
Cost of interest-bearing deposits 2.26
2.33
2.30
2.04
1.72
2.30
1.59
Cost of total deposits 1.94
1.99
1.96
1.70
1.42
1.96
1.35
Cost of funds 1.94
1.99
1.96
1.72
1.46
1.96
1.40
Net interest margin⁽²⁾
3.24
3.35
3.46
3.51
3.44
3.35
3.34
Return on average assets 0.89
0.86
0.91
1.06
0.70
0.89
0.37
Non-GAAP core operating return on average assets⁽³⁾
0.89
0.89
0.78
0.67
0.72
0.86
0.53
Return on average equity 7.58
7.78
7.98
9.03
6.68
7.76
3.51
Non-GAAP core operating return on average equity⁽⁴⁾
7.58
8.04
6.79
5.59
6.83
7.48
5.38
Non-interest expense to average assets 1.82
2.00
2.20
2.06
2.20
2.00
2.61
Efficiency ratio⁽⁵⁾
54.29
60.09
64.20
60.18
65.91
59.36
79.08
Non-GAAP core operating efficiency ratio⁽⁶⁾
54.29
59.40
64.20
62.61
65.54
59.13
72.24
Non-GAAP tax equivalent efficiency ratio⁽⁷⁾
53.43
59.10
63.10
59.02
64.31
58.38
76.82
Non-interest-bearing deposits to total deposits 14.05
14.28
14.36
15.10
17.99
14.05
17.99
Loans to deposits 99.23 % 96.74 % 96.40 % 95.41 % 97.49 % 99.23 % 97.49 %
Credit Quality Ratios
Allowance for loan losses to total loans 1.18 % 1.24 % 1.22 % 1.23 % 1.22 % 1.18 % 1.22 %
Nonperforming assets to total assets 1.00
1.18
0.36
0.43
0.35
1.00
0.35
Nonperforming loans to total loans 1.22
1.45
0.40
0.58
0.48
1.22
0.48
Allowance for loan losses to nonperforming loans 97.12
85.20
307.27
212.30
256.65
97.12
256.65
Net charge-offs (recoveries) to average loans⁽⁸⁾
0.53 % — % 0.09 % 0.03 % (0.05 )% 0.21 % 0.09 %

(2)



		39

~~Table of Contents~~

Third Second First Fourth Third Nine Months Ended
Quarter Quarter Quarter Quarter Quarter September 30,
2019 2019 2019 2018 2018 2019 2018
Capital Ratios
Total stockholders’ equity to total assets 12.95 % 11.16 % 11.26 % 11.94 % 11.03 % 12.95 % 11.03 %
Tier 1 leverage ratio 12.57
10.87
11.15
12.43
11.39
12.57
11.39
Common equity tier 1 capital ratio 12.91
11.02
11.23
11.75
10.55
12.91
10.55
Tier 1 risk-based capital ratio 12.93
11.04
11.23
12.53
11.38
12.93
11.38
Total risk-based capital ratio 13.90 % 12.04 % 12.20 % 13.51 % 12.32 % 13.90 % 12.32 %
⁽¹⁾Tangible common stockholders’ equity and tangible book value per share are non-GAAP financial measures. The most directly comparable GAAP measure is stockholders’ equity and book value per share. See ’’GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures’’ for a reconciliation of this measure.
⁽²⁾ Tax exempt income (tax-free municipal securities) is calculated on a tax equivalent basis. The incremental tax rate used is 21.0%.
⁽³⁾ Non-GAAP core operating income and non-GAAP core operating return on average assets are non-GAAP financial measures. The most directly comparable measure under GAAP is net income and return on average assets, respectively. See ‘‘GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures’’ for a reconciliation of this measure.
⁽⁴⁾ Non-GAAP core operating return on average equity is a non-GAAP financial measure. The most directly comparable GAAP financial measure is return on average equity. See ‘‘GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures’’ for a reconciliation of this measure.
⁽⁵⁾We calculate efficiency ratio as non-interest expense divided by the sum of net interest income and non-interest income.
⁽⁶⁾ Non-GAAP core operating efficiency ratio is a non-GAAP financial measure. The most directly comparable GAAP financial measure is the efficiency ratio. See ‘‘GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures’’ for a reconciliation of this measure.
⁽⁷⁾ Non-GAAP tax equivalent efficiency ratio is a non-GAAP financial measure. The most directly comparable measure is the efficiency ratio. See ‘‘GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures’’ for a reconciliation of this measure.
⁽⁸⁾Interim periods are annualized

~~GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures~~

~~Non-GAAP financial measures are used by management to evaluate our performance. The~~Represents a non-GAAP financial ~~measures that we discuss should not be considered in isolation or as~~measure.

See "Non-GAAP Financial Measures"

below for a ~~substitute for the most directly comparable financial measures calculated in accordance with GAAP. Moreover, the way we calculate~~reconciliation of these ~~non-GAAP financial measures may differ from that of other companies reporting measures with similar names.~~measures.

(3)

We calculate ~~‘‘non-GAAP core operating income’’ as net income adjusted to remove non-recurring or non-core income and expense items related to:~~

Restructuring charges associated with the transition of our former CEO - In connection with the departure of our former CEO in the second quarter of 2018, we incurred restructuring charges related to the acceleration of certain stock-based compensation and employee costs, some of which were adjusted in the fourth quarter of 2018.

Impairment charges associated with two buildings that were held-for-sale - We acquired a larger corporate headquarters to accommodate our business needs that eliminated the need for two smaller support buildings. The two smaller support buildings had been acquired recently and were extensively remodeled, which resulted in a difference between book and market value for those assets. We sold one of the buildings in 2018 and the other in the second quarter of 2019.

~~State tax credits - As a result of the purchase and improvement of our new corporate headquarters we received state tax credits.~~

~~The most directly comparable GAAP financial measure for non-GAAP core operating income is net income.~~

We calculate ‘‘non-GAAP core operating return on average assets’’ as non-GAAP core operating income (as defined above) divided by average assets. The most directly comparable GAAP financial measure is return on average assets, which is calculated as net income divided by average assets.



		40

~~Table of Contents~~

We calculate ‘‘non-GAAP core operating return on average equity’’ as non-GAAP core operating income (defined above) less preferred dividends divided by average common equity. The most directly comparable GAAP financial measure is return on average equity, which is calculated as net income less preferred dividends divided by average common equity.

~~We calculate ‘‘non-GAAP core operating~~ efficiency ~~ratio’’~~ratio as non-interest expense ~~adjusted to remove non-recurring non-interest expenses as defined under non-GAAP core operating income~~

divided by the sum of net interest income and

non-interest income.

(4)

Tax exempt income (tax-free municipal securities)

is calculated on a tax equivalent basis.

The incremental tax rate used is 21.0%

Third Quarter 2023 Highlights

During the third quarter ended September 30, 2023, we accomplished the following:

●

Improved profitability as operating revenue, adjusted diluted earnings per common share

(1)

, and adjusted return on average

common equity

(1)

increased compared to ~~remove non-recurring~~the prior quarter and the prior year third quarter; year-to-date

2023 operating

revenue grew 21% compared to the prior year

●

Completed the previously-announced acquisition of Canyon Bancorporation,

Inc. and its wholly owned subsidiary, Canyon

Community Bank, N.A. (the “Tucson acquisition”)

Added $106 million of loans net of $5.2 million in acquired loan marks, $165

million of deposits and $4.5 million of

core deposit intangible

Deepened our Arizona franchise; system integration planned for the fourth quarter of 2023

●

Loans grew $149 million, or 2.6%, for the quarter and grew 10.7% year-to date

Excluding the Tucson acquisition, loans grew 0.8% for the quarter and 8.7% year-to-date

●

Deposits grew $232 million, or 3.8%, for the quarter and grew 12.0%

year-to-date

Excluding the Tucson acquisition, deposits grew 1.1% for the quarter and 9.1% year-to-date

Non-interest-bearing deposits increased 11% from the prior quarter,

and increased 6% excluding the impact of the

Tucson acquisition

Table of Contents

●

Non-performing assets increased to 0.50% of total assets but were contained within a

few relationships of manageable size;

Net charge-offs of $1.3 million were previously reserved and represented an annualized

rate of 0.09% of average loans

●

Reduced non-interest expense compared to the linked quarter,

progressing towards our longer-term efficiency goal

(1)

Represents a non-GAAP financial measure.

See “Non-GAAP Financial Measures” below

for a reconciliation of these measures.

Mergers and Acquisitions

Update

During the third quarter of 2023, the Company completed its acquisition of Canyon

whereby Canyon Bancorporation, Inc. was

ultimately merged with and into CrossFirst Bankshares, Inc. and Canyon Community

Bank, N.A. was merged with and into CrossFirst

Bank. In accordance with the agreement, the Company paid approximately

$9.1 million of cash consideration and issued 597,645

of Company common stock,

and the Company and the Bank assumed all of the assets and liabilities of the Canyon entities

with which

they merged by operation of law.

System integration is expected to occur during the fourth quarter of 2023.

Table of Contents

Non-GAAP Financial Measures

In addition to disclosing financial measures determined in accordance

with U.S. generally accepted accounting principles (GAAP), the Company discloses certain

non-GAAP

financial measures including “tangible common stockholders’

equity,” “tangible book value per common share,”

“adjusted efficiency ratio – FTE,”

“adjusted net income,” “adjusted

earnings per common share – diluted,” “adjusted return on average assets,” and

“adjusted return on average common equity.”

We consider the use of select non-GAAP financial

measures and ratios to be useful for financial and operational decision making and useful in

evaluating period-to-period comparisons. We believe that these non-GAAP financial

measures provide meaningful supplemental information to investors regarding

our performance by excluding certain expenditures or gains that we believe

are not indicative of our

primary business operating results. We believe that management and investors benefit

from referring to these non-GAAP financial measures in assessing our performance and when

planning, forecasting, analyzing,

and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in

accordance with GAAP and you should not rely on non-

GAAP financial measures alone as ~~defined under~~measures of our performance. The non-GAAP ~~core operating income. The most directly~~financial measures we present may differ from non-GAAP financial measures

used by our peers or

other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever

we present the non-GAAP financial measures and by including a

reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both

measures and the individual components may be considered when

analyzing our performance.

A reconciliation of non-GAAP financial measures to the comparable GAAP financial ~~measure is~~measures follows.

Quarter Ended

Nine Months Ended

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

9/30/2023

9/30/2022

(Dollars in thousands, except per share data)

Adjusted net income:

Net income (GAAP)

16,863

16,047

16,108

11,946

17,280

49,018

49,653

Add: Acquisition costs

1,328

338

1,477

3,570

3,143

320

Add: Acquisition - Day 1 CECL

provision

900

4,400

900

Add: Employee separation

1,300

1,063

Less: Tax effect

(1)

(468)

(344)

(310)

(2,045)

(17)

(1,122)

(290)

Adjusted net income

18,623

17,341

17,275

17,871

17,344

53,239

50,746

Preferred stock dividends

155

103

258

Diluted weighted average common shares outstanding

49,480,107

48,943,325

49,043,621

49,165,578

49,725,207

49,184,810

50,280,593

Earnings per common share – diluted (GAAP)

0.34

0.33

0.24

0.35

0.99

Adjusted earnings per common share – diluted

0.37

0.35

0.36

0.35

1.08

1.01

(1)

Represents the ~~efficiency ratio.~~tax impact of the adjustments at a tax rate

of 21.0%, plus permanent tax expense associated with

merger related transactions.

~~Management believes that non-GAAP core operating income, non-GAAP core operating~~

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Quarter Ended

Nine Months Ended

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

9/30/2023

9/30/2022

(Dollars in thousands)

Adjusted return on average assets:

Net income (GAAP)

16,863

16,047

16,108

11,946

17,280

49,018

49,653

Adjusted net income

18,623

17,341

17,275

17,871

17,344

53,239

50,746

Average assets

7,114,228

6,929,972

6,712,801

6,159,783

5,764,347

6,920,471

5,625,317

Return on average assets ~~non-GAAP core operating~~(GAAP)

0.94

0.93

0.97

0.77

1.19

0.95

1.18

Adjusted return on average equity and non-GAAP core operating efficiency ratio remove events that are not recurring and not part of core business activities and are useful analytical tools for investors to compare periods excluding these non-recurring or non-core income and charges.assets

~~The following table reconciles, as of the dates set forth below, net income to non-GAAP core operating income, non-GAAP core operating~~1.04

1.00

1.04

1.15

1.19

1.03

1.21

Quarter Ended

Nine Months Ended

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

9/30/2023

9/30/2022

(Dollars in thousands)

Adjusted return on average ~~assets, non-GAAP core operating~~common equity:

Net income (GAAP)

16,863

16,047

16,108

11,946

17,280

49,018

49,653

Preferred stock dividends

155

103

258

Net income attributable to common shareholders (GAAP)

16,708

15,944

16,108

11,946

17,280

48,760

49,653

Adjusted net income

18,623

17,341

17,275

17,871

17,344

53,239

50,746

Preferred stock dividends

155

103

258

Adjusted net income attributable to common shareholders

18,468

17,238

17,275

17,871

17,344

52,981

50,746

Average common equity

650,494

639,741

619,952

589,587

613,206

636,841

627,016

Return on average common equity (GAAP)

10.19

10.00

10.54

8.04

11.18

10.24

10.59

Adjusted return on average common equity

11.26

10.81

11.30

12.03

11.22

11.12

10.82

Quarter Ended

9/30/2023

6/30/2023

3/31/2023

12/31/2022

9/30/2022

(Dollars in thousands, except per share data)

Tangible common stockholders' equity:

Total stockholders' equity ~~and non-GAAP core operating efficiency ratio:~~(GAAP)

Three Months Ended Nine Months Ended
September June March December September
30, 30, 31, 31, 30, September 30,
2019 2019 2019 2018 2018 2019 2018
(Dollars in thousands)
Non-GAAP core operating income:
Net Income $ 10,384
$ 9,439
$ 9,350
$ 10,334
$ 6,354
$ 29,173
$ 9,256
Add: restructuring charges —
—
—
(815 ) —
—
5,548
Less: tax effect⁽¹⁾
—
—
—
(210 ) —
—
1,591
Restructuring charges, net of tax —
—
—
(605 ) —
—
3,957
Add: fixed asset impairments —
424
—
—
171
424
171
Less: tax effect⁽²⁾
—
109
—
—
44
109
44
Fixed asset impairments, net of tax —
315
—
—
127
315
127
Add: state tax credit⁽³⁾
—
—
(1,361 ) (3,129 ) —
(1,361 ) —
Non-GAAP core operating income $ 10,384
$ 9,754
$ 7,989
$ 6,600
$ 6,481
$ 28,127
$ 13,340
⁽¹⁾Represents the tax impact of the adjustments above at a tax rate of 25.73%, plus a permanent tax benefit associated with stock-based grants that were exercised prior to our former CEO’s departure.
⁽²⁾ Represents the tax impact of the adjustments above at a tax rate of 25.73%.
⁽³⁾ No tax effect.
643,051

651,483



		41

~~Table of Contents~~

645,491

608,599

Three Months Ended Nine Months Ended
September June March December September
30, 30, 31, 31, 30, September 30,
2019 2019 2019 2018 2018 2019 2018
(Dollars in thousands)
Non-GAAP core operating return on average assets:
Non-GAAP core operating income $ 10,384
$ 9,754
$ 7,989
$ 6,600
$ 6,481
$ 28,127
$ 13,340
Average assets 4,610,958
4,402,002
4,168,243
3,884,642
3,588,876
4,395,356
3,363,230
Return on average assets 0.89 % 0.86 % 0.91 % 1.06 % 0.70 % 0.89 % 0.37 %
Non-GAAP core operating return on average assets 0.89 % 0.89 % 0.78 % 0.67 % 0.72 % 0.86 % 0.53 %
Non-GAAP core operating return on average equity:
Non-GAAP core operating income $ 10,384
$ 9,754
$ 7,989
$ 6,600
$ 6,481
$ 28,127
$ 13,340
Less: preferred dividends —
—
175
525
525
175
1,575
Non-GAAP core operating income available to common stockholders 10,384
9,754
7,814
6,075
5,956
27,952
11,765
Average common equity $ 543,827
$ 486,880
$ 466,506
$ 430,881
$ 346,025
$ 499,354
$ 292,589
Return on average equity 7.58 % 7.78 % 7.98 % 9.03 % 6.68 % 7.76 % 3.51 %
Non-GAAP core operating return on average equity 7.58 % 8.04 % 6.79 % 5.59 % 6.83 % 7.48 % 5.38 %
$

580,547

Non-GAAP core operating efficiency ratio
Non-interest expense $ 21,172
$ 21,960
$ 22,631
$ 20,166
$ 19,875
$ 65,763
$ 65,589
Less: restructuring charges —
—
—
(815 ) —
—
5,548
Non-GAAP non-interest expense (numerator) 21,172
21,960
22,631
20,981
19,875
65,763
60,041
Net interest income 35,786
34,874
33,605
32,315
28,968
104,265
78,053
Non-interest income 3,212
1,672
1,645
1,195
1,185
6,529
4,888
Add: fixed asset impairments —
424
—
—
171
424
171
Non-GAAP operating revenue (denominator) $ 38,998
$ 36,970
$ 35,250
$ 33,510
$ 30,324
$ 111,218
$ 83,112
Efficiency ratio 54.29 % 60.09 % 64.20 % 60.18 % 65.91 % 59.36 % 79.08 %
Non-GAAP core operating efficiency ratio 54.29 % 59.40 % 64.20 % 62.61 % 65.54 % 59.13 % 72.24 %

~~We calculate ‘‘tangible common stockholders’ equity’’ as total stockholders’ equity less~~Less: goodwill and other intangible assets ~~and~~

32,293

27,457

28,259

29,081

Less: preferred ~~stock. The most directly comparable GAAP financial measure is total stockholders’ equity.~~stock

~~We calculate ‘‘tangible~~7,750

7,750

Tangible common stockholders' equity

603,008

616,276

609,482

579,518

580,476

Common shares outstanding at end of period

49,295,036

48,653,487

48,600,618

48,448,215

48,787,696

Book value per common share (GAAP)

13.04

13.39

13.28

12.56

11.90

Tangible book value per ~~share’’ as tangible~~ common stockholders’ equity (as defined above) divided by the number of shares of our common stock outstanding at the end of the relevant period. The most directly comparable GAAP financial measure is book value per share.share

Management believes that tangible stockholders’ equity and tangible book value per share are important to many investors in the marketplace who are interested in changes from period to period in our stockholders’ equity, exclusive of changes in intangible assets. The following table reconciles, as of the dates set forth below, total stockholders’ equity to tangible stockholders’ equity and presents tangible book value per share compared to book value per share:$

12.23

12.67

12.54

11.96

11.90



		42

Table of Contents

Quarter Ended

Period Ended
September June March December September
30, 30, 31, 31, 30,
2019 2019 2019 2018 2018
(Dollars in thousands except per share data)
Tangible common stockholders’ equity:
Stockholders’ equity $ 602,435
$ 499,195
$ 480,514
$ 490,336
$ 409,780
Less: goodwill and other intangible assets 7,720
7,745
7,770
7,796
7,821
Less: preferred stock —
—
—
30,000
30,000
Tangible common stockholders’ equity $ 594,715
$ 491,450
$ 472,744
$ 452,540
$ 371,959
Tangible book value per share:
Tangible common stockholders’ equity $ 594,715
$ 491,450
$ 472,744
$ 452,540
$ 371,959
Shares outstanding at end of period 51,969,203
45,367,641
45,202,370
45,074,322
40,261,480
Book value per share $ 11.59
$ 11.00
$ 10.63
$ 10.21
$ 9.43
Tangible book value per share $ 11.44
$ 10.83
$ 10.46
$ 10.04
$ 9.24
Nine Months Ended

9/30/2023

~~We calculate ‘‘Non-GAAP tax equivalent efficiency ratio’’ as non-interest~~6/30/2023

3/31/2023

12/31/2022

9/30/2022

9/30/2023

9/30/2022

(Dollars in thousands)

Adjusted Efficiency Ratio - FTE

(1)

Non-interest expense ~~divided by the sum of net~~

36,354

37,412

38,092

36,423

28,451

111,858

85,319

Less: Acquisition costs

(1,328)

(338)

(1,477)

(3,570)

(81)

(3,143)

(320)

Less: Core deposit intangible amortization

(922)

(802)

(822)

(291)

(2,546)

Less: Employee separation

(1,300)

(1,063)

Adjusted Non-interest expense (numerator)

34,104

34,972

35,793

32,562

28,370

104,869

83,936

Net interest income

55,127

54,539

58,221

54,015

49,695

167,887

139,519

Tax equivalent interest income

(1)

707

750

797

818

820

2,254

2,403

Non-interest income

5,981

5,779

4,421

4,359

3,780

16,181

12,922

Total tax-equivalent income (denominator)

61,815

61,068

63,439

59,192

54,295

186,322

154,844

Efficiency Ratio (GAAP)

59.49

62.02

60.81

62.40

53.20

60.77

55.97

Adjusted Efficiency Ratio - FTE

(1)

55.17

57.27

56.42

55.01

52.25

56.28

54.21

(1)

Tax exempt income (tax-free municipal securities)

is calculated on a tax equivalent ~~basis and non-interest income. Management believes the~~ basis. The incremental

tax ~~equivalent efficiency ratio provides a better understanding of our efficiency ratio because it gives effect for our tax-exempt security strategy.~~

~~The following table reconciles, as of the dates set forth below, the efficiency ratio compared to the tax-equivalent efficiency ratio:~~

rate used is 21.0%.

Three Months Ended Nine Months Ended
September June March December September
30, 30, 31, 31, 30, September 30,
2019 2019 2019 2018 2018 2019 2018
(Dollars in thousands)
Non-GAAP Tax Equivalent Efficiency Ratio:
Non-interest expense (Numerator) $ 21,172
$ 21,960
$ 22,631
$ 20,166
$ 19,875
$ 65,763
$ 65,589
Net interest income 35,786
34,874
33,605
32,315
28,968
104,265
78,053
Tax equivalent interest income 624
612
616
658
753
1,852
2,440
Net interest income - tax equivalent 36,410
35,486
34,221
32,973
29,721
106,117
80,493
Non-interest income 3,212
1,672
1,645
1,195
1,185
6,529
4,888
Total tax-equivalent income (Denominator) $ 39,622
$ 37,158
$ 35,866
$ 34,168
$ 30,906
$ 112,646
$ 85,381
Efficiency Ratio 54.29 % 60.09 % 64.20 % 60.18 % 65.91 % 59.36 % 79.08 %
Non-GAAP Tax Equivalent Efficiency Ratio 53.43 % 59.10 % 63.10 % 59.02 % 64.31 % 58.38 % 76.82 %



		43

Table of Contents

Results of Operations

Overview

Net income totaled $16.9 million, or $0.34 per diluted common share, for the three-months

ended September, 30, 2023 compared

~~Summary~~to $17.3 million, or $0.35 per diluted common share, during the three-months ended

September 30, 2022.

For the nine-month periods

ending September 30, 2023 and 2022, net income totaled $49.0 million, or $0.99

per diluted common share, and $49.7 million, or $0.99

~~The Company’s results of operations depend substantially on~~per diluted common share, respectively.

For both comparative periods, increases in net interest income and non-interest ~~income. Other factors contributing to the Company’s results~~income

were

more than offset by higher non-interest expense.

The third quarter of ~~operations include its non-interest~~2023 included acquisition-related charges of $1.3

million and Day 1 CECL provision expense ~~such as salaries~~on acquired

loans of $0.9 million, resulting in adjusted net income

(1)

of $18.6 million, or $0.37 per diluted common share on an adjusted

basis

(1)

The nine-months ended September 30, 2023 included acquisition-related charges

of $3.1 million,

Day 1 CECL provision expense on

acquired loans of $0.9 million and employee ~~benefits, occupancy~~separation costs of $1.3

million resulting in adjusted net income

(1)

of $53.2 million, or

$1.08 per diluted common share, on an adjusted basis

(1)

Return on average assets was 0.94% and ~~equipment and other miscellaneous operating expenses. The components of the Company’s results of operations were as follows~~0.95% for the ~~periods shown:~~three- and nine-months ended

September 30, 2023, respectively.

Adjusted

return on average assets

(1)

was 1.04% and 1.03% for the same periods.

Return on average common equity was 10.19% and 10.24% for

the three- and nine-months ended September 30, 2023, respectively.

Adjusted return on average common equity

(1)

was 11.26% and

11.12% for the same periods.

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 % Change 2019 2018 % Change
(Dollars in thousands)
Net interest income $ 35,786
$ 28,968
23.5 % $ 104,265
$ 78,053
33.6 %
Provision for loan losses 4,850
3,000
61.7
10,550
9,000
17.2
Non-interest income 3,212
1,185
171.1
6,529
4,888
33.6
Non-interest expense 21,172
19,875
6.5
65,763
65,589
0.3
Income taxes 2,592
924
180.5
5,308
(904 ) (687.2 )
Net income $ 10,384
$ 6,354
63.4 % $ 29,173
$ 9,256
215.2 %
Preferred dividends —
525
(100.0 ) 175
1,575
(88.9 )
Net income available to common shareholders $ 10,384
$ 5,829
78.1 % $ 28,998
$ 7,681
277.5 %
Non-GAAP core operating income⁽¹⁾
$ 10,384
$ 6,481
60.2 % $ 28,127
$ 13,340
110.8 %

⁽¹⁾ Non-GAAP core operating income is a non-GAAP financial measure. The most directly comparable measure under GAAP is net income. See ‘‘GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures’’ for a reconciliation of this measure.

(1)

Represents a non-GAAP financial measure.

See "Non-GAAP Financial Measures" above for



		44



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

a reconciliation of these measures.

Net Interest Income

~~We present and discuss net~~Net interest income is presented on a tax-equivalent basis below. A tax-equivalent basis makes all income taxable at the same rate. For example, $100 of tax-exempt income would be presented as $126.58, an amount that, if taxed at the statutory federal incomefully tax ~~rate of 21% would yield $100.~~ equivalent basis.

We believe ~~a tax-equivalent~~reporting on an FTE basis provides for improved

comparability between the various earning assets. ~~The following table presents, for the period indicated, average balance sheet information, interest income, interest expense and the corresponding average yield and rates paid:~~

Three Months Ended
September 30,
2019 2018
Average Balance Interest Income / Expense
Average Yield / Rate⁽⁴⁾
Average Balance Interest Income / Expense
Average Yield / Rate⁽⁴⁾
(Dollars in thousands)
Interest-earning assets:
Securities - taxable $ 335,045
$ 2,263
2.68 % $ 304,937
$ 2,454
3.19 %
Securities - tax-exempt⁽¹⁾
392,644
3,592
3.63
447,333
4,338
3.85
Federal funds sold 16,315
89
2.16
20,674
110
2.10
Interest-bearing deposits in other banks 171,913
881
2.03
132,585
613
1.84
Gross loans, net of unearned income⁽²⁾⁽³⁾
3,540,707
49,327
5.53
2,523,107
34,012
5.35
Total interest-earning assets⁽¹⁾
4,456,624
$ 56,152
5.00 % 3,428,636
$ 41,527
4.81 %
Allowance for loan losses (43,327 ) (31,716 )
Other non-interest-earning assets 197,661
191,956

Total assets $ 4,610,958
$ 3,588,876

Interest-bearing liabilities
Transaction deposits $ 134,987
$ 386
1.13 % $ 56,072
$ 33
0.24 %
Savings and money market deposits 1,743,575
9,553
2.17
1,450,397
6,139
1.68
Time deposits 1,276,571
8,064
2.51
801,416
3,827
1.89
Total interest-bearing deposits 3,155,133
18,003
2.26
2,307,885
9,999
1.72
FHLB and short-term borrowings 345,794
1,703
1.95
397,252
1,772
1.77
Trust preferred securities, net of fair value adjustments 904
37
16.06
868
36
16.21
Non-interest-bearing deposits 535,467
—
—
491,942
—
—
Cost of funds 4,037,298
$ 19,743
1.94 % 3,197,947
$ 11,807
1.46 %
Other liabilities 29,833
14,904

Stockholders’ equity 543,827
376,025

Total liabilities and stockholders’ equity $ 4,610,958
$ 3,588,876

Net interest income⁽¹⁾
$ 36,409
$ 29,720

Net interest spread⁽¹⁾
3.06 % 3.35 %
Net interest margin⁽¹⁾
3.24 % 3.44 %
⁽¹⁾ Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
⁽²⁾ Loans, net of unearned income includes non-accrual loans of $43.6 million and $12.5 million as of September 30, 2019 and 2018, respectively.
⁽³⁾ Loan interest income includes loan fees of $2.4 million and $1.8 million for the three months ended September 30, 2019 and 2018, respectively.
⁽⁴⁾Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.

Nine Months Ended
September 30,
2019 2018
Average Balance Interest Income / Expense
Average Yield / Rate⁽⁴⁾
Average Balance Interest Income / Expense
Average Yield / Rate⁽⁴⁾
(Dollars in thousands)
Interest-earning assets:
Securities - taxable $ 334,272
$ 7,447
2.98 % $ 273,525
$ 6,447
3.15 %
Securities - tax-exempt⁽¹⁾
378,651
10,672
3.77
484,090
14,062
3.88
Federal funds sold 18,714
345
2.46
18,782
281
2.00
Interest-bearing deposits in other banks 135,030
2,107
2.09
174,740
2,200
1.68
Gross loans, net of unearned income⁽²⁾⁽³⁾
3,373,118
142,319
5.64
2,275,039
89,262
5.25
Total interest-earning assets⁽¹⁾
4,239,785
$ 162,890
5.14 % 3,226,176
$ 112,252
4.65 %
Allowance for loan losses (41,329 ) (29,607 )
Other non-interest-earning assets 196,900
166,661

Total assets $ 4,395,356
$ 3,363,230

Interest-bearing liabilities
Transaction deposits $ 127,785
$ 1,139
1.19 % $ 53,995
$ 101
0.25 %
Savings and money market deposits 1,616,558
27,326
2.26
1,381,291
15,658
1.52
Time deposits 1,249,219
22,956
2.46
809,550
10,880
1.80
Total interest-bearing deposits 2,993,562
51,421
2.30
2,244,836
26,639
1.59
FHLB and short-term borrowings 366,708
5,240
1.91
381,166
5,020
1.76
Trust preferred securities, net of fair value adjustments 895
112
16.74
860
100
15.47
Non-interest-bearing deposits 508,888
—
—
402,850
—
—
Cost of funds 3,870,053
$ 56,773
1.96 % 3,029,712
$ 31,759
1.40 %
Other liabilities 22,762
10,929

Stockholders’ equity 502,541
322,589

Total liabilities and stockholders’ equity $ 4,395,356
$ 3,363,230

Net interest income⁽¹⁾
$ 106,117
$ 80,493

Net interest spread⁽¹⁾
3.18 % 3.25 %
Net interest margin⁽¹⁾
3.35 % 3.34 %
⁽¹⁾ Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
⁽²⁾Loans, net of unearned income includes non-accrual loans of $43.6 million and $12.5 million as of September 30, 2019 and 2018, respectively.
⁽³⁾ Loan interest income includes loan fees of $6.6 million and $5.1 million for the nine months ended September 30, 2019 and 2018, respectively.
⁽⁴⁾Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this report may not produce the same amounts.



		45

~~Table of Contents~~

Changes in interest income and

interest expense result from changes in average

balances (volume) of interest earning assets and interest-bearing liabilities, as well

as changes in average interest rates.

Table of Contents

The following ~~table sets forth~~tables present, for the ~~effects~~periods indicated, average statement of ~~changing rates and volumes on our net~~

financial condition information, interest income, ~~during~~

interest expense and the ~~period shown. Information is provided with respect to: (i) changes in volume (change in volume times old rate); (ii) changes in~~corresponding average yield and rates ~~(change in rate times old volume); and (iii) changes in rate/volume (change in rate times the change in volume).~~

paid:

Three Months Ended Nine Months Ended
September 30, 2019 over 2018 September 30, 2019 over 2018
Average Volume Yield/Rate
Net Change⁽²⁾
Average Volume Yield/Rate
Net Change⁽²⁾
(Dollars in thousands)
Interest Income
Securities - taxable $ 227
$ (418 ) $ (191 ) $ 1,364
$ (364 ) $ 1,000
Securities - tax-exempt⁽¹⁾
(509 ) (237 ) (746 ) (3,000 ) (390 ) (3,390 )
Federal funds sold (24 ) 3
(21 ) (1 ) 65
64
Interest-bearing deposits in other banks 199
69
268
(562 ) 469
(93 )
Gross loans, net of unearned income 14,136
1,179
15,315
45,980
7,077
53,057
Total interest income⁽¹⁾
14,029
596
14,625
43,781
6,857
50,638
Interest Expense
Transaction deposits 97
256
353
277
761
1,038
Savings and money market deposits 1,397
2,017
3,414
3,024
8,644
11,668
Time deposits 2,728
1,509
4,237
7,209
4,867
12,076
Total interest-bearing deposits 4,222

3,782
8,004
10,510
14,272
24,782
FHLB and short-term borrowings (241 ) 172
(69 ) (195 ) 415
220
Trust preferred securities, net of fair value adjustments 1
—
1
4
8
12
Total interest expense 3,982
3,954
7,936
10,319
14,695
25,014
Net interest income⁽¹⁾
$ 10,047
$ (3,358 ) $ 6,689
$ 33,462
$ (7,838 ) $ 25,624

⁽¹⁾ Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
⁽²⁾ The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.
Three Months Ended

~~Three months ended~~ September 30, ~~2019 over 2018~~2023

~~For the three months ended~~ September 30, ~~2019, net interest income increased $6.7 million or 22.5% from the same period~~2022

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

(Dollars in ~~the prior year. Net interest income improved as a result of a $1.0 billion or 30.0% increase~~thousands)

Interest-earning assets:

Securities - taxable

357,260

3,216

3.60

213,775

1,241

2.32

Securities - tax-exempt

(1)

489,320

4,072

3.33

560,541

4,725

3.37

Federal funds sold

332

5.97

Interest-bearing deposits in ~~average interest-earning assets offset by a 20 basis point decline in our net interest margin (‘‘NIM’’).~~other banks

For the three months ended September 30, 2019, NIM was 3.24% compared to 3.44% in 2018. The declining margin was attributable to a rising interest rate environment in the third quarter of 2018 compared to two rate cuts by the Federal Open Market Committee (‘‘FOMC’’) in the third quarter of 2019. As a result, we experienced higher cost of funds as interest-bearing deposits repriced slower than our loan portfolio. The margin on gross198,068

2,439

4.89

231,345

1,193

2.05

Gross loans, net of unearned income ~~increased 18 basis points from 5.35% to 5.53% while the Company’s cost of funds increased 48 basis points from 1.46% to 1.94%. Changes in the yield and rate of~~

(2)(3)

5,907,730

103,631

6.96

4,626,684

59,211

5.08

Total interest-earning assets - FTE

(1)

6,952,710

113,363

6.47

5,632,345

66,370

4.68

Allowance for credit losses

(69,415)

(56,995)

Other non-interest-earning assets

230,933

188,997

Total assets

7,114,228

5,764,347

Interest-bearing liabilities

Transaction deposits

689,973

5,727

3.29

531,999

1,539

1.95

Savings and money market deposits

2,775,549

29,655

4.24

2,519,574

10,568

1.66

Time deposits

1,795,798

20,915

4.62

733,607

2,802

1.52

Total interest-bearing deposits

5,261,320

56,297

4.25

3,785,180

14,909

1.56

FHLB and short-term borrowings

131,420

1,169

3.53

165,196

907

2.18

Trust preferred securities, net of fair value

adjustments

1,091

22.91

1,037

14.58

Non-interest-bearing deposits

954,005

1,137,626

Cost of funds

6,347,836

57,529

3.60

5,089,039

15,855

1.23

Other liabilities

108,148

62,102

Stockholders’

equity

658,244

613,206

Total liabilities ~~decreased net~~and stockholders’ equity

7,114,228

5,764,347

Net interest income ~~by $3.4 million.~~- FTE

~~Average volume~~(1)

55,834

50,515

Net interest spread - FTE

(1)

2.87

3.46

Net interest margin - FTE

(1)

3.19

3.56

(1)

Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal income taxes. The incremental tax

rate used is 21.0%.

(2)

Loans, net of unearned income include non-accrual loans of $20

million and $17 million as of September 30, 2023 and 2022, respectively.

(3)

Loan interest income includes loan fees of $3 million for the ~~three months~~three-months ended September 30, ~~2019 compared~~2023 and 2022.

(4)

Actual unrounded values are used to ~~2018 improved net interest income by $10.0 million. Average interest-earning assets were driven by a $1.0 billion~~calculate the reported yield or ~~40.3% increase~~rate. Accordingly, recalculations using the amounts in ~~average loans. The growth~~thousands as disclosed in ~~loans was primarily supported by a $847.2 million or 36.7% increase in interest-bearing deposits and a $43.5 million or 8.8% increase in non-interest-bearing deposits.~~this

report may not produce the same amounts.



		46

Table of Contents

Nine ~~months ended September 30, 2019 over 2018~~Months Ended

~~For the nine-months ended September 30, 2019, net interest income increased $25.6 million or 31.8% from the same period~~2023

2022

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

(Dollars in ~~the prior year. Net interest income was driven by a $1.0 billion or 31.4% increase~~thousands)

Interest-earning assets:

Securities - taxable

321,128

8,313

3.45

218,421

3,728

2.28

Securities - tax-exempt - FTE

(1)

514,333

12,984

3.37

549,490

13,845

3.36

Federal funds sold

691

2.13

Interest-bearing deposits in average interest-earning assets. NIM increased 1 basis point as a result of four rate increases by the FOMC from March 2018 to December 2018, offset by two rate declines by the FOMC in July and September of 2019.other banks

~~For the nine-months ended September 30, 2019, NIM was 3.35% compared to 3.34% in 2018. The yield on~~179,649

6,056

4.51

246,213

1,714

0.93

Gross loans, net of unearned income ~~increased 39 basis points to 5.64%, increasing~~

(2)(3)

5,742,621

292,231

6.80

4,466,887

149,266

4.47

Total interest-earning assets - FTE

(1)

6,758,422

319,595

6.32

5,481,011

168,553

4.11

Allowance for credit losses

(66,265)

(57,213)

Other non-interest-earning assets

228,314

201,519

Total assets

6,920,471

5,625,317

Interest-bearing liabilities

Transaction deposits

610,869

13,566

2.97

541,933

2,134

0.89

Savings and money market deposits

2,787,915

80,151

3.84

2,386,205

15,285

0.86

Time deposits

1,505,329

47,968

4.26

627,458

5,733

1.22

Total interest-bearing deposits

4,904,113

141,685

3.86

3,555,596

23,152

0.87

FHLB and short-term borrowings

250,795

7,593

4.05

241,897

3,385

1.87

Trust preferred securities, net of fair value

adjustments

1,077

176

21.85

1,024

12.29

Non-interest-bearing deposits

1,022,469

1,148,150

Cost of funds

6,178,454

149,454

3.23

4,946,667

26,631

0.72

Other liabilities

99,896

51,634

Stockholders’

equity

642,121

627,016

Total liabilities and stockholders’ equity

6,920,471

5,625,317

Net interest income ~~by $7.1~~- FTE

(1)

170,141

141,922

Net interest spread - FTE

(1)

3.09

3.39

Net interest margin - FTE

(1)

3.36

3.46

(1)

Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal income taxes. The incremental tax

rate used is 21.0%.

(2)

Loans, net of unearned income include non-accrual loans of

$20 million ~~offset by an increase in the cost~~and $17 million as of ~~interest-bearing deposits of 71 basis points resulting in a $14.3 million increase in interest expense. While our margin improved, the overall impact of interest rates decreased net~~September 30, 2023 and 2022, respectively.

(3)

Loan interest income ~~by $7.8 million. Average volume~~includes loan fees of $10 million for the nine-months ended September 30, ~~2019 compared~~2023 and 2022.

(4)

Actual unrounded values are used to ~~2018 improved net~~calculate the reported yield or rate. Accordingly, recalculations using the amounts in thousands as disclosed in this

report may not produce the same amounts.

Table of Contents

Net interest income ~~by $33.5 million. Average loans increased $1.1 billion or 48.3%, while average interest-bearing deposits increased $748.7 million or 33.4%.~~

Net interest income ~~reflects~~increased $5.4 million and $28.4 million and net interest income

- FTE increased $5.3 million

and $28.2 million for the ~~Company’s strong balance sheet growth~~ three-

and ~~maintenance of NIM.~~nine-month periods

~~As of~~ended September 30, ~~2019, approximately $223.8 million of time deposits mature~~ 2023 compared to the same periods

in 2022,

respectively.

Compared to the ~~fourth quarter at an average interest rate of 2.51%. An additional $331.2 million of time deposits mature during the first~~third quarter of ~~2020 at an~~2022,

net interest margin - FTE for the third quarter of 2023 decreased 37 basis points.

For the nine-

months ended September 30, 2023 compared to the same period in 2022, net interest

margin - FTE decreased 10 basis points.

Average earning assets totaled $7.0 billion for the three-month period

ended September 30, 2023 and $6.8

billion for the nine-month

period ended September 30, 2023, resulting in increases

of $1.3

billion for both periods,

compared to the same periods

in 2022,

inclusive of the impact of the acquisition of Farmers & Stockmens Bank (the

“Colorado/New Mexico acquisition”) and the Tucson

acquisition. The increases were driven by higher average ~~interest of 2.67%.~~loan and investment portfolio balances, partially

offset by lower average cash

~~Impact of Transition Away from LIBOR~~balances for the three- and nine-month periods

ended September 30, 2023 compared to the corresponding periods

in 2022.

The ~~Company has loans, derivative contracts,~~FTE yield on earning assets increased 1.79%

from the third quarter of 2022 to the third quarter of 2023 and ~~other financial instruments that directly or indirectly depend on LIBOR to establish an interest rate and/or value. This included $1.1 billion in loans tied to LIBOR as of~~increased 2.21% for

the

nine-months ended September 30, 2019. LIBOR is expected to cease on December 31, 2021. The impact of alternatives to LIBOR on the valuations, pricing and operation of our financial instruments is not yet known; however, loans, securities, and derivatives indexed to LIBOR that mature after December 31, 2021 may be impacted. As a result, the Company established an internal committee to evaluate potential substitutions and the related financial impact2023, compared to the ~~Company.~~

~~Provision for Loan Losses~~

The provision for loan losses is a charge to earnings to maintain the allowance for loan losses at a level that reflects management’s assessment of the collectability of the loan portfolio. Net charge-offs (recoveries) represent a reduction (addition) to the allowance for loan losses for loans we believe are no longer collectible. The provision for loan losses was as follows for the periods shown:

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 $ Change % Change 2019 2018 $ Change % Change
(Dollars in thousands)
Provision for loan losses $ 4,850
$ 3,000
$ 1,850
61.7 % $ 10,550
$ 9,000
$ 1,550
17.2 %

~~The allowance for loan losses as of September 30, 2019 was $43.0 million compared to $33.5 million as of September 30, 2018. The increase of $9.5 million or 28.2% was primarily~~same period in 2022 due to ~~an increase in our~~new loan ~~portfolio~~ production

as well as ~~an increase in non-performing~~repricing of

variable rate loans, partially offset by the impact of non-accrual loan interest reversals.

The cost of funds increased 2.37% and 2.51%

over the same periods

due to pricing pressure on interest-bearing deposits from the higher interest rate environmen

as well as client

migration into higher cost deposit products compared to the prior year.

The Company currently anticipates net interest margin - FTE to be in a ~~reduction~~range of 3.20%

to 3.25% for the fourth quarter of 2023.

Provision

For the Three Months Ended

For the Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands)

Provision for credit losses - loans

4,929

1,923

12,965

3,297

Provision for credit losses - off-balance sheet

(1,600)

1,411

(2,575)

1,547

Total provision for credit losses

3,329

3,334

10,390

4,844

Provision expense of $3.3 million for the ~~energy portfolio’s qualitative factors. The allowance as a percentage~~third quarter of ~~loans~~2023 was ~~1.18% at~~consistent with the same

period in 2022.

For the nine-months

ended September 30, ~~2019~~2023 provision expense of $10.4 million increased $5.5

million compared to ~~1.22% at September 30, 2018.~~the same period in 2022.

Increases

due to loan growth, changes in credit quality, economic factors, an increase in specific reserves

and $0.9 million of Day 1 CECL

provision expense related to the Tucson acquisition were partially offset by a decrease related

to the decrease in unfunded commitments.



		47

~~Table of Contents~~

Non-Interest Income

The components of non-interest income were as follows for the periods shown:

Three Months Ended

Nine Months Ended

September 30,

Three Months Ended Nine Months Ended
September 30, September 30,
Change Change
2019 2018 $ % 2019 2018 $ %
(Dollars in thousands)
Service charges and fees (rebates) on customer accounts $ 72
$ (100 ) $ 172
NA
$ 441
$ 506
$ (65 ) (12.8 )%
Gain on sale of available for sale securities 34
195
(161 ) (82.6 )% 467
608
(141 ) (23.2 )
Impairment of premises and equipment held for sale —
(171 ) 171
(100.0 ) (424 ) (171 ) (253 ) NA
Gain on sale of loans 49
25
24
96.0
207
618
(411 ) (66.5 )
Income from bank-owned life insurance 476
513
(37 ) (7.2 ) 1,416
1,511
(95 ) (6.3 )
Swap fee income, net 1,879
253
1,626
642.7
2,415
299
2,116
707.7
ATM and credit card interchange income 476
301
175
58.1
1,312
827
485
58.6
Other non-interest income 226
169
57
33.7
695
690
5
0.7
Total non-interest income $ 3,212
$ 1,185
$ 2,027
171.1 % $ 6,529
$ 4,888
$ 1,641
33.6 %
September 30,

Change

2023

2022

2023

2022

(Dollars in thousands)

Service charges and fees on customer

accounts

2,249

1,566

683

6,188

4,520

1,668

ATM and credit card interchange income

1,436

1,326

110

3,913

5,513

(1,600)

(29)

Gain on sale of loans

739

2,131

Income from bank-owned life insurance

437

405

1,266

1,200

Swap fees and credit valuation adjustments,

net

(7)

231

123

108

Other non-interest income

1,063

490

573

117

2,452

1,566

886

Total non-interest income

5,981

3,780

2,201

16,181

12,922

3,259

The changes in non-interest income were driven primarily by the following:

~~Swap Fee Income, Net~~

~~Swap fee income, net includes both swap~~

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Service charges and fees ~~from~~on customer accounts

- The increases for the ~~execution of new swaps~~three- and ~~the credit valuation adjustment (‘‘CVA’’). During the quarter, the Company added several large swaps, resulting in $1.1 million of swap fees~~ nine-month periods

ended September 30, 2023

compared to ~~$272.7 thousand of~~the corresponding periods in 2022 were driven primarily by increases in account

analysis fees due to increased client

volume from ~~several, smaller swaps in the third quarter of 2018. Year-to-date 2019 swap~~new markets and acquired accounts as well as various fee ~~activity totaled $2.4 million compared to $335.9 thousand in the prior year. The back-to-back swap program increased in activity during 2019 as a result of attractive market conditions.~~increases

In addition, the increase included a change in the CVA methodology during the third quarter of 2019. Prior to the third quarter, a more conservative default methodology was used to account for non-performance risk. The Company moved to a review of historical defaults and internal credit analysis performed by the Company. The result was an increase to non-interest income of approximately $800 thousand related to swaps entered in previous quarters.on commercial accounts.

ATM and ~~Credit Card Interchange Income~~credit card interchange income

~~Increased~~

– The increase in ATM and credit card interchange income for the three-months ended

September 30, 2023 compared to the three-months ended September 30,

2022 was primarily due to increases in ATM fee income due to

higher transaction volume. The decrease in ATM and credit card interchange income for the nine-months ended September 30, 2023

compared to the same period in 2022 was driven primarily by ~~the expansion of our~~a decrease in credit

card ~~program~~fees due to ~~our new and existing customers.~~one large customer with pandemic-

~~Service Charges and Fees on Customer Accounts~~

~~This category includes a rebate program implemented~~related activity that did not occur in the ~~second quarter of 2018 that attracted additional funding for the Bank and account analysis fees that continue to grow with our customer base.~~current year,

partially offset by increases in ATM fee income.

Gain on ~~Sale~~sale of ~~Available for Sale Securities~~loans

– The ~~Company sold $63.5 million and $149.3 million of securities~~ increases

for the ~~nine months~~three-

and nine-month periods ended ~~2019~~September 30, 2023 compared to

the same periods

for 2022 were due to mortgage and ~~2018, respectively. The sales were~~SBA loan sale activity in 2023.

Our SBA lending team is a ~~strategic decision by management to capitalize on attractive market conditions, balance taxable and tax-free municipal securities, and redeploy~~specialty lending vertical we augmented

from the ~~proceeds into higher yielding loans.~~

~~Impairment of Premises and Equipment Held for Sale~~

~~During~~Colorado/New Mexico acquisition in the ~~second~~fourth quarter of ~~2019,~~2022.

Other non-interest income

– The increases for the ~~Company sold its remaining assets held-for-sale. The assets sold~~three-

and nine-month periods ended September 30, 2023 compared to the same

periods for ~~approximately $2.9 million resulting~~ 2022 were due to stronger client-related transactional income and an increase

in ~~an additional impairment of $424.4 thousand.~~



		48

~~Table of Contents~~

gains on equity securities.

Non-Interest Expense

The components of non-interest expense were as follows for the periods

indicated:

Quarter Ended

Nine Months Ended

September 30,

Three Months Ended Nine Months Ended
September 30, September 30,
Change Change
2019 2018 $ % 2019 2018 $ %
(Dollars in thousands)
Salary and employee benefits $ 14,256
$ 12,652
$ 1,604
12.7 % $ 43,296
$ 43,689
(393 ) (0.9 )%
Occupancy 2,080
2,132
(52 ) (2.4 ) 6,301
6,199
102
1.6
Professional fees 427
766
(339 ) (44.3 ) 1,923
2,421
(498 ) (20.6 )
Deposit insurance premiums 302
823
(521 ) (63.3 ) 2,020
2,411
(391 ) (16.2 )
Data processing 649
528
121
22.9
1,868
1,470
398
27.1
Advertising 580
527
53
10.1
1,770
1,982
(212 ) (10.7 )
Software and communication 900
630
270
42.9
2,407
1,958
449
22.9
Depreciation and amortization 413
516
(103 ) (20.0 ) 1,320
1,306
14
1.1
Other non-interest expense 1,565
1,301
264
20.3
4,858
4,153
705
17.0
Total non-interest expense $ 21,172
$ 19,875
$ 1,297
6.5 % $ 65,763
$ 65,589
$ 174
0.3 %
September 30,

Change

2023

2022

2023

2022

(Dollars in thousands)

Salaries and employee benefits

22,017

18,252

3,765

68,700

53,288

15,412

Occupancy

3,183

2,736

447

9,211

7,851

1,360

Professional fees

1,945

580

1,365

235

5,533

2,453

3,080

126

Deposit insurance premiums

1,947

903

1,044

116

5,359

2,355

3,004

128

Data processing

904

877

3,203

2,849

354

Advertising

593

796

(203)

(26)

1,994

2,247

(253)

(11)

Software and communication

1,898

1,222

676

5,204

3,689

1,515

Foreclosed assets, net

(9)

(100)

128

(30)

158

Other non-interest expense

2,945

3,057

(112)

(4)

9,980

10,559

(579)

(5)

Core deposit intangible amortization

922

903

4,753

2,546

2,488

4,290

Total non-interest expense

36,354

28,451

7,903

111,858

85,319

26,539

Non-interest expense increased $7.9 million and $26.5 million for the three-

and nine-month periods

ended September 30, 2023

compared to the same periods

in 2022.

The third quarter of 2023 included $1.3 million of acquisition-related expenses,

with $0.8 million

included in professional fees, $0.3 million in salaries and employee benefits, $0.1

million in software and communication, and $0.1

million in other non-interest expense.

The nine-months ended September 30, 2023 included $3.1 million of acquisition

-related

expenses, most of which were included in professional fees and salaries and

employee benefits, and $1.3 million of employee separation

costs included in salaries and employee benefits. The three-month period ended September

30, 2022 included $0.1

million of

acquisition-related expenses, most of which were included in professional

fees. The nine-months ended September 30, 2022 included

$0.3

million of acquisition-related expenses, most of which were included in professional fees, and $1.

million of employee separation

costs included in other non-interest expense. The changes in non-interest ~~income~~ expense

were driven primarily by the following:

Salary and Employee Benefits

~~Quarterly salary~~

– For both the three-

and nine-months ended September 30, 2023 as compared to the same periods in

the prior year, excluding the employee ~~benefit~~separation costs ~~increased as a result of a rise~~ in headcount in 2019 and a $758.2 thousand increase in equity-based compensation expense. Year-to-Date salary and employee benefit costs decline was driven by a $5.5 million management restructuring charge2023 previously

mentioned, increases were primarily due to the ~~transition~~addition of ~~our former CEO~~

employees from the Colorado/New Mexico acquisition and the Tucson

acquisition,

hiring in ~~2018, partially offset~~new markets and merit increases.

Occupancy

– For both comparative periods,

the increases in occupancy costs were driven by the addition of a ~~net increase~~second location in Dallas,

Texas as well as the additional

occupancy cost from acquired locations in Colorado,

New Mexico and Tucson.

Table of ~~15 employees between~~Contents

Professional Fees

– Professional fees for both the three-

and nine-months ended September 30, ~~2018 and 2019 to support our growth strategy.~~2023

were consistent with the prior year

periods after adjusting for the acquisition related costs.

Deposit Insurance Premiums

~~During 2018, the Deposit Insurance Fund Reserve Ratio exceeded the statutorily required minimum reserve ratio. As a result, the Company received a $664.1 thousand assessment credit.~~

– The ~~credit resulted~~increase in ~~lower costs on both a quarter-to-date and year-to-date basis from the prior year. Credits will be applied until the excess is exhausted. Excluding the credit, the~~ deposit insurance ~~premium increased approximately $143.0 thousand during~~premiums was due to an increase in the ~~third quarter of 2019~~assessment rate

and increases

in assets for both comparative periods.

Software and communication

– For both the three- and nine-months ended September 30, 2023 as compared to the same periods

in the

prior year, increases in software and communications were due to technology

for additional employees and clients as well as new

technology implementation.

Other Non-interest Expense

– For the nine-months ended September 30, 2023 as compared to the same period in ~~2018. The FDIC uses a risk-based premium system to calculate the quarterly fee. Between 2018 and 2019 our rate was impacted by our strong asset growth and changes to our loan mix.~~

~~Professional Fees~~

~~The professional fees decrease was driven by a reduction in recruitment costs from~~ the prior year, the

decrease for employee separation costs was partially offset by increased post-pandemic

travel expenses and transaction fraud-related

losses.

Core Deposit Intangible Amortization

– For both the three-

and nine-months ended September 30, 2023 as ~~a result of management’s strategic initiative~~compared to ~~reduce~~ the ~~use of consultants. In addition, the Company saw a reduction in external consulting fees as we finalized our IPO plans.~~same

~~Software and Communication~~

~~Software and communication costs increased during 2019 as a result of our continued strategy to invest in technologies that are expected to increase operating efficiency~~periods in the ~~short~~prior year, increases

were due to expense related to the Colorado/New Mexico acquisition and ~~long-term.~~the Tucson

acquisition.

~~Data Processing~~

Data processing includes our core system provided by a third-party and other operational support systems. Our customer base, transaction volume and asset size increased, resulting in higher data processing costs.



		49

~~Table of Contents~~

~~Advertising~~

Quarterly advertising costs increased from the previous year as the Company continued its rebranding process. Year-to-date advertising costs declined as a result of management’s strategic initiative to improve the efficiency and effectiveness of the Company’s targeted advertising.

~~Other non-interest expense~~

~~Other~~We currently anticipate non-interest expense ~~included an increase~~to be in ~~commercial card costs that continue~~a range of $34 to ~~increase as we grow our customer base. In addition,~~$35 million

for the ~~Company had an increase in operational loan costs due to increased loan volume, types~~fourth quarter of ~~loans originated or renewed~~2023. The efficiency

ratios were 59.49% and ~~events related to foreclosed assets. Other non-interest expense also saw an increase in insurance costs due to our transition from~~60.77% and the adjusted efficiency ratios – FTE

(1)

were 55.17% and 56.28% for the three- and nine-month

periods ended September 30, 2023,

respectively.

(1)

Represents a ~~private to public company.~~non-GAAP financial measure.

See "Non-GAAP Financial Measures"

above for a reconciliation of these measures.

Income Taxes

For the Quarter Ended

For the Nine Months Ended

September 30,

2023

2022

2023

2022

(Dollars in thousands)

Income tax expense (benefit) ~~was as follows:~~

Three Months Ended Nine Months Ended
September 30, September 30,
2019 2018 $ Change % Change 2019 2018 $ Change % Change
(Dollars in thousands)
Income tax expense (benefit) $ 2,592
$ 924
$ 1,668
180.5 % $ 5,308
$ (904 ) $ 6,212
NA
Effective tax rate 20.0 % 12.7 % 15.4 % (10.8 )%
4,562

4,410

12,802

12,625

Income (loss) before income taxes

21,425

21,690

61,820

62,278

Effective tax rate

Our income tax expense ~~(benefit)~~ differs from the amount that would be calculated using the

federal statutory tax rate, primarily from

investments in tax advantaged assets, ~~such as~~including bank-owned

life insurance and tax-exempt municipal ~~securities,~~ securities;

state tax ~~credits,~~ credits;

and

permanent tax differences from ~~equity-based~~stock-based compensation.

The ~~$6.2 million increase between year-to-date~~Company’s effective tax rate benefited

from tax-exempt interest in both the three-

and nine-

month periods ended September

30, ~~2018 and 2019 primarily relates~~2023 compared to ~~our $26.1 million increase~~the same periods in 2022.

However, the impact of tax-exempt interest on the overall tax rate is lower in 2023 as

its proportion to total income ~~before income taxes and a $334.0 thousand decline in permanent benefits associated with equity-based compensation that~~ was ~~partially offset by a $1.4 million state~~lower as compared to 2022. We currently anticipate the Company’s

effective tax ~~credit recorded~~rate to remain within

the 20% to 22% range in the ~~first quarter of 2019. The state tax credit related to our purchase and improvement of our corporate headquarters.~~near term.

Analysis of Financial Condition

Total assets were $7.2 billion at September 30, 2023 compared to $6.6

billion at December 31, 2022, an increase of $0.6 billion,

or 9%, including $0.2 billion as a result of the Tucson acquisition.

Cash and cash equivalents decreased $67 million, or 22%, from

December 31, 2022, and investment securities increased $64

million, or 9%. Loans increased $0.6 billion, or 11%, including $0.1 billion

as a result of the Tucson acquisition, and the allowance for credit losses increased $10 million to $72

million at September 30, 2023.

Total deposits increased $0.7

billion to $6.3 billion at September 30, 2023, compared to December 31,

2022, including $0.2 billion as a

result of the Tucson acquisition.

Federal Home Loan Bank (“FHLB”) advances totaled $89 million and decreased

$130 million

compared to December 31, 2022.

Investment Portfolio

The primary objective of our investment portfolio is to ensure adequate liquidity, including

serving as a contingent, on-balance

sheet source of liquidity.

In addition, we manage the portfolio in a manner that optimizes earnings, manages

credit and interest rate risk,

Table of Contents

~~Balance Sheet Summary~~

and meets pledging and regulatory capital requirements. Our portfolio is 100%

available-for-sale and as of September 30, 2023 totaled

$750 million, an increase of $64 million from December 31, 2022.

The increase in the investment portfolio was driven by the purchase of $107

million in SBA securities,

$45 million in mortgage-

backed securities, $15 million in U.S. Treasury securities,

and $12 million in tax-exempt municipal securities.

The increase was

partially offset by an increase of $37 million in the unrealized loss on available-for-sale

securities.

Additional offsets include the sale of

$67 million in tax-exempt municipal securities at a modest gain and $14

million of paydowns and maturities in mortgage-backed

securities as we intentionally improved the liquidity of the portfolio during the

year, consistent with our current investment strategy.

Our

future investment strategy includes reducing the concentration in municipal

investments, investing in lower risk-weighted assets and

restructuring the portfolio to increase liquidity and provide more balanced

cash flow.

For additional information, including information

regarding other securities owned by the Company, see “Note 3: Securities” in the

notes to consolidated financial statements – unaudited.

The following table ~~summarizes select components~~shows the estimated fair value, percent of the ~~Company’s Balance Sheet:~~portfolio and

weighted average yield of our available-for-sale

As of Change
September 30, 2019 December 31, 2018 $ %
(Dollars in thousands)
Total assets $ 4,651,313
$ 4,107,215
$ 544,098
13.2 %
Cash and cash equivalents 128,126
216,541
(88,415 ) (40.8 )
Available-for-sale securities 733,093
663,678
69,415
10.5
Gross loans, net of unearned income 3,629,792
3,060,747
569,045
18.6
Total deposits 3,658,108
3,208,097
450,011
14.0
Federal funds purchased and repurchase agreements 49,810
75,406
(25,596 ) (33.9 )
Federal Home Loan Bank advances 307,804
312,985
(5,181 ) (1.7 )
Total stockholders’ equity $ 602,435
$ 490,336
$ 112,099
22.9 %

Assets grew primarily from loan growth, as well as, an increase in available-for-sale securities. Loan growth was driven by increases in commercial, commercial real estate, and residential real estate loans. During 2019, the Company



		50

~~Table of Contents~~

~~purchased $157.5 million of~~ securities primarily made up of mortgage backed securities and tax-exempt municipal securities, which was offset by $112.2 million of sales, maturities, and pay downs. Purchases of available-for-sale securities during the third quarter were hampered by the current interest rate environment. The Company remains committed to identifying and purchasing high-quality securities with an appropriate yield. Increases in assets were offset by a reduction in cash and cash equivalents, which was part of a strategic decision to move assets to higher yielding areas.

~~Our increase in assets was funded primarily from an increase in total deposits that raised the loan to deposit ratio to 99.2%~~ as of September 30, 2019. The increase in total deposits included a $212.1 million increase in time deposits and a $144.1 million increase in money market and savings deposits. The time deposit increase was driven by short-term, competitive rates that are expected to mature over the next two quarters. In addition to our increase in deposits, the Company successfully completed an initial public offering during the third quarter of 2019 and was the primary reason for the increase in total stockholders’ equity.dates indicated:

~~Security Portfolio~~

The Company’s investment portfolio is governed by the investment policy that sets objectives, limits, and liquidity requirements among other items. The investment strategy is generally updated annually in coordination with an investment advisor. The portfolio is maintained to serve as a contingent, on-balance sheet source of liquidity. The objective of the Company’s investment portfolio is to optimize earnings, manage credit risk, ensure adequate liquidity, manage interest rate risk, meet pledging requirements, and meet regulatory capital requirements. The investment portfolio is generally comprised of government sponsored entity securities and U.S. state and political subdivision securities; limits are set on all types of securities.

As of September 30, ~~2019,~~2023

As of December 31, 2022

Estimated

Fair Value

Percent of

portfolio

Weighted

Average

Yield

(1)

Estimated

Fair Value

Percent of

portfolio

Weighted

Average

Yield

(1)

Available-for-sale securities

(Dollars in thousands)

U.S. Treasury securities

14,803

5.11

Mortgage-backed - GSE residential

298,044

3.58

172,309

2.39

Collateralized mortgage obligations - GSE

residential

18,724

4.68

10,886

2.36

State and political subdivisions

410,442

2.80

494,496

2.80

Corporate bonds

8,474

5.69

9,210

5.70

Total available-for-sale ~~investments totaled $733.1~~securities

750,487

100

3.21

686,901

100

2.74

(1)

Yields are calculated based on amortized cost using 30/360 day basis.

Tax-exempt securities are not tax effected.

Table of Contents

Loan Portfolio

Refer to “Note 4: Loans and Allowance for Credit Losses” within the notes to consolidated financial statements – unaudited

for additional information regarding the

Company’s loan portfolio. As of September 30, 2023, gross loans, net of unearned

fees increased $573 million ~~a $69.4 million increase~~or 11% from December 31, ~~2018 and a $28.3 million or 4.0% increase from June 30, 2019.~~ 2022.

The increase in ~~investment securities was part~~loans includes

$106 million related to the Tucson acquisition. The following table presents the balance and associated percentage

change of ~~management’s strategy to manage liquidity and optimize income. For additional information, see ‘‘Note 3 - Securities’’ in the notes to unaudited consolidated financial statements.~~

~~Loan Portfolio~~

~~Loans consisted of the following~~each segment within our portfolio as of the dates

indicated:

As of September 30,

2023

As of December 31,

2022

December 31, 2022 vs.

September 30, 2023

% Change

(Dollars in thousands)

Commercial and industrial

2,056,171

1,974,932

4.1

September 30, 2019 December 31, 2018 September 30, 2019 vs. December 31, 2018
Amount % of Gross Loans Amount % of Gross Loans
$
increase (decrease)

%
increase
(decrease)
(Dollars in thousands)
Commercial $ 1,312,647
36.1 % 1,134,414
36.9 % $ 178,233
15.7 %
Energy 396,132
10.9
358,283
11.7
37,849
10.6
Commercial real estate 993,153
27.3
846,561
27.6
146,592
17.3
Construction and land development 527,582
14.5
440,032
14.3
87,550
19.9
Residential real estate 365,435
10.0
246,275
8.0
119,160
48.4
Equity lines of credit 22,192
0.6
20,286
0.7
1,906
9.4
Consumer installment 21,552
0.6
23,528
0.8
(1,976 ) (8.4 )
Gross loans 3,638,693
100.0 % 3,069,379
100.0 % 569,314
18.5
Less: Allowance for loan losses 42,995
37,826
5,169
13.7
Less: Net deferred loan fees and costs 8,901
8,632
269
3.1
Net loans $ 3,586,797
$ 3,022,921
$ 563,876
18.7 %
Energy

214,166

173,218

23.6

Commercial real estate - owner-occupied

583,442

437,119

33.5

Commercial real estate - non-owner-occupied

2,592,684

2,314,600

12.0

Residential real estate

456,047

439,367

3.8

Consumer

43,243

33,493

29.1

Total

5,945,753

5,372,729

10.7

Our loan portfolio remains balanced with 44% of loans in commercial and industrial and

owner-occupied commercial real estate and 43% of loans in

non-owner-occupied

commercial real estate. There remains diversity within our loan portfolio segments

with the highest commercial real estate property type accounting for 19%

of total commercial real

estate exposure, and the largest industry segment in commercial and industrial

being manufacturing at 10% of commercial and industrial exposure.

Table of Contents

The following table shows the contractual maturities of our gross loans and sensitivity to

interest rate changes:

As of September 30, ~~2019, gross loans increased $569.3 million~~2023

Due in One Year or ~~18.5% from December 31, 2018~~Less

Due in One Year through

Five Years

Due in Five Year through

Fifteen Years

Due after Fifteen Years

Fixed Rate

Adjustable

Rate

Fixed Rate

Adjustable

Rate

Fixed Rate

Adjustable

Rate

Fixed Rate

Adjustable

Rate

Total

(Dollars in thousands)

Commercial and increased $162.4 million or 4.7% on a linked quarter basis. The increase from December 31,2018 included $178.2 million in commercial loans. Our commercial portfolio remains well diversified with health care remaining our largest industry category at 12%.industrial

122,203



		51

~~Table of Contents~~

578,059

336,284

856,655

65,863

76,728

20,115

264

2,056,171

Energy

18,834

489

194,843

214,166

Commercial real estate ~~was the second largest segment for growth during the first nine-months of 2019. Approximately 73% of the commercial~~-

owner-occupied

13,268

31,738

174,065

83,324

109,329

114,691

2,540

54,487

583,442

Commercial real estate ~~portfolio is located within the states of Kansas, Missouri, Oklahoma, and Texas, with Texas, our largest state concentration, representing 40% of the portfolio as of September 30, 2019. The commercial~~- non-

owner-occupied

93,247

289,764

582,605

1,196,536

104,175

218,449

12,926

94,982

2,592,684

Residential real estate ~~portfolio remains well diversified. Retail is the largest segment in our real estate loan portfolio, representing 15% of the portfolio.~~

~~Our energy portfolio increased from year-end 2018 but declined as a percentage of our total portfolio from 11.7% at December 31, 2018 to 10.9%~~5,253

2,039

25,172

10,187

67,731

26,434

3,524

315,707

456,047

Consumer

20,407

12,267

5,953

4,300

218

43,243

Total

254,378

932,701

1,124,568

2,345,845

347,316

436,400

39,105

465,440

5,945,753

Allowance for Credit Losses

The ACL at September 30, ~~2019. The Company continues to identify and attract strong energy credits, but currently expects to see less activity in the fourth quarter of 2019.~~

~~Residential real estate growth was driven by developing relationships within our markets.~~

~~Allowance for Loan Losses (‘‘ALLL’’)~~

The ALLL is an amount required to cover net loan charge-offs plus the amount considered necessary by the Bank’s management to maintain the balance in the allowance at a level adequate to absorb expected loan losses in the existing loan portfolio. The ALLL is evaluated on at least a quarterly basis. We use a loan grading system and portfolio segmentation to group the portfolio. Each group is evaluated and adjusted for changes in historical trends that may impact the segment. The ALLL at September 30, 2019,2023 represents our best estimate of the ~~incurred~~expected credit losses ~~inherent~~ in the Company’s

loan portfolio ~~at that date.~~and off-balance sheet commitments, measured over

the contractual life of the underlying instrument.

Table of Contents

The table below presents the allocation of the allowance for credit losses as of the dates indicated.

The allocation in one portfolio segment does not preclude its availability to

absorb losses in other segments. ~~The table below presents~~

September 30, 2023

December 31, 2022

ACL

Amount

Percent of

ACL to

Total ACL

Percent of

Loans to

Total Loans

ACL

Amount

Percent of

ACL to

Total ACL

Percent of

Loans to

Total Loans

Loans

Off-

Balance

Sheet

Total

Loans

Off-

Balance

Sheet

Total

(Dollars in thousands)

Commercial and industrial

30,744

185

30,929

26,803

319

27,122

Energy

4,343

174

4,517

4,396

787

5,183

Commercial real estate -

owner-occupied

7,294

264

7,558

5,214

221

5,435

Commercial real estate -

non-owner-occupied

25,616

5,426

31,042

21,880

7,323

29,203

Residential real estate

3,460

3,524

3,333

3,368

Consumer

149

152

Total

71,556

6,113

77,669

100

61,775

8,688

70,463

100

Refer to “Note 4: Loans and Allowance for Credit Losses” within the ~~allocation~~notes to consolidated financial statements – unaudited

for a summary of the ~~allowance for loan losses:~~

September 30, 2019 December 31, 2018
Amount Percent of Allowance to Total Allowance Amount Percent of Allowance to Total Allowance
(Dollars in thousands)
Commercial $ 24,811
57.7 % 16,584
43.9 %
Energy 5,377
12.5 % 10,262
27.1 %
Commercial real estate 7,284
16.9 % 6,755
17.9 %
Construction and land development 3,016
7.0 % 2,475
6.5 %
Residential real estate 2,220
5.2 % 1,464
3.9 %
Equity lines of credit 160
0.4 % 159
0.4 %
Consumer installment $ 127
0.3 % 127
0.3 %
Gross loans $ 42,995
100.0 % 37,826
100.0 %

~~Activity~~changes in the ~~allowance~~ACL.

Charge-offs and Recoveries

Net charge-offs were $1.3 million and $3.5 million for the three-

and nine-month periods ended September 30, 2023, respectively. For the three

-month period ended

September 30, 2023, charge-offs were primarily due to one commercial and

industrial loan ~~losses is presented in~~that was previously reserved.

For the ~~following table:~~nine-month period ended September 30, 2023, there

were charge-offs of three additional commercial and industrial loans. The below table provides

the ratio of net charge-offs (recoveries) to average loans outstanding based on our

loan categories for the periods indicated:

Three Months Ended Nine Months Ended
September 30, September 30, 2019
2019 2018 2019 2018
(Dollars in thousands)
Allowance for loan losses:
Balance at beginning of period $ 42,852
$ 30,197
$ 37,826
$ 26,091
Provision for loan losses 4,850
3,000
10,550
9,000
Charge-offs:
Commercial (1,700 ) (97 ) (2,954 ) (681 )
Energy (3,000 ) —
(3,000 ) (1,256 )
Commercial real estate —
—
—
—
Construction and land development —
—
—
—
Residential real estate —
—
—
—
Equity lines of credit —
—
—
(25 )
Consumer installment (8 ) —
(19 ) (45 )
Total charge-offs (4,708 ) (97 ) (5,973 ) (2,007 )
Recoveries:
Commercial 1
439
15
455
Energy —
—
576
—
Commercial real estate —
—
—
—
Construction and land development —
—
—
—
Residential real estate —
—
—
—
Equity lines of credit —
—
—
—
Consumer installment —
1
1
1
Total recoveries 1
440
592
456
Net (charge-offs) recoveries (4,707 ) 343
(5,381 ) (1,551 )
Balance at end of period $ 42,995
$ 33,540
$ 42,995
$ 33,540
Allowance for loan losses to total loans 1.18 % 1.22 % 1.18 % 1.22 %
Allowance for loan losses to nonperforming loans 97.1
256.7
97.1
256.7
Net charge-offs (recoveries) to average loans⁽¹⁾
0.53 % (0.05 )% 0.21 % 0.09 %
⁽¹⁾Interim periods annualized

For the ~~quarter ended~~ Quarter Ended

September 30, ~~2019, the Company charged off $1.7 million related to a previously disclosed non-performing commercial loan. In addition, the Company charged off $3.0 million related to one oil exploration~~

June 30,

March 31,

December 31,

September 30,

2023

2022

Commercial and ~~production credit.~~industrial

Our ALLL as of September 30, 2019 increased $9.5 million or 28.2% from September 30, 2018 and increased $142.5 thousand or less than 1% from June 30, 2019. Year-over-year, the ALLL has increased primarily from the growth of our loan portfolio and an increase in our impaired loans, offset by a reduction in the energy portfolio’s qualitative factors. On a linked quarter basis, our ALLL was impacted by $4.7 million in0.24

0.14

0.31

(0.02)

0.48

Energy

(0.23)

(0.46)

1.19

Commercial real estate - owner-occupied

Commercial real estate - non-owner-occupied

(0.15)

Residential real estate

Consumer

0.04

(0.04)

Total net charge-offs ~~a decline in our reserve required for our impaired~~to average loans and a reduction in qualitative factors impacting our commercial and energy portfolios. As a result, the Company took a $4.9 million provision during the third quarter of 2019. Our ALLL to total loans declined 6 basis points to 1.18% as our loan portfolio continued to grow.

0.09

0.04

0.12

(0.02)

0.16



		52

Table of Contents

~~Nonperforming~~Non-performing Assets and Other Asset Quality Metrics

~~Nonperforming~~Non-performing assets include: (i) non-performing loans, which includes

non-accrual loans, loans past due 90 days or more and still accruing interest,

and loans modified

prior to January 1, 2023 under TDRs that are not performing in accordance with their modified terms;


i.	Nonperforming loans - includes non-accrual loans, loans past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings (‘‘TDRs’’) that are not performing in accordance with their modified terms;


~~ii.~~	~~Foreclosed assets held for sale;~~


~~iii.~~	~~Repossessed assets~~


~~iv.~~	~~Impaired securities~~

(ii) foreclosed assets held for sale; (iii) repossessed assets; and (iv) impaired

debt securities.

Non-performing assets increased $22.8 million during the quarter

to $36.1 million at September 30, 2023 primarily due to one commercial and industrial

credit and one

commercial real estate - non-owner-occupied credit moving to non-accrual and several credits

that were 90+ days past due and still accruing at quarter-end. The non-performing

assets to total assets ratio increased from 0.31% at September 30, 2022 to 0.50%

at September 30, 2023. Annualized net charge-offs were 0.09% for the quarter compared to 0.04%

in the prior quarter and 0.16% in the prior year third quarter. With respect to one commercial and industrial credit

with a $13.6 million balance that was over 90 days past due, the

borrower raised new equity capital and brought the credit current after quarter end, reducing our

non-performing assets to total assets ratio to 0.31%.

The Company continues to monitor the U.S. economic indicators, including the inflation rate,

the unemployment rate, commodity prices, interest rates, and potential supply

chain disruptions and the impact they may have on the Company’s

markets, clients, and prospects. The Company is monitoring the impact of a rising interest rate environment on the

commercial real estate market and enterprise and leverage loans that is currently

partially mitigated by low debt-to-equity ratios.

As of September 30, 2023, the Company did not

identify any systemic issues within its loan portfolio that would

materially affect the credit quality of the loan portfolio. However, there could be some

risk rating migration in certain

sectors of the commercial real estate portfolio in the future as many projects are

faced with higher interest rates, operating costs, and property taxes.

The table below summarizes our ~~nonperforming~~non-performing assets and related ratios as of the dates indicated:

September 30,
2019 June 30,
2019 March 31,
2019 December 31,
2018 September 30,
2018
(Dollars in thousands)
Non-accrual loans $ 43,626
$ 50,044
$ 13,018
$ 17,818
$ 12,625
Loans past due 90 days or more and still accruing 642
238
—
—
443
Total nonperforming loans 44,268
50,282
13,018
17,818
13,068
Foreclosed assets held for sale 2,471
2,471
2,471
—
—
Impaired securities —
—
—
—
—
Total nonperforming assets $ 46,739
$ 52,753
$ 15,489
$ 17,818
$ 13,068
Nonperforming assets to total assets 1.00 % 1.18 % 0.36 % 0.43 % 0.35 %
Nonperforming loans to total loans 1.22 % 1.45 % 0.40 % 0.58 % 0.48 %
For the Quarter Ended

September 30, ~~2019 nonperforming~~

June 30,

March 31,

December 31,

September 30,

2023

2022

Asset Quality

(Dollars in thousands)

Non-accrual loans

20,380

12,867

9,490

11,272

16,923

Loans past due 90 days or more and still accruing

15,750

433

868

750

303

Total non-performing loans

36,130

13,300

10,358

12,022

17,226

Foreclosed assets held for sale

855

1,130

973

Total non-performing assets

36,130

13,300

11,213

13,152

18,199

Loans 30-89 days past due

29,457

13,333

5,056

19,519

21,383

Asset quality metrics (%)

Non-performing loans to total loans

0.61

0.23

0.18

0.22

0.37

Non-performing assets to total assets increased 65 basis points from the prior year driven by one commercial loan restructured in the second quarter of 2019 and subsequently placed on non-accrual. On a linked quarter basis, our September 30, 2019 nonperforming assets

0.50

0.19

0.16

0.20

0.31

ACL to total ~~assets declined~~loans

1.20

1.17

1.15

1.19

ACL + RUC to total loans

(1)

1.31

1.30

1.31

1.34

ACL to non-performing loans

198

508

629

514

324

Classified loans / (total capital + ACL)

14.2

9.7

9.4

10.1

11.3

Classified loans / (total capital + ACL + RUC)

(1)

14.0

9.6

9.3

10.0

11.2

(1)

Includes the accrual for off-balance sheet credit risk from ~~1.18% at June 30, 2019 to 1.00%.~~

Other asset quality metrics management reviews include loans past due 30 - 89 days and classified loans. The Company defines classified loans as loans categorized as substandard, doubtful or loss. The definitions of substandard, doubtful and loss see ‘‘Note 4 - Loans and Allowance for Loan Losses’’ in the notes to unaudited consolidated financial statements. The following table summarizes our loans past due 30 - 89 days, classified assets and related ratios:

unfunded commitments.

September 30,
2019 June 30,
2019 March 31,
2019 December 31,
2018 September 30,
2018
(Dollars in thousands)
Loan Past Due Detail
30 - 59 days past due $ 61,941
$ 15,967
$ 30,450
$ 3,062
$ 19,838
60 - 89 days past due 2,785
7,640
616
619
6,505
Total 30 - 89 days past due $ 64,726
$ 23,607
$ 31,066
$ 3,681
$ 26,343
Loans 30 - 89 days past due to loans 1.78 % 0.68 % 0.95 % 0.12 % 0.96 %
Classified Loans
Substandard $ 79,536
$ 79,190
$ 92,450
$ 96,247
$ 48,845
Doubtful 5,637
9,115
5,083
5,197
5,502
Loss —
—
—
—
—
Total classified loans $ 85,173

$ 88,305

$ 97,533

$ 101,444

$ 54,347
Classified Loans / (Total Capital + ALLL) 13.2 % 16.3 % 18.7 % 19.2 % 12.3 %



		53

Table of Contents

During the quarter ended, September 30, 2019 the Company experienced a $45.9 million increase in loans past due 30 to 59 days from $16.0 million to $61.9 million. The increase was driven by one commercial loan restructured during the second quarter of 2019 and subsequently placed on non-accrual, as well as, one construction and land development loan that was in the process of being renewed.

The Company's classified assets has trended down $16.3 million or 16.0% since December 31, 2018. The decline in classified assets is a combination of charge-offs, primarily from commercial and energy loans, and changes to loan risk ratings due to borrower improvements.

Deposits and Other Borrowings

Deposits and other borrowings are used to support our asset growth. Our strong asset growth requires us to place a greater emphasis on both interest and non-interest-bearing deposits. We attract and retain deposits by aggressively setting our deposit rates within our markets. Other borrowings supplement our core deposit strategy.

At September 30, ~~2019,~~2023, our deposits totaled ~~$3.7~~ $6.3

billion, an increase of ~~$450.0~~$680 million or ~~14.0%~~12% from December 31, ~~2018~~2022. The increase included

a $798 million increase in time

deposits and $253 million in money market, NOW and savings deposits, parti

ally offset by a decrease of $371 million in non-interest-bearing

deposits. The increases in deposits

include $165 million related to the Tucson acquisition.

Approximately 45% of the time deposit increase was from new client money and shifts

from other deposit categories with the

remainder representing an increase in wholesale funding. The decrease in non-interest-bearing

deposits was primarily due to elevated deposits at year-end that were deployed

by clients

late in the first quarter of ~~$74.0 million~~ 2023.

The following table sets forth the maturity of time deposits as of September 30,

2023:

As of September 30, 2023

Three Months

or ~~2.1% since June 30, 2019. Deposit growth was driven by competitive interest rates within our markets.~~Less

Three to Six Months

Six to Twelve

Months

After Twelve Months

Total

(Dollars in thousands)

Time deposits in excess of FDIC insurance limit

65,429

229,548

169,110

17,895

481,982

Time deposits below FDIC insurance limit

433,065

390,354

324,581

113,671

1,261,671

Total

498,494

619,902

493,691

131,566

1,743,653

Other borrowings include FHLB advances, repurchase agreements, ~~fed funds purchased, FHLB~~a line of credit,

SBA loan secured borrowings, and our trust preferred security.

At September 30, ~~2019,~~2023, other

borrowings totaled ~~$358.5~~$107 million, a ~~$30.7~~$147 million, or ~~7.9% decline~~58% decrease from December 31, ~~2018 and a $6.6 million decrease from June 30, 2019. The decline in other borrowings was driven by strong~~

2022. Borrowings were reduced due to client deposit growth and acquired deposit

balances.

During the ~~successfully completed initial public offering.~~nine-month period ended September 30, 2023, $31 million of FHLB advances

matured and were converted into a drawdown on the FHLB line of credit, an additional $12

million matured and $12 million of net FHLB advances were paid off

With respect to the FHLB line of credit, the Company paid

down the converted $31 million of FHLB advances

and an additional $75 million, net, resulting in a zero balance on the FHLB line of credit as of September

30, 2023.

As of September 30, 2023, the Company had approximately $2.4 billion of uninsured

deposits, which is an estimated amount based on the same methodologies and assumptions

used for the Bank’s regulatory requirements.

Excluding pass-thru accounts where clients have deposit insurance at the correspondent

financial institution, our uninsured deposits are

$2.1 billion, or 33% of total deposits as of September 30, 2023. The average client account

balance as of September 30, 2023 is less than $250 thousand for both individual accounts

and business accounts in total after excluding pass-through and insured cash sweep deposits.

We have geographic and industry

diversity within our deposit base as the majority of our

deposits are located in our footprint states of Kansas, Oklahoma, Texas,

Missouri, and Colorado.

The Company believes that its current capital ratios and liquidity are sufficient

mitigate the risks of uninsured deposits.

Table of Contents

Liquidity and Capital Resources

Liquidity

We manage our liquidity based upon factors that include the level and quality of capital and

our overall financial condition, the

trend and volume of problem assets, our balance sheet risk exposure, the level of deposits

as a percentage of total loans, the amount of

non-deposit funding used to fund assets, the availability of unused funding sources and

off-balance sheet obligations, the availability of

assets to be readily converted into cash without undue loss, the amount of cash and liquid securities

we hold, and other factors. We also

conduct contingency funding plan stress tests at least annually to assess potential liquidity

outflows or funding problems resulting from

economic disruptions, volatility in the financial markets, unexpected credit

events or other significant occurrences deemed potentially

problematic by management. The ~~objective of the~~ Company’s

liquidity ~~policy~~strategy is to maintain adequate, but not excessive, liquidity to meet the daily

cash flow needs of ~~its~~ clients while attempting to achieve adequate earnings for ~~its~~ stockholders.

The Company measures liquidity ~~position is monitored continuously by the Company’s finance department.~~needs

through daily balance sheet monitoring, weekly cash projections and

monthly liquidity measures reviewed in conjunction with Board-

approved liquidity policy limits. The Company's short-term and long-term liquidity requirements

are primarily met through cash flow

from operations, redeployment of proceeds from prepaying and

maturing balances in our loan portfolio and security portfolio, increases

in client deposits and wholesale deposits. Liquidity resources can be derived

from two sources: (i) on-balance sheet liquidity resources,

which represent funds currently on the ~~balance sheet~~statement of financial condition and (ii) off-balance

sheet liquidity resources, which represent

funds available from ~~third party~~third-party sources. ~~Our~~ The Company’s

on-balance sheet and off-balance sheet liquidity resources consisted of the ~~following:~~

following as of the dates indicated:

September 30, 2023

December 31, 2022

(Dollars in thousands)

Total on-balance sheet liquidity

983,678

986,482

Total off-balance sheet liquidity

1,435,631

770,165

Total liquidity

2,419,309

1,756,647

On-balance sheet liquidity as a percent of assets

Total liquidity as a percent of assets

Off-balance sheet liquidity increased from December 31, 2022 to September 30,

2023 primarily due to increases in available

funding with FHLB and the Federal Reserve Bank.

For the nine-months ended September 30, 2023, the Company’s

cash and cash equivalents decreased $67 million from December

31, 2022 to $233 million, representing 3% of total assets. During the nine-month period

ended September 30, 2023, the Company

increased the available-for-sale securities portfolio on an amortized cost basis by $101 million,

net of paydowns,

maturities, and

amortization.

As of September 30, 2023, the Company had $332 million in securities that could be

pledged and $46 million that could

be sold at a net gain based on market conditions at the time. In addition, the Company increased

funded loans by $471 million, net of

payoffs and charge-offs during the nine-month period ended September

30, 2023 that reduced cash and cash equivalents.

September 30, 2019 December 31, 2018
(Dollars in thousands)
On-balance sheet
Cash and cash equivalents $ 109,961
$ 216,541
Unpledged securities available-for-sale 696,519
552,950
Total on-balance sheet liquidity 806,480
769,491
Off-balance sheet
FHLB available funds 157,302
68,704
Federal Reserve available funds 285,187
286,397
Other available funds 105,000
95,000
Total off-balance sheet liquidity 547,489
450,101
Total liquidity $ 1,353,969
$ 1,219,592
On-balance sheet liquidity as a percent of assets 17.3 % 18.8 %
Total liquidity as a percent of assets 29.1 % 29.7 %
The Company’s time deposits increased by $780

million primarily from wholesale funding, new client money and shifts from

other deposit categories. Savings and money market deposits increased by $253

million. Non-interest-bearing deposits decreased $371

million as elevated year-end balances were deployed by clients in the first quarter

of 2023 in addition to clients migrating into interest-

bearing deposits.

FHLB advances and other borrowings decreased $147 million during the nine-month period

ended September 30,

2023, largely related to a reduction in FHLB advances due to client deposit growth and

acquired deposit balances.

The Company did not purchase any common stock during the first nine months of 2023. As of September 30, 2023,

$16 million

remains available for repurchase under our share repurchase program. The amount and timing of

such future share repurchases will be

dependent on a number of factors, including the price of our common stock, overall capital

levels and cash flow needs. There is no

assurance that we will repurchase up to the full amount remaining under our program.

Dividends of $258 thousand related to the Series A Non-Cumulative Perpetual Preferred Stock were declared and paid by the

Company during the nine-months ended September, 2023. In October 2023,

the Board of Directors declared a quarterly dividend on



		54

Table of Contents



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

Series A Non-Cumulative Perpetual Preferred Stock in the amount of $20.00 per share to be payable on December 15, 2023 to

shareholders of record as of November 30, 2023.

The Company believes that its current on and off-balance sheet liquidity will be

sufficient to meet anticipated cash requirements

for the next 12 months and thereafter. The Company believes that it has several on and off-balance sheet

options to address reductions in

cash and cash equivalents in order to maintain appropriate liquidity.

Contractual Obligations

and Off-Balance Sheet Arrangements

The ~~following table presents our~~Company is subject to contractual obligations made in the ordinary course of business.

The obligations include deposit

liabilities, other borrowed funds, and operating leases. Refer to “Note 8: Time

Deposits and Other Borrowings” and “Note 5: Leases”

within the notes to consolidated financial statements – unaudited for information regarding

the Company’s significant contractual

cash

obligations and contractual obligations to third parties ~~debt~~on lease obligations, respectively.

As a financial services provider, the Company is a party to

various financial instruments with off-balance sheet risks, such as

commitments to extend credit. Off-balance sheet arrangements represent

the Company’s future cash requirements.

However, a portion

of these commitments may expire without being drawn upon. Refer to “Note 15:

Commitments and ~~lease agreements~~Credit Risk” within the notes to

consolidated financial statements – unaudited for a listing of the Company’s

off-balance sheet arrangements.

The Company’s short-term and ~~service~~ long-term contractual

obligations, ~~as of September 30, 2019~~including off-balance sheet obligations,

may be satisfied

through the Company’s on-balance

sheet and ~~December 31, 2018:~~

September 30, 2019
Payments Due by Period
Less than
1 Year 1 to 2
Years 2 to 5
Years More than
5 Years Total
(Dollars in thousands)
Time deposits $ 822,439
$ 216,486
$ 182,832
$ —
$ 1,221,757
Fed funds purchased & repurchase agreements 49,810
—
—
—
49,810
FHLB borrowings and line of credit 24,000
76,500
56,204
151,100
307,804
Trust preferred security —
—
—
2,500
2,500
Operating leases 1,718
1,564
4,607
6,479
14,368
Total $ 897,967
$ 294,550
$ 243,643
$ 160,079
$ 1,596,239

December 31, 2018
Payments Due by Period
Less than
1 Year 1 to 2
Years 2 to 5
Years More than
5 Years Total
(Dollars in thousands)
Time deposits $ 444,824
$ 287,451
$ 267,856
$ 9,546
$ 1,009,677
Fed funds purchased & repurchase agreements 75,406
—
—
—
75,406
FHLB borrowings and line of credit 44,000
45,000
72,885
151,100
312,985
Trust preferred security —
—
—
2,500
2,500
Operating leases 1,876
1,633
4,812
7,450
15,771
Total $ 566,106
$ 334,084
$ 345,553
$ 170,596
$ 1,416,339

off-balance sheet liquidity discussed above.

Capital ~~Resources and Off-Balance Sheet Arrangements~~

Requirements

The Company and the Bank are subject to various regulatory capital requirements administered

by the federal banking agencies.

The regulatory capital requirements involve quantitative measures of the

Company’s assets, liabilities, select

off-balance sheet items and

equity. Failure to meet minimum capital requirements can initiate certain

mandatory and possibly additional discretionary actions by

regulators that, if undertaken, could have a direct material effect on the Company’s

consolidated financial statements. Refer to “Note 10:

Regulatory Matters”

in the notes to consolidated financial statements – unaudited for additional

information. Management believes that

as of September 30, ~~2019,~~2023, the Company and the Bank ~~meet~~met all capital adequacy requirements

to which

they are subject. ~~For additional information, see ‘‘Note 8 - Regulatory Matters’’ in the notes to unaudited consolidated financial statements.~~

The Company is subject to off-balance sheet risk in the normal course of business to meet the needs of its clients that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources. These off-balance sheet arrangements include commitments to fund loans, standby letters of credit, and a previously disclosed future lease obligation in Kansas City, Missouri.



		55

~~Table of Contents~~

~~The following is a summary of our off-balance sheet commitments as of the dates presented:~~

September 30, 2019 December 31, 2018
(Dollars in thousands)
Commitments to fund C&I loans $ 507,195
$ 597,534
Other loan commitments 925,167
767,629
Standby letters of credit 35,699
32,439
Lease agreements 19,054
19,054
Total $ 1,487,115
$ 1,416,656

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance

with GAAP and with general practices within the financial

services industry. Application of these principles requires management to make complex and subjective estimates and assumptions

that

affect the amounts reported in the financial statements and accompanying notes. The

Company bases estimates on historical experience

and on various other assumptions that it believes to be reasonable under current circumstances.

These assumptions form the basis for

management judgments about the carrying values of assets and liabilities that are not readily

available from independent, objective

sources. The Company ~~identified several accounting policies that are critical to~~evaluates

estimates on an ~~understanding~~ongoing basis. Use of ~~our financial condition and~~alternative assumptions may have resulted

in significantly

different estimates. Actual results ~~of operations. In addition,~~may differ from these policies require difficult, subjective or complex judgments and assumptions that create potential sensitivity of our financial statements to those judgments and assumptions. These policies relate to the allowance for loan and lease losses, investment securities impairment, deferred tax assets, and the fair value of financial instruments. estimates.

A discussion of these policies can be found in the section captioned ~~‘‘Critical~~“Critical Accounting ~~Policies’’~~Policies and Estimates” in

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

included in the ~~IPO Prospectus.~~ 2022 Form 10-K.

There have

been no changes in the Company’s

application of critical accounting policies and estimates since ~~June 30, 2019.~~December

31, 2022.

Recent Accounting Pronouncements

~~The Company had the following updates~~Refer to ~~recent accounting pronouncements during the quarter. For additional information on accounting pronouncements, see~~ ~~Note 1 -~~“Note 1: Nature of Operations and Summary of Significant Accounting ~~Policies.~~ ~~A complete list of recent, applicable accounting pronouncements was provided~~Policies”

included in the ~~Company’s IPO Prospectus.~~notes to consolidated

~~ASU 2016-13, Financial Instruments - Credit Losses~~ - The Company established a committee of individuals from applicable departments to oversee the implementation process. The committee chose a third-party software solution. By the third quarter of 2019, the Company completed the software implementation phase of the transition. The software implementation phase included data capture and portfolio segmentation amongst other items. The Company completed a parallel run using 2019 data and expects to complete a second parallel run using third quarter data during the fourth quarter of 2019. At this time an estimate of the impact to the Company’s financial statements ~~is not known, but the impact could be significantly affected by the composition, characteristics and quality~~– unaudited included elsewhere in this Form 10-Q.

��

Table of ~~the underlying loan portfolio at the time of adoption.~~Contents

~~ASU 2016-02, Leases (Topic 842)~~ - The Company plans to apply the update as of the beginning of the period of adoption and is not planning to restate comparative periods. The Company expects to elect certain optional practical expedients. The Company gathered all potential lease and embedded lease agreements and is evaluating the applicability and impact to the financial statements. Current operating leases relate primarily to three branch locations. Based on these current leases, the Company anticipates recognizing a lease liability and related right-to-use asset on our balance sheet, with an immaterial impact on the income statement compared to the current lease accounting model. However, the ultimate impact of the standard will depend on the Company’s lease portfolio as of the adoption date.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

A primary component of market risk is interest rate volatility. ~~Managing interest~~Interest rate risk management is a key element of the ~~Company’s balance sheet~~Company

’s

statement of financial condition management. Interest rate risk is the risk that net interest ~~margin~~

margins will erode over time due to changing

market conditions. Many factors can cause margins to erode: (i) lower loan demand; (ii) increased

competition for funds; (iii) weak

pricing policies; (iv) ~~balance sheet mismatches~~statement of financial condition mismatches; and (v) changing

liquidity demands. The objective is to maximize

income while minimizing interest rate risk. The Company manages its sensitivity position

using its interest rate risk policy. The

management of interest rate risk is a three-step process and involves: (i)

measuring the interest rate risk position; (ii) policy constraints;

and (iii) strategic review and implementation.

Our exposure to interest rate risk is managed by the ~~Bank’s Funds Management~~Asset/Liability Committee ~~(‘‘FMC’’~~(“ALCO”) ~~in accordance with policies approved by the Bank’s board of directors.~~. The ~~FMC~~ALCO uses a combination of

three systems to measure the



		56

~~Table~~ statement of ~~Contents~~financial condition’s

~~balance sheet’s~~ interest rate risk position. ~~Because each system serves a different purpose and provides a different perspective, the~~The three systems in combination are expected

to provide a better overall result than a single system alone. The three systems include: (i) gap reports;

(ii) earnings simulation; and (iii)

economic value of equity. The ~~FMC’s~~ALCO’s primary tools to change the interest rate risk position are:

(i) investment portfolio duration; (ii)

deposit and borrowing mix; and (iii) ~~on balance~~on-balance sheet derivatives.

The ~~FMC~~ALCO evaluates interest rate risk using a rate shock method and rate ramp method. In a rate shock analysis, rates change

immediately,

and the change is sustained over the time horizon. In a rate ramp analysis, rate

changes occur gradually over time.

Management reviews and utilizes both methods in managing interest rate risk;

however, both methods represent a risk indicator, not a

forecast. The following tables summarize the simulated changes in net interest income and fair value of equity

over a 12-month horizon

using a rate shock and rate ramp method as of the dates indicated:

Hypothetical Change in Interest Rate - Rate Shock

Hypothetical Change in Interest Rate - Rate Shock
September 30, 2019 September 30, 2018
Change in Interest Rate
(Basis Points) Percent change in net interest income Percent change in fair value of equity Percent change in net interest income Percent change in fair value of equity
+300 12.0 % (2.6 )% 10.3 % (8.3 )%
+200 8.6
(0.4 ) 7.1
(4.6 )
+100 4.7
0.5
3.8
(0.8 )
Base —
—
—
—
-100 (5.0 ) 0.1
(4.2 ) (1.1 )
-200 (11.3 )% 1.2 % (6.2 )% 0.3 %
September 30, 2023

September 30, 2022

Change in Interest

Rate (Basis Points)

Percent change in net

interest income

Percent change in fair

value of equity

Percent change in net

interest income

Percent change in fair

value of equity

+300

(0.1)

(18.1)

6.1

(11.1)

+200

(0.1)

(12.9)

4.1

(7.3)

+100

(0.1)

(7.0)

2.0

(3.2)

Base

-100

0.3

7.4

(1.9)

3.2

-200

1.0

13.6

(5.7)

5.7

-300

0.8

20.6

(10.1)

7.1

Hypothetical Change in Interest Rate - Rate Ramp

September 30, 2023

September 30, 2022

Change in Interest Rate

(Basis Points)

Hypothetical Change in Interest Rate - Rate Ramp
September 30, 2019 September 30, 2018
Change in Interest Rate
(Basis Points) Percent change in net interest income Percent change in net interest income
+300 7.4 % 4.9 %
+200 5.1
3.4
+100 2.6
1.7
Base —
—
-100 (2.8 ) (1.8 )
-200 (6.2 )% (3.6 )%

~~The hypothetical~~Percent change in net interest

income

Percent change in net interest

income

+300

(1.0)

2.9

+200

(0.7)

1.9

+100

(0.4)

1.0

Base

-100

0.4

(0.9)

-200

0.8

(2.1)

-300

1.1

(4.1)

Table of Contents

The Company’s position is relatively neutral as of

September 30, 2023, which is less sensitive as compared to both September 30,

2022 and December 31, 2022 due to deposit mix changes with demand deposits as the main

driver. Compared to December 31, 2022,

the Company’s position is less

asset sensitive due to the reduction in demand deposits and an on-balance sheet interest

rate collar that

becomes effective in the first quarter of 2024. The aggregate beta assumption utilized as of

September 30, 2023 was approximately 60%

which is unchanged from our previous assumption. Other key assumptions updated

during 2023 include updated deposit decay rates,

new business spreads and updating market yield curves. Other assumptions included

in the model that are periodically updated include

loan prepayments and call provisions within investment and debt holdings. The

Company is monitoring interest rate sensitivity closely

as $4.1

billion, or 68%, of loans mature or reprice within the twelve-month period following September

30, 2023, including $2.8 billion

that repriced in the first month of the fourth quarter.

$5.3 billion of interest-bearing liabilities mature or reprice over

the same twelve-

month period. As of September 30, ~~2019 in a down or up 100 basis point shock~~2023 and December 31, 2022, the investment portfolio

duration was approximately 5.6 and 5.2

years, respectively. The Company is ~~mainly due~~

reviewing additional options to ~~approximately 67%~~manage the statement of ~~earning assets repricing or maturing over~~financial condition

sensitivity based on the next 12 months. Loans remain the largest portion of our adjustable earning assets, as the mix of adjustable loans to total loans was 71.5%. The amount of adjustable loans causes the Company to see an increase in net

interest ~~income in a rising~~ rate environment and ~~a decline~~anticipated composition of assets and liabilities in ~~net interest income in a declining rate environment.~~the next twelve

months and beyond.

The models the Company uses include assumptions regarding interest rates ~~and balance changes.~~

while balances remain unchanged. These assumptions

are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or

precisely predict the impact of higher

or lower interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and

frequency

of interest rate changes as well as changes in market conditions, customer behavior

and management strategies, among other factors.



		57



~~Table of Contents~~	~~Notes to Unaudited Consolidated Financial Statements~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management,

with the participation of the Company’s

Chief Executive Officer and Chief Financial Officer, has

evaluated the effectiveness of the Company’s

disclosure controls and procedures (as defined in Rule 13a-15(e)

under the Securities

Exchange Act of 1934 ~~(‘‘~~(“Exchange ~~Act’’~~Act”)) as of September 30, ~~2019.~~2023. Based on that evaluation, the Company’s

Chief Executive Officer

and Chief Financial Officer concluded that the Company’s

disclosure controls and procedures were effective as of September

30, ~~2019.~~2023.

Changes in Internal Control over Financial Reporting

Our internal control over financial reporting continues to be updated as necessary to accommodate

modifications to our business

processes and accounting procedures. There ~~was~~has been no change in ~~the Company’s~~our internal control over

financial reporting (as such term is defined

in Rule 13a-15(f) under the Exchange Act) ~~that occurred~~ during the third quarter of ~~2019~~ 2023

that has materially affected, or is reasonably likely to

materially affect, ~~the Company’s~~our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are named or threatened to be named as a defendant in various

lawsuits. Management,

following consultation with legal counsel, does not expect the ultimate disposition of any or

a combination of these matters to have a

material adverse effect on our business, financial condition, results of operations, cash

flows or growth prospects. However, given the

nature, scope, and complexity of the extensive legal and regulatory landscape applicable

to our business (including laws and regulations

governing consumer protection, fair lending, fair labor, privacy, information

security and anti-money laundering and anti-terrorism

laws), we, like all banking organizations, are subject to heightened legal and regulatory compliance

and litigation risk.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the

factors discussed in Part I, "Item 1A.

Risk Factors" in our 2022 Form 10-K, which could materially affect our business, financial

condition, or results of operations in future

periods. There were no material changes from the ~~risks~~risk factors disclosed in the ~~Risk Factors section~~2022 Form 10-K.

Table of ~~the IPO Prospectus (File No. 333-232704), dated August 14, 2019, filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, as amended, on August 15, 2019.~~Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

~~Unregistered Sales of Equity Securities~~

~~During~~On August 1, 2023, the ~~quarter ended September 30, 2019 and prior to September 13, 2019 (the date of the filing of our registration statement on Form S-8), we~~Company issued ~~and sold an aggregate of 5,883~~597,645 shares of ~~our~~its common stock to ~~current employees~~Canyon Bancorporation,

Inc. stockholders as partial

merger consideration in the Tucson acquisition. The Company’s

common stock was valued at a ~~weighted average exercise~~per share price of ~~$17.00 per share pursuant to our partner share purchase program~~approximately

$14.11 for ~~aggregate cash consideration~~purposes of ~~$100.0 thousand.~~calculating the merger consideration. The shares were issued pursuant to an exemption under Rule 701 promulgated under the Securities Act. Each of the recipients of securities in these transactions had adequate access, through employment, to information about us.

During the quarter ended September 30, 2019 and prior to September 13, 2019 (the date of the filing of our registration statement on Form S-8), we issued 31,575 stock settled appreciation rights (‘‘SSARs’’) under our 2018 Equity Incentive Plan at a weighted average exercise price of $14.41 per unit. The SSARs vest in seven equal annual installments commencing in August 2020 and expire in August 2029.

~~In addition, during the quarter ended September 30, 2019 and prior to the filing of our Form S-8, we issued and sold to our employees an aggregate of 1,317~~ shares of common stock ~~upon the exercise of SSARs~~ issued ~~under our 2018 Equity Incentive Plan at a weighted-average exercise price of $8.25 and a $17.00 price of the underlying security. The Company~~

as partial merger consideration



		58

~~Table of Contents~~

withheld an aggregate of 599 shares of common stock subject to such SSARs for payment of the exercise price and satisfaction of the aggregate tax withholding obligations in connection with the exercises of certain of those SSARs.

~~The SSARs and the common stock issuable upon the exercise of such SSARs~~ were ~~issued~~not registered under the ~~2018 Equity Incentive Plan~~Securities Act of 1933, as amended (the "Securities Act"), in reliance on the exemption from

registration provided by ~~Rule 701~~Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder and were issued in

compliance with such exemption only to "accredited investors."

(b)

Not applicable.

(c)

Share Repurchase Program

On May 10, 2022, the Company announced that its Board of Directors approved

a share repurchase program under which the

Company may repurchase up to $30 million of its common stock. The objective

of the program is to give the Company the ability to

opportunistically acquire undervalued shares and return capital to shareholders.

No shares were repurchased during the three-

months ended September 30, 2023.

As of September 30, 2023, $16 million remains available for repurchase under this

repurchase program. Repurchases under the ~~Securities Act. Each of~~program may be made in the ~~recipients of securities~~open

market or privately negotiated transactions in ~~these transactions had adequate access, through employment,~~

compliance with SEC Rule 10b-18, subject to ~~information about us.~~market conditions, applicable legal requirements

and other relevant factors. The

~~Use of Proceeds from our Initial Public Offering of Common Stock~~

~~On August 19, 2019, we completed our IPO, in which we sold 6,594,362 shares~~program does not obligate the Company to acquire any amount of common stock ~~including 844,362 shares pursuant to~~and

may be suspended at any time at the underwriters' overallotment option, at price to the public of $14.50 per share. We received aggregate net proceeds of $87.0 million, net of underwriting discounts and commissions of $6.2 million and offering expenses paid by us of approximately $2.4 million subject to certain cost reimbursements. The offering

Company's discretion. No time limit has ~~terminated. We distributed $50 million~~been set for completion of the ~~proceeds to our wholly-owned subsidiary, CrossFirst Bank, to support its growth. The balance of the proceeds for the offering was held at the Company~~ program. Our officers

and ~~used for general corporate purposes. We made no payments to our~~ directors officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates in connection with the issuance and sale of the securities registered. We did not receive any proceedsare prohibited from ~~the sale of shares by the selling stockholders.~~

~~All the shares issued and sold~~trading in the ~~initial public offering were registered under~~ Company’s securities

if they are in possession of material non-public information and

must at all times comply with

the Securities Act pursuant to a Registration Statement on Form S-1 (File No. 333-232704), which was declared effective by the SEC on August 14, 2019. Pursuant to the Registration Statement, we registered an aggregate of 7,855,951 shares of our common stock, inclusive of the underwriters’ option to purchase additional sharesCompany’s Insider Trading Policy, including

quarterly blackout periods and the shares to be offered by selling stockholders. Keefe, Bruyette & Woods, A Stifel Company, Raymond James & Associates, Inc. and Stephens Inc. acted as joint book-running managers for the offering, and Sandler O’Neill + Partners, L.P. acted as co-manager of the offering.pre-clearance procedures.

There has been no material change in the planned use of the proceeds of the initial public offering as described in our IPO Prospectus (File No. 333-232704) filed with the SEC on August 15, 2019, pursuant to Rule 424(b) of the Securities Act. The Company intends to use the net proceeds from the offering to support our growth, organically or through mergers and acquisitions, and for general corporate purposes. As previously disclosed, the Company is currently considering using a portion of the net proceeds for the opening of a second smaller full-service branch in the Dallas MSA, in addition to consistently evaluating other strategic opportunities.

~~ITEM 3. DEFAULTS UPON SENIOR SECURITIES~~

~~None.~~

~~ITEM 4. MINE SAFETY DISCLOSURES~~

~~Not applicable.~~

ITEM 5. OTHER INFORMATION

(a)

~~The Board of Directors~~ None

(b)

None

(c)

Trading Arrangements

During the three months ended September 30, 2023, (i) no director or officer (as

defined in Rule 16a-1(f) under the Exchange Act)

of the Company ~~has established May 12, 2020~~

adopted

terminated

a “Rule 10b5-1 trading arrangement” or “

non-Rule

10b5-1

trading arrangement,” as each

term is defined in Item 408 of Regulation S-K; and (ii) the ~~date~~Company did not adopt or

terminate a “Rue 10b5-1 trading

arrangement,” as such term is defined in Item 408 of ~~the Company’s 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”). The time and location of the 2020 Annual Meeting will be specified in the Company’s 2020 proxy statement.~~Regulation S-K.



		59

Table of Contents

ITEM 6. EXHIBITS

Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/Period End Date
10.1

Amended Employment Agreement with George F. Jones, Jr. dated May 1, 2018†
S-1 10.1 July 18, 2019
10.2

Second Amendment to Employment Agreement with George F. Jones, Jr. dated March 20, 2019†
S-1 10.2 July 18, 2019
10.3

Third Amendment to Employment Agreement with George F. Jones, Jr. dated May 1, 2019†
S-1 10.3 July 18, 2019
10.4

Employment Agreement with David O’Toole dated May 1, 2015†
S-1 10.4 July 18, 2019
10.5

First Amendment to Employment Agreement with David O’Toole dated March 19, 2019†
S-1 10.5 July 18, 2019
10.6

Employment Agreement with Mike Maddox dated May 1, 2015†
S-1 10.6 July 18, 2019
10.7

First Amendment to Employment Agreement with Mike Maddox dated March 19, 2019†
S-1 10.7 July 18, 2019
10.8

Employment Agreement with Amy Fauss dated June 29, 2016†
S-1 10.8 July 18, 2019
10.9

First Amendment to Employment Agreement with Amy Fauss dated March 15, 2019†
S-1 10.9 July 18, 2019
10.10

Employment Agreement with Tom Robinson dated May 1, 2015†
S-1 10.10 July 18, 2019
10.11

First Amendment to Employment Agreement with Tom Robinson dated March 18, 2019†
S-1 10.11 July 18, 2019
10.12

Chairman Emeritus Agreement with Ron Baldwin dated April 26, 2018†
S-1 10.12 July 18, 2019
10.13

RSU Award Agreement with George F. Jones, Jr. dated February 28, 2019†
S-1 10.13 July 18, 2019
10.14

Performance Share Award Agreement with George F. Jones, Jr. dated February 28, 2019†
S-1 10.14 July 18, 2019
10.15

2018 Omnibus Equity Incentive Plan†
S-1 10.15 July 18, 2019
10.16

Form of Legacy RSU - New Market Founders Award†
S-1 10.16 July 18, 2019
10.17

Form of Legacy EIP 2018 RSU Award Agreement†
S-1 10.17 July 18, 2019
10.18

Form of Legacy SAR Award Agreement†
S-1 10.18 July 18, 2019
10.19

Form of EEIP Legacy RSU Award Agreement†
S-1 10.19 July 18, 2019
10.20

Form of RSU Award Agreement†
S-1 10.20 July 18, 2019
10.21

Form of 2019 RSU Award Agreement†
S-1 10.21 July 18, 2019
10.22

Form of 2019 Performance Share Award Agreement†
S-1 10.22 July 18, 2019
10.23

Form of Director Restricted Stock Award†
S-1 10.23 July 18, 2019
10.24

Form of Indemnification Agreement†
S-1 10.24 July 18, 2019
10.25

Director Deferred Fee Program†
S-1 10.25 July 18, 2019
Exhibit

Number

Exhibit Description



		60

3.1

~~Table~~Articles of ~~Contents~~Incorporation of CrossFirst Bankshares, Inc. (incorporatedby reference to Exhibit 3.1 to the Company's

Registration Statement on Form S-1 as filed with the SEC on July 18, 2019)

3.2

Amendment to Articles of Incorporation of CrossFirst Bankshares, Inc. (incorporated by reference to Exhibit 3.2 tothe

Incorporated by Reference
Exhibit Number Exhibit Description Form Exhibit Filing Date/Period End Date
10.26

Stock Appreciation Rights Plan†
S-1 10.26 July 18, 2019
10.27

Form of SAR Award Agreement†
S-1 10.27 July 18, 2019
10.28

Annual Incentive Plan†
S-1 10.28 July 18, 2019
12.01

Subsidiaries of CrossFirst Bankshares, Inc.
S-1 21.1 July 18, 2019
31.1*

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002

101.INS* XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH* XBRL Taxonomy Extension Schema Document
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
Company’s Registration Statementon Form S-1 as filed with the SEC on July 18, 2019)

3.3

Bylaws of CrossFirst Bankshares, Inc. (incorporated by reference to Exhibit 3.3to the Company's Registration

Statement on Form S-1 as filed with the SEC on July 18, 2019)

3.4

Certificate of Designations of Series A Non-Cumulative Perpetual Preferred Stock of CrossFirst Bankshares, Inc.

(incorporated by reference to Exhibit 3.1 to the Company’sCurrent Report on Form 8-K as filed with the SEC on

March 31, 2023)

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a)of the Exchange Act, as adopted pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906of the Sarbanes-Oxley Act of

2002

101.INS*

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags

are embedded within the Inline XBRL document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

104*

Cover Page Interactive Data File (formation in Inline XBRL and contained in Exhibit 101)

Filed Herewith

Furnished Herewith

†

Indicates a management contract or compensatory plan arrangement



		61

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed

on its

behalf by the undersigned thereunto duly authorized.

CrossFirst Bankshares, Inc.

Date:

November 3, 2023

/s/ Benjamin R. Clouse



					~~CrossFirst Bankshares Inc.~~

~~November 12, 2019~~					~~/s/ David O’Toole~~
					~~David O’Toole~~
					~~Chief Financial Officer~~
					~~(Principal Financial Officer and Principal Accounting Officer)~~

Benjamin R. Clouse

Chief Financial Officer

(Duly authorized officer and principal financial officer)



		62



	September 30, 2019			December 31, 2018
	(Unaudited)
	(Dollars in thousands)
Assets
Cash and cash equivalents	$	128,126		$	216,541
Available for sale securities - taxable	323,531			296,133
Available for sale securities - tax-exempt	409,562			367,545
Premises and equipment, held for sale	—			3,444
Loans, net of allowance for loan losses of $42,995 and $37,826 at September 30, 2019 and December 31, 2018, respectively	3,586,797			3,022,921
Premises and equipment, net	71,314			74,945
Restricted equity securities	16,053			14,525
Interest receivable	15,909			14,092
Foreclosed assets held for sale	2,471			—
Deferred tax asset	7,429			16,316
Goodwill and other intangible assets, net	7,720			7,796
Bank-owned life insurance	65,228			63,811
Other	17,173			9,146
Total assets	$	4,651,313		$	4,107,215
Liabilities and stockholders’ equity
Deposits
Non-interest bearing	$	513,832		$	484,284
Savings, NOW and money market	1,922,522			1,714,136
Time	1,221,754			1,009,677
Total deposits	3,658,108			3,208,097
Federal funds purchased and repurchase agreements	49,810			75,406
Federal Home Loan Bank advances	307,804			312,985
Other borrowings	912			884
Interest payable and other liabilities	32,244			19,507
Total liabilities	4,048,878			3,616,879
Stockholders’ equity
Redeemable preferred stock, $0.01 par value, $25 liquidation value:
authorized - 5,000,000 shares, issued - 0 and 1,200,000 shares at September 30, 2019 and December 31, 2018, respectively	—			12
Common stock, $0.01 par value:
authorized - 200,000,000 shares, issued - 51,969,203 and 45,074,322 shares at September 30, 2019 and December 31, 2018, respectively	520			451
Additional paid-in capital	518,816			454,512
Retained earnings	65,282			38,567
Other	(84		)	(196		)
Accumulated other comprehensive income (loss)	17,901			(3,010		)
Total stockholders’ equity	602,435			490,336
Total liabilities and stockholders’ equity	$	4,651,313		$	4,107,215



																		Accumulated
									Additional									Other
	Preferred Stock			Common Stock					Paid in			Retained						Comprehensive
	Shares	Amount		Shares⁽¹⁾		Amount⁽¹⁾			Capital			Earnings⁽¹⁾			Other			Income (Loss)			Total
	(Dollars in thousands)
Balance at June 30, 2018	1,200,000	$	12	35,496,278		$	355		$	321,544		$	25,778		$	(191	)	$	(4,961	)	$	342,537
Net income	—	—		—		—			—			6,354			—			—			6,354
Change in unrealized depreciation on available-for-sale securities	—	—		—		—			—			—			—			(5,120		)	(5,120		)
Issuance of shares	—	—		5,031,110		50			69,733			(25		)	—			—			69,758
Issuance of shares from equity-based awards	—	—		—		—			—			—			—			—			—
Retired shares	—	—		(265,908	)	(3		)	(2,534		)	(1,253		)	—			—			(3,790		)
Preferred dividends declared	—	—		—		—			—			(525		)	—			—			(525		)
Employee receivables from sale of stock	—	—		—		—			2			—			(1		)	—			1
Share-based compensation	—	—		—		—			527			—			—			—			527
Employee stock purchase plan additions	—	—		—		—			38			—			—			—			38
Balance at September 30, 2018	1,200,000	$	12	40,261,480		$	402		$	389,310		$	30,329		$	(192	)	$	(10,081	)	$	409,780



Balance at June 30, 2019	—	$	—	45,367,641	$	453	$	430,347		$	54,899		$	(83	)	$	13,579	$	499,195
Net income	—	—		—	—		—			10,384			—			—		10,384
Change in unrealized appreciation on available-for-sale securities	—	—		—	—					—			—			4,322		4,322
Issuance of shares	—	—		6,600,245	67		87,154			(1		)	—			—		87,220
Issuance of shares from equity-based awards	—	—		1,317	—		(10		)	—			—			—		(10		)
Employee receivables from sale of stock	—	—		—	—		1			—			(1		)	—		—
Share-based compensation	—	—		—	—		1,324			—			—			—		1,324
Employee stock purchase plan additions	—	—		—	—		—			—			—			—		—
Balance at September 30, 2019	—	$	—	51,969,203	$	520	$	518,816		$	65,282		$	(84	)	$	17,901	$	602,435



Balance at December 31, 2018	1,200,000		$	12		45,074,322		$	451	$	454,512		$	38,567		$	(196	)	$	(3,010	)	$	490,336
Net income			—			—		—		—			29,173			—			—			29,173
Change in unrealized appreciation on available-for-sale securities	—		—			—		—					—			—			20,842			20,842
Issuance of shares	—		—			6,851,213		68		88,869			—			—			—			88,937
Issuance of shares from equity-based awards	—		—			53,668		1		(246		)	—			—			—			(245		)
Retired shares	(1,200,000	)	(12		)	(10,000	)	—		(30,088		)	(55		)	—						(30,155		)
Preferred dividends declared	—		—			—		—		—			(175		)	—			—			(175		)
Employee receivables from sale of stock	—		—			—		—		5			—			112			—			117
Share-based compensation	—		—			—		—		3,569			—			—			—			3,569
Employee receivables from sale of stock	—		—			—		—		36			—			—			—			36
Adoption of ASU 2016-01	—		—			—		—		—			(69		)	—			69			—
Adoption of ASU 2018-07	—		—			—		—		2,159			(2,159		)	—			—			—
Balance at September 30, 2019	—		$	—		51,969,203		$	520	$	518,816		$	65,282		$	(84	)	$	17,901		$	602,435


~~Note 1:~~	~~Nature of Operations and Summary of Significant Accounting Policies~~



	September 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Approximate Fair Value
	(Dollars in thousands)
Available-for-sale debt securities
Mortgage-backed - GSE residential	$	158,897	$	2,009	$	192	$	160,714
Collateralized mortgage obligations - GSE residential	147,917		1,002		244		148,675
State and political subdivisions	398,963		21,051		5		420,009
Corporate bonds	1,444		92		—		1,536
Total available-for-sale debt securities	707,221		24,154		441		730,934
Equity securities
Mutual funds	2,179		—		20		2,159
Total equity securities	2,179		—		20		2,159
Total available-for-sale securities	$	709,400	$	24,154	$	461	$	733,093



	Pass & Watch		Special Mention		Substandard		Doubtful		Loss		Total
	(Dollars in thousands)
September 30, 2019
Commercial	$	1,217,280	$	29,350	$	66,017	$	—	$	—	$	1,312,647
Energy	378,533		10,342		2,580		4,677		—		396,132
Commercial real estate	976,262		7,529		8,402		960		—		993,153
Construction and land development	527,582		—		—		—		—		527,582
Residential real estate	362,625		273		2,537		—		—		365,435
Equity lines of credit	22,192		—		—		—		—		22,192
Consumer installment	21,552		—		—		—		—		21,552
	$	3,506,026	$	47,494	$	79,536	$	5,637	$	—	$	3,638,693



	30-59 Days Past Due		60-89 Days Past Due		90 Days or More		Total Past Due		Current		Total Loans Receivable		Loans >= 90 Days and Accruing
	(Dollars in thousands)
September 30, 2019
Commercial	$	42,039	$	2,785	$	1,101	$	45,925	$	1,266,722	$	1,312,647	$	—
Energy	7,122		—		5,319		12,441		383,691		396,132		642
Commercial real estate	317		—		93		410		992,743		993,153		—
Construction and land development	12,345		—		—		12,345		515,237		527,582		—
Residential real estate	68		—		2,012		2,080		363,355		365,435		—
Equity lines of credit	—		—		—		—		22,192		22,192		—
Consumer installment	50		—		—		50		21,502		21,552		—
	$	61,941	$	2,785	$	8,525	$	73,251	$	3,565,442	$	3,638,693	$	642



			Unpaid
	Recorded Balance		Principal Balance		Specific Allowance
	(Dollars in thousands)
September 30, 2019
Loans without a specific valuation
Commercial	$	25,770	$	25,770	$	—
Energy	2,969		2,969		—
Commercial real estate	12,501		12,501		—
Construction and land development	—		—		—
Residential real estate	2,195		2,195		—
Equity lines of credit	—		—		—
Consumer installment	—		—		—
Loans with a specific valuation
Commercial	40,392		40,392		10,398
Energy	7,257		7,257		854
Commercial real estate	4,043		4,043		343
Construction and land development	—		—		—
Residential real estate	342		342		219
Equity lines of credit	—		—		—
Consumer installment	—		—		—
Total
Commercial	66,162		66,162		10,398
Energy	10,226		10,226		854
Commercial real estate	16,544		16,544		343
Construction and land development	—		—		—
Residential real estate	2,537		2,537		219
Equity lines of credit	—		—		—
Consumer installment	—		—		—
	$	95,469	$	95,469	$	11,814



	September 30, 2019					December 31, 2018
	Number of Loans	Outstanding Balance		Balance 90 days past due at any time during previous 12 months⁽¹⁾		Number of Loans	Outstanding Balance		Balance 90 days past due at any time during previous 12 months⁽¹⁾
	(Dollars in thousands)
Commercial	7	$	36,865	$	—	6	$	5,022	$	55
Energy	2	2,969		—		2	3,631		—
Commercial real estate	3	4,947		—		2	1,382		—
Construction and land development	—	—		—		—	—		—
Residential real estate	—	—		—		1	237		—
Equity lines of credit	—	—		—		—	—		—
Consumer installment	—	—		—		—	—		—
Total restructured loans	12	$	44,781	$	—	11	$	10,272	$	55
⁽¹⁾ Default is considered to mean 90 days or more past due as to interest or principal.



	September 30, 2019			December 31, 2018
Product	Number of Instruments	Notional Amount		Number of Instruments	Notional Amount
	(Dollars in thousands)
Back-to-back swaps	46	$	308,960	20	$	77,709



	Asset Derivatives					Liability Derivatives
	Balance Sheet	September 30,		December 31,		Balance Sheet	September 30,		December 31,
	Location	2019		2018		Location	2019		2018
	(Dollars in thousands)
Derivatives not designated as hedging instruments
Interest rate products	Other assets	$	13,735	$	1,051	Other liabilities	$	13,782	$	1,136



September 30, 2019
(Dollars in thousands)
							Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets and Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
Offsetting of derivative assets
Derivatives	$	13,735	$	—	$	13,735	$	—	$	—	$	13,735
Offsetting of derivative liabilities
Derivatives	$	13,782	$	—	$	13,782	$	—	$	—	$	13,782



	September 30, 2019
	Within One Year		One to Two Years		Two to Three Years		Three to Four Years		Four to Five Years		After Five Years		Total
	(Dollars in thousands)
Time deposits	$	822,439	$	216,486	$	105,559	$	52,055	$	25,215	$	—	$	1,221,754
Fed funds purchased & repurchase agreements	49,810		—		—		—		—		—		49,810
FHLB borrowings	24,000		76,500		16,500		39,704		—		151,100		307,804
Trust preferred securities⁽¹⁾	—		—		—		—		—		912		912
	$	896,249	$	292,986	$	122,059	$	91,759	$	25,215	$	152,012	$	1,580,280



	Actual				Minimum Capital Required - Basel III Phase-In Schedule				Minimum Capital Required - Basel III Fully Phase-In				Required to be Considered Well Capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio		Amount		Ratio
	(Dollars in thousands)
September 30, 2019
Total Capital to Risk-Weighted Assets
Consolidated	$	618,407	13.9	%	$	467,160	10.5	%	$	467,160	10.5	%	N/A		N/A
Bank	567,667		12.8		467,085		10.5		467,085		10.5		$	444,843	10.0	%
Tier I Capital to Risk-Weighted Assets
Consolidated	575,412		12.9		378,177		8.5		378,177		8.5		N/A		N/A
Bank	524,672		11.8		378,117		8.5		378,117		8.5		355,875		8.0
Common Equity Tier 1 to Risk-Weighted Assets
Consolidated	574,500		12.9		311,440		7.0		311,440		7.0		N/A		N/A
Bank	524,672		11.8		311,390		7.0		311,390		7.0		289,148		6.5
Tier I Capital to Average Assets
Consolidated	575,412		12.6		183,152		4.0		183,152		4.0		N/A		N/A
Bank	$	524,672	11.5	%	$	183,109	4.0	%	$	183,109	4.0	%	$	228,886	5.0	%
December 31, 2018
Total Capital to Risk-Weighted Assets
Consolidated	$	521,111	13.5	%	$	380,873	9.9	%	$	404,979	10.5	%	N/A		N/A
Bank	481,287		12.5		380,369		9.9		404,443		10.5		$	385,184	10.0	%
Tier I Capital to Risk-Weighted Assets
Consolidated	483,285		12.5		303,734		7.9		327,840		8.5		N/A		N/A
Bank	443,461		11.5		303,332		7.9		327,406		8.5		308,147		8.0
Common Equity Tier 1 to Risk-Weighted Assets
Consolidated	453,049		11.7		245,880		6.4		269,986		7.0		N/A		N/A
Bank	443,461		11.5		245,555		6.4		269,629		7.0		250,369		6.5
Tier I Capital to Average Assets
Consolidated	483,285		12.4		155,538		4.0		155,538		4.0		N/A		N/A
Bank	$	443,461	11.4	%	$	155,420	4.0	%	$	155,420	4.0	%	$	194,275	5.0	%



	Third			Second			First			Fourth			Third			Nine Months Ended
	Quarter			Quarter			Quarter			Quarter			Quarter			September 30,
	2019			2019			2019			2018			2018			2019			2018
Per Common Share Data
Basic earnings per share	$	0.22		$	0.21		$	0.20		$	0.22		$	0.15		$	0.63		$	0.23
Diluted earnings per share	0.21			0.20			0.20			0.22			0.15			0.61			0.22
Book value per share	11.59			11.00			10.63			10.21			9.43			11.59			9.43
Tangible book value per share⁽¹⁾	$	11.44		$	10.83		$	10.46		$	10.04		$	9.24		$	11.44		$	9.24
Selected Operating Ratios
Yield on securities - tax equivalent⁽²⁾	3.19		%	3.42		%	3.59		%	3.61		%	3.58		%	3.40		%	3.62		%
Yield on loans	5.53			5.66			5.75			5.56			5.35			5.64			5.25
Yield on interest-earning assets⁽²⁾	5.00			5.18			5.25			5.08			4.81			5.14			4.65
Cost of interest-bearing deposits	2.26			2.33			2.30			2.04			1.72			2.30			1.59
Cost of total deposits	1.94			1.99			1.96			1.70			1.42			1.96			1.35
Cost of funds	1.94			1.99			1.96			1.72			1.46			1.96			1.40
Net interest margin⁽²⁾	3.24			3.35			3.46			3.51			3.44			3.35			3.34
Return on average assets	0.89			0.86			0.91			1.06			0.70			0.89			0.37
Non-GAAP core operating return on average assets⁽³⁾	0.89			0.89			0.78			0.67			0.72			0.86			0.53
Return on average equity	7.58			7.78			7.98			9.03			6.68			7.76			3.51
Non-GAAP core operating return on average equity⁽⁴⁾	7.58			8.04			6.79			5.59			6.83			7.48			5.38
Non-interest expense to average assets	1.82			2.00			2.20			2.06			2.20			2.00			2.61
Efficiency ratio⁽⁵⁾	54.29			60.09			64.20			60.18			65.91			59.36			79.08
Non-GAAP core operating efficiency ratio⁽⁶⁾	54.29			59.40			64.20			62.61			65.54			59.13			72.24
Non-GAAP tax equivalent efficiency ratio⁽⁷⁾	53.43			59.10			63.10			59.02			64.31			58.38			76.82
Non-interest-bearing deposits to total deposits	14.05			14.28			14.36			15.10			17.99			14.05			17.99
Loans to deposits	99.23		%	96.74		%	96.40		%	95.41		%	97.49		%	99.23		%	97.49		%
Credit Quality Ratios
Allowance for loan losses to total loans	1.18		%	1.24		%	1.22		%	1.23		%	1.22		%	1.18		%	1.22		%
Nonperforming assets to total assets	1.00			1.18			0.36			0.43			0.35			1.00			0.35
Nonperforming loans to total loans	1.22			1.45			0.40			0.58			0.48			1.22			0.48
Allowance for loan losses to nonperforming loans	97.12			85.20			307.27			212.30			256.65			97.12			256.65
Net charge-offs (recoveries) to average loans⁽⁸⁾	0.53		%	—		%	0.09		%	0.03		%	(0.05		)%	0.21		%	0.09		%



	Three Months Ended												Nine Months Ended
	September		June		March			December			September
	30,		30,		31,			31,			30,		September 30,
	2019		2019		2019			2018			2018		2019			2018
	(Dollars in thousands)
Non-GAAP core operating income:
Net Income	$	10,384	$	9,439	$	9,350		$	10,334		$	6,354	$	29,173		$	9,256
Add: restructuring charges	—		—		—			(815		)	—		—			5,548
Less: tax effect⁽¹⁾	—		—		—			(210		)	—		—			1,591
Restructuring charges, net of tax	—		—		—			(605		)	—		—			3,957
Add: fixed asset impairments	—		424		—			—			171		424			171
Less: tax effect⁽²⁾	—		109		—			—			44		109			44
Fixed asset impairments, net of tax	—		315		—			—			127		315			127
Add: state tax credit⁽³⁾	—		—		(1,361		)	(3,129		)	—		(1,361		)	—
Non-GAAP core operating income	$	10,384	$	9,754	$	7,989		$	6,600		$	6,481	$	28,127		$	13,340
⁽¹⁾Represents the tax impact of the adjustments above at a tax rate of 25.73%, plus a permanent tax benefit associated with stock-based grants that were exercised prior to our former CEO’s departure.
⁽²⁾ Represents the tax impact of the adjustments above at a tax rate of 25.73%.
⁽³⁾ No tax effect.



Non-GAAP core operating efficiency ratio
Non-interest expense	$	21,172		$	21,960		$	22,631		$	20,166		$	19,875		$	65,763		$	65,589
Less: restructuring charges	—			—			—			(815		)	—			—			5,548
Non-GAAP non-interest expense (numerator)	21,172			21,960			22,631			20,981			19,875			65,763			60,041
Net interest income	35,786			34,874			33,605			32,315			28,968			104,265			78,053
Non-interest income	3,212			1,672			1,645			1,195			1,185			6,529			4,888
Add: fixed asset impairments	—			424			—			—			171			424			171
Non-GAAP operating revenue (denominator)	$	38,998		$	36,970		$	35,250		$	33,510		$	30,324		$	111,218		$	83,112
Efficiency ratio	54.29		%	60.09		%	64.20		%	60.18		%	65.91		%	59.36		%	79.08		%
Non-GAAP core operating efficiency ratio	54.29		%	59.40		%	64.20		%	62.61		%	65.54		%	59.13		%	72.24		%



	Period Ended
	September		June		March		December		September
	30,		30,		31,		31,		30,
	2019		2019		2019		2018		2018
	(Dollars in thousands except per share data)
Tangible common stockholders’ equity:
Stockholders’ equity	$	602,435	$	499,195	$	480,514	$	490,336	$	409,780
Less: goodwill and other intangible assets	7,720		7,745		7,770		7,796		7,821
Less: preferred stock	—		—		—		30,000		30,000
Tangible common stockholders’ equity	$	594,715	$	491,450	$	472,744	$	452,540	$	371,959
Tangible book value per share:
Tangible common stockholders’ equity	$	594,715	$	491,450	$	472,744	$	452,540	$	371,959
Shares outstanding at end of period	51,969,203		45,367,641		45,202,370		45,074,322		40,261,480
Book value per share	$	11.59	$	11.00	$	10.63	$	10.21	$	9.43
Tangible book value per share	$	11.44	$	10.83	$	10.46	$	10.04	$	9.24



	Three Months Ended									Nine Months Ended
	September 30, 2019 over 2018									September 30, 2019 over 2018
	Average Volume			Yield/Rate			Net Change⁽²⁾			Average Volume			Yield/Rate			Net Change⁽²⁾
	(Dollars in thousands)
Interest Income
Securities - taxable	$	227		$	(418	)	$	(191	)	$	1,364		$	(364	)	$	1,000
Securities - tax-exempt⁽¹⁾	(509		)	(237		)	(746		)	(3,000		)	(390		)	(3,390		)
Federal funds sold	(24		)	3			(21		)	(1		)	65			64
Interest-bearing deposits in other banks	199			69			268			(562		)	469			(93		)
Gross loans, net of unearned income	14,136			1,179			15,315			45,980			7,077			53,057
Total interest income⁽¹⁾	14,029			596			14,625			43,781			6,857			50,638
Interest Expense
Transaction deposits	97			256			353			277			761			1,038
Savings and money market deposits	1,397			2,017			3,414			3,024			8,644			11,668
Time deposits	2,728			1,509			4,237			7,209			4,867			12,076
Total interest-bearing deposits	4,222			3,782			8,004			10,510			14,272			24,782
FHLB and short-term borrowings	(241		)	172			(69		)	(195		)	415			220
Trust preferred securities, net of fair value adjustments	1			—			1			4			8			12
Total interest expense	3,982			3,954			7,936			10,319			14,695			25,014
Net interest income⁽¹⁾	$	10,047		$	(3,358	)	$	6,689		$	33,462		$	(7,838	)	$	25,624

⁽¹⁾ Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
⁽²⁾ The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.



	As of				Change
	September 30, 2019		December 31, 2018		$			%
	(Dollars in thousands)
Total assets	$	4,651,313	$	4,107,215	$	544,098		13.2	%
Cash and cash equivalents	128,126		216,541		(88,415		)	(40.8	)
Available-for-sale securities	733,093		663,678		69,415			10.5
Gross loans, net of unearned income	3,629,792		3,060,747		569,045			18.6
Total deposits	3,658,108		3,208,097		450,011			14.0
Federal funds purchased and repurchase agreements	49,810		75,406		(25,596		)	(33.9	)
Federal Home Loan Bank advances	307,804		312,985		(5,181		)	(1.7	)
Total stockholders’ equity	$	602,435	$	490,336	$	112,099		22.9	%



	September 30, 2019				December 31, 2018				September 30, 2019 vs. December 31, 2018
	Amount		% of Gross Loans		Amount		% of Gross Loans		$ increase (decrease)			% increase (decrease)
	(Dollars in thousands)
Commercial	$	1,312,647	36.1	%	1,134,414		36.9	%	$	178,233		15.7	%
Energy	396,132		10.9		358,283		11.7		37,849			10.6
Commercial real estate	993,153		27.3		846,561		27.6		146,592			17.3
Construction and land development	527,582		14.5		440,032		14.3		87,550			19.9
Residential real estate	365,435		10.0		246,275		8.0		119,160			48.4
Equity lines of credit	22,192		0.6		20,286		0.7		1,906			9.4
Consumer installment	21,552		0.6		23,528		0.8		(1,976		)	(8.4	)
Gross loans	3,638,693		100.0	%	3,069,379		100.0	%	569,314			18.5
Less: Allowance for loan losses	42,995				37,826				5,169			13.7
Less: Net deferred loan fees and costs	8,901				8,632				269			3.1
Net loans	$	3,586,797			$	3,022,921			$	563,876		18.7	%



	September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			September 30, 2018
	(Dollars in thousands)
Non-accrual loans	$	43,626		$	50,044		$	13,018		$	17,818		$	12,625
Loans past due 90 days or more and still accruing	642			238			—			—			443
Total nonperforming loans	44,268			50,282			13,018			17,818			13,068
Foreclosed assets held for sale	2,471			2,471			2,471			—			—
Impaired securities	—			—			—			—			—
Total nonperforming assets	$	46,739		$	52,753		$	15,489		$	17,818		$	13,068
Nonperforming assets to total assets	1.00		%	1.18		%	0.36		%	0.43		%	0.35		%
Nonperforming loans to total loans	1.22		%	1.45		%	0.40		%	0.58		%	0.48		%



	September 30, 2019
	Payments Due by Period
	Less than 1 Year		1 to 2 Years		2 to 5 Years		More than 5 Years		Total
	(Dollars in thousands)
Time deposits	$	822,439	$	216,486	$	182,832	$	—	$	1,221,757
Fed funds purchased & repurchase agreements	49,810		—		—		—		49,810
FHLB borrowings and line of credit	24,000		76,500		56,204		151,100		307,804
Trust preferred security	—		—		—		2,500		2,500
Operating leases	1,718		1,564		4,607		6,479		14,368
Total	$	897,967	$	294,550	$	243,643	$	160,079	$	1,596,239



Hypothetical Change in Interest Rate - Rate Shock
	September 30, 2019				September 30, 2018
Change in Interest Rate (Basis Points)	Percent change in net interest income		Percent change in fair value of equity		Percent change in net interest income		Percent change in fair value of equity
+300	12.0	%	(2.6	)%	10.3	%	(8.3	)%
+200	8.6		(0.4	)	7.1		(4.6	)
+100	4.7		0.5		3.8		(0.8	)
Base	—		—		—		—
-100	(5.0	)	0.1		(4.2	)	(1.1	)
-200	(11.3	)%	1.2	%	(6.2	)%	0.3	%



		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Exhibit	Filing Date/Period End Date
10.1	Amended Employment Agreement with George F. Jones, Jr. dated May 1, 2018†	S-1	10.1	July 18, 2019
10.2	Second Amendment to Employment Agreement with George F. Jones, Jr. dated March 20, 2019†	S-1	10.2	July 18, 2019
10.3	Third Amendment to Employment Agreement with George F. Jones, Jr. dated May 1, 2019†	S-1	10.3	July 18, 2019
10.4	Employment Agreement with David O’Toole dated May 1, 2015†	S-1	10.4	July 18, 2019
10.5	First Amendment to Employment Agreement with David O’Toole dated March 19, 2019†	S-1	10.5	July 18, 2019
10.6	Employment Agreement with Mike Maddox dated May 1, 2015†	S-1	10.6	July 18, 2019
10.7	First Amendment to Employment Agreement with Mike Maddox dated March 19, 2019†	S-1	10.7	July 18, 2019
10.8	Employment Agreement with Amy Fauss dated June 29, 2016†	S-1	10.8	July 18, 2019
10.9	First Amendment to Employment Agreement with Amy Fauss dated March 15, 2019†	S-1	10.9	July 18, 2019
10.10	Employment Agreement with Tom Robinson dated May 1, 2015†	S-1	10.10	July 18, 2019
10.11	First Amendment to Employment Agreement with Tom Robinson dated March 18, 2019†	S-1	10.11	July 18, 2019
10.12	Chairman Emeritus Agreement with Ron Baldwin dated April 26, 2018†	S-1	10.12	July 18, 2019
10.13	RSU Award Agreement with George F. Jones, Jr. dated February 28, 2019†	S-1	10.13	July 18, 2019
10.14	Performance Share Award Agreement with George F. Jones, Jr. dated February 28, 2019†	S-1	10.14	July 18, 2019
10.15	2018 Omnibus Equity Incentive Plan†	S-1	10.15	July 18, 2019
10.16	Form of Legacy RSU - New Market Founders Award†	S-1	10.16	July 18, 2019
10.17	Form of Legacy EIP 2018 RSU Award Agreement†	S-1	10.17	July 18, 2019
10.18	Form of Legacy SAR Award Agreement†	S-1	10.18	July 18, 2019
10.19	Form of EEIP Legacy RSU Award Agreement†	S-1	10.19	July 18, 2019
10.20	Form of RSU Award Agreement†	S-1	10.20	July 18, 2019
10.21	Form of 2019 RSU Award Agreement†	S-1	10.21	July 18, 2019
10.22	Form of 2019 Performance Share Award Agreement†	S-1	10.22	July 18, 2019
10.23	Form of Director Restricted Stock Award†	S-1	10.23	July 18, 2019
10.24	Form of Indemnification Agreement†	S-1	10.24	July 18, 2019
10.25	Director Deferred Fee Program†	S-1	10.25	July 18, 2019

~~Large accelerated filer~~

~~Accelerated filer~~

Non-accelerated filer

~~Smaller reporting company~~

~~Emerging growth company~~