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dummy:Item dummy:Securities
 
 
 
UNITED STATES
SECURITIES AND
 
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
10-Q
 
☒
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended
June 30, 2023
 
or
☐
 
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
 
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
,
KS
66211
(Address of principal executive offices)
(Zip Code)
(
913
)
901-4516
 
(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
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
 
☐
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 growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☒
Non-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 of the Exchange Act). Yes
 
☐
 
No
 
☒
As of August 1, 2023, the registrant had
49,290,990
 
shares of common stock, par value $0.01, outstanding.
 
 
 
 
 
 
 
 
 
3
Forward-Looking Information
All statements contained in this quarterly report on Form 10-Q that do not directly
 
and exclusively relate to historical facts
constitute forward-looking statements. These statements are often, but not always, made
 
through the use of words or phrases such as
“may,” “might,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,”
 
“will,” “anticipate,” “seek,” “estimate,” “intend,”
“plan,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,”
 
“annualized,” “position” and “outlook,” or the negative of 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 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 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; fluctuations in fair value
 
of our investments due to factors 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 or other external events; changes in 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; the ability of our Board to issue our preferred stock; risks
 
inherent with proposed business acquisitions and
the failure to achieve projected synergies; or other external events.
 
Additional discussion of these and other risk factors can be found in
our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”), filed with the Securities and
Exchange Commission (“SEC”) on March 3, 2023, and in our other filings
 
with the SEC.
 
Except as 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
 
changes in our business, results of operations or financial condition over
time. Given these risks and uncertainties, readers are cautioned not to place undue reliance
 
on such forward-looking statements.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements – Unaudited
4
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED
 
FINANCIAL STATEMENTS
CROSSFIRST BANKSHARES, INC.
Consolidated Statements of Financial Condition – Unaudited
June 30, 2023
December 31, 2022
(Dollars in thousands)
Assets
Cash and cash equivalents
$
342,497
$
300,138
Available-for-sale securities - taxable
297,097
198,808
Available-for-sale securities - tax-exempt
446,803
488,093
Loans, net of unearned fees
5,796,599
5,372,729
Allowance for credit losses on loans
67,567
61,775
Loans, net of the allowance for credit losses on loans
5,729,032
5,310,954
Premises and equipment, net
68,539
65,984
Restricted equity securities
13,060
12,536
Interest receivable
33,303
29,507
Foreclosed assets held for sale
-
1,130
Goodwill and other intangible assets, net
27,457
29,081
Bank-owned life insurance
69,929
69,101
Other
92,461
95,754
Total assets
$
7,120,178
$
6,601,086
Liabilities and stockholders’ equity
Deposits
Non-interest-bearing
$
928,098
$
1,400,260
Savings, NOW and money market
3,333,514
3,305,481
Time
1,838,455
945,567
Total deposits
6,100,067
5,651,308
Federal Home Loan Bank advances
262,708
218,111
Other borrowings
14,320
35,457
Interest payable and other liabilities
91,600
87,611
Total liabilities
6,468,695
5,992,487
Stockholders’ equity
Preferred stock, $
0.01
 
par value:
 
Authorized -
15,000
 
shares, issued -
7,750
 
shares at
June 30, 2023 and
no
 
shares at December 31, 2022
-
-
Common stock, $
0.01
 
par value:
 
Authorized -
200,000,000
 
shares, issued -
53,241,885
 
and
53,036,613
 
shares at June 30, 2023 and December 31, 2022,
respectively
532
530
Treasury stock, at cost:
 
4,588,398
 
shares held at June 30, 2023 and December 31,
2022
(64,127)
(64,127)
Additional paid-in capital
539,793
530,658
Retained earnings
238,147
206,095
Accumulated other comprehensive loss
(62,862)
(64,557)
Total stockholders’ equity
651,483
608,599
Total liabilities and stockholders’ equity
$
7,120,178
$
6,601,086
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements – Unaudited
5
CROSSFIRST BANKSHARES, INC.
Consolidated Statements of Operations – Unaudited
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
(Dollars in thousands except per share data)
Interest Income
Loans, including fees
$
98,982
$
47,327
$
188,600
$
90,055
Available-for-sale securities - taxable
2,622
1,086
4,471
2,130
Available-for-sale securities - tax-exempt
3,571
3,845
7,365
7,537
Deposits with financial institutions
1,609
369
3,623
521
Dividends on bank stocks
364
213
626
357
Total interest income
107,148
52,840
204,685
100,600
Interest Expense
Deposits
48,663
4,732
85,388
8,243
Fed funds purchased and repurchase agreements
-
74
46
74
Federal Home Loan Bank Advances
3,734
1,294
6,125
2,403
Other borrowings
212
31
366
56
Total interest expense
52,609
6,131
91,925
10,776
Net Interest Income
54,539
46,709
112,760
89,824
Provision for Credit Losses
2,640
2,135
7,061
1,510
Net Interest Income after Provision for Credit Losses
51,899
44,574
105,699
88,314
Non-Interest Income
 
 
 
 
Service charges and fees on customer accounts
2,110
1,546
3,939
2,954
ATM and credit card interchange income
1,213
1,521
2,477
4,185
Realized gains (losses) on available-for-sale securities
-
(12)
63
(38)
Gain on sale of loans
1,205
-
1,392
-
Gains (losses) on equity securities, net
6
(71)
16
(174)
Income from bank-owned life insurance
418
407
829
795
Swap fees and credit valuation adjustments, net
84
12
174
130
Other non-interest income
743
798
1,310
1,291
Total non-interest income
5,779
4,201
10,200
9,143
Non-Interest Expense
 
 
 
 
Salaries and employee benefits
24,061
17,095
46,683
35,036
Occupancy
3,054
2,622
6,028
5,115
Professional fees
970
1,068
3,588
1,873
Deposit insurance premiums
1,881
713
3,412
1,450
Data processing
1,057
1,160
2,299
1,972
Advertising
649
757
1,401
1,449
Software and communication
1,655
1,198
3,306
2,468
Foreclosed assets, net
(21)
15
128
(38)
Other non-interest expense
3,304
4,555
7,035
7,505
Core deposit intangible amortization
802
20
1,624
39
Total non-interest expense
37,412
29,203
75,504
56,869
Net Income Before Taxes
20,266
19,572
40,395
40,588
Income tax expense
$
4,219
$
4,027
$
8,240
$
8,215
Net Income
$
16,047
$
15,545
$
32,155
$
32,373
Basic Earnings Per Common Share
$
0.33
$
0.31
$
0.66
$
0.65
Diluted Earnings Per Common Share
$
0.33
$
0.31
$
0.65
$
0.64
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements – Unaudited
6
CROSSFIRST BANKSHARES, INC.
Consolidated Statements of Comprehensive Income (Loss) – Unaudited
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
(Dollars in thousands)
Net Income
$
16,047
$
15,545
$
32,155
$
32,373
Other Comprehensive Income (Loss)
Unrealized (loss) gain on available-for-sale securities
(10,430)
(39,026)
4,521
(97,982)
Less: income tax (benefit) expense
(2,482)
(9,554)
1,175
(23,987)
Unrealized (loss) gain on available-for-sale securities, net of
income tax
(7,948)
(29,472)
3,346
(73,995)
Reclassification adjustment for realized (loss) gain included in
income
-
(12)
63
(38)
Less: income tax expense (benefit)
-
(3)
15
(9)
Less: reclassification adjustment for realized (loss) gain included
in income, net of income tax
-
(9)
48
(29)
Unrealized (loss) gain on cash flow hedges
(3,632)
1,385
(2,092)
4,040
Less: income tax expense (benefit)
(865)
339
(496)
992
Unrealized (loss) gain on cash flow hedges, net of income tax
(2,767)
1,046
(1,596)
3,048
Reclassification adjustment for interest income included in
income
9
-
9
-
Less: income tax expense
2
-
2
-
Less: reclassification adjustment for interest income included in
income, net of income tax
7
-
7
-
Other comprehensive (loss) income
 
(10,722)
(28,417)
1,695
(70,918)
Comprehensive Income (Loss)
$
5,325
(12,872)
33,850
(38,545)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements – Unaudited
7
CROSSFIRST BANKSHARES, INC.
Consolidated Statements of Stockholders’ Equity – Unaudited
Preferred Stock
Common Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shares
Amount
Shares
Amount
(Dollars in thousands)
Balance at March 31, 2022
-
$
-
49,728,253
$
529
$
(45,109)
$
527,468
$
161,323
$
(21,012)
$
623,199
Net income
-
-
-
-
-
-
15,545
-
15,545
Other comprehensive loss - available-for-
sale securities
-
-
-
-
-
-
-
(29,463)
(29,463)
Other comprehensive gain - cash flow
hedges
-
-
-
-
-
-
-
1,046
1,046
Issuance of shares from equity-based
awards
-
-
45,689
-
-
(40)
-
-
(40)
Open market common share repurchases
-
-
(237,993)
-
(3,392)
-
-
-
(3,392)
Stock-based compensation
-
-
-
-
-
1,120
-
-
1,120
Balance at June 30, 2022
-
$
-
49,535,949
$
529
$
(48,501)
$
528,548
$
176,868
$
(49,429)
$
608,015
Preferred Stock
Common Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shares
Amount
Shares
Amount
(Dollars in thousands)
Balance at March 31, 2023
7,750
$
-
48,600,618
$
532
$
(64,127)
$
539,023
$
222,203
$
(52,140)
$
645,491
Net income
-
-
-
-
-
-
16,047
-
16,047
Other comprehensive loss - available-for-
sale securities
-
-
-
-
-
-
-
(7,948)
(7,948)
Other comprehensive loss - cash flow
hedges
-
-
-
-
-
-
(2,774)
(2,774)
Preferred dividends $
13.33
 
per share
-
-
-
 
-
-
(103)
-
(103)
Issuance of shares from equity-based
awards
-
-
52,869
-
-
(77)
-
-
(77)
Warrants exercised, cash settled
-
-
-
-
-
(418)
-
-
(418)
Stock-based compensation
-
-
-
-
-
1,265
-
-
1,265
Balance June 30, 2023
7,750
$
-
48,653,487
$
532
$
(64,127)
$
539,793
$
238,147
$
(62,862)
$
651,483
Preferred Stock
Common Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shares
Amount
Shares
Amount
(Dollars in thousands)
Balance at December 31, 2021
-
$
-
50,450,045
$
526
$
(28,347)
$
526,806
$
147,099
$
21,489
$
667,573
Adoption of ASU 2016-13
-
-
-
-
-
-
(2,610)
-
(2,610)
Net income
-
-
-
-
-
-
32,373
-
32,373
Other comprehensive loss - available-for-
sale securities
-
-
-
-
-
-
-
(73,966)
(73,966)
Other comprehensive gain - cash flow
hedges
-
-
-
-
 
-
-
3,048
3,048
Issuance of shares from equity-based
awards
-
-
382,229
3
-
(493)
-
-
(490)
Open market common share repurchases
-
-
(1,296,325)
-
(20,154)
-
-
-
(20,154)
Employee receivables from sale of stock
-
-
-
-
-
-
6
-
6
Stock-based compensation
-
-
-
-
-
2,235
-
-
2,235
Balance at June 30, 2022
-
$
-
49,535,949
$
529
$
(48,501)
$
528,548
$
176,868
$
(49,429)
$
608,015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements – Unaudited
8
Preferred Stock
Common Stock
Treasury
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Shares
Amount
Shares
Amount
(Dollars in thousands)
Balance at December 31, 2022
-
$
-
48,448,215
$
530
$
(64,127)
$
530,658
$
206,095
$
(64,557)
$
608,599
Net income
-
-
-
-
-
-
32,155
-
32,155
Other comprehensive gain -available-for-
sale securities
-
-
-
-
-
-
-
3,298
3,298
Other comprehensive loss - cash flow
hedges
-
-
-
-
-
-
(1,603)
(1,603)
Issuance of preferred shares
7,750
-
-
-
-
7,750
-
-
7,750
Preferred dividends $
13.33
 
per share
-
-
-
-
-
-
(103)
-
(103)
Issuance of shares from equity-based
awards
-
-
205,272
2
-
(700)
-
-
(698)
Warrants exercised, cash settled
-
-
-
-
-
(418)
-
-
(418)
Stock-based compensation
-
-
-
-
-
2,503
-
-
2,503
Balance June 30, 2023
7,750
$
-
48,653,487
$
532
$
(64,127)
$
539,793
$
238,147
$
(62,862)
$
651,483
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Consolidated Financial Statements – Unaudited
9
CROSSFIRST BANKSHARES, INC.
Consolidated Statements of Cash Flows – Unaudited
Six Months Ended
June 30,
2023
2022
(Dollars in thousands)
Operating Activities
Net income
$
32,155
$
32,373
Adjustments to reconcile net income to cash provided by
 
operating activities:
 
 
Depreciation and amortization
4,642
2,474
Provision for credit losses
7,061
1,510
Accretion of discounts on loans
(1,371)
-
Accretion of discounts and amortization of premiums on securities
1,732
2,192
Equity based compensation
2,503
2,235
Gain on disposal of fixed assets
(67)
-
Loss on sale of foreclosed assets and related impairments
80
-
Gain on sale of loans
(1,392)
-
Origination of loans held for sale
(23,550)
-
Proceeds from sales of loans held for sale
23,368
-
Deferred income taxes
(79)
2,557
Net increase in bank owned life insurance
(829)
(795)
Net realized (gains) losses on available-for-sale securities
(63)
38
Dividends on FHLB stock
(625)
-
Changes in:
Interest receivable
(3,796)
(1,886)
Other assets
3,057
3,780
Other liabilities
3,373
(21,268)
Net cash provided by operating activities
46,199
23,210
Investing Activities
 
 
Net change in loans
(426,834)
(274,206)
Purchases of available-for-sale securities
(121,251)
(73,399)
Proceeds from maturities of available-for-sale securities
11,605
22,513
Proceeds from sale of available-for-sale securities
54,572
-
Proceeds from the sale of foreclosed assets
1,050
237
Purchase of premises and equipment
(5,251)
(1,135)
Proceeds from the sale of premises and equipment and related
 
insurance claims
67
13
Purchase of restricted equity securities
(11,953)
(4,208)
Proceeds from sale of restricted equity securities
12,062
1,544
Net cash used in investing activities
(485,933)
(328,641)
Financing Activities
Net decrease in demand deposits, savings, NOW and
 
money market accounts
(444,129)
(47,861)
Net increase in time deposits
892,782
108,684
Net (decrease) increase in fed funds purchased and repurchase agreements
(20,000)
6
Proceeds from Federal Home Loan Bank advances
22,414
50,000
Repayment of Federal Home Loan Bank advances
(70,201)
(130,000)
Net proceeds of Federal Home Loan Bank line of credit
94,696
140,000
Proceeds from issuance of preferred shares, net of issuance
 
cost
7,750
-
Issuance of common shares, net of issuance cost
2
170
Proceeds from employee stock purchase plan
167
364
Repurchase of common stock
-
(20,154)
Acquisition of common stock for tax withholding obligations
(867)
(833)
Settlement of warrants
(418)
-
Dividends paid on preferred stock
(103)
-
Net decrease in employee receivables
-
6
Net cash provided by financing activities
482,093
100,382
Increase (Decrease) in Cash and Cash Equivalents
42,359
(205,049)
Cash and Cash Equivalents, Beginning of Period
300,138
482,727
Cash and Cash Equivalents, End of Period
$
342,497
$
277,678
Supplemental Cash Flows Information
 
 
Interest paid
83,157
10,862
Income taxes paid
7,754
3,880
 
See Notes to Consolidated Financial Statements – Unaudited
10
 
11
CROSSFIRST BANKSHARES, INC.
Notes to Consolidated Financial Statements – Unaudited
Note 1: Nature of Operations and Summary of Significant Accounting Policies
 
 
Organization and Nature of Operations
 
 
 
 
 
 
 
 
CrossFirst Bankshares, Inc. (the “Company”) is a bank holding company whose principal activities
 
are the ownership and
management of its wholly-owned subsidiary, CrossFirst Bank (the
 
“Bank”). In addition, the Bank has
three
 
subsidiaries including
CrossFirst Investments, Inc. (“CFI”), which holds investments in marketable
 
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 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; and (xii) Clayton, New Mexico.
 
As described in "Note 16: Subsequent Events" below, the Company
added one full-service branch in Tucson, Arizona to the Company’s footprint on August 1, 2023 in connection with an acquisition
 
 
Basis of Presentation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, the Bank, CFI, CFBSA I, LLC
and CFBSA II, LLC. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”) and where applicable,
 
with general practices in the 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 financial statements under GAAP applicable to annual periods and accordingly should be read
 
in conjunction with the financial
information contained in the Company's most recent Annual Report on Form 10-K. The unaudited consolidated financial statements
reflect all adjustments which are, in the 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 in
consolidation. Certain reclassifications of prior years' amounts are made whenever
 
necessary to conform to current period presentation.
The results of operations for the interim period are not necessarily indicative of the
 
results that may be expected for the 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 changes in market and economic
conditions, it is possible that actual results could differ significantly from those estimates.
 
The Company's significant accounting policies followed in the preparation of
 
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 $
11
 
million and $
13
 
million while related party deposits totaled $
85
 
million and $
92
 
million at June 30, 2023 and December 31,
2022, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
12
Note 2: Securities
The amortized cost and approximate fair values, together with gross unrealized
 
gains and losses, of period end available-for-sale
securities consisted of the following:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Approximate
Fair Value
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential
$
297,941
$
216
$
25,224
$
272,933
Collateralized mortgage obligations - GSE residential
10,256
-
740
9,516
State and political subdivisions
504,236
464
51,751
452,949
Corporate bonds
9,749
-
1,247
8,502
Total available-for-sale securities
$
822,182
$
680
$
78,962
$
743,900
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 $
16
 
million and $
22
 
million at June 30, 2023 and December 31, 2022,
respectively.
As of June 30, 2023 and December 31, 2022, the available-for-sale securities had $
7
 
million and $
6
 
million, respectively of
accrued interest, excluded from the amortized cost basis, and presented
 
in “interest receivable” on the consolidated statements of
financial condition.
 
The following tables summarize the gross realized gains and losses from sales or maturities
 
of available-for-sale securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
For the Six Months Ended
June 30, 2023
June 30, 2023
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gain
 
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gain
(Dollars in thousands)
Available-for-sale securities
$
74
$
(74)
$
-
$
267
$
(204)
$
63
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
For the Six Months Ended
June 30, 2022
June 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
$
2
$
(14)
$
(12)
$
3
$
(41)
$
(38)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
13
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, aggregated by investment class and length of time that
individual securities have been in a continuous unrealized loss position
 
at June 30, 2023 and December 31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 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
Mortgage-backed -
GSE residential
$
100,527
$
1,751
28
$
131,007
$
23,473
41
$
231,534
$
25,224
69
Collateralized
mortgage obligations
- GSE residential
-
-
-
9,515
740
19
9,515
740
19
State and political
subdivisions
123,696
1,366
111
275,023
50,385
195
398,719
51,751
306
Corporate bonds
4,380
621
1
4,122
626
4
8,502
1,247
5
Total temporarily
impaired securities
$
228,603
$
3,738
140
$
419,667
$
75,224
259
$
648,270
$
78,962
399
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
41
$
66,036
$
14,756
16
$
157,965
$
25,166
57
Collateralized
mortgage obligations
- GSE residential
10,636
733
18
251
10
1
10,887
743
19
State and political
subdivisions
350,884
36,697
266
52,519
20,743
40
403,403
57,440
306
Corporate bonds
9,210
552
5
-
-
-
9,210
552
5
Total temporarily
impaired securities
$
462,659
$
48,392
330
$
118,806
$
35,509
57
$
581,465
$
83,901
387
Based on the Company’s evaluation at each respective period end,
 
we recorded
no
 
credit loss impairment during the six-months
ended June 30, 2023 or the year ended December 31, 2022.
 
The unrealized losses in the Company’s investment portfolio were caused
by interest rate changes.
 
As of June 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.
 
 
 
 
 
 
 
14
The amortized cost, fair value, and weighted average yield of available-for
 
-sale securities at June 30, 2023, by contractual
maturity, are shown below:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
Within
After One to
After Five to
After
One Year
Five Years
Ten Years
Ten Years
Total
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential
(1)
Amortized cost
$
-
$
14
$
1,053
$
296,874
$
297,941
Estimated fair value
$
-
$
13
$
965
$
271,955
$
272,933
Weighted average yield
(2)
-
%
4.82
%
2.40
%
3.29
%
3.29
%
Collateralized mortgage obligations -
GSE residential
(1)
Amortized cost
$
-
$
-
$
2,296
$
7,960
$
10,256
Estimated fair value
$
-
$
-
$
2,165
$
7,351
$
9,516
Weighted average yield
(2)
-
%
-
%
2.77
%
2.34
%
2.43
%
State and political subdivisions
Amortized cost
$
1,068
$
5,900
$
91,244
$
406,024
$
504,236
Estimated fair value
$
1,076
$
5,966
$
90,275
$
355,632
$
452,949
Weighted average yield
(2)
3.55
%
4.32
%
3.10
%
2.72
%
2.81
%
Corporate bonds
Amortized cost
$
-
$
144
$
9,605
$
-
$
9,749
Estimated fair value
$
-
$
140
$
8,362
$
-
$
8,502
Weighted average yield
(2)
-
%
4.29
%
5.70
%
-
%
5.68
%
Total available-for-sale securities
Amortized cost
$
1,068
$
6,058
$
104,198
$
710,858
$
822,182
Estimated fair value
$
1,076
$
6,119
$
101,767
$
634,938
$
743,900
Weighted average yield
(2)
3.55
%
4.32
%
3.33
%
2.96
%
3.01
%
(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 $
4
 
million of private equity investments as well as $
13
 
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 three 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 same issuer. No such events occurred
 
during the three- or six-month period ended June 30, 2023.
 
 
 
 
 
 
 
 
 
15
The following is a summary of the unrealized and realized gains and losses on equity
 
securities recognized in net income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 30,
 
June 30,
 
2023
2022
2023
2022
(Dollars in thousands)
Net gains (losses) recognized during the reporting period on equity securities
$
6
$
(71)
$
16
$
(174)
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
$
6
$
(71)
$
16
$
(174)
 
 
 
 
 
16
Note 3:
 
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 $
23
 
million and $
24
 
million as of June 30, 2023 and December 31, 2022, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
December 31, 2022
Amount
% of Loans
Amount
% of Loans
(Dollars in thousands)
Commercial and industrial
$
2,057,912
36
%
$
1,974,932
37
%
Energy
232,863
4
173,218
3
Commercial real estate - owner-occupied
542,827
9
437,119
8
Commercial real estate - non-owner-occupied
2,480,282
42
2,314,600
43
Residential real estate
439,434
8
439,367
8
Consumer
43,281
1
33,493
1
Loans, net of unearned fees
5,796,599
100
%
5,372,729
100
%
Less: allowance for credit losses on loans
(67,567)
(61,775)
Loans, net of the allowance for credit losses on loans
$
5,729,032
$
5,310,954
 
Accrued interest of $
26
 
million and $
23
 
million at June 30, 2023 and December 31, 2022, respectively, presented
 
in “interest receivable” on the consolidated statements of
financial condition is excluded from the carrying value disclosed in
 
the above table.
 
The Company aggregates the loan 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 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.
 
 
17
 
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 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. For example, the outstanding commercial and industrial
 
loans and commercial and industrial lines of credit loan segments as of quarter
 
-end are considered cohorts.
The cohort is then tracked for losses over the remaining life of loans or until the pool
 
is exhausted. The Company used a 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 loan segments.
 
18
 
 
Qualitative
 
– The Company uses qualitative factors to adjust the historical loss factors for current conditions. The
 
Company primarily uses the following qualitative factors:
◾
The nature and volume of changes in risk ratings;
◾
The volume and severity of past due loans;
◾
The volume of non-accrual loans;
◾
The nature and volume of the loan portfolio, including the 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 the current condition qualitative adjustments, the Company uses the
 
Federal Reserve’s unemployment forecast to adjust the ACL based on forward looking
guidance. The Federal Reserve’s unemployment forecast extends three-years
 
and is eventually reverted to the mean of six percent by year 10.
 
Internal Credit Risk Ratings
The Company 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 ongoing basis. The rating assigned to a loan reflects the risks
 
posed by the borrower’s expected performance and the transaction’s structure.
 
Performance metrics
used to determine a risk rating include, but are not limited to, cash flow adequacy,
 
liquidity, and collateral. A description of the loan 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.
 
19
●
Loss (risk rating 8)
- Credits which are considered uncollectible or of such little value that their continuance
 
as a bankable asset is not warranted.
 
The following tables present the credit risk profile of the Company’s loan portfolio
 
based on internal rating categories and loan segments as of June 30, 2023 and December
31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
$
283,048
$
306,846
$
207,224
$
60,219
$
44,139
$
43,384
$
946,803
$
37,305
$
1,928,968
Special mention
11,750
5,809
16,002
2,310
758
305
34,185
6,785
77,904
Substandard - accrual
1,419
64
67
157
983
844
20,303
17,610
41,447
Substandard - non-
accrual
-
-
(8)
57
-
-
8,511
1,033
9,593
Doubtful
-
-
-
-
-
-
-
-
-
Total
$
296,217
$
312,719
$
223,285
$
62,743
$
45,880
$
44,533
$
1,009,802
$
62,733
$
2,057,912
Energy
Pass
$
-
$
7,278
$
105
$
192
$
-
$
-
$
224,677
$
143
$
232,395
Special mention
-
-
-
-
-
-
-
-
-
Substandard - accrual
-
-
-
-
-
-
-
-
-
Substandard - non-
accrual
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
468
-
468
Total
$
-
$
7,278
$
105
$
192
$
-
$
-
$
225,145
$
143
$
232,863
Commercial real estate
- owner-occupied
Pass
$
43,160
$
77,915
$
134,076
$
59,154
$
49,994
$
37,095
$
72,630
$
39,009
$
513,033
Special mention
10,311
5,847
5,905
431
1,196
5,267
-
-
28,957
Substandard - accrual
65
-
203
407
89
73
-
-
837
Substandard - non-
accrual
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total
$
53,536
$
83,762
$
140,184
$
59,992
$
51,279
$
42,435
$
72,630
$
39,009
$
542,827
 
20
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
$
292,061
$
915,099
$
298,948
$
147,121
$
79,500
$
80,385
$
535,380
$
89,707
$
2,438,201
Special mention
-
-
7,528
137
16,398
4,154
-
33
28,250
Substandard - accrual
10,092
365
-
-
-
314
439
-
11,210
Substandard - non-
accrual
-
-
2,448
173
-
-
-
-
2,621
Doubtful
-
-
-
-
-
-
-
-
-
Total
$
302,153
$
915,464
$
308,924
$
147,431
$
95,898
$
84,853
$
535,819
$
89,740
$
2,480,282
Residential real estate
Pass
$
19,066
$
76,723
$
86,898
$
115,256
$
39,976
$
67,055
$
26,962
$
-
$
431,936
Special mention
253
-
3,560
165
210
-
-
-
4,188
Substandard - accrual
-
-
-
3,125
-
-
-
-
3,125
Substandard - non-
accrual
-
-
-
-
-
-
-
185
185
Doubtful
-
-
-
-
-
-
-
-
-
Total
$
19,319
$
76,723
$
90,458
$
118,546
$
40,186
$
67,055
$
26,962
$
185
$
439,434
Consumer
Pass
$
8,007
$
6,360
$
621
$
113
$
245
$
123
$
27,776
$
-
$
43,245
Special mention
-
-
-
-
-
7
-
-
7
Substandard - accrual
-
-
-
29
-
-
-
-
29
Substandard - non-
accrual
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Total
$
8,007
$
6,360
$
621
$
142
$
245
$
130
$
27,776
$
-
$
43,281
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
$
645,342
$
1,390,221
$
727,872
$
382,055
$
213,854
$
228,042
$
1,834,228
$
166,164
$
5,587,778
Special mention
22,314
11,656
32,995
3,043
18,562
9,733
34,185
6,818
139,306
Substandard - accrual
11,576
429
270
3,718
1,072
1,231
20,742
17,610
56,648
Substandard - non-
accrual
-
-
2,440
230
-
-
8,511
1,218
12,399
Doubtful
-
-
-
-
-
-
468
-
468
Total
$
679,232
$
1,402,306
$
763,577
$
389,046
$
233,488
$
239,006
$
1,898,134
$
191,810
$
5,796,599
 
22
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
86
49,861
41
98,045
Substandard - accrual
290
677
1,647
1,330
740
299
10,805
21,166
36,954
Substandard - non-
accrual
-
104
-
6
1,383
-
6,479
-
7,972
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
12
-
-
12
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
-
1,476
Substandard - non-
accrual
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
618
-
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
98
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
 
23
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
82
60
253
-
992
12,849
Substandard - non-
accrual
-
2,479
-
-
-
-
-
-
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
34
-
3,148
-
-
-
-
-
3,182
Substandard - non-
accrual
-
-
-
-
-
-
-
191
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
$
6
$
21,173
$
-
$
33,448
Special mention
-
-
-
-
8
-
-
-
8
Substandard - accrual
-
-
32
-
5
-
-
-
37
Substandard - non-
accrual
-
-
-
-
-
-
-
-
-
Doubtful
-
-
-
-
-
-
-
-
-
Loss
-
-
-
-
-
-
-
-
-
Total
$
7,917
$
1,347
$
2,643
$
265
$
142
$
6
$
21,173
$
-
$
33,493
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
24
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
-
6
1,383
-
6,479
191
10,642
Doubtful
-
-
-
-
-
-
618
-
618
Loss
-
-
-
-
-
12
-
-
12
Total
$
1,502,872
$
980,869
$
457,711
$
253,347
$
177,797
$
156,029
$
1,664,787
$
179,317
$
5,372,729
 
 
25
 
Loan Portfolio Aging Analysis
The following tables present the Company’s loan portfolio aging analysis as of June
 
30, 2023 and December 31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
$
-
$
-
$
2
$
-
$
-
$
-
$
2,946
$
152
$
3,100
60-89 days
-
31
80
-
-
-
1,536
843
2,490
Greater than 90 days
-
7
-
205
-
-
7,293
-
7,505
Total past due
-
38
82
205
-
-
11,775
995
13,095
Current
296,217
312,681
223,203
62,538
45,880
44,533
998,027
61,738
2,044,817
Total
$
296,217
$
312,719
$
223,285
$
62,743
$
45,880
$
44,533
$
1,009,802
$
62,733
$
2,057,912
Greater than 90 days
and accruing
$
-
$
7
$
-
$
148
$
-
$
-
$
242
$
-
$
397
Energy
30-59 days
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
60-89 days
-
-
-
-
-
-
-
-
-
Greater than 90 days
-
-
-
-
-
-
468
-
468
Total past due
-
-
-
-
-
-
468
-
468
Current
-
7,278
105
192
-
-
224,677
143
232,395
Total
$
-
$
7,278
$
105
$
192
$
-
$
-
$
225,145
$
143
$
232,863
Greater than 90 days
and accruing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
 
26
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
$
-
$
-
$
203
$
-
$
-
$
-
$
-
$
-
$
203
60-89 days
-
-
-
-
-
-
-
-
-
Greater than 90 days
-
-
-
-
-
-
-
-
-
Total past due
-
-
203
-
-
-
-
-
203
Current
53,536
83,762
139,981
59,992
51,279
42,435
72,630
39,009
542,624
Total
$
53,536
$
83,762
$
140,184
$
59,992
$
51,279
$
42,435
$
72,630
$
39,009
$
542,827
Greater than 90 days
and accruing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Commercial real estate - non-owner-occupied
30-59 days
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
60-89 days
-
-
6,029
-
-
-
-
-
6,029
Greater than 90 days
-
-
-
-
-
-
-
-
-
Total past due
-
-
6,029
-
-
-
-
-
6,029
Current
302,153
915,464
302,895
147,431
95,898
84,853
535,819
89,740
2,474,253
Total
$
302,153
$
915,464
$
308,924
$
147,431
$
95,898
$
84,853
$
535,819
$
89,740
$
2,480,282
Greater than 90 days
and accruing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
Residential real estate
30-59 days
$
-
$
-
$
-
$
-
$
-
$
-
$
176
$
-
$
176
60-89 days
-
-
1,320
-
-
-
-
-
1,320
Greater than 90 days
-
-
-
-
-
-
-
-
-
Total past due
-
-
1,320
-
-
-
176
-
1,496
Current
19,319
76,723
89,138
118,546
40,186
67,055
26,786
185
437,938
Total
$
19,319
$
76,723
$
90,458
$
118,546
$
40,186
$
67,055
$
26,962
$
185
$
439,434
Greater than 90 days
and accruing
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
 
27
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
-
-
1
14
-
-
-
-
15
Greater than 90 days
-
36
-
-
-
-
-
-
36
Total past due
-
36
1
14
-
-
-
-
51
Current
8,007
6,324
620
128
245
130
27,776
-
43,230
Total
$
8,007
$
6,360
$
621
$
142
$
245
$
130
$
27,776
$
-
$
43,281
Greater than 90 days
and accruing
$
-
$
36
$
-
$
-
$
-
$
-
$
-
$
-
$
36
Total
30-59 days
$
-
$
-
$
205
$
-
$
-
$
-
$
3,122
$
152
$
3,479
60-89 days
-
31
7,430
14
-
-
1,536
843
9,854
Greater than 90 days
-
43
-
205
-
-
7,761
-
8,009
Total past due
-
74
7,635
219
-
-
12,419
995
21,342
Current
679,232
1,402,232
755,942
388,827
233,488
239,006
1,885,715
190,815
5,775,257
Total
$
679,232
$
1,402,306
$
763,577
$
389,046
$
233,488
$
239,006
$
1,898,134
$
191,810
$
5,796,599
Greater than 90 days
and accruing
$
-
$
43
$
-
$
148
$
-
$
-
$
242
$
-
$
433
 
28
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 and industrial
30-59 days
$
20
$
4,784
$
-
$
-
$
-
$
1,049
$
2,814
$
-
$
8,667
60-89 days
-
55
-
-
-
-
980
430
1,465
Greater than 90 days
-
143
7
6
1,383
12
7,063
-
8,614
Total past due
20
4,982
7
6
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
$
-
$
39
$
7
$
-
$
-
$
-
$
584
$
-
$
630
Energy
30-59 days
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
60-89 days
-
-
-
-
-
-
-
-
-
Greater than 90 days
-
-
-
-
-
-
618
-
618
Total past due
-
-
-
-
-
-
618
-
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
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
 
 
 
 
 
 
 
 
 
 
29
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
-
$
10
$
-
$
-
$
30
$
-
$
3,907
60-89 days
-
-
-
-
-
-
-
-
-
Greater than 90 days
-
120
-
-
-
-
-
-
120
Total past due
-
3,987
-
10
-
-
30
-
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
$
-
$
-
$
-
$
-
$
-
$
-
$
120
Consumer
30-59 days
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
$
-
60-89 days
-
-
2
-
5
-
-
-
7
Greater than 90 days
-
-
-
-
-
-
-
-
-
Total past due
-
-
2
-
5
-
-
-
7
Current
7,917
1,347
2,641
265
137
6
21,173
-
33,486
Total
$
7,917
$
1,347
$
2,643
$
265
$
142
$
6
$
21,173
$
-
$
33,493
 
30
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
-
55
2
-
5
-
980
430
1,472
Greater than 90 days
-
263
7
6
1,383
12
7,681
-
9,352
Total past due
4,313
8,969
9
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
$
7
$
-
$
-
$
-
$
584
$
-
$
750
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
31
 
Non-accrual Loan Analysis
Non-accrual loans are loans for which the Company does not record interest
 
income. The accrual of interest on 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. 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
 
tables present the Company’s non
 
-accrual loans by loan segments at June 30, 2023 and December 31,
2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2023
Amortized Cost Basis by Origination Year and On Non-accrual
Amortized Cost Basis
2023
2022
2021
2020
2019
2018 and
Prior
Revolving
loans
Revolving
loans
converted
to term
loans
Total Non-
accrual
Loans
Non-accrual
Loans with no
related
Allowance
(Dollars in thousands)
Commercial and industrial
$
-
$
-
$
-
$
57
$
-
$
-
$
8,503
$
1,033
$
9,593
$
6,991
Energy
-
-
-
-
-
-
468
-
468
468
Commercial real estate -
owner-occupied
-
-
-
-
-
-
-
-
-
-
Commercial real estate -
non-owner-occupied
-
-
2,448
173
-
-
-
-
2,621
2,621
Residential real estate
-
-
-
-
-
-
-
185
185
185
Consumer
-
-
-
-
-
-
-
-
-
-
Total
$
-
$
-
$
2,448
$
230
$
-
$
-
$
8,971
$
1,218
$
12,867
$
10,265
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
32
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Non-
accrual
Loans
Non-accrual
Loans with no
related
Allowance
(Dollars in thousands)
Commercial and industrial
$
-
$
104
$
-
$
6
$
1,383
$
12
$
6,479
$
-
$
7,984
$
7,984
Energy
-
-
-
-
-
-
618
-
618
618
Commercial real estate -
owner-occupied
-
-
-
-
-
-
-
-
-
-
Commercial real estate -
non-owner-occupied
-
2,479
-
-
-
-
-
-
2,479
2,479
Residential real estate
-
-
-
-
-
-
-
191
191
191
Consumer
-
-
-
-
-
-
-
-
-
-
Total
$
-
$
2,583
$
-
$
6
$
1,383
$
12
$
7,097
$
191
$
11,272
$
11,272
Interest income recognized on non-accrual loans was $
0.1
 
million and $
0.3
 
million for the three- and six-months ended June 30, 2023, respectively.
 
For the three-and six-months
ended June 30, 2022, the interest income recognized on non-accrual loans
 
was $
0.3
 
million and $
0.4
 
million, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
33
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 six-months ended June 30, 2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 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
$
27,660
$
4,679
$
5,610
$
23,807
$
3,265
$
109
$
65,130
Charge-offs
(738)
-
-
-
-
(5)
(743)
Recoveries
3
137
-
-
-
-
140
Provision
2,004
98
751
174
3
10
3,040
Ending balance
$
28,929
$
4,914
$
6,361
$
23,981
$
3,268
$
114
$
67,567
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures:
Beginning balance
$
461
$
541
$
226
$
6,819
$
59
$
7
$
8,113
Provision (release)
(12)
(45)
(21)
(323)
8
(7)
(400)
Ending balance
$
449
$
496
$
205
$
6,496
$
67
$
-
$
7,713
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 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
Charge-offs
(2,380)
-
-
-
-
(5)
(2,385)
Recoveries
4
137
-
-
-
-
141
Provision (release)
4,502
381
1,147
2,101
(65)
(30)
8,036
Ending balance
$
28,929
$
4,914
$
6,361
$
23,981
$
3,268
$
114
$
67,567
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures:
Beginning balance
$
319
$
787
$
221
$
7,323
$
35
$
3
$
8,688
Provision (release)
130
(291)
(16)
(827)
32
(3)
(975)
Ending balance
$
449
$
496
$
205
$
6,496
$
67
$
-
$
7,713
The ACL increased $
2.4
 
million during the quarter.
 
Provision expense of $
3.0
 
million was driven primarily by loan growth, and was partially offset by $
0.6
 
million in net
charge-offs, primarily due to two commercial and industrial loans.
 
The reserve on unfunded commitments decreased $
0.4
 
million due to a decrease in unfunded commitments in the
quarter.
The ACL increased $
5.8
 
million during the six-months ended June 30, 2023 and included provision
 
of $
8.0
 
million due to loan growth and changes in credit quality and
economic factors and an increase in reserves on impaired loans of $
0.8
 
million, partially offset by $
2.2
 
million in net charge-offs.
 
The reserve on unfunded commitments decreased
$
1.0
 
million due to a decrease in unfunded commitments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
35
The following tables presents the Company’s gross charge-offs by year of
 
origination for the three- and six-months ended June 30, 2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Quarter Ended June 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
$
6
$
-
$
2
$
-
$
-
$
11
$
569
$
150
$
738
Energy
-
-
-
-
-
-
-
-
-
Commercial real estate - owner-occupied
-
-
-
-
-
-
-
-
-
Commercial real estate - non-owner-occupied
-
-
-
-
-
-
-
-
-
Residential real estate
-
-
-
-
-
-
-
-
-
Consumer
-
-
-
-
-
5
-
-
5
Total
$
6
$
-
$
2
$
-
$
-
$
16
$
569
$
150
$
743
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 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
$
6
$
-
$
72
$
-
$
-
$
1,358
$
569
$
375
$
2,380
Energy
-
-
-
-
-
-
-
-
-
Commercial real estate - owner-occupied
-
-
-
-
-
-
-
-
-
Commercial real estate - non-owner-occupied
-
-
-
-
-
-
-
-
-
Residential real estate
-
-
-
-
-
-
-
-
-
Consumer
-
-
-
-
-
5
-
-
5
Total
$
6
$
-
$
72
$
-
$
-
$
1,363
$
569
$
375
$
2,385
 
 
 
 
 
 
 
 
 
 
 
 
 
36
 
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 of
loans considered collateral dependent by loan segment and collateral type
 
as of June 30, 2023 and December 31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of June 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
$
7,984
$
883
$
6,065
Energy
Oil and natural gas properties
468
-
468
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
-
-
-
$
8,452
$
883
$
6,533
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
-
$
7,981
Energy
Oil and natural gas properties
618
-
618
Commercial real estate - owner-occupied
Commercial real estate properties
-
-
-
Commercial real estate - non-owner-
occupied
Commercial real estate properties
92
-
92
Residential real estate
Residential real estate properties
-
-
-
Consumer
Vehicles & other personal assets
39
22
-
$
8,728
$
22
$
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.
 
 
 
 
 
37
During the three- and six-months ended June 30, 2023, the Company modified
three
 
loans with an amortized cost basis of
$
4.7
 
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:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
Term Extension
Amortized Cost Basis
% of Loan Class
(Dollars in thousands)
Commercial and industrial
$
4,607
0.2
 
%
 
Commercial real estate - owner-occupied
65
0.0
Total Loans
$
4,672
The following schedule presents the payment status, by loan class, as of
 
June 30, 2023, of the amortized cost basis of loans that
have been modified since January 1, 2023:
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
Current
(Dollars in thousands)
Commercial and industrial
$
4,607
Commercial real estate - owner-occupied
65
Total Loans
$
4,672
The Company had no TDMs that were modified and had defaulted on their modified terms during
 
the six-months ended June 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
June 30, 2023:
 
 
 
 
 
 
 
 
June 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
0.6
 
years to the life of loan, which reduced
monthly payment amounts
 
Troubled Debt Restructurings
Prior to the adoption of ASU 2022-02, TDRs were extended to borrowers who were experiencing financial difficulty
 
and who had
been granted a concession, excluding loan modifications as a result of
 
the COVID-19 pandemic. The modification of terms typically
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 $
28.4
 
million and $
30.5
 
million as of
June 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 for credit loss expense. The
estimate is calculated for each loan segment and includes consideration of the
 
likelihood that funding will occur and an estimate of the
 
38
 
 
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 $
8
 
million and $
9
 
million allowance for
credit losses on off-balance sheet credit exposures at June 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.
Note 4:
 
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
nineteen 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 June 30, 2023, the Company recognized one finance lease and the
 
remaining Company leases are classified as
operating leases.
During the second quarter of 2023, the Company entered into a lease agreement
 
for a new bank branch in Oklahoma City,
Oklahoma.
 
The lease is expected to commence at the beginning of 2025. The lease will be recognized
 
in the Company’s consolidated
financial statements during the period that includes the lease’s commencement
 
date.
The ROU asset is included in “other assets” on the consolidated statements of
 
financial condition, and was $
29
 
million and $
31
million at June 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 $
32
 
million and $
34
 
million at June 30, 2023 and December 31, 2022, respectively.
 
As of June 30, 2023, the remaining weighted-average lease term is
11.3
 
years, and the weighted-average discount rate was
2.55
%
utilizing the Company’s incremental Federal Home Loan Bank (“FHLB”)
 
borrowing rate for borrowings of a similar term at the date of
lease commencement.
 
 
 
 
 
 
 
 
 
 
 
 
 
39
The following table presents components of operating lease expense
 
in the accompanying consolidated statements of operations
for the three-and six-month periods ended June 30, 2023 and 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2023
2022
2023
2022
(Dollars in thousands)
Finance lease amortization of right-of-use asset
$
71
$
92
$
141
$
92
Finance lease interest on lease liability
68
46
137
46
Operating lease expense
731
603
1,463
1,329
Variable lease expense
488
345
881
558
Short-term lease expense
5
5
10
10
Total lease expense
$
1,363
$
1,091
$
2,632
$
2,035
Future minimum commitments due under these lease agreements as of
 
June 30, 2023 are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Leases
Finance Lease
(Dollars in thousands)
Remainder of 2023
$
2,059
$
245
2024
3,289
490
2025
3,309
490
2026
3,350
490
2027
3,340
528
Thereafter
12,619
8,296
Total lease payments
$
27,966
$
10,539
Less imputed interest
3,421
3,027
Total
$
24,545
$
7,512
Supplemental cash flow information –
Operating cash flows paid for operating lease amounts included in the measurement
 
of
lease liabilities were $
1.8
 
million and $
1.4
 
million for the six-months ended June 30, 2023 and 2022, respectively. Operating
 
cash flows
paid for finance lease amounts included in the measurement of lease liabilities was $
0.2
 
million and $
0.1
 
million for the six-months
ended June 30, 2023 and 2022, respectively. During the six-months ended
 
June 30, 2023, the Company did
no
t record any ROU assets
that were exchanged for operating lease liabilities.
Note 5:
 
Goodwill and Core Deposit Intangible
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.
No
 
goodwill impairment was recorded during the six-months ended June 30, 2023.
The Company is amortizing the core deposit intangible (“CDI”) from the
 
Farmers & Stockmens acquisition over its estimated
useful life of approximately
10
 
years using the sum of the years’ digits accelerated method. The Company recognized core deposit
intangible amortization expense of $
0.8
 
million and $
1.6
 
million for the three- and six-month periods ended June 30, 2023, respectively.
 
 
 
 
 
 
 
 
 
40
The gross carrying amount of goodwill and the gross carrying amount and
 
accumulated amortization of the CDI at June 30, 2023
and December 31, 2022 were:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
(Dollars in thousands)
June 30, 2023
Goodwill
$
12,836
$
-
$
12,836
Core deposit intangible
17,479
2,858
14,621
Total goodwill and intangible assets
$
30,315
$
2,858
$
27,457
December 31, 2022
Goodwill
$
12,836
$
-
$
12,836
Core deposit intangible
17,479
1,234
16,245
Total goodwill and intangible assets
$
30,315
$
1,234
$
29,081
The following table shows the estimated future amortization expense for
 
the CDI as of June 30, 2023:
 
 
 
 
 
 
 
 
 
 
Amount
Years ending December 31,
(Dollars in thousands)
For the six months ending December 31, 2023
$
1,517
For the year ending December 31, 2024
2,762
For the year ending December 31, 2025
2,436
For the year ending December 31, 2026
2,109
For the year ending December 31, 2027
1,783
 
 
 
 
 
 
 
Note 6:
 
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 will start 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 June 30, 2023 and December 31, 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 Company currently estimates that $
1.5
 
million will be reclassified as a decrease to net interest income during the next twelve
months.
 
 
 
 
 
 
 
 
 
 
 
 
41
 
 
 
 
 
 
 
The Company is hedging its exposure to the variability in future cash flows for forecasted
 
transactions over a maximum period of
5.9
 
years.
 
Non-designated Hedges
Derivatives not designated as hedges are not speculative and result from
 
a service 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,
 
such that the Company minimizes its net risk exposure
resulting from such transactions. Interest rate derivatives 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.
 
Swap fees earned upon origination and credit valuation adjustments that represent
 
the risk of a counterparty’s default are reported
on the statements of operations as swap fee income, 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
48
 
and
49
 
swaps had an aggregate notional amount of $
378
 
million and $
421
 
million at June 30, 2023 and December 31,
2022, respectively.
Fair Values
 
of Derivative Instruments on the Statements of Financial Condition
The table below presents the fair value of the Company’s derivative financial
 
instruments and their classification on the
Statements of Financial Condition as of June 30, 2023 and December
 
31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset Derivatives
Liability Derivatives
Statement of
Financial
Condition
June 30,
 
December 31,
 
Statement of
Financial
Condition
June 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
$
211
$
-
Interest payable
and other
liabilities
$
7,726
$
5,403
Derivatives not
designated as hedging
instruments
Other assets
and Interest
receivable
10,415
11,038
Interest payable
and other
liabilities
10,415
11,039
Total
$
10,626
$
11,038
$
18,141
$
16,442
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
42
The table below presents the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income
 
(Loss) for the
three- and six-months ended June 30, 2023 and 2022.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 June 30, 2023
Derivatives in Cash Flow Hedging Relationships:
Interest Rate Products
Interest Income
$
(3,839)
$
(3,839)
$
-
$
-
$
-
$
-
Interest Rate Products
Interest Expense
207
207
-
9
9
-
Total
$
(3,632)
$
(3,632)
$
-
$
9
$
9
$
-
For the Three Months Ended June 30, 2022
Derivatives in Cash Flow Hedging Relationships:
Interest Rate Products
Interest Expense
1,385
1,385
-
-
-
-
Total
$
1,385
$
1,385
$
-
$
-
$
-
$
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Six Months Ended June 30, 2023
Derivatives in Cash Flow Hedging Relationships:
Interest Rate Products
Interest Income
$
(2,299)
$
(2,299)
$
-
$
-
$
-
$
-
Interest Rate Products
Interest Expense
207
207
-
9
9
-
Total
$
(2,092)
$
(2,092)
$
-
$
9
$
9
$
-
For the Six Months Ended June 30, 2022
Derivatives in Cash Flow Hedging Relationships:
Interest Rate Products
Interest Expense
4,040
4,040
-
-
-
-
Total
$
4,040
$
4,040
$
-
$
-
$
-
$
-
As of June 30, 2023 and December 31, 2022, the Company had minimum collateral
 
thresholds with certain of its derivative
counterparties and has received collateral of $
2.8
 
million and $
4.9
 
million, respectively.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
43
Note 7:
 
Time Deposits and Borrowings
The scheduled maturities, excluding interest, of the Company’s borrowings at
 
June 30, 2023 were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 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
$
1,709,991
$
122,995
$
1,849
$
2,208
$
1,181
$
231
$
1,838,455
FHLB borrowings
4,153
11,391
-
-
65,000
15,000
95,544
FHLB line of credit
167,164
-
-
-
-
-
167,164
Line of credit
-
7,500
-
-
-
-
7,500
SBA secured borrowing
-
-
-
-
-
5,731
5,731
Trust preferred securities
(1)
-
-
-
-
-
1,089
1,089
$
1,881,308
$
141,886
$
1,849
$
2,208
$
66,181
$
22,051
$
2,115,483
(1)
The contract value of the trust preferred securities is $
2.6
 
million and is currently being accreted to the maturity date of 2035.
 
Note 8:
 
Income Tax
An income tax expense reconciliation at the statutory rate to the Company’s
 
actual income tax expense is shown below:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
(Dollars in thousands)
Computed at the statutory rate (21%)
$
4,256
$
4,110
$
8,483
$
8,523
Increase (decrease) resulting from
Tax-exempt income
(835)
(890)
(1,715)
(1,744)
Nondeductible expenses
67
111
160
193
State income taxes
670
728
1,302
1,424
Equity based compensation
80
15
35
(154)
Other adjustments
(19)
(47)
(25)
(27)
Actual tax expense
$
4,219
$
4,027
$
8,240
$
8,215
The tax effects of temporary differences related to deferred taxes located
 
in “other assets” on the consolidated statements of
financial condition are presented below:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
December 31, 2022
(Dollars in thousands)
Deferred tax assets
Net unrealized loss on securities available-for-sale
$
19,634
$
20,295
Allowance for credit losses
17,857
16,710
Lease incentive
424
451
Loan fees
4,078
4,048
Accrued expenses
2,171
3,379
Deferred compensation
2,023
2,166
Other
1,419
1,469
Total deferred tax asset
47,606
48,518
Deferred tax liability
FHLB stock basis
(287)
(436)
Premises and equipment
(1,819)
(2,042)
Other
(1,062)
(1,018)
Total deferred tax liability
(3,168)
(3,496)
Net deferred tax asset
$
44,438
$
45,022
 
 
 
 
 
 
 
 
 
 
44
Note 9:
 
Change in Accumulated Other Comprehensive Income (Loss)
 
Amounts reclassified from AOCI and the affected line items in the consolidated statements of operations during the
 
three-
 
and
six-month periods ended June 30, 2023 and 2022, were as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 30,
 
June 30,
 
Affected Line Item in the
2023
2022
2023
2022
Statements of Operations
(Dollars in thousands)
Realized (losses) gains on available-for-sale
securities
$
-
$
(12)
$
63
$
(38)
Realized gains (losses) on sale
of available-for-sale securities
Less: tax (benefit) expense effect
-
(3)
15
(9)
Income tax expense
Realized (losses) gains on available-for-sale
securities, net of income tax
-
(9)
48
(29)
 
Interest income on cash flow hedges
9
-
9
-
Interest expense - Deposits
Less: tax expense effect
2
-
2
-
Income tax expense
Interest income on cash flow hedges, net of
tax
7
-
7
-
 
Total reclassified amount
$
7
(9)
55
(29)
 
Note 10:
 
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 June 30, 2023, the Company and the Bank 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.
 
45
The Company’s and the Bank’s actual capital amounts and ratios as of June 30,
 
2023 and December 31, 2022 are presented in the
following table:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Actual
Required to be Considered
 
Well Capitalized
Required to be Considered
Adequately Capitalized
(1)
Amount
Ratio
Amount
Ratio
Amount
Ratio
(Dollars in thousands)
June 30, 2023
Total Capital to Risk-Weighted Assets
Consolidated
$
763,079
10.7
%
 
N/A
 
 
N/A
 
$
751,833
10.5
%
Bank
765,483
10.7
$
715,561
10.0
%
751,339
10.5
Tier I Capital to Risk-Weighted Assets
Consolidated
687,799
9.6
N/A
N/A
608,626
8.5
Bank
690,203
9.6
572,449
8.0
608,227
8.5
Common Equity Tier 1 to Risk-Weighted Assets
Consolidated
678,960
9.5
 
N/A
 
 
N/A
 
501,222
7.0
Bank
690,203
9.6
465,115
6.5
500,893
7.0
Tier I Capital to Average Assets
Consolidated
687,799
9.9
N/A
N/A
279,015
4.0
Bank
$
690,203
9.9
%
$
348,828
5.0
%
$
279,063
4.0
%
December 31, 2022
Total Capital to Risk-Weighted Assets
Consolidated
$
715,416
10.5
%
 
N/A
 
 
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
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
 
 
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
N/A
249,270
4.0
Bank
$
643,837
10.3
%
$
311,623
5.0
%
$
249,299
4.0
%
(1)
Represents the minimum capital required for capital adequacy under Basel III.
 
Includes capital conservation buffer of
2.5
%.
Note 11:
 
Stock-Based Compensation
The Company issues stock-based compensation in the form of non-vested
 
restricted stock, restricted stock units and stock
appreciation rights under the 2018 Omnibus Equity Incentive 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 reinstated during the
third quarter of 2020. The aggregate number of shares authorized for future issuance under the
 
Omnibus Plan is
1,275,410
 
shares as of
June 30, 2023.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
46
The table below summarizes the stock-based compensation for the
 
three- and six-months-ended June 30, 2023 and 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 30,
 
June 30,
 
2023
2022
2023
2022
(Dollars in thousands)
Stock appreciation rights
$
42
$
88
$
141
$
187
Performance-based stock awards
298
200
534
411
Restricted stock units and awards
889
795
1,768
1,573
Employee stock purchase plan
36
37
60
64
Total stock-based compensation
$
1,265
$
1,120
$
2,503
$
2,235
 
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
0
% of target
and
150
% of target.
During the six-month period ended June 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
(5,335)
14.49
Unvested, June 30, 2023
236,220
$
14.40
 
Unrecognized stock-based compensation related to the performance
 
awards issued through June 30, 2023 was $
2.4
 
million and is
expected to be recognized over
2.3
 
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
(209,641)
13.74
Forfeited
(18,751)
14.31
Unvested, June 30, 2023
522,567
$
13.68
 
47
Unrecognized stock-based compensation related to the RSUs and RSAs issued through
 
June 30, 2023 was $
6.0
 
million and is
expected to be recognized over
2.1
 
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 six-month period ended June 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
no
 
outstanding warrants as of June 30, 2023.
 
Note 13: Stockholders’ Equity
The following table presents the computation of basic and diluted earnings per
 
common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
(Dollars in thousands except per share data)
Earnings per Common Share
Net Income
$
16,047
$
15,545
$
32,155
$
32,373
Less: preferred stock dividends
103
-
103
-
Net income available to common stockholders
$
15,944
$
15,545
$
32,052
$
32,373
Weighted average common shares
48,744,507
49,758,263
48,690,509
50,003,418
Earnings per common share
$
0.33
$
0.31
$
0.66
$
0.65
Diluted Earnings per Common Share
Net Income
$
16,047
$
15,545
$
32,155
$
32,373
Less: preferred stock dividends
103
-
103
-
Net income available to common stockholders
$
15,944
$
15,545
$
32,052
$
32,373
Weighted average common shares
48,744,507
49,758,263
48,690,509
50,003,418
Effect of dilutive shares
198,818
445,462
304,298
558,450
Weighted average dilutive common shares
48,943,325
50,203,725
48,994,807
50,561,868
Diluted earnings per common share
$
0.33
$
0.31
$
0.65
$
0.64
Stock-based awards not included because to do so would be
antidilutive
920,812
711,375
917,479
450,541
Dividends of $
103
 
thousand related to the Series A Non-Cumulative Perpetual Preferred Stock were declared and paid during the
three-months ended June 30, 2023.
 
In July 2023, the Board of Directors declared a quarterly dividend on Series A Non-Cumulative
Perpetual Preferred Stock in the amount of $
20.00
 
per share to be payable on
September 15, 2023
 
to shareholders of record as of
August 31, 2023
.
Note 14:
 
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.
 
48
 
Recurring Measurements
The following list presents the assets and liabilities recognized in the accompanying
 
consolidated 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 June 30, 2023 and December 31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Description
Valuation
Hierarchy
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 of
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.
 
Level 2
Note 2:
Securities
 
Derivatives
Fair value of the interest rate swaps is obtained from independent pricing
services based on quoted market prices for similar derivative contracts.
Level 2
Note 6:
Derivatives and
Hedging
 
Non-recurring Measurements
The following tables present assets measured at fair value on a non-recurring
 
basis and the level within the fair value hierarchy in
which the fair value measurements fall at June 30, 2023 and December
 
31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 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
$
8,452
$
-
$
-
$
8,452
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
-
$
-
$
8,728
Foreclosed assets held-for-sale
$
1,745
$
-
$
-
$
1,745
 
Following is a description of the valuation methodologies and inputs used for
 
assets measured at fair value on a non-recurring
basis and recognized in the accompanying consolidated statements of
 
financial condition.
Collateral-Dependent Loans,
 
Net of ACL
The estimated fair value of collateral-dependent 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
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. Appraisals of the collateral underlying collateral dependent
 
loans are
 
49
 
 
obtained when the loan is determined to be 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 list of 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.
Foreclosed Assets Held-for-Sale
The 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 non-recurring Level 3 fair value
measurements at June 30, 2023 and December 31, 2022:
 
 
 
 
 
 
 
June 30, 2023
Fair Value
Valuation Techniques
Unobservable
Inputs
Range
(Weighted Average)
(Dollars in thousands)
$
Market comparable
properties
Marketability
discount
0
%
-
25
%
Collateral dependent loans
8,452
(
16
)%
 
 
 
 
 
 
 
 
December 31, 2022
Fair Value
Valuation Techniques
Unobservable
Inputs
Range
(Weighted Average)
(Dollars in thousands)
$
Market comparable
properties
Marketability
discount
0
 
%
-
100
%
Collateral dependent loans
8,728
(
13
)%
$
Market comparable
properties
Marketability
discount
10%
Foreclosed assets held-for-sale
1,745
(
10
)%
 
50
The following tables present the estimated fair values of the Company’s financial
 
instruments at June 30, 2023 and December 31,
2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
Carrying
Fair Value Measurements
Amount
Level 1
Level 2
Level 3
(Dollars in thousands)
Financial Assets
Cash and cash equivalents
$
342,497
$
342,497
$
-
$
-
Available-for-sale securities
743,900
-
743,900
-
Loans, net of allowance for credit losses
5,729,032
-
-
5,718,780
Restricted equity securities
13,060
-
-
13,060
Interest receivable
33,303
-
33,303
-
Equity securities
3,993
-
-
3,993
Derivative assets
10,626
-
10,626
-
Financial Liabilities
Deposits
$
6,100,067
$
928,098
$
-
$
5,142,980
Federal Home Loan Bank line of credit
167,164
-
167,164
-
Federal Home Loan Bank advances
95,544
-
88,189
-
Other borrowings
14,320
-
15,021
-
Interest payable
14,479
-
14,479
-
Derivative liabilities
18,141
-
18,141
-
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2022
Carrying
Fair Value Measurements
Amount
Level 1
Level 2
Level 3
(Dollars in thousands)
Financial Assets
Cash and cash equivalents
$
300,138
$
300,138
$
-
$
-
Available-for-sale securities
769,641
-
686,901
-
Loans, net of allowance for loan losses
5,310,954
-
-
5,307,607
Restricted equity securities
12,536
-
-
12,536
Interest receivable
29,507
-
29,507
-
Equity securities
2,870
-
-
2,870
Derivative assets
11,038
-
11,038
-
Financial Liabilities
Deposits
$
5,651,308
$
1,400,260
$
-
$
4,142,673
Federal funds purchased and repurchase agreements
74,968
-
74,968
-
Federal Home Loan Bank advances
143,143
-
135,086
-
Other borrowings
35,457
-
36,529
-
Interest payable
5,713
-
5,713
-
Derivative liabilities
16,442
-
16,442
-
 
 
 
 
 
 
51
 
Note 15:
 
Commitments and Credit Risk
Commitments
The Company had the following commitments at June 30, 2023 and December
 
31, 2022:
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2023
December 31, 2022
(Dollars in thousands)
Commitments to originate loans
$
118,369
$
134,961
Standby letters of credit
66,851
66,889
Lines of credit
2,518,588
2,705,730
Future lease commitments
5,833
1,888
Commitments related to investment fund
2,548
3,403
$
2,712,189
$
2,912,871
 
Note 16:
 
Subsequent Events
On August 1, 2023, the Company completed its acquisition of Canyon Bancorporation, Inc. and its wholly owned
 
subsidiary,
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. 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 in Tucson, Arizona to the Company’s footprint.
 
 
 
 
 
 
 
 
 
 
 
 
52
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 
AND RESULTS OF
OPERATIONS
The following management's discussion and analysis of our financial condition
 
and results of operations should be read in
conjunction with our consolidated financial statements and related notes
 
as of and for the three- and six-months ended June 30, 2023,
and 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.
Second Quarter 2023 Highlights
During the second quarter ended June 30, 2023, we accomplished the following:
●
Received regulatory approval for the acquisition of Canyon Bancorporation,
 
Inc. and its wholly owned subsidiary, Canyon
Community Bank, N.A. (collectively, “Canyon”),
 
which is expected to add low-cost liquidity and deepen our Arizona
franchise; the transaction closed on August 1, 2023
●
Loans grew $149 million, or 2.6%, for the quarter and grew 7.9% year-to
 
date; loan growth was well diversified across
commercial and industrial, energy and commercial real estate – owner-occupied
●
Credit metrics remained strong with annualized net charge-offs of just 0.04% of
 
average total loans and a non-performing
assets to total assets ratio of 0.19%
●
Non-interest-bearing deposits stabilized, decreasing 4% from the prior quarter,
 
while total deposits increased 4.5% due to an
increase in wholesale funding sources at quarter-end
●
Identified meaningful non-interest expense savings for the remainder
 
of 2023, advancing our efficiency improvement goal
●
Book value per common share grew to $13.39 while tangible book value per common
 
share
(1)
 
grew to $12.67
(1)
Represents a non-GAAP financial measure.
 
See “Non-GAAP Financial Measures” below for a reconciliation of these measures.
Mergers and Acquisitions
 
Update
On August 1, 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 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
53
Performance Measures
As of or For the Three Months
 
Ended
As of or For the Six Months
Ended
June 30,
March 31,
December 31,
September 30,
June 30,
June 30,
June 30,
2023
2023
2022
2022
2022
2023
2022
(Dollars in thousands, except per share data)
Return on average assets
(1)
0.93
%
0.97
%
0.77
%
1.19
%
1.12
%
0.95
%
1.18
%
Adjusted return on average assets
(1)(2)
1.00
%
1.04
%
1.15
%
1.19
%
1.20
%
1.02
%
1.21
%
Return on average common equity
(1)
10.00
%
10.54
%
8.04
%
11.18
%
10.15
%
10.26
%
10.30
%
Adjusted return on average common
equity
(1)(2)
10.81
%
11.30
%
12.03
%
11.22
%
10.82
%
11.05
%
10.62
%
Earnings per common share - basic
$
0.33
$
0.33
$
0.25
$
0.35
$
0.31
$
0.66
$
0.65
Earnings per common share - diluted
$
0.33
$
0.33
$
0.24
$
0.35
$
0.31
$
0.65
$
0.64
Adjusted earnings per common share -
diluted
(1)
$
0.35
$
0.35
$
0.36
$
0.35
$
0.33
$
0.70
$
0.66
Efficiency ratio
(2)
62.02
%
60.81
%
62.40
%
53.20
%
57.36
%
61.41
%
57.46
%
Adjusted efficiency ratio - FTE
(2)(3)(4)
57.27
%
56.42
%
55.01
%
52.25
%
53.95
%
56.84
%
55.26
%
Ratio of equity to assets
9.15
%
9.36
%
9.22
%
9.93
%
10.65
%
9.15
%
10.65
%
(1)
 
Interim periods annualized
(2)
 
Represents a non-GAAP financial measure.
 
See "Non-GAAP Financial Measures"
 
below for a reconciliation of these measures.
(3)
 
We calculate efficiency ratio as non-interest expense
 
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%.
 
Results of Operations
Net Interest Income
Net interest income is presented on a fully tax equivalent basis.
 
We believe reporting on an FTE basis provides for improved
comparability between the various earning assets. 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.
The following tables present, for the periods indicated, average statement
 
of financial condition information, interest income,
interest expense and the corresponding average yield and rates paid:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
54
Three Months Ended
June 30,
2023
2022
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
$
336,446
$
2,986
3.55
%
$
220,763
$
1,299
2.35
%
Securities - tax-exempt
(1)
511,993
4,321
3.38
553,960
4,653
3.36
Interest-bearing deposits in other banks
145,559
1,609
4.43
198,210
369
0.75
Gross loans, net of unearned income
(2)(3)
5,776,137
98,982
6.87
4,437,917
47,327
4.28
Total interest-earning assets - FTE
(1)
6,770,135
$
107,898
6.39
%
5,410,850
$
53,648
3.98
%
Allowance for credit losses
(66,078)
(56,732)
Other non-interest-earning assets
225,915
191,539
Total assets
$
6,929,972
$
5,545,657
Interest-bearing liabilities
Transaction deposits
$
598,646
$
4,339
2.91
%
$
508,403
$
374
0.29
%
Savings and money market deposits
2,707,637
26,927
3.99
2,334,103
2,869
0.49
Time deposits
1,612,105
17,397
4.33
559,708
1,489
1.07
Total interest-bearing deposits
4,918,388
48,663
3.97
3,402,214
4,732
0.56
FHLB and short-term borrowings
349,763
3,888
4.46
330,064
1,368
1.66
Trust preferred securities, net of fair value
adjustments
1,077
58
21.60
1,024
29
11.94
Non-interest-bearing deposits
921,259
-
-
1,149,654
-
-
Cost of funds
6,190,487
$
52,609
3.41
%
4,882,956
$
6,129
0.50
%
Other liabilities
91,994
48,160
Stockholders’ equity
647,491
614,541
Total liabilities and stockholders’ equity
$
6,929,972
$
5,545,657
Net interest income - FTE
(1)
$
55,289
$
47,519
Net interest spread - FTE
(1)
2.98
%
3.48
%
Net interest margin - FTE
(1)
3.27
%
3.52
%
(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 $13 million and $28 million as of June 30, 2023 and 2022, respectively.
(3)
Loan interest income includes loan fees of $3 million for the three-months ended June 30, 2023 and 2022.
(4)
Actual unrounded values are used to calculate the reported yield or rate. Accordingly, recalculations using the amounts in thousands as disclosed in this
report may not produce the same amounts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55
Six Months Ended
June 30,
2023
2022
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
$
302,763
$
5,097
3.37
%
$
220,783
$
2,487
2.26
%
Securities - tax-exempt - FTE
(1)
527,047
8,912
3.38
543,873
9,120
3.35
Federal funds sold
873
6
1.39
-
-
-
Interest-bearing deposits in other banks
170,287
3,617
4.28
253,771
521
0.41
Gross loans, net of unearned income
(2)(3)
5,658,698
188,600
6.72
4,385,664
90,055
4.14
Total interest-earning assets - FTE
(1)
6,659,668
$
206,232
6.24
%
5,404,091
$
102,183
3.81
%
Allowance for credit losses
(64,664)
(57,324)
Other non-interest-earning assets
226,983
207,881
Total assets
$
6,821,987
$
5,554,648
Interest-bearing liabilities
Transaction deposits
$
570,661
$
7,839
2.77
%
$
546,982
$
596
0.22
%
Savings and money market deposits
2,794,201
50,496
3.64
2,318,415
4,716
0.41
Time deposits
1,357,688
27,053
4.02
573,503
2,931
1.03
Total interest-bearing deposits
4,722,550
85,388
3.65
3,438,900
8,243
0.48
FHLB and short-term borrowings
311,471
6,423
4.16
280,883
2,477
1.78
Trust preferred securities, net of fair value
adjustments
1,070
114
21.49
1,018
56
11.11
Non-interest-bearing deposits
1,057,268
-
-
1,153,499
-
-
Cost of funds
6,092,359
$
91,925
3.04
%
4,874,300
$
10,776
0.44
%
Other liabilities
95,702
46,312
Stockholders’ equity
633,926
634,036
Total liabilities and stockholders’ equity
$
6,821,987
$
5,554,648
Net interest income - FTE
(1)
$
114,307
$
91,407
Net interest spread - FTE
(1)
3.20
%
3.37
%
Net interest margin - FTE
(1)
3.46
%
3.41
%
(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 $13 million and $28 million as of June 30, 2023 and 2022, respectively.
(3)
Loan interest income includes loan fees of $7 million for the six-months ended June 30, 2023 and 2022.
(4)
Actual unrounded values are used to calculate the reported yield or rate. Accordingly, recalculations using the amounts in thousands as disclosed in this
report may not produce the same amounts.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56
Net interest income
 
-
 
Net interest income and net interest income - FTE increased $7.8 million and $22.9 million
 
for the three- and six-
month periods
 
ended June 30, 2023 compared to the same periods in 2022, respectively.
 
Compared to the second quarter of 2022, net
interest margin - FTE for the second quarter of 2023 decreased 25 basis points
 
.
 
For the six-months ended June 30, 2023 compared to
the same period in 2022, net interest margin - FTE increased 5 basis points.
Average earning assets totaled $6.8
 
billion for the three-month period ended June 30, 2023 and $6.7 billion
 
for the six-month period
ended June 30, 2023, resulting in increases
 
of $1.4 billion, or 25%, and $1.3 billion, or 23%, respectively, compared to the same
 
periods
in 2022, inclusive of the impact of acquisition of Farmers & Stockmens Bank,
 
which we refer to herein as the Colorado and New
Mexico acquisition. The increases
 
were driven by higher average loan and investment portfolio balances,
 
partially offset by lower
average cash balances for the three- and six-month periods ended June 30, 2023
 
compared to the corresponding periods in 2022.
The FTE yield on earning assets increased 2.41% from the second
 
quarter of 2022 to the second quarter of 2023 and increased 2.43% for
the six-months ended June 30, 2023, compared to the same period in 2022
 
due to new loan production as well as repricing of variable
rate loans. The cost of funds increased 2.91% and 2.60% over the same periods due
 
to pricing pressure on deposits as well as client
migration into higher cost deposit products compared to the prior
 
year.
The Company currently anticipates net interest margin - FTE to remain
 
consistent with the current quarter and to be in a range of 3.20%
to 3.35% for the full year 2023.
Provision
For the Three Months Ended
For the Six Months Ended
June 30,
 
June 30,
 
2023
2022
2023
2022
(Dollars in thousands)
Provision for credit losses - loans
$
3,040
$
1,690
$
8,036
$
1,374
Provision for credit losses - off-balance sheet
(400)
445
(975)
136
Allowance for credit losses - loans
67,567
55,817
67,567
55,817
Allowance for credit losses - off-balance sheet
7,713
5,320
7,713
5,320
Net charge-offs
$
603
$
1,104
$
2,244
$
2,185
The ACL increased $2.4 million during the quarter.
 
Provision expense of $3.0 million was primarily driven by loan growth and
was partially offset by $0.6 million in net charge-offs, primarily due
 
to two commercial and industrial loans.
 
The reserve on unfunded
commitments decreased $0.4 million due to a decrease in unfunded
 
commitments in the quarter.
The ACL increased $5.8 million during the six-months ended June 30, 2023 and included provision of $8.0 million due to loan
growth and changes in credit quality and economic factors and an increase
 
in reserves on impaired loans of $0.8 million, partially offset
by $2.2 million in net charge-offs.
 
The reserve on unfunded commitments decreased $1.0 million due
 
to a decrease in unfunded
commitments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
57
Non-Interest Income
The components of non-interest income were as follows for the periods shown:
Three Months Ended
Six Months Ended
June 30,
 
June 30,
 
Change
Change
2023
2022
$
%
2023
2022
$
%
(Dollars in thousands)
Service charges and fees on customer
accounts
$
2,110
$
1,546
$
564
36
%
$
3,939
$
2,954
$
985
33
%
ATM and credit card interchange income
1,213
1,521
(308)
(20)
2,477
4,185
(1,708)
(41)
Realized gains (losses) on available-for-sale
securities
-
(12)
12
 
N/M
 
63
(38)
101
 
N/M
 
Gain on sale of loans
1,205
-
1,205
N/M
1,392
-
1,392
N/M
Gains (losses) on equity securities, net
6
(71)
77
 
N/M
 
16
(174)
190
 
N/M
 
Income from bank-owned life insurance
418
407
11
3
829
795
34
4
Swap fees and credit valuation adjustments,
net
84
12
72
600
174
130
44
34
Other non-interest income
743
798
(55)
(7)
1,310
1,291
19
1
Total non-interest income
$
5,779
$
4,201
$
1,578
38
%
$
10,200
$
9,143
$
1,057
12
%
The changes in non-interest income were driven primarily by the following:
Service charges and fees on customer accounts
 
- The increases
 
for the three-
 
and six-month periods ended June 30, 2023 compared to
the corresponding periods in 2022 were driven primarily by increas
 
es in account analysis fees due to increased client volume from new
markets and acquired accounts as well as various fee increases on commercial
 
accounts.
ATM and credit card interchange income
 
- The decrease in ATM and credit card interchange income was driven primarily by a
decrease in credit card fees due to one large customer with pandemic-related
 
activity that did not occur in the current year.
 
Gain on sale of loans
– The increase for the three- and six-month periods ended June 30, 2023 compared to the same periods
 
for 2022
were primarily due to SBA loan sale activity. Our SBA lending team is a specialty lending vertical we augmented from the Colorado and
New Mexico acquisition in 2022.
 
Non-Interest Expense
The components of non-interest expense were as follows for the periods indicated:
Three Months Ended
Six Months Ended
June 30,
 
June 30,
 
Change
Change
2023
2022
$
%
2023
2022
$
%
(Dollars in thousands)
Salaries and employee benefits
$
24,061
$
17,095
$
6,966
41
%
$
46,683
$
35,036
$
11,647
33
%
Occupancy
3,054
2,622
432
16
6,028
5,115
913
18
Professional fees
970
1,068
(98)
(9)
3,588
1,873
1,715
92
Deposit insurance premiums
1,881
713
1,168
164
3,412
1,450
1,962
135
Data processing
1,057
1,160
(103)
(9)
2,299
1,972
327
17
Advertising
649
757
(108)
(14)
1,401
1,449
(48)
(3)
Software and communication
1,655
1,198
457
38
3,306
2,468
838
34
Foreclosed assets, net
(21)
15
(36)
N/M
128
(38)
166
N/M
Other non-interest expense
3,304
4,555
(1,251)
(27)
7,035
7,505
(470)
(6)
Core deposit intangible amortization
802
20
782
3,910
1,624
39
1,585
4,064
Total non-interest expense
$
37,412
$
29,203
$
8,209
28
%
$
75,504
$
56,869
$
18,635
33
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
58
Non-interest expense increased $8.2 million and $18.6 million
 
for the three- and six-month periods ended June 30, 2023
compared to the same periods
 
in 2022. The second quarter of 2023 included $0.3 million of acquisition-related expenses, most of
 
which
were included in professional fees, and $1.3 million of employee separation costs included
 
in salaries and employee benefits. The six-
months ended June 30, 2023 included $1.8 million of acquisition-related
 
expenses, most of which were included in professional fees,
and $1.3 million of employee separation costs included in salaries and
 
employee benefits.
 
The three-
 
and six-month periods ended June
30, 2022 included $0.2 million of acquisition-related expenses, most of which
 
were included in professional fees, and $1.0 million of
employee separation costs included in other non-interest expense. The changes
 
in non-interest expense were driven primarily by the
following:
Salary and Employee Benefits
 
– For both the three- and six-months ended June 30, 2023 as compared to the
 
same periods in the prior
year, excluding the employee separation costs in 2023 previously mentioned
 
above, increases were primarily due to the addition of
employees from the Colorado and New Mexico acquisition, hiring
 
in new markets and merit increases.
Occupancy
 
– For both comparative periods,
 
the increases
 
in occupancy costs was driven by the addition of a second location in Dallas,
Texas and new properties
 
in Colorado and New Mexico.
 
Professional Fees
 
– Professional fees for both the three-
 
and six-months ended June 30, 2023 were consistent with the prior year
periods after adjusting for the acquisition related costs.
Deposit Insurance Premiums
 
– The increase in deposit insurance premiums was due to an increase in the assessment rate and
 
increases
in assets for both comparative periods.
 
Software and communication
 
– For both the three-
 
and six-months ended June 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 three-months ended June 30, 2023 compared to the same period
 
in 2022, the decrease was due to
employee separation costs in 2022. For the six-months ended June 30, 2023
 
as compared to the same period in 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 six-months ended June 30, 2023 as compared to the same periods in
the prior year, increases
 
were due to expense related to the Colorado and New Mexico acquisition.
 
We currently anticipate non-interest expense to be in a range of $34 to $35 million
 
per quarter for the remainder of 2023. The
efficiency ratios were 62.02% and 61.41% and the adjusted efficiency ratios
 
– FTE
(1)
 
were 57.27%
 
and 56.84% for the three- and six-
month periods ended June 30, 2023,
 
respectively.
(1)
Represents a non-GAAP financial measure.
 
See "Non-GAAP Financial Measures"
 
below for a reconciliation of these measures.
Income Taxes
For the Three Months Ended
For the Six Months Ended
June 30,
 
June 30,
 
2023
2022
2023
2022
(Dollars in thousands)
Income tax expense
$
4,219
$
4,027
$
8,240
$
8,215
Income before income taxes
20,266
19,572
40,395
40,588
Effective tax rate
21
%
21
%
20
%
20
%
Our income tax expense differs from the amount that would be calculated
 
using the federal statutory tax rate, primarily from
investments in tax advantaged assets, including bank-owned
 
life insurance and tax-exempt municipal securities;
 
state tax credits;
 
and
permanent tax differences from equity-based compensation. Refer to “Note
 
8: Income Tax” within the notes to consolidated financial
statements – unaudited for a reconciliation of the statutory rate to the Company’s
 
actual income tax expense.
 
59
During the three- and six-month periods
 
ended June 30, 2023 and 2022, the Company’s effective tax rate benefited primarily
from permanent tax differences related to tax-exempt interest.
 
We currently anticipate the Company’s effective tax rate to remain
 
within
the 20% to 22% range in the near term.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
60
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 measures of our performance. The non-GAAP 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 measures follows.
Quarter Ended
Six Months Ended
6/30/2023
3/31/2023
12/31/2022
9/30/2022
6/30/2022
6/30/2023
6/30/2022
(Dollars in thousands, except per share data)
Adjusted net income:
Net income (GAAP)
$
16,047
$
16,108
$
11,946
$
17,280
$
15,545
$
32,155
$
32,373
Add: Acquisition costs
338
1,477
3,570
81
239
1,815
239
Add: Acquisition - Day 1 CECL
 
provision
-
-
4,400
-
-
-
-
Add: Employee separation
1,300
-
-
-
1,063
1,300
1,063
Less: Tax effect
(1)
(344)
(310)
(2,045)
(17)
(273)
(654)
(273)
Adjusted net income
$
17,341
$
17,275
$
17,871
$
17,344
$
16,574
$
34,616
$
33,402
Preferred stock dividends
$
103
$
-
$
-
$
-
$
-
103
-
Diluted weighted average common shares outstanding
48,943,325
49,043,621
49,165,578
49,725,207
50,203,725
48,994,807
50,561,868
Earnings per common share – diluted (GAAP)
$
0.33
$
0.33
$
0.24
$
0.35
$
0.31
$
0.65
$
0.64
Adjusted earnings per common share – diluted
$
0.35
$
0.35
$
0.36
$
0.35
$
0.33
$
0.70
$
0.66
(1)
Represents the tax impact of the adjustments at a tax rate
 
of 21.0%, plus permanent tax expense associated with
 
merger related transactions
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
61
Quarter Ended
Six Months Ended
6/30/2023
3/31/2023
12/31/2022
9/30/2022
6/30/2022
6/30/2023
6/30/2022
(Dollars in thousands)
Adjusted return on average assets:
Net income (GAAP)
$
16,047
$
16,108
$
11,946
$
17,280
$
15,545
$
32,155
$
32,373
Adjusted net income
17,341
17,275
17,871
17,344
16,574
34,616
33,402
Average assets
$
6,929,972
$
6,712,801
$
6,159,783
$
5,764,347
$
5,545,657
$
6,821,987
$
5,554,648
Return on average assets (GAAP)
0.93
%
0.97
%
0.77
%
1.19
%
1.12
%
0.95
%
1.18
%
Adjusted return on average assets
1.00
%
1.04
%
1.15
%
1.19
%
1.20
%
1.02
%
1.21
%
Quarter Ended
Six Months Ended
6/30/2023
3/31/2023
12/31/2022
9/30/2022
6/30/2022
6/30/2023
6/30/2022
(Dollars in thousands)
Adjusted return on average common equity:
Net income (GAAP)
$
16,047
$
16,108
$
11,946
$
17,280
$
15,545
$
32,155
$
32,373
Preferred stock dividends
103
-
-
-
-
103
-
Net income attributable to common shareholders (GAAP)
$
15,944
$
16,108
$
11,946
$
17,280
$
15,545
$
32,052
$
32,373
Adjusted net income
$
17,341
$
17,275
$
17,871
$
17,344
$
16,574
$
34,616
$
33,402
Preferred stock dividends
103
-
-
-
-
103
-
Adjusted net income attributable to common shareholders
$
17,238
$
17,275
$
17,871
$
17,344
$
16,574
$
34,513
$
33,402
Average common equity
$
639,741
$
619,952
$
589,587
$
613,206
$
614,541
$
629,901
$
634,036
Return on average common equity (GAAP)
10.00
%
10.54
%
8.04
%
11.18
%
10.15
%
10.26
%
10.30
%
Adjusted return on average common equity
10.81
%
11.30
%
12.03
%
11.22
%
10.82
%
11.05
%
10.62
%
Quarter Ended
6/30/2023
3/31/2023
12/31/2022
9/30/2022
6/30/2022
(Dollars in thousands, except per share data)
Tangible common stockholders' equity:
Total stockholders' equity (GAAP)
$
651,483
$
645,491
$
608,599
$
580,547
$
608,016
Less: goodwill and other intangible assets
27,457
28,259
29,081
71
91
Less: preferred stock
7,750
7,750
-
-
-
Tangible common stockholders' equity
$
616,276
$
609,482
$
579,518
$
580,476
$
607,925
Tangible book value per common share:
Tangible common stockholders' equity
$
616,276
$
609,482
$
579,518
$
580,476
$
607,925
Common shares outstanding at end of period
48,653,487
48,600,618
48,448,215
48,787,696
49,535,949
Book value per common share (GAAP)
$
13.39
$
13.28
$
12.56
$
11.90
$
12.27
Tangible book value per common share
$
12.67
$
12.54
$
11.96
$
11.90
$
12.27
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
62
Quarter Ended
Six Months Ended
6/30/2023
3/31/2023
12/31/2022
9/30/2022
6/30/2022
6/30/2023
6/30/2022
(Dollars in thousands)
Adjusted Efficiency Ratio - FTE
(1)
Non-interest expense
$
37,412
$
38,092
$
36,423
$
28,451
$
29,203
$
75,504
$
56,869
Less: Acquisition costs
(338)
(1,477)
(3,570)
(81)
(239)
(1,815)
(239)
Less: Core deposit intangible amortization
(802)
(822)
(291)
-
-
(1,624)
-
Less: Employee separation
(1,300)
-
-
-
(1,063)
(1,300)
(1,063)
Adjusted Non-interest expense (numerator)
$
34,972
$
35,793
$
32,562
$
28,370
$
27,901
$
70,765
$
55,567
Net interest income
54,539
58,221
54,015
49,695
46,709
112,760
89,824
Tax equivalent interest income
(1)
750
797
818
820
808
1,547
1,583
Non-interest income
5,779
4,421
4,359
3,780
4,201
10,200
9,143
Total tax-equivalent income (denominator)
$
61,068
$
63,439
$
59,192
$
54,295
$
51,718
$
124,507
$
100,550
Efficiency Ratio (GAAP)
62.02
%
60.81
%
62.40
%
53.20
%
57.36
%
61.41
%
57.46
%
Adjusted Efficiency Ratio - FTE
(1)
57.27
%
56.42
%
55.01
%
52.25
%
53.95
%
56.84
%
55.26
%
(1)
Tax exempt income (tax-free municipal securities) is
 
calculated on a tax equivalent basis. The incremental
 
tax rate used is 21.0%.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
63
Analysis of Financial Condition
Investment Portfolio
The objective of our investment portfolio is to optimize earnings, manage
 
credit and interest rate risk, ensure adequate liquidity,
and meet pledging and regulatory capital requirements. Our investment
 
portfolio is also maintained to serve as a contingent, on-balance
sheet source of liquidity. As of June 30, 2023, available-for-sale investments totaled $744 million, an increase of $57
 
million from
December 31, 2022.
 
The increase in the investment portfolio was driven by the purchase of $107
 
million in SBA securities and $12 million in tax-
exempt municipal securities,
 
and a $4 million reduction in the unrealized loss on available-for-sale securities. The increase
 
was partially
offset by the sale of $55 million in tax-exempt municipal securities at a modest
 
gain and $9 million of paydowns and maturities in
mortgage-backed securities as we intentionally improved the liquidity
 
of the portfolio during the six-month period.
 
For additional
information, including information regarding other securities owned
 
by the Company, see “Note 2: Securities”
 
in the notes to
consolidated financial statements – unaudited.
The following table shows with respect to our portfolio of available-for-sale securities,
 
the estimated fair value, percent of the
portfolio of available-for-sale securities and weighted average yield of such securities
 
as of the dates indicated:
 
As of June 30, 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)
Mortgage-backed - GSE residential
$
272,933
37
%
3.29
%
$
172,309
25
%
2.39
%
Collateralized mortgage obligations - GSE
residential
9,516
1
2.43
10,886
2
2.36
State and political subdivisions
452,949
61
2.81
494,496
72
2.80
Corporate bonds
8,502
1
5.68
9,210
1
5.70
Total available-for-sale securities
$
743,900
100
%
3.01
%
$
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
64
Loan Portfolio
Refer to “Note 3: 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 June 30, 2023, gross loans, net of unearned fees increased $424 million
 
or 8% from December 31, 2022.
 
The following table presents the balance
and associated percentage change of each segment within our portfolio
 
as of the dates indicated:
As of June 30,
2023
As of December 31,
2022
December 31, 2022
vs.
June 30, 2023
% Change
(Dollars in thousands)
Commercial and industrial
$
2,057,912
$
1,974,932
4.2
 
%
 
Energy
232,863
173,218
34.4
Commercial real estate - owner-occupied
542,827
437,119
24.2
Commercial real estate - non-owner-occupied
2,480,282
2,314,600
7.2
Residential real estate
439,434
439,367
-
Consumer
43,281
33,493
29.2
Total
$
5,796,599
$
5,372,729
7.9
 
%
 
Our loan portfolio remains diversified with 45% of loans in commercial and industrial
 
and owner-occupied real estate and 42% of loans in commercial real estate. There
remains diversity within our loan portfolios with the highest commercial real
 
estate property type accounting for 17% of total commercial real estate exposure,
 
and the largest
industry segment in commercial and industrial being manufacturing at
 
11% of commercial and industrial exposure.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65
The following table shows the contractual maturities of our gross loans and
 
sensitivity to interest rate changes:
As of June 30, 2023
Due in One Year or 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 industrial
$
112,736
$
528,269
$
348,572
$
909,898
$
62,302
$
75,766
$
19,855
$
514
$
2,057,912
Energy
-
27,661
634
204,568
-
-
-
-
232,863
Commercial real estate -
owner-occupied
12,378
28,532
163,234
64,081
117,395
104,700
1,523
50,984
542,827
Commercial real estate - non-
owner-occupied
90,267
274,361
587,757
1,160,478
96,681
199,587
12,513
58,638
2,480,282
Residential real estate
7,381
4,316
21,434
8,758
69,479
21,973
4,333
301,760
439,434
Consumer
18,989
11,597
4,624
7,674
302
95
-
-
43,281
Total
$
241,751
$
874,736
$
1,126,255
$
2,355,457
$
346,159
$
402,121
$
38,224
$
411,896
$
5,796,599
Allowance for Credit Losses
The ACL at June 30, 2023 represents our best estimate of the expected credit losses in the Company’s loan portfolio and off-balance sheet
 
commitments, measured over the
contractual life of the underlying instrument.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
66
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.
 
June 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
$
28,929
$
449
$
29,378
39
%
36
%
$
26,803
$
319
$
27,122
39
%
37
%
Energy
4,914
496
5,410
7
4
4,396
787
5,183
7
3
Commercial real estate -
owner-occupied
6,361
205
6,566
9
9
5,214
221
5,435
8
8
Commercial real estate -
non-owner-occupied
23,981
6,496
30,477
41
42
21,880
7,323
29,203
41
43
Residential real estate
3,268
67
3,335
4
8
3,333
35
3,368
5
8
Consumer
114
-
114
-
1
149
3
152
 
-
1
Total
$
67,567
$
7,713
$
75,280
100
%
100
%
$
61,775
$
8,688
$
70,463
100
%
100
%
Refer to “Note 3: Loans and Allowance for Credit Losses” within the notes to consolidated financial statements –
 
unaudited for a summary of the changes in the ACL.
Charge-offs and Recoveries
Net charge-offs were $0.6 million and $2.2
 
million for the three- and six-month periods ended June 30, 2023, respectively. For
 
the three-month period ended June 30, 2023,
charge-offs were primarily related to charge-offs of two commercial and
 
industrial loans.
 
Recoveries primarily included a recovery related to an energy loan. For the
 
six-month
period ended June 30, 2023, charge-offs also included a charge-off
 
of a collateral-dependent commercial and industrial loan. The below table provides the ratio of net charge
 
-offs
(recoveries) to average loans outstanding based on our loan categories for
 
the periods indicated:
 
For the Quarter Ended
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
2023
2023
2022
2022
2022
Commercial and industrial
0.14
%
0.31
%
(0.02)
%
0.48
%
(0.11)
%
Energy
(0.23)
-
(0.46)
1.19
4.77
Commercial real estate - owner-occupied
-
-
-
-
-
Commercial real estate - non-owner-occupied
-
-
-
(0.15)
(0.35)
Residential real estate
-
-
-
-
0.20
Consumer
0.04
-
(0.04)
-
-
Total net charge-offs to average loans
0.04
%
0.12
%
(0.02)
%
0.16
%
0.10
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
67
Non-performing Assets and Other Asset Quality Metrics
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; (ii) foreclosed assets held for sale; (iii) repossessed assets; and (iv) impaired
debt securities.
Credit quality metrics remained strong during the second quarter of 2023.
 
Non-performing assets increased $2.1 million during the quarter to $13.3
 
million at June 30, 2023
primarily due to two commercial and industrial loans moving to non-accrual,
 
partially
 
offset by the sale of one other real estate owned property.
 
The non-performing assets to total
assets ratio decreased from 0.54% at June 30, 2022 to 0.19% at June 30, 2023. Annualized net charge-offs were 0.04% for
 
the quarter compared to 0.12% in the prior quarter and
0.10% in the prior year second quarter.
The Company continues to monitor the U.S. economic indicators, including
 
the inflation 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 June 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 non-performing assets and related ratios as of
 
the dates indicated:
For the Quarter Ended
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
2023
2023
2022
2022
2022
Asset Quality
(Dollars in thousands)
Non-accrual loans
$
12,867
$
9,490
$
11,272
$
16,923
$
27,698
Loans past due 90 days or more and still accruing
433
868
750
303
2,163
Total non-performing loans
13,300
10,358
12,022
17,226
29,861
Foreclosed assets held for sale
-
855
1,130
973
973
Total non-performing assets
$
13,300
$
11,213
$
13,152
$
18,199
$
30,834
Loans 30-89 days past due
$
13,333
$
5,056
$
19,519
$
21,383
$
16,635
Asset quality metrics (%)
Non-performing loans to total loans
0.23
%
0.18
%
0.22
%
0.37
%
0.66
%
Non-performing assets to total assets
0.19
0.16
0.20
0.31
0.54
ACL to total loans
1.17
1.15
1.15
1.19
1.23
ACL + RUC to total loans
(1)
1.30
1.30
1.31
1.34
1.35
ACL to non-performing loans
508
629
514
324
187
Classified loans / (total capital + ACL)
9.7
9.4
10.1
11.3
12.1
Classified loans / (total capital + ACL + RUC)
(1)
9.6
9.3
10.0
11.2
12.0
(1)
Includes the accrual for off-balance sheet credit risk from unfunded commitments.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
68
 
Deposits and Other Borrowings
At June 30, 2023, our deposits totaled $6.1 billion, an increase of $449 million or
 
8% from December 31, 2022. The increase included an $893 million increase in time deposits
and $28 million in money market, NOW and savings deposits, partially offset
 
by a decrease of $472 million in non-interest-bearing deposits. Approximately one
 
-third 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 2023.
The following table sets forth the maturity of time deposits as of June 30, 2023:
As of June 30, 2023
Three Months
 
or Less
Three to Six Months
Six to Twelve
Months
After Twelve Months
Total
(Dollars in thousands)
Time deposits in excess of FDIC insurance limit
$
28,183
$
42,042
$
333,875
$
21,740
$
425,840
Time deposits below FDIC insurance limit
409,149
357,659
539,083
106,724
1,412,615
Total
$
437,332
$
399,701
$
872,958
$
128,464
$
1,838,455
Other borrowings include FHLB advances, a line of credit, SBA loan secured
 
borrowings, and our trust preferred security.
 
At June 30, 2023, other borrowings totaled $277
million, a $23 million, or 9% increase from December 31, 2022. During
 
the six-month period ended June 30, 2023, $31.0 million of FHLB advances matured
 
and were converted into a
drawdown on the FHLB line of credit, an additional $10.0 million matured
 
and $6.5 million of net FHLB advances were paid off.
 
The Company utilized an additional $61.2 million of
net draws on the FHLB line of credit and the conversion of $31.0 million of FHLB advances to
 
the FHLB line of credit to support loan growth and changes in deposits, resulting
 
in a
balance of $167.2 million outstanding on the FHLB line of credit as of
 
June 30, 2023.
As of June 30, 2023, the Company’s
 
top 25 customer relationships represented approximately 20% or $1.2 billion of
 
total deposits, $0.5 billion of which are insured cash sweep
(“ICS”) deposits. The Company believes it has sufficient funding
 
sources, including on-balance sheet liquid assets and wholesale deposit options,
 
so that an immediate reduction in
these deposit balances would not be expected to have a material, detrimental
 
effect on the Company’s
 
financial position or operations.
As of June 30, 2023, the Company had approximately $2.3 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 $2.0
billion, or 32% of total deposits as of June 30, 2023. The average client account
 
balance as of June 30, 2023 is less than $250 thousand for both individual accounts
 
and business
accounts in total after excluding pass-through and ICS 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 to mitigate the risks of uninsured
deposits.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
69
Liquidity and Capital Resources
Contractual Obligations and Off-Balance Sheet Arrangements
The 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 7: Time
 
Deposits and Other Borrowings” and “Note 4: 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 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 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 long
 
-term contractual obligations, including off-balance
 
sheet obligations, may be satisfied
through the Company’s on-balance
 
sheet and off-balance sheet liquidity discussed below.
 
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. The
Company’s liquidity strategy is to maintain adequate, but not excessive, liquidity
 
to meet the daily cash flow needs of clients while
attempting to achieve adequate earnings for stockholders. The liquidity position is monitored
 
continuously by management. The
Company's short-term and long-term liquidity requirements are primarily
 
met through cash flow from operations, redeployment of
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
statement of financial condition and (ii) off-balance sheet liquidity resources,
 
which represent funds available from third-party sources.
The Company’s on-balance sheet and off-balance sheet liquidity resources
 
consisted of the following as of the dates indicated:
June 30, 2023
December 31, 2022
(Dollars in thousands)
Total on-balance sheet liquidity
$
1,086,397
$
986,482
Total off-balance sheet liquidity
1,492,762
770,165
Total liquidity
$
2,579,159
$
1,756,647
On-balance sheet liquidity as a percent of assets
15
%
15
%
Total liquidity as a percent of assets
36
%
27
%
For the six-months ended June 30, 2023, the Company’s cash and cash equivalents
 
increased $42 million from December 31,
2022
 
to $342 million, representing 5% of total assets. During the six-month period ended June
 
30, 2023, the Company increased the
available-for-sale securities portfolio on an amortized cost basis by $53 million, net
 
of paydowns, maturities,
 
and amortization. As of
June 30, 2023, the Company had $282 million in securities that could be pledged
 
and $169 million that could be sold at a net gain based
on market conditions at the time. In addition, the Company increased funded
 
loans by $427 million, net of payoffs and charge-offs
during the six-month period ended June 30, 2023 that reduced cash and
 
cash equivalents.
 
The Company’s time deposits increased by $893 million primarily from
 
wholesale funding, while savings and money market
deposits increased by $28 million. Non-interest-bearing deposits decreased
 
$472 million as elevated year-end balances were deployed
by clients in the first quarter in addition to clients migrating into savings
 
and money market accounts.
 
Other borrowings decreased $21
million during the six-month period ended June 30, 2023,
 
largely related to a reduction in Federal Funds purchased.
 
 
 
 
 
70
The Company did not purchase any common stock during the first six months of
 
2023. As of June 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.
 
A dividend of $103 thousand related to the Series A
 
Non-cumulative Perpetual Preferred Stock was declared and paid by the
Company during the three-
 
and six-months
 
ended June, 2023. In July 2023, the Board of Directors declared a quarterly dividend on
Series A Non-Cumulative Perpetual Preferred Stock in the amount of $20.00 per share to be payable on September 15, 2023 to
shareholders of record as of August 31, 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.
 
In addition, we expect the acquisition of Canyon will modestly
improve our liquidity position and loan-to-deposit ratio post-merger.
Capital 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 June 30, 2023, the Company and the Bank met all capital adequacy requirements
 
to which they are subject.
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 evaluates estimates on an ongoing
 
basis. Use of alternative assumptions may have resulted in significantly
different estimates. Actual results may differ from these estimates.
A discussion of these policies can be found in the section captioned “Critical Accounting Policies and Estimates” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Form
 
10-K.
 
There have
been no changes in the Company’s application of critical accounting policies
 
and estimates since December 31, 2022.
 
Recent Accounting Pronouncements
Refer to “Note 1: Nature of Operations and Summary of Significant Accounting Policies” included in the notes to consolidated
financial statements – unaudited included elsewhere in this Form 10-Q.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
71
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
A primary component of market risk is interest rate volatility. Interest rate risk management is a key element of the Company’s
statement of financial condition management. Interest rate risk is the risk that net interest 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) 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 Asset/Liability Committee (“ALCO”). The ALCO uses a combination of
three systems to measure the statement of financial condition’s interest rate
 
risk position. 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 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 sheet derivatives.
The 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
June 30, 2023
June 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
3.5
%
(18.1)
%
6.4
%
(9.2)
%
+200
2.2
(12.3)
4.1
(5.8)
+100
0.9
(5.9)
2.0
(3.0)
Base
-
%
-
%
-
%
-
%
-100
(1.4)
5.9
(2.7)
2.7
-200
(2.5)
12.4
NA
(1)
NA
(1)
-300
(4.5)
19.4
NA
(1)
NA
(1)
(1)
The Company excluded a portion of the down rate environment from its analysis due to the low interest rate environment.
Hypothetical Change in Interest Rate - Rate Ramp
June 30, 2023
June 30, 2022
Change in Interest Rate
 
(Basis Points)
Percent change in net interest
income
Percent change in net interest
income
+300
0.2
%
3.1
%
+200
-
2.0
+100
(0.1)
1.0
Base
-
%
-
%
-100
(0.4)
(1.1)
-200
(0.4)
NA
(1)
-300
(0.7)
NA
(1)
(1)
 
The Company excluded a portion of the down rate environment from its analysis due to the low interest rate environment.
 
72
The Company’s position is slightly asset sensitive as of June 30, 2023, which
 
is less sensitive as compared to both June 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 slightly less asset sensitive due to the reduction in demand
 
deposits. The aggregate beta assumption utilized as of
June 30, 2023 was approximately 60% which is unchanged from our
 
previous assumption. Other key assumptions updated year-to-date
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 $4.0 billion, or 69%, of
 
loans and $0.4 billion, or 32%, of investments mature or reprice
within the twelve-month period following June 30, 2023, including $2.7
 
billion and $0.4 billion, respectively,
 
that repriced in the first
month of the third quarter. $5.3
 
billion of interest-bearing liabilities mature or reprice over the same twelve-month
 
period. As of June
30, 2023 and December 31, 2022, the investment portfolio duration
 
was approximately 5.3 years. The Company is reviewing additional
options to manage the statement of financial condition sensitivity based
 
on the interest rate environment and anticipated composition of
assets and liabilities in the next twelve months and beyond.
The models the Company uses include assumptions regarding interest rates
 
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.
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”)) as of June 30, 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 June 30, 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 has been no change in our
 
internal control over financial reporting (as such term is defined
in Rule 13a-15(f) under the Exchange Act) during the second quarter of 2023
 
that has materially affected, or is reasonably likely to
materially affect, 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 risk factors disclosed in the 2022 Form 10-K.
 
 
 
73
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a)
Not applicable.
(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. No shares
 
were repurchased during the three-months ended June
30, 2023.
 
As of June 30, 2023, $16 million remains available for repurchase under
 
this share repurchase program. Repurchases
under the program may be made in the open market or privately negotiated
 
transactions in compliance with SEC Rule 10b-18,
subject to market conditions, applicable legal requirements,
 
and other relevant factors. The program does not obligate the Company
to acquire any amount of common stock and may be suspended at any time at the
 
Company's discretion. No time limit has been set
for completion of the program.
ITEM 5. OTHER INFORMATION
(a)
None
(b)
None
(c)
Trading Arrangements
During the three months ended June 30, 2023, no director or officer (as defined
 
in Rule 16a-1(f) under the Exchange Act) of the
Company
adopted
 
or
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.
 
 
 
 
 
 
74
ITEM 6. EXHIBITS
 
Exhibit
Number
Exhibit Description
*
**
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
 
 
75
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:
 
August 4, 2023
/s/ Benjamin R. Clouse
 
Benjamin R. Clouse
 
Chief Financial Officer
 
(Duly authorized officer and principal financial officer)
 
exhibit101
 
 
 
 
 
 
CROSSFIRST BANKSHARES, INC.
2018 OMNIBUS EQUITY INCENTIVE PLAN
DIRECTOR RESTRICTED STOCK AWARD
 
AGREEMENT
Date of Grant:
 
[●]
Number of Restricted Shares Granted:
 
_________
This Restricted Stock Award Agreement (this "Award
 
Agreement"), is entered into on
the Date of Grant above, by and between CrossFirst Bankshares, Inc., a Kansas Corporation (the
"Company") and _____________ (the "Grantee").
RECITALS:
A.
 
Effective October 25, 2018, the Company adopted the CrossFirst Bankshares, Inc.
2018 Omnibus Equity Incentive Plan (the "Plan") pursuant to which the Company may, from
time to time, grant Restricted Stock to eligible Service Providers of the Company and its
Affiliates.
B.
 
The Grantee is a Service Provider of the Company or one of its Affiliates,
 
and the
Company desires to grant to the Grantee shares of Restricted Stock of the Company on the terms
and conditions reflected in this Award
 
Agreement, the Plan and as otherwise established by the
Committee.
AGREEMENT:
In consideration of the mutual covenants contained herein and other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree as follows:
Section 1.
 
Incorporation of the Plan.
 
All provisions of this Award Agreement
 
and
the rights of the Grantee hereunder are subject in all respects to the provisions of the Plan, the
terms of which are incorporated herein by reference, and the powers of the Committee therein
provided.
 
Capitalized terms used in this Award
 
Agreement but not defined herein have the
meanings set forth in Plan.
Section 2.
 
Grant of Restricted
 
Stock.
 
As of the
 
Date of Grant
 
identified above and
subject
 
to
 
Section
 
21
 
below,
 
the
 
Company
 
grants
 
to
 
the
 
Grantee,
 
subject
 
to
 
the
 
conditions
 
and
restrictions set forth in this Award Agreement and in the Plan, that number of shares of Restricted
Stock
 
identified
 
above
 
opposite
 
the
 
heading
 
"Number
 
of
 
Restricted
 
Shares
 
Granted"
 
(the
"Restricted Shares").
Section 3.
 
Restrictions
 
on
 
Transfer;
 
Vesting
 
Date
.
 
Subject
 
to
 
any
 
exceptions
 
set
forth in this
 
Award
 
Agreement or in
 
the Plan, the
 
Restricted Shares or
 
the rights
 
relating thereto
may
 
not
 
be
 
sold,
 
transferred,
 
gifted,
 
bequeathed,
 
pledged,
 
assigned,
 
or
 
otherwise
 
alienated
 
or
hypothecated,
 
voluntarily
 
or
 
involuntarily,
 
prior
 
to
 
the
 
vesting
 
date
 
for
 
such
 
Restricted
 
Shares
 
 
 
 
 
 
identified below
 
(the "Vesting
 
Date").
 
Subject to
 
Section 21
 
below,
 
on the
 
Vesting
 
Date, such
restriction on transfer shall lapse and the Restricted Shares, if not previously forfeited pursuant to
Section 4
 
below, will become
 
freely transferable
 
under this
 
Award Agreement and
 
the Plan,
 
subject
only to such further limitations on transfer,
 
if any,
 
as may exist under applicable law or any other
agreement binding upon Grantee.
 
Subject to any exceptions listed in this Award Agreement or in
the
 
Plan,
 
the
 
Restricted
 
Shares
 
shall
 
become
 
vested
 
in
 
accordance
 
with
 
the
 
schedule
 
set
 
forth
below:
 
Vest
 
Date
 
Restricted Shares
[●]
 
___________
Notwithstanding the foregoing,
 
(a) if Grantee's
 
position as a
 
Service Provider with
 
the Company
or any of its Affiliates
 
is terminated by reason of
 
the Grantee's death or
 
Disability (and assuming
Participant
 
continuously
 
served
 
as
 
a
 
Director
 
on
 
the
 
Board
 
through
 
the
 
date
 
of
 
such
 
death
 
or
Disability), the Vesting
 
Date for all
 
of the
 
Restricted Shares
 
automatically will
 
be accelerated
 
to
the date
 
of Grantee's
 
termination as
 
a Service
 
Provider; or
 
(b) if
 
Grantee’s
 
position as
 
a Service
Provider with the Company or any of its
 
Affiliates is terminated prior to vesting due to the natural
termination of the Grantee’s
 
current Board service period prior to vesting
 
in accordance with this
Award
 
Agreement,
 
the
 
unvested
 
Restricted
 
Shares
 
shall
 
instead
 
continue
 
to
 
vest
 
in
 
accordance
with the vesting schedule shown above.
Section 4.
 
Forfeiture
 
Prior
 
to
 
Vesting
.
 
Unless
 
otherwise
 
provided
 
in
 
this
 
Award
Agreement or the Plan, if Grantee's position as a Service Provider with the Company or any of its
Affiliates
 
is
 
terminated
 
by
 
the
 
Company
 
or
 
any
 
such
 
Affiliate
 
for
 
any
 
reason
 
(other
 
than
 
the
Grantee’s
 
death, Disability
 
or natural
 
termination of
 
Board service
 
period), prior
 
to the
 
Vesting
Date for
 
the Restricted
 
Shares, Grantee
 
will thereupon
 
immediately forfeit
 
any and
 
all unvested
Restricted Shares,
 
and the
 
full ownership
 
of such
 
Restricted Shares
 
and rights
 
will revert
 
to the
Company.
 
Upon such
 
forfeiture, Grantee
 
shall have
 
no further
 
rights under
 
this Award Agreement.
 
For purposes
 
of this Award Agreement, the
 
transfer of employment
 
between the Company
 
and any
of its Affiliates (or
 
between Affiliates) shall not constitute
 
a termination of the Grantee's position
as a Service Provider.
 
Section 5.
 
Dividends and Voting.
 
Subject to Section 21 below, Grantee is entitled to
(i) receive all dividends, payable in stock, in cash or in kind, or other distributions, declared on or
with respect to any Restricted
 
Shares as of a record
 
date that occurs on or
 
after the Date of Grant
hereunder and before any transfer or forfeiture of the
 
Restricted Shares by Grantee, provided that
any such dividends
 
paid in cash
 
are to be held
 
in escrow by
 
the Company and, such
 
cash dividends
and
 
distributions
 
are
 
to
 
be
 
subject
 
to
 
the
 
same
 
rights,
 
restrictions
 
on
 
transfer
 
and
 
conditions
regarding vesting and forfeiture
 
as the Restricted
 
Shares with respect
 
to which such
 
dividends or
distributions are paid at the time of payment, and
 
(ii) exercise all voting rights with respect to the
Restricted Shares,
 
if the
 
record date
 
for the
 
exercise of
 
such voting
 
rights occurs
 
on or
 
after the
Date of
 
Grant hereunder
 
and prior
 
to any
 
transfer or
 
forfeiture of
 
such Restricted
 
Shares.
 
In the
event of forfeiture by Grantee of any or all of the Restricted Shares or any of the equity securities
distributed to Grantee with respect thereto, Grantee shall forfeit all cash dividends
 
held in escrow
and
 
relating
 
to
 
the
 
underlying
 
forfeited
 
Restricted
 
Shares
 
and
 
must
 
return
 
to
 
the
 
Company
 
any
distributions previously paid to Grantee with respect to such Restricted Shares.
 
 
 
 
 
 
 
 
 
 
 
 
Section 6.
 
No Right
 
to Continue
 
as
 
a Service
 
Provider.
 
Neither the
 
Plan nor
 
this
Award
 
Agreement
 
confers
 
upon
 
the
 
Grantee
 
any
 
right
 
to
 
be
 
retained
 
in
 
any
 
position
 
as
 
an
Employee, Consultant,
 
or Director
 
of the
 
Company.
 
Further,
 
nothing in
 
the Plan
 
or this
 
Award
Agreement shall be construed to limit the discretion of
 
the Company to terminate the Grantee as a
Service Provider at any time, with or without Cause.
 
Section 7.
Compliance with
 
Law.
 
The issuance
 
and transfer
 
of Shares
 
shall be
 
subject
to compliance
 
by the
 
Company
 
and the
 
Grantee with
 
all applicable
 
requirements of
 
federal and
state
 
securities
 
laws
 
and
 
with
 
all
 
applicable
 
requirements
 
of
 
any
 
stock
 
exchange
 
on
 
which
 
the
Company's Shares
 
may be
 
listed. The
 
Grantee understands
 
that the
 
Company is
 
under no
 
obligation
to
 
register
 
the
 
Shares
 
with
 
the
 
Securities
 
and
 
Exchange
 
Commission,
 
any
 
state
 
securities
commission, or any stock exchange to effect such compliance.
Section 9.
 
Notices.
 
Any
 
notice
 
required
 
to
 
be
 
delivered
 
to
 
the
 
Company
 
under this
Award
 
Agreement
 
shall
 
be
 
in
 
writing
 
and
 
addressed
 
to
 
the
 
General
 
Counsel
 
and
 
Corporate
Secretary of the Company at the Company's principal corporate office.
 
Any notice required to be
delivered
 
to
 
the
 
Grantee
 
under
 
this
 
Award
 
Agreement
 
shall
 
be
 
in
 
writing
 
and
 
addressed
 
to
 
the
Grantee
 
at
 
the
 
Grantee's
 
address
 
as
 
shown
 
in
 
the
 
records
 
of
 
the
 
Company.
 
Either
 
party
 
may
designate another address in writing (or such other method approved by
 
the Company) from time
to time.
Section 10.
 
Governing Law.
 
This Award Agreement will be construed
 
and interpreted
in accordance with the laws of the State of Kansas without regard to conflict of law principles.
Section 11.
 
Adjustments.
 
If
 
any
 
change
 
is
 
made
 
to
 
the
 
outstanding
 
Stock
 
or
 
capital
structure of the Company, if required, the Restricted Shares shall be adjusted or terminated in any
manner as contemplated by the Plan.
Section 12.
 
Amendment.
 
This Award Agreement may be amended in a manner that is
materially
 
adverse
 
to
 
the
 
Grantee
 
only
 
by
 
a
 
writing
 
executed
 
by
 
the
 
parties
 
hereto
 
which
specifically states that it is amending this Award Agreement.
Section 13.
 
Interpretation.
 
Any
 
dispute
 
regarding
 
the
 
interpretation
 
of
 
this
 
Award
Agreement shall be submitted by
 
the Grantee or the Company
 
to the Committee for review.
 
The
resolution
 
of
 
such
 
dispute
 
by
 
the
 
Committee
 
shall
 
be
 
final
 
and
 
binding
 
on
 
the
 
Grantee
 
and
 
the
Company.
Section 14.
 
Titles.
 
Titles are provided herein for convenience only and
 
are not to serve
as a basis for interpretation or construction of this Award Agreement.
Section 15.
 
Successors and Assigns.
 
The Company may assign any of its rights under
this Award
 
Agreement. This
 
Award
 
Agreement will
 
be binding
 
upon and
 
inure to
 
the benefit
 
of
the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein,
this Award Agreement will
 
be binding
 
upon the
 
Grantee and
 
the Grantee's
 
beneficiaries, executors,
administrators and the person(s) to
 
whom the Restricted Shares may
 
be transferred by will
 
or the
laws of descent or distribution.
 
 
 
 
 
 
 
 
Section 16.
 
Severability.
 
The
 
invalidity
 
or
 
unenforceability
 
of
 
any
 
provision
 
of
 
the
Plan or this Award Agreement shall not affect the validity or enforceability of any other provision
of the Plan
 
or this Award
 
Agreement, and each
 
provision of the
 
Plan and this
 
Award
 
Agreement
shall be severable and enforceable to the extent permitted by law.
Section 17.
Counterparts.
 
This
 
Award
 
Agreement
 
may
 
be
 
executed
 
in
 
counterparts,
each of
 
which shall
 
be deemed
 
an original
 
but all
 
of which
 
together will
 
constitute one
 
and the
same instrument. Counterpart
 
signature pages to
 
this Award
 
Agreement transmitted by
 
facsimile
transmission,
 
by
 
electronic
 
mail
 
in
 
portable
 
document
 
format
 
(.pdf),
 
or
 
by
 
any
 
other
 
electronic
means intended to preserve the original graphic
 
and pictorial appearance of a document, will have
the same effect as physical delivery of the paper document bearing an original signature.
Section 18.
 
Acceptance.
 
The
 
Grantee
 
hereby
 
acknowledges
 
receipt
 
of
 
a
 
copy
 
of
 
the
Plan and this Agreement. The Grantee has read and understands the terms and provisions thereof,
and accepts the subject to all of the terms and conditions of the Plan and this Award Agreement.
 
Section 19.
 
Entire Agreement
 
and Binding
 
Effect.
 
This Award
 
Agreement and
 
the
Plan
 
constitute
 
the
 
entire
 
contract
 
between
 
the
 
parties
 
hereto
 
with
 
regard
 
to
 
the
 
subject
 
matter
hereof.
 
They supersede any other agreements, representations or understandings (whether oral or
written
 
and
 
whether
 
express
 
or
 
implied)
 
that
 
relate
 
to
 
the
 
subject
 
matter
 
hereof.
 
Except
 
as
expressly stated herein
 
to the
 
contrary,
 
this Award
 
Agreement will be
 
binding upon
 
and inure to
the
 
benefit
 
of
 
the
 
respective
 
heirs,
 
legal
 
representatives,
 
successors
 
and
 
assigns
 
of
 
the
 
parties
hereto.
Section 20.
 
409A
 
Compliance
.
 
Notwithstanding
 
any
 
provision
 
of
 
the
 
Plan
 
or
 
this
Award Agreement
 
to the contrary, (i) this Award
 
Agreement shall not be amended in any manner
that
 
would
 
cause
 
any
 
amounts
 
payable
 
hereunder
 
that
 
are
 
not
 
subject
 
to
 
Code
 
Section
 
409A
("Section 409A")
 
to become subject
 
thereto (unless they
 
also are in
 
compliance therewith), and
 
the
provisions of
 
any purported
 
amendment that
 
may
 
reasonably be
 
expected to
 
result in
 
such non-
compliance
 
shall
 
be
 
of
 
no
 
force
 
or
 
effect
 
with
 
respect
 
to
 
this
 
Award
 
Agreement
 
and
 
(ii)
 
the
Company,
 
to the
 
extent it
 
deems necessary
 
or advisable
 
in its
 
sole discretion,
 
reserves the
 
right,
but
 
shall
 
not
 
be
 
required,
 
to
 
unilaterally
 
amend
 
or
 
modify
 
this
 
Award
 
Agreement
 
to
 
reflect
 
the
intention that
 
the Plan
 
qualifies for
 
exemption from
 
or complies
 
with Section
 
409A in
 
a manner
that as
 
closely as
 
practicable achieves
 
the original
 
intent of
 
this Award
 
Agreement and
 
with the
least reduction, if any,
 
in overall benefit to
 
the Grantee to comply with
 
Section 409A on a timely
basis, which
 
may be
 
made on
 
a retroactive
 
basis, in
 
accordance with
 
regulations and
 
other guidance
issued under
 
Section 409A.
 
Neither the
 
Company nor
 
the Committee
 
makes any
 
representation
that
 
this
 
Award
 
Agreement
 
shall
 
be
 
exempt
 
from
 
or
 
comply
 
with
 
Section
 
409A
 
and
 
makes
 
no
undertaking to preclude Section 409A from applying to this Award
 
Agreement.
Section 21.
 
Applicability
 
of
 
Directors'
 
Deferred
 
Fee
 
Plan.
 
In
 
the
 
event
 
that
 
the
Grantee
 
has
 
made
 
an
 
election
 
under
 
the
 
Company's
 
2018
 
Directors'
 
Deferred
 
Fee
 
Plan
 
(the
"Deferred Fee Plan") to defer the receipt
 
of any of the Restricted Shares,
 
no shares of Stock shall
be
 
issued
 
to
 
the
 
Grantee
 
and
 
the
 
Grantee
 
shall
 
only
 
have
 
a
 
right
 
to
 
receive
 
the
 
shares
 
of
 
Stock
subject to
 
this
 
Award
 
Agreement
 
(i) if
 
the Restricted
 
Shares
 
would have
 
become vested
 
on
 
the
Vesting
 
Date if
 
no election
 
to defer
 
the receipt
 
of the
 
Restricted Shares
 
had been
 
made, and
 
(ii)
following and
 
in accordance
 
with the
 
issuance date
 
provisions specified
 
under the
 
Deferred Fee
 
 
Plan.
 
Any
 
of
 
the
 
Restricted
 
Shares
 
deferred
 
under
 
the
 
Deferred
 
Fee
 
Plan
 
shall
 
be
 
treated
 
as
Deferred Shares under such plan and under the Omnibus Plan.
 
[Signature Page Follows]
 
 
 
 
 
The parties to this Award
 
Agreement have executed this
 
Award
 
Agreement as of the
 
date
provided in the preamble to this agreement.
CROSSFIRST BANKSHARES, INC.
By:
 
Name:
 
Title:
 
GRANTEE
[●]
exhibit311
 
 
 
Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael J. Maddox, certify that:
1.
 
I have reviewed this quarterly report on Form 10-Q of CrossFirst Bankshares,
 
Inc.;
2.
 
Based on my knowledge, this report does not contain any untrue statement of
 
a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
 
which such statements were made, not
misleading with respect to the period covered by this report;
3.
 
Based on my knowledge, the financial statements, and other financial information
 
included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows
 
of the registrant as of, and for, the
periods presented in this report;
4.
 
The registrant’s other certifying officer and I are responsible for establishing
 
and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
 
(as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
 
controls and procedures to be
designed under our supervision, to ensure that material information relating
 
to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly
 
during the period
in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
 
internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
 
regarding the reliability of
financial reporting and the preparation of financial statements for external
 
purposes in accordance with
generally accepted accounting principles;
(c)
 
Evaluated the effectiveness of the registrant’s disclosure controls and
 
procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures,
 
as of the end of the period
covered by this report based on such evaluation; and
(d)
 
Disclosed in this report any change in the registrant’s internal control over
 
financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth
 
fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect,
 
the registrant’s internal control
over financial reporting; and
5.
 
The registrant’s other certifying officer and I have disclosed, based on our
 
most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee
 
of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
 
All significant deficiencies and material weaknesses in the design or operation of
 
internal control over
financial reporting which are reasonably likely to adversely affect the
 
registrant’s ability to record, process,
summarize and report financial information; and
(b)
 
Any fraud, whether or not material, that involves management or other
 
employees who have a significant role
in the registrant’s internal control over financial reporting.
 
Date:
 
August 4, 2023
 
/s/ Michael J. Maddox
Michael J. Maddox
President and Chief Executive Officer
(Principal Executive Officer)
exhibit312
 
 
 
Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
I, Benjamin R. Clouse, certify that:
1.
 
I have reviewed this quarterly report on Form 10-Q of CrossFirst Bankshares,
 
Inc.;
2.
 
Based on my knowledge, this report does not contain any untrue statement of
 
a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
 
which such statements were made, not
misleading with respect to the period covered by this report;
3.
 
Based on my knowledge, the financial statements, and other financial information
 
included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows
 
of the registrant as of, and for, the
periods presented in this report;
4.
 
The registrant’s other certifying officer and I are responsible for establishing
 
and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
 
(as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
 
Designed such disclosure controls and procedures, or caused such disclosure
 
controls and procedures to be
designed under our supervision, to ensure that material information relating
 
to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly
 
during the period
in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such
 
internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance
 
regarding the reliability of
financial reporting and the preparation of financial statements for external
 
purposes in accordance with
generally accepted accounting principles;
(c)
 
Evaluated the effectiveness of the registrant’s disclosure controls and procedures
 
and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures,
 
as of the end of the period
covered by this report based on such evaluation; and
(d)
 
Disclosed in this report any change in the registrant’s internal control over
 
financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth
 
fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the
 
registrant’s internal
control over financial reporting; and
5.
 
The registrant’s other certifying officer and I have disclosed, based on our
 
most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee
 
of the registrant’s board of directors (or
persons performing the equivalent functions):
(a)
 
All significant deficiencies
 
and material weaknesses
 
in the
 
design or
 
operation of internal
 
control over financial
reporting which are reasonably likely to adversely affect the registrant’s
 
ability to record, process, summarize
and report financial information; and
(b)
 
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
 
Date:
 
August 4, 2023
 
/s/ Benjamin R. Clouse
Benjamin R. Clouse
Chief Financial Officer
(Principal Financial Officer)
exhibit321
 
 
 
 
 
 
 
 
 
 
 
Exhibit 32.1
CERTIFICATION OF PRINCIPAL
 
EXECUTIVE OFFICER AND PRINCIPAL
 
FINANCIAL OFFICER
UNDER 18 U.S.C. § 1350 FURNISHED PURSUANT TO SECURITIES EXCHANGE
 
ACT RULE 13a-14(b)
In connection with the Quarterly Report of CrossFirst Bankshares, Inc. (the
 
“Company”) on Form 10-Q for the period ended on June 30,
2023, as filed with the Securities and Exchange Commission on the date hereof
 
(the “Report”), each of the undersigned, in his respective
capacities indicated below, hereby certifies, pursuant to 18 U.S.C. § 1350,
 
as enacted by Section 906 of the Sarbanes-Oxley Act of 2002,
that, to his knowledge and belief, (1) the Report fully complies with the requirements of
 
Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended, and (2) the information contained in the Report
 
fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date: August 4, 2023
 
/s/ Michael J. Maddox
Michael J. Maddox
President and Chief Executive Officer (Principal Executive Officer)
/s/ Benjamin R. Clouse
Benjamin R. Clouse
 
Chief Financial Officer (Principal Financial Officer)