CROSSFIRST BANKSHARES, INC. - Quarter Report: 2023 March (Form 10-Q)

cfb-2023q1

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

March 31, 2023

☐

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

For the transition period from ______ to

______

Commission file number

001-39028

CROSSFIRST BANKSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)

Kansas

26-3212879

(State or other jurisdiction of incorporation or organization)

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

11440 Tomahawk Creek Parkway

Leawood

66211

(Address of principal executive offices)

(Zip Code)

(

913

)

901-4516

(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

☒

☐

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

☒

☐

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

☐

☒

As of April 28, 2023, the registrant had

48,600,618

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

CROSSFIRST BANKSHARES, INC.

Form 10-Q for the Quarter Ended March 31, 2023

Index

Part I. Financial Information

Item 1. Consolidated Financial Statements

Forward-Looking Information

Consolidated Statements of Financial Condition – Unaudited

Consolidated Statements of Operations – Unaudited

Consolidated Statements of Comprehensive Income (Loss) – Unaudited

Consolidated Statements of Stockholders’ Equity – Unaudited

Consolidated Statements of Cash Flows – Unaudited

Notes to Consolidated Financial Statements – Unaudited

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Item 4. Controls and Procedures

Part II. Other Information

Item 1. Legal Proceedings

Item 1A. Risk Factors

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

Item 5. Other Information

Item 6. Exhibit Index

Signature

Table of Contents

Forward-Looking Information

All statements contained in this quarterly report 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 expectations, opportunities or plans for growth;

the proposed acquisition of Canyon Bancorporation, Inc. and

Canyon Community Bank, N.A. (collectively “Canyon”); our anticipated

expenses, cash requirements and sources of liquidity; and our

capital allocation strategies and plans.

Unless we state otherwise or the context otherwise requires, references

below to “we,” “our,” “us,” and the “Company” refer to

CrossFirst Bankshares, Inc., and its consolidated subsidiaries. References 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, the Company cautions you that any such forward-looking

statements are not guarantees

of future performance and are subject to risks, assumptions, estimates and uncertainties

that are difficult to predict. Although the

Company believes 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; the transition away from the London Interbank Offered

Rate (“LIBOR”); 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 capital requirements,

higher FDIC insurance premiums and assessments, consumer protection

laws and privacy laws; volatility in our stock price; issuance of

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.

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

PART I - FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Financial Condition – Unaudited

March 31, 2023

December 31, 2022

(Dollars in thousands)

Assets

Cash and cash equivalents

262,971

300,138

Available-for-sale securities - taxable

280,408

198,808

Available-for-sale securities - tax-exempt

470,843

488,093

Loans, net of unearned fees

5,647,639

5,372,729

Allowance for credit losses on loans

65,130

61,775

Loans, net of the allowance for credit losses on loans

5,582,509

5,310,954

Premises and equipment, net

67,311

65,984

Restricted equity securities

16,700

12,536

Interest receivable

30,385

29,507

Foreclosed assets held for sale

855

1,130

Goodwill and other intangible assets, net

28,259

29,081

Bank-owned life insurance

69,511

69,101

Other

84,978

95,754

Total assets

6,894,730

6,601,086

Liabilities and stockholders’ equity

Deposits

Non-interest-bearing

969,701

1,400,260

Savings, NOW and money market

3,491,586

3,305,481

Time

1,376,027

945,567

Total deposits

5,837,314

5,651,308

Federal Home Loan Bank advances

314,031

218,111

Other borrowings

17,970

35,457

Interest payable and other liabilities

79,924

87,611

Total liabilities

6,249,239

5,992,487

Stockholders’ equity

Preferred stock, $

0.01

par value:

Authorized -

15,000

shares, issued -

7,750

and

shares at March 31, 2023 and December 31, 2022, respectively

Common stock, $

0.01

par value:

Authorized -

200,000,000

shares, issued -

53,189,016

and

53,036,613

shares at March 31, 2023 and December 31, 2022,

respectively

532

530

Treasury stock, at cost:

4,588,398

shares held at March 31, 2023 and December 31,

2022

(64,127)

Additional paid-in capital

539,023

530,658

Retained earnings

222,203

206,095

Accumulated other comprehensive loss

(52,140)

(64,557)

Total stockholders’ equity

645,491

608,599

Total liabilities and stockholders’ equity

6,894,730

6,601,086

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Operations – Unaudited

Three Months Ended

March 31,

2023

2022

(Dollars in thousands except per share data)

Interest Income

Loans, including fees

89,618

42,728

Available-for-sale securities - taxable

1,849

1,044

Available-for-sale securities - tax-exempt

3,794

3,692

Deposits with financial institutions

2,014

152

Dividends on bank stocks

262

144

Total interest income

97,537

47,760

Interest Expense

Deposits

36,725

3,511

Fed funds purchased and repurchase agreements

Federal Home Loan Bank Advances

2,391

1,109

Other borrowings

154

Total interest expense

39,316

4,645

Net Interest Income

58,221

43,115

Provision for Credit Losses

4,421

(625)

Net Interest Income after Provision for Credit Losses

53,800

43,740

Non-Interest Income

Service charges and fees on customer accounts

1,829

1,408

ATM and credit card interchange income

1,264

2,664

Realized gains (losses) on available-for-sale securities

(26)

Gain on sale of loans

187

Gains (losses), net on equity securities

(103)

Income from bank-owned life insurance

411

388

Swap fees and credit valuation adjustments, net

118

Other non-interest income

567

493

Total non-interest income

4,421

4,942

Non-Interest Expense

Salaries and employee benefits

22,622

17,941

Occupancy

2,974

2,493

Professional fees

2,618

805

Deposit insurance premiums

1,531

737

Data processing

1,242

812

Advertising

752

692

Software and communication

1,651

1,270

Foreclosed assets, net

149

(53)

Other non-interest expense

3,731

2,950

Core deposit intangible amortization

822

Total non-interest expense

38,092

27,666

Net Income Before Taxes

20,129

21,016

Income tax expense

4,021

4,188

Net Income

16,108

16,828

Basic Earnings Per Common Share

0.33

Diluted Earnings Per Common Share

0.33

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Comprehensive Income (Loss) – Unaudited

Three Months Ended

March 31,

2023

2022

(Dollars in thousands)

Net Income

16,108

16,828

Other Comprehensive Income (Loss)

Unrealized gain (loss) on available-for-sale securities

14,951

(58,956)

Less: income tax expense (benefit)

3,657

(14,433)

Unrealized gain (loss) on available-for-sale securities, net of income tax

11,294

(44,523)

Reclassification adjustment for realized gains (losses) included in income

(26)

Less: income tax expense (benefit)

(6)

Less: reclassification adjustment for realized gain (loss) included

in income, net of income tax

(20)

Unrealized gain on cash flow hedges

1,540

2,655

Less: income tax expense

369

653

Unrealized gain on cash flow hedges, net of income tax

1,171

2,002

Other comprehensive income (loss)

12,417

(42,501)

Comprehensive Income (Loss)

28,525

(25,673)

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Stockholders’ Equity – Unaudited

Preferred Stock

Common Stock

Treasury

Stock

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Total

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)

Net income

16,828

Other comprehensive loss

- available-for-

sale securities

(44,503)

Other comprehensive gain

- cash flow

hedges

2,002

Issuance of shares from equity-based

awards

336,540

(453)

(450)

Open market common share repurchases

(1,058,332)

(16,762)

Employee receivables from sale of stock

Stock-based compensation

1,115

Balance at March 31, 2022

49,728,253

529

(45,109)

527,468

161,323

(21,012)

623,199

Preferred Stock

Common Stock

Treasury

Stock

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Total

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

16,108

Other comprehensive gain

- available-for-

sale securities

11,246

Other comprehensive gain

- cash flow

hedges

1,171

Issuance of preferred shares

7,750

Issuance of shares from equity-based awards

152,403

(623)

(621)

Stock-based compensation

1,238

Balance March 31, 2023

7,750

48,600,618

532

(64,127)

539,023

222,203

(52,140)

645,491

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Cash Flows – Unaudited

Three Months Ended

March 31,

2023

2022

(Dollars in thousands)

Operating Activities

Net income

16,108

16,828

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

Depreciation and amortization

2,318

1,241

Provision for credit losses

4,421

(625)

Accretion of discounts on loans

(547)

Accretion of discounts and amortization of premiums on securities

926

1,116

Equity based compensation

1,238

1,115

(Gain) loss on disposal of fixed assets

(4)

Loss (gain) on sale of foreclosed assets and related impairments

102

(62)

Gain on sale of loans

(187)

Deferred income taxes

1,640

3,358

Net increase in bank owned life insurance

(411)

(388)

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

(63)

Dividends on FHLB stock

(261)

(142)

Changes in:

Interest receivable

(878)

(910)

Other assets

2,615

14,565

Other liabilities

(2,693)

(21,650)

Net cash provided by operating activities

24,324

14,485

Investing Activities

Net change in loans

(275,817)

(94,437)

Purchases of available-for-sale securities

(93,488)

(49,138)

Proceeds from maturities of available-for-sale securities

5,714

11,582

Proceeds from sale of available-for-sale securities

37,069

Proceeds from the sale of foreclosed assets

173

237

Purchase of premises and equipment

(2,662)

(962)

Proceeds from the sale of premises and equipment and related insurance claims

Purchase of restricted equity securities

(8,226)

Proceeds from sale of restricted equity securities

4,334

1,544

Net cash used in investing activities

(332,899)

(131,161)

Financing Activities

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

(244,454)

50,403

Net increase (decrease) in time deposits

430,407

(112,320)

Net decrease in federal funds sold

(20,000)

Repayment of Federal Home Loan Bank advances

(12,643)

(10,000)

Net proceeds of Federal Home Loan Bank line of credit

110,969

Proceeds from issuance of preferred shares, net of issuance cost

7,750

Issuance of common shares, net of issuance cost

170

Proceeds from employee stock purchase plan

167

172

Repurchase of common stock

(16,762)

Acquisition of common stock for tax withholding obligations

(790)

(793)

Net decrease in employee receivables

Net cash provided by (used in) financing activities

271,408

(89,124)

Decrease in Cash and Cash Equivalents

(37,167)

(205,800)

Cash and Cash Equivalents, Beginning of Period

300,138

482,727

Cash and Cash Equivalents, End of Period

262,971

276,927

Supplemental Cash Flows Information

Interest paid

35,459

4,784

Income taxes paid

Table of Contents

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.

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 other than those noted below

Related Party Transactions

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

opinion, the loans and deposits were made

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

at the time with other persons. Related party loans

totaled $

million and $

million at March 31, 2023 and December 31, 2022, respectively. Related party deposits

totaled $

129

million

and $

million at March 31, 2023 and December 31, 2022, respectively.

Table of Contents

Accounting Pronouncements Implemented

ASU 2022-02, Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures

Background

– ASU 2022-02 provides new guidance on (i) troubled debt restructurings (“TDRs”) and (ii) vintage disclosures

for

gross write-offs. The update eliminates the accounting guidance for TDRs and requires a company to determine

if a modification

results in a new loan or a continuation of an existing loan. The update enhances the required

disclosures for certain modifications

made to borrowers experiencing financial difficulty. In addition, the update

requires disclosure of current-period gross charge-offs

by year of origination for financing receivables. For the Company, the

amendments are effective as of January 1, 2023.

Impact of adoption

– The Company adopted the provisions of this guidance as of January 1, 2023 on a prospective

basis. The

adoption of this ASU did not impact our consolidated financial statements.

The incremental vintage disclosures for gross write-

offs are included within “Note 3: Loans and Allowance for Credit Losses.”

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:

March 31, 2023

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Approximate

Fair Value

(Dollars in thousands)

Available-for-sale securities

Mortgage-backed - GSE residential

274,895

2,110

22,356

254,649

Collateralized mortgage obligations - GSE residential

10,989

604

10,385

State and political subdivisions

523,464

1,449

47,771

477,142

Corporate bonds

9,754

679

9,075

Total available-for-sale securities

819,102

3,559

71,410

751,251

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 $

million and $

million at March 31, 2023 and December 31, 2022,

respectively.

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

had $

million of accrued interest, excluded from

the amortized cost basis, and presented in “interest receivable” on the

consolidated statements of financial condition.

Table of Contents

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

maturities of AFS securities:

For the Three Months Ended

March 31, 2023

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Gain

(Dollars in thousands)

Available-for-sale securities

193

(130)

For the Three Months Ended

March 31, 2022

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Loss

(Dollars in thousands)

Available-for-sale securities

(27)

(26)

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

March 31, 2023 and December 31, 2022:

March 31, 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

13,935

562

133,560

21,794

147,495

22,356

Collateralized

mortgage obligations

- GSE residential

2,235

8,150

516

10,385

604

State and political

subdivisions

142,418

2,633

105

210,220

45,138

151

352,638

47,771

256

Corporate bonds

4,861

251

4,213

428

9,074

679

Total temporarily

impaired securities

163,449

3,534

128

356,143

67,876

208

519,592

71,410

336

Table of Contents

December 31, 2022

Less than 12 Months

12 Months or More

Total

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

(Dollars in thousands)

Available-for-sale

securities

Mortgage-backed -

GSE residential

91,929

10,410

66,036

14,756

157,965

25,166

Collateralized

mortgage obligations

- GSE residential

10,636

733

251

10,887

743

State and political

subdivisions

350,884

36,697

266

52,519

20,743

403,403

57,440

306

Corporate bonds

9,210

552

9,210

552

Total temporarily

impaired securities

462,659

48,392

330

118,806

35,509

581,465

83,901

387

Based on the Company’s evaluation at each respective period end,

we recorded

credit loss impairment during the first quarter

of 2023 or fourth quarter of 2022.

The unrealized losses in the Company’s investment portfolio were caused by

interest rate changes.

As of March 31, 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.

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The amortized cost, fair value, and weighted average yield of available-for-sale

securities at March 31, 2023, by contractual

maturity, are shown below:

March 31, 2023

Within

After One to

After Five to

After

One Year

Five Years

Ten Years

Total

(Dollars in thousands)

Available-for-sale securities

Mortgage-backed - GSE residential

(1)

Amortized cost

274,787

274,895

Estimated fair value

254,544

254,649

Weighted average yield

(2)

4.82

4.02

3.14

Collateralized mortgage obligations -

GSE residential

(1)

Amortized cost

2,322

8,667

10,989

Estimated fair value

2,235

8,150

10,385

Weighted average yield

(2)

2.75

2.25

2.36

State and political subdivisions

Amortized cost

1,075

7,962

90,970

423,457

523,464

Estimated fair value

1,078

8,158

90,981

376,925

477,142

Weighted average yield

(2)

3.71

4.32

2.96

2.68

2.76

Corporate bonds

Amortized cost

149

9,605

9,754

Estimated fair value

146

8,929

9,075

Weighted average yield

(2)

4.09

5.71

5.68

Total available-for-sale securities

Amortized cost

1,075

8,128

102,988

706,911

819,102

Estimated fair value

1,078

8,321

102,233

639,619

751,251

Weighted average yield

(2)

3.71

4.32

3.21

2.85

2.92

(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 $

3.2

million of private equity investments. Equity securities 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-month period ended March 31, 2023.

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The following is a summary of the unrealized and realized gains and losses on equity

securities recognized in net income:

Three Months Ended

March 31,

2023

2022

(Dollars in thousands)

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

securities

(103)

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

(103)

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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 $

million as of March 31, 2023 and December 31, 2022.

March 31, 2023

December 31, 2022

Amount

% of Loans

Amount

% of Loans

(Dollars in thousands)

Commercial and industrial

986,636

1,017,678

Commercial and industrial lines of credit

1,047,280

957,254

Energy

193,859

173,218

Commercial real estate

1,808,888

1,718,947

Construction and land development

845,085

794,788

Residential real estate

412,334

409,124

Multifamily real estate

295,469

237,984

Consumer

58,088

63,736

Loans, net of unearned

fees

5,647,639

100

5,372,729

100

Less: allowance for credit losses on loans

65,130

61,775

Loans, net of the allowance for credit losses on loans

5,582,509

5,310,954

Accrued interest of $

million and $

million at March 31, 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. The loan

segments are described in additional detail below:

●

Commercial and Industrial

- The category includes loans to commercial and industrial customers for use in property,

plant, and equipment purchases and

expansions. Loan terms typically require principal and interest payments

that decrease the outstanding loan balance.

Repayment is primarily from the cash flow of a

borrower’s principal business operation. Credit risk is driven by creditworthiness

of a borrower and the economic conditions that impact the cash flow stability from

business operations.

The category also includes the remaining PPP loans outstanding. These loans were established by the Coronavirus Aid, Relief, and Economic

Security Act which

authorized forgivable loans to small businesses to pay their employees during

the COVID-19 pandemic. The loans are

100

percent guaranteed by the Small Business

Administration (“SBA”) and repayment is primarily dependent on

the borrower’s cash flow or SBA repayment approval.

●

Commercial and Industrial Lines of Credit

– The category includes

lines of credit to commercial and industrial customers for working capital needs. The loan

terms typically require interest-only payments, mature in one year, and

require the full balance paid-off at maturity. Lines of credit allow the borrower

to draw down

and repay the line of credit based on the customer’s cash flow needs. Repayment

is primarily from the operating cash flow of the business. Credit risk is driven by

creditworthiness of a borrower and the economic conditions that impact the cash

flow stability from business operations.

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●

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

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

loans is generally dependent on the

successful operations of the property securing the loan or the business conducted

on the property securing the loan. These are viewed primarily as cash flow loans and

secondarily as loans secured by real estate. Credit risk may be impacted by the

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

borrower’s market areas.

●

Construction and Land Development

- The category includes loans that are usually based upon estimates of costs and estimated value

of the completed project and

include independent appraisal reviews and a financial analysis of the developers

and property owners. Sources of repayment include permanent loans,

sales of

developed property or an interim loan commitment from the Company

until permanent financing is obtained. These loans are higher risk than other real estate loans

due to their ultimate repayment being sensitive to interest rate changes, general

economic conditions, and the availability of long-term financing. Credit risk may

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. 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.

●

Multifamily Real Estate -

The category includes loans that are generally secured by multifamily properties.

Repayment of these loans is primarily dependent on

occupancy rates and the personal income of the tenants. 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 the tenants’ personal income.

●

Consumer

- The category includes revolving 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

pool segments, 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.

In addition, TDRs

are also individually evaluated. 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.

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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 poo

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 and adjust the losses with qualitative and

forecast factors.

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

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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.

●

Loss (risk rating 8)

- Credits which are considered uncollectible or of such little value that their continuance

as a bankable asset is not warranted.

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

based on internal rating categories and loan segments as of March 31, 2023

and December

31, 2022:

As of March 31, 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

111,407

379,176

224,316

54,865

48,014

64,730

27,044

909,552

Special mention

12,388

5,826

19,996

13,802

795

318

53,158

Substandard - accrual

125

1,566

1,152

1,019

19,786

23,717

Substandard - non-

accrual

198

209

Doubtful

Loss

Total

123,795

385,071

244,437

70,233

49,961

66,078

47,061

986,636

Commercial and industrial

lines of credit

Pass

973,052

Special mention

49,569

Substandard - accrual

18,594

Substandard - non-

accrual

6,065

Doubtful

Loss

Total

1,047,280

Energy

Pass

7,481

206

192

185,262

160

193,301

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

558

Loss

Total

7,481

206

192

185,820

160

193,859

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As of March 31, 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

Pass

65,310

437,240

287,175

153,430

128,097

135,622

411,771

101,002

1,719,647

Special mention

9,833

12,446

5,945

555

1,204

13,815

4,243

27,476

75,517

Substandard - accrual

10,238

550

385

11,254

Substandard - non-

accrual

2,470

Doubtful

Loss

Total

75,143

459,924

295,590

154,535

129,382

149,822

416,014

128,478

1,808,888

Construction and land development

Pass

96,933

395,906

212,418

70,749

9,960

1,603

49,228

836,797

Special mention

7,624

Substandard - accrual

226

438

664

Substandard - non-

accrual

Doubtful

Loss

Total

96,933

396,132

220,042

70,749

9,960

1,603

49,666

845,085

Residential real estate

Pass

6,195

77,458

86,022

118,328

44,628

68,535

3,950

405,116

Special mention

253

3,253

182

212

3,900

Substandard - accrual

3,130

Substandard - non-

accrual

188

Doubtful

Loss

Total

6,448

77,458

89,275

121,640

44,840

68,535

3,950

188

412,334

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As of March 31, 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)

Multifamily real estate

Pass

22,508

112,051

39,983

7,490

11,869

3,178

98,355

295,434

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Loss

Total

22,508

112,051

39,983

7,490

11,869

3,178

98,355

295,469

Consumer

Pass

397

7,016

707

133

255

130

49,407

58,045

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Loss

Total

397

7,016

707

163

255

143

49,407

58,088

Total

Pass

302,750

1,416,328

850,827

405,187

242,823

273,798

1,771,025

128,206

5,390,944

Special mention

22,474

18,272

36,818

14,539

2,211

14,141

53,812

27,544

189,811

Substandard - accrual

10,533

125

5,276

1,233

1,409

19,032

19,786

57,394

Substandard - non-

accrual

2,470

6,065

386

8,932

Doubtful

558

Loss

Total

325,224

1,445,133

890,240

425,002

246,267

289,359

1,850,492

175,922

5,647,639

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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

19,089

941,840

Special mention

2,531

23,055

14,573

2,951

4,947

48,184

Substandard - accrual

290

677

1,647

1,330

740

299

21,166

26,149

Substandard - non-

accrual

104

1,383

1,493

Doubtful

Loss

Total

468,784

305,002

72,154

54,732

55,665

21,045

40,296

1,017,678

Commercial and industrial lines of credit

Pass

890,109

Special mention

49,861

Substandard - accrual

10,805

Substandard - non-

accrual

6,479

Doubtful

Loss

Total

957,254

Energy

Pass

7,585

306

228

162,834

171

171,124

Special mention

Substandard - accrual

1,476

Substandard - non-

accrual

Doubtful

618

Loss

Total

7,585

306

228

164,928

171

173,218

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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

Pass

474,901

276,403

156,553

119,643

73,989

84,460

350,732

108,837

1,645,518

Special mention

23,223

6,603

566

1,330

6,558

4,339

2,429

12,285

57,333

Substandard - accrual

10,388

547

1,548

992

13,617

Substandard - non-

accrual

2,479

Doubtful

Loss

Total

508,512

285,485

157,666

121,055

80,607

90,347

353,161

122,114

1,718,947

Construction and land development

Pass

346,429

266,557

93,229

19,866

1,497

9,053

49,500

786,131

Special mention

7,727

Substandard - accrual

157

310

463

930

Substandard - non-

accrual

Doubtful

Loss

Total

346,586

274,594

93,692

19,866

1,497

9,053

49,500

794,788

Residential real estate

Pass

77,416

84,158

121,078

45,265

37,395

34,852

1,649

401,813

Special mention

253

3,272

187

226

3,938

Substandard - accrual

3,148

3,182

Substandard - non-

accrual

191

Doubtful

Loss

Total

77,703

87,430

124,413

45,491

37,395

34,852

1,649

191

409,124

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Multifamily real estate

Pass

85,785

26,705

6,915

11,938

2,491

726

86,879

16,509

237,948

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Loss

Total

85,785

26,705

6,915

11,938

2,491

726

86,879

16,545

237,984

Consumer

Pass

7,917

1,347

2,611

265

129

51,416

63,691

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Loss

Total

7,917

1,347

2,643

265

142

51,416

63,736

Total

Pass

1,465,996

936,642

436,548

247,422

164,096

149,745

1,593,119

144,606

5,138,174

Special mention

26,007

40,657

15,326

4,507

11,513

4,425

52,290

12,362

167,087

Substandard - accrual

10,869

987

5,837

1,412

805

1,847

12,281

22,158

56,196

Substandard - non-

accrual

2,583

1,383

6,479

191

10,642

Doubtful

618

Loss

Total

1,502,872

980,869

457,711

253,347

177,797

156,029

1,664,787

179,317

5,372,729

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Loan Portfolio Aging Analysis

The following tables present the Company’s loan portfolio aging analysis as of

March 31, 2023 and December 31, 2022:

As of March 31, 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

142

1,915

2,127

60-89 days

Greater than 90 days

148

161

Total past due

144

148

1,915

2,288

Current

123,795

385,001

244,293

70,085

49,961

66,067

45,146

984,348

Total

123,795

385,071

244,437

70,233

49,961

66,078

47,061

986,636

Greater than 90 days

and accruing

148

150

Commercial and industrial lines of credit

30-59 days

2,510

60-89 days

Greater than 90 days

6,679

Total past due

9,189

Current

1,038,091

Total

1,047,280

Greater than 90 days

and accruing

613

Energy

30-59 days

60-89 days

Greater than 90 days

558

Total past due

558

Current

7,481

206

192

185,262

160

193,301

Total

7,481

206

192

185,820

160

193,859

Greater than 90 days

and accruing

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As of March 31, 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

30-59 days

190

214

404

60-89 days

Greater than 90 days

100

Total past due

190

214

100

504

Current

75,143

459,734

295,590

154,535

129,382

149,608

415,914

128,478

1,808,384

Total

75,143

459,924

295,590

154,535

129,382

149,822

416,014

128,478

1,808,888

Greater than 90 days

and accruing

100

Construction and land development

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

96,933

396,132

220,042

70,749

9,960

1,603

49,666

845,085

Total

96,933

396,132

220,042

70,749

9,960

1,603

49,666

845,085

Greater than 90 days

and accruing

Residential real estate

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

6,448

77,450

89,275

121,640

44,840

68,535

3,950

188

412,326

Total

6,448

77,458

89,275

121,640

44,840

68,535

3,950

188

412,334

Greater than 90 days

and accruing

Table of Contents

As of March 31, 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)

Multifamily real estate

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

22,508

112,051

39,983

7,490

11,869

3,178

98,355

295,469

Total

22,508

112,051

39,983

7,490

11,869

3,178

98,355

295,469

Greater than 90 days

and accruing

Consumer

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

397

7,015

702

162

255

138

49,407

58,076

Total

397

7,016

707

163

255

143

49,407

58,088

Greater than 90 days

and accruing

Total

30-59 days

268

147

214

2,510

1,915

5,054

60-89 days

Greater than 90 days

148

7,337

7,503

Total past due

269

149

230

9,847

1,915

12,559

Current

325,224

1,444,864

890,091

424,853

246,267

289,129

1,840,645

174,007

5,635,080

Total

325,224

1,445,133

890,240

425,002

246,267

289,359

1,850,492

175,922

5,647,639

Greater than 90 days

and accruing

148

713

868

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial and industrial

30-59 days

4,784

1,049

5,853

60-89 days

430

485

Greater than 90 days

143

1,383

1,551

Total past due

4,982

1,383

1,061

430

7,889

Current

468,764

300,020

72,147

54,726

54,282

19,984

39,866

1,009,789

Total

468,784

305,002

72,154

54,732

55,665

21,045

40,296

1,017,678

Greater than 90 days

and accruing

Commercial and industrial lines of credit

30-59 days

2,814

60-89 days

980

Greater than 90 days

7,063

Total past due

10,857

Current

946,397

Total

957,254

Greater than 90 days

and accruing

584

Energy

30-59 days

60-89 days

Greater than 90 days

618

Total past due

618

Current

7,585

306

228

164,310

171

172,600

Total

7,585

306

228

164,928

171

173,218

Greater than 90 days

and accruing

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial real estate

30-59 days

1,180

60-89 days

Greater than 90 days

Total past due

1,180

Current

508,512

285,485

157,666

119,875

80,607

90,347

353,161

122,114

1,717,767

Total

508,512

285,485

157,666

121,055

80,607

90,347

353,161

122,114

1,718,947

Greater than 90 days

and accruing

Construction and land development

30-59 days

4,293

60-89 days

Greater than 90 days

Total past due

4,293

Current

342,293

274,594

93,692

19,866

1,497

9,053

49,500

790,495

Total

346,586

274,594

93,692

19,866

1,497

9,053

49,500

794,788

Greater than 90 days

and accruing

Residential real estate

30-59 days

3,867

3,877

60-89 days

Greater than 90 days

120

Total past due

3,987

3,997

Current

77,703

83,443

124,413

45,481

37,395

34,852

1,649

191

405,127

Total

77,703

87,430

124,413

45,491

37,395

34,852

1,649

191

409,124

Greater than 90 days

and accruing

120

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Multifamily real estate

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

85,785

26,705

6,915

11,938

2,491

726

86,879

16,545

237,984

Total

85,785

26,705

6,915

11,938

2,491

726

86,879

16,545

237,984

Greater than 90 days

and accruing

Consumer

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

7,917

1,347

2,641

265

137

51,386

63,699

Total

7,917

1,347

2,643

265

142

51,416

63,736

Greater than 90 days

and accruing

Total

30-59 days

4,313

8,651

1,190

1,049

2,844

18,047

60-89 days

980

430

1,472

Greater than 90 days

263

1,383

7,681

9,352

Total past due

4,313

8,969

1,196

1,388

1,061

11,505

430

28,871

Current

1,498,559

971,900

457,702

252,151

176,409

154,968

1,653,282

178,887

5,343,858

Total

1,502,872

980,869

457,711

253,347

177,797

156,029

1,664,787

179,317

5,372,729

Greater than 90 days

and accruing

159

584

750

Table of Contents

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 March 31, 2023 and December 31,

2022:

As of March 31, 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

Allowance

(Dollars in thousands)

Commercial and industrial

198

209

Commercial and industrial

lines of credit

6,065

Energy

558

Commercial real estate

2,470

Construction and land

development

Residential real estate

188

Multifamily real estate

Consumer

Total

2,470

6,623

386

9,490

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and On Non-accrual

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Total Non-

accrual

Loans

Non-accrual

Loans with no

Allowance

(Dollars in thousands)

Commercial and industrial

104

1,383

1,505

Commercial and industrial

lines of credit

6,479

Energy

618

Commercial real estate

2,479

Construction and land

development

Residential real estate

191

Multifamily real estate

Consumer

Total

2,583

1,383

7,097

191

11,272

Interest income recognized on non-accrual loans was $

0.5

million and $

0.2

million for the three months ended March 31, 2023 and 2022, respectively.

Table of Contents

Allowance for Credit Losses

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

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

segment for the

three months ended March 31, 2023:

For the Three Months Ended March 31, 2023

Commercial

and Industrial

Commercial

and

Industrial

Lines of

Credit

Energy

Commercial

Real Estate

Construction

and Land

Development

Residential

Real Estate

Multifamily

Real Estate

Consumer

Total

(Dollars in thousands)

Allowance for Credit Losses:

Beginning balance

12,272

14,531

4,396

19,504

5,337

3,110

2,253

372

61,775

Charge-offs

(1,642)

Recoveries

Provision (release)

1,392

676

283

1,259

437

(49)

627

371

4,996

Ending balance

12,022

15,207

4,679

20,763

5,774

3,061

2,880

744

65,130

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

Beginning balance

245

787

700

6,830

8,688

Provision (release)

(71)

213

(246)

(506)

(5)

(575)

Ending balance

174

287

541

712

6,324

8,113

Table of Contents

The ACL increased $

2.8

million during the quarter.

Provision expense of $

4.4

million was driven by loan growth partially offset by improvement in qualitative

factors, in part

due to continued improvement in credit quality.

In addition, $

1.6

million in charge-offs on two commercial and industrial loans offset the provision expense for

the quarter.

The

reserve on unfunded commitments decreased $

0.6

million due to higher line utilization in the quarter.

The following table presents the Company’s charge-offs by year of origination

for the three months ended March 31, 2023:

For the Quarter Ended March 31, 2023

Gross Charge-offs by Origination Year

Gross Charge-offs

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Gross

Charge-

offs

(Dollars in thousands)

Commercial and industrial

1,347

225

1,642

Commercial and industrial lines of credit

Energy

Commercial real estate

Construction and land development

Residential real estate

Multifamily real estate

Consumer

Total

1,347

225

1,642

Table of Contents

Collateral Dependent Loans:

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

substantially through the operation or

sale of the collateral and the borrower is experiencing financial difficulty. The following

table presents the amortized cost balance of

loans considered collateral dependent by loan segment and collateral type

as of March 31, 2023 and December 31, 2022:

As of March 31, 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 Lines of Credit

All business assets

6,065

Energy

Oil and natural gas properties

558

Consumer

Vehicles & other personal assets

6,628

6,623

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

1,489

Commercial and Industrial Lines of Credit

All business assets

6,492

Energy

Oil and natural gas properties

618

Commercial Real Estate

Commercial real estate properties

Consumer

Vehicles & other personal assets

8,728

8,689

Troubled Debt Restructurings

TDRs are those extended to borrowers who are experiencing financial

difficulty and who have been granted a concession,

excluding loan modifications as a result of the COVID-19 pandemic.

The modification of terms typically includes the extension of

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

stated interest rate. Effective January 1, 2023, the Company

adopted ASU 2022-02, which eliminates the accounting guidance for TDRs.

The Company adopted this accounting standard on a

prospective basis.

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

28.7

million and $

30.5

million as of

March 31, 2023 and December 31, 2022, respectively. Under the new

guidance, there were

loans restructured that qualified as

modifications for the three months ended March 31, 2023.

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

Table of Contents

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

For each pool of contractual obligations expected

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

loan pools. The $

million and $

million allowance for

credit losses on off-balance sheet credit exposures at March 31, 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

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 March 31, 2023, the Company recognized one finance lease and the

remaining Company leases are classified as

operating leases.

The ROU asset is included in “other assets” on the consolidated statements of

financial condition, and was $

29.6

million and

30.5

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

to the ROU asset may be required for items

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

and other liabilities” on the

consolidated statements of financial condition and was $

million and $

million at March 31, 2023 and December 31, 2022,

respectively.

As of March 31, 2023, the remaining weighted-average lease term is

11.4

years, and the weighted-average discount rate was

2.54

% utilizing the Company’s incremental Federal Home Loan Bank (“FHLB”)

borrowing rate for borrowings of a similar term at the

date of lease commencement.

The following table presents components of operating lease expense in

the accompanying consolidated statements of operations

for the three-month period ended March 31, 2023:

For the Three Months Ended March 31,

2023

2022

(Dollars in thousands)

Finance lease amortization of right-of-use asset

Finance lease interest on lease liability

Operating lease expense

732

726

Variable lease expense

393

213

Short-term lease expense

Total lease expense

1,269

944

Table of Contents

Future minimum commitments due under these lease agreements as of

March 31, 2023 are as follows:

Operating Leases

Finance Lease

(Dollars in thousands)

Remainder of 2023

2,821

367

2024

3,289

490

2025

3,309

490

2026

3,350

490

2027

3,340

528

Thereafter

12,619

8,296

Total lease payments

28,728

10,661

Less imputed interest

3,350

3,095

Total

25,378

7,566

Supplemental cash flow information –

Operating cash flows paid for operating lease amounts included in the measurement

lease liabilities were $

0.9

million and $

0.7

million for the three months ended March 31, 2023 and 2022, respectively. Operating

cash

flows paid for finance lease amounts included in the measurement of

lease liabilities was $

0.1

million for the three-month period ended

March 31, 2023. During the three months ended March 31, 2023, the Company

did

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.

goodwill impairment was recorded during the three months ended March 31, 2023.

As a result of economic conditions resulting from bank failures during

the first quarter of 2023, the Company conducted a

goodwill impairment test as of March 31, 2023. A qualitative analysis was performed,

and the Company does not believe it is more

likely than not that a goodwill impairment exists.

The Company is amortizing the core deposit intangible (“CDI”) from the

Farmers & Stockmens (“Central”) acquisition over its

estimated useful life of approximately

years using the sum of the years’ digits accelerated method. The Company recognized core

deposit intangible amortization expense of $

0.8

million for the three months ended March 31, 2023.

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

accumulated amortization of the CDI at March 31,

2023 and December 31, 2022 were:

Gross Carrying

Amount

Accumulated

Amortization

Net Carrying

Amount

(Dollars in thousands)

March 31, 2023

Goodwill

12,836

Core deposit intangible

17,479

2,056

15,423

Total goodwill and intangible assets

30,315

2,056

28,259

December 31, 2022

Goodwill

12,836

Core deposit intangible

17,479

1,234

16,245

Total goodwill and intangible assets

30,315

1,234

29,081

Table of Contents

The following table shows the estimated future amortization expense for

the CDI as of March 31, 2023:

Amount

Years ending December 31,

(Dollars in thousands)

For the nine months ending December 31, 2023

2,286

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 loan assets.

The 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

one

instrument with a notional amount of $

250

million at March 31, 2023 and December 31, 2022.

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

liabilities. The derivative financial instruments did not impact the statements of operations

for the three months ended March 31, 2023.

The Company estimates that $

0.2

million will be reclassified as a decrease to net interest income during the next twelve months.

The Company is hedging its exposure to the variability in future cash flows for forecasted

transactions over a maximum period of

6.1

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”.

Table of Contents

These

and

swaps had an aggregate notional amount of $

417

million and $

421

million at March 31, 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 March 31, 2023 and December

31, 2022:

Asset Derivatives

Liability Derivatives

Statement of

Financial

Condition

March 31,

December 31,

Statement of

Financial

Condition

March 31,

December 31,

Location

2023

2022

Location

2023

2022

(Dollars in thousands)

Interest rate products:

Derivatives

designated as hedging

instruments

Other assets

Interest payable

and other

liabilities

3,883

5,403

Derivatives not

designated as hedging

instruments

Other assets

7,907

11,038

Interest payable

and other

liabilities

7,908

11,039

Total

7,907

11,038

11,791

16,442

The table below presents the effect of cash flow hedge accounting on Accumulated Other Comprehensive Income

(Loss) for the

three months ended March 31, 2023 and 2022.

For the Three Months Ended

March 31, 2023

March 31, 2022

Location of

Gain or (Loss)

Recognized

from

Accumulated

Other

Comprehensive

Income into

Income

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)

Recognized

in OCI on

Derivative

Gain or

(Loss)

Recognized

in OCI

Included

Component

Gain or

(Loss)

Recognized

in OCI

Excluded

Component

(Dollars in thousands)

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Expense

1,540

2,655

Total

1,540

2,655

As of March 31, 2023 and December 31, 2022, the Company had minimum

collateral thresholds with certain of its derivative

counterparties and has received collateral of $

3.6

million and $

4.9

million, respectively.

Table of Contents

Note 7:

Time Deposits and Borrowings

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

March 31, 2023 were as follows:

March 31, 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

1,153,933

215,690

2,084

1,356

2,964

1,376,027

FHLB borrowings

37,573

1,598

11,423

60,000

20,000

130,594

FHLB line of credit

183,437

Line of credit

7,500

SBA secured borrowing

9,396

Trust preferred securities

(1)

1,074

1,382,443

217,288

13,507

1,356

62,964

30,470

1,708,028

(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

March 31,

2023

2022

(Dollars in thousands)

Computed at the statutory rate (21%)

4,227

4,413

Increase (decrease) resulting from

Tax-exempt income

(880)

(854)

Non-deductible expenses

State income taxes

632

696

Equity based compensation

(45)

(169)

Other adjustments

(6)

Actual tax expense

4,021

4,188

The tax effects of temporary differences related to deferred taxes located

in “other assets” on the consolidated statements of

financial condition are presented below:

March 31, 2023

December 31, 2022

(Dollars in thousands)

Deferred tax assets

Net unrealized loss on securities available-for-sale

16,285

20,295

Allowance for credit losses

17,372

16,710

Lease incentive

438

451

Loan fees

4,070

4,048

Accrued expenses

1,303

3,379

Deferred compensation

1,735

2,166

Other

1,433

1,469

Total deferred tax asset

42,636

48,518

Deferred tax liability

FHLB stock basis

(394)

(436)

Premises and equipment

(1,934)

(2,042)

Other

(938)

(1,018)

Total deferred tax liability

(3,266)

(3,496)

Net deferred tax asset

39,370

45,022

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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 months

ended March 31, 2023 and 2022, were as follows:

Three Months Ended

March 31,

Affected Line Item in the

2023

2022

Statements of Operations

(Dollars in thousands)

Unrealized gains (losses) on available-for-sale securities

(26)

Gain (loss) on sale of available-

for-sale securities

Less: tax expense (benefit) effect

(6)

Income tax expense (benefit)

Net reclassified amount

(20)

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 March 31, 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.

Table of Contents

The Company’s and the Bank’s actual capital amounts and ratios as of March

31, 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)

March 31, 2023

Total Capital to Risk-Weighted Assets

Consolidated

743,690

10.5

N/A

741,502

10.5

Bank

745,374

10.6

705,775

10.0

741,064

10.5

Tier I Capital to Risk-Weighted Assets

Consolidated

670,447

9.5

N/A

600,264

8.5

Bank

672,131

9.5

564,620

8.0

599,909

8.5

Common Equity Tier 1 to Risk-Weighted Assets

Consolidated

661,622

9.4

N/A

494,335

7.0

Bank

672,131

9.5

458,754

6.5

494,043

7.0

Tier I Capital to Average Assets

Consolidated

670,447

9.9

N/A

270,441

4.0

Bank

672,131

9.9

338,128

5.0

270,502

4.0

December 31, 2022

Total Capital to Risk-Weighted Assets

Consolidated

715,416

10.5

N/A

714,162

10.5

Bank

714,300

10.5

679,793

10.0

713,783

10.5

Tier I Capital to Risk-Weighted Assets

Consolidated

644,953

9.5

N/A

578,131

8.5

Bank

643,837

9.5

543,835

8.0

577,824

8.5

Common Equity Tier 1 to Risk-Weighted Assets

Consolidated

643,892

9.5

N/A

476,108

7.0

Bank

643,837

9.5

441,866

6.5

475,855

7.0

Tier I Capital to Average Assets

Consolidated

644,953

10.3

N/A

249,270

4.0

Bank

643,837

10.3

311,623

5.0

249,299

4.0

(1)

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

1,218,970

shares as of

March 31, 2023.

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The table below summarizes the stock-based compensation for the

three months ended March 31, 2023 and 2022:

Three Months Ended

March 31,

2023

2022

(Dollars in thousands)

Stock appreciation rights

Performance-based stock awards

236

211

Restricted stock units and awards

879

778

Employee stock purchase plan

Total stock-based compensation

1,238

1,115

Performance-Based Restricted Stock Units

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

officers of the Company. The performance-

based shares typically cliff-vest at the end of

three years

based on attainment of certain performance metrics developed by the

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

award is the product of the award target and

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

by level of achievement range between

of target and

150

% of target.

During the three-month period ended March 31, 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, March 31, 2023

236,220

14.40

Unrecognized stock-based compensation related to the performance

awards issued through March 31, 2023 was $

2.7

million and

is expected to be recognized over

2.5

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

264,197

13.96

Vested

(141,857)

14.05

Forfeited

(11,650)

14.28

Unvested, March 31, 2023

527,670

14.06

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

March 31, 2023 was $

6.3

million and is

expected to be recognized over

2.4

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

March 31, 2023 and December 31, 2022. The

80,000

warrants expire on April 26, 2023. During the three-month period ended

March 31,

2023,

warrants were exercised or issued.

Note 13: Earnings Per Common Share

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

common share:

Three Months Ended

March 31,

2023

2022

(Dollars in thousands except per share data)

Earnings per Common Share

Net income available to common stockholders

16,108

16,828

Weighted average common shares

48,635,910

50,251,297

Earnings per common share

0.33

Diluted Earnings per Common Share

Net income available to common stockholders

16,108

16,828

Weighted average common shares

48,635,910

50,251,297

Effect of dilutive common shares

407,711

659,193

Weighted average dilutive common shares

49,043,621

50,910,490

Diluted earnings per common share

0.33

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

916,080

285,672

During March 2023, the Company offered and sold shares of its Series A Non-Cumulative Perpetual Preferred Stock, par value

0.01

per share, for an aggregate purchase price of $

7.8

million.

dividends related to the preferred stock were declared or paid during

the three months ended March 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.

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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 March 31, 2023 and December 31, 2022:

Fair Value Description

Valuation

Hierarchy

Level

Where Fair

Value Balance

Can Be Found

Available-for-

Sale Securities and

CRA Equity Security

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 March 31, 2023 and December

31, 2022:

March 31, 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

6,628

Foreclosed assets held-for-sale

880

December 31, 2022

Fair Value Measurements Using

Fair Value

Quoted Prices in Active

Markets for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Unobservable

Inputs

(Level 3)

(Dollars in thousands)

Collateral-dependent impaired loans

8,728

Foreclosed assets held-for-sale

1,745

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

assets measured at fair value on a 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.

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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

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 March 31, 2023 and December 31, 2022:

March 31, 2023

Fair Value

Valuation Techniques

Unobservable

Inputs

Range

(Weighted Average)

(Dollars in thousands)

Market comparable

properties

Marketability

discount

Collateral dependent loans

6,628

(

Market comparable

properties

Marketability

discount

Foreclosed assets held-for-sale

880

(

December 31, 2022

Fair Value

Valuation Techniques

Unobservable

Inputs

Range

(Weighted Average)

(Dollars in thousands)

Market comparable

properties

Marketability

discount

100

Collateral-dependent impaired loans

8,728

(

Market comparable

properties

Marketability

discount

10%

Foreclosed assets held-for-sale

1,745

(

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

instruments at March 31, 2023 and

December 31, 2022:

March 31, 2023

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

(Dollars in thousands)

Financial Assets

Cash and cash equivalents

262,971

Available-for-sale securities

751,251

Loans, net of allowance for credit losses

5,582,509

5,587,995

Restricted equity securities

16,700

Interest receivable

30,385

Equity securities

3,242

Derivative assets

7,907

Financial Liabilities

Deposits

5,837,314

969,701

4,879,677

Federal Home Loan Bank line of credit

183,437

Federal Home Loan Bank advances

130,594

125,909

Other borrowings

17,970

18,382

Interest payable

9,571

Derivative liabilities

11,791

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

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

Interest receivable

29,507

Equity securities

2,870

Derivative assets

11,038

Financial Liabilities

Deposits

5,651,308

1,400,260

4,142,673

Federal funds purchased and repurchase agreements

74,968

Federal Home Loan Bank advances

143,143

135,086

Other borrowings

35,457

36,529

Interest payable

5,713

Derivative liabilities

16,442

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Note 15:

Commitments and Credit Risk

Commitments

The Company had the following commitments at March 31, 2023

and December 31, 2022:

March 31, 2023

December 31, 2022

(Dollars in thousands)

Commitments to originate loans

202,975

134,961

Standby letters of credit

65,124

66,889

Lines of credit

2,528,595

2,705,730

Future lease commitments

1,888

Commitments related to investment fund

3,032

3,403

2,801,614

2,912,871

Note 16:

Subsequent Events

On April 21, 2023, the Company announced its entry into a definitive agreement under which the Company will acquire

Canyon

Bancorporation, Inc. and its wholly owned subsidiary, Canyon Community

Bank, N.A. (collectively, “Canyon”) in a stock and cash

transaction.

The business combination transaction is expected to result in the mergers of

Canyon Bancorporation, Inc. with and into

CrossFirst Bankshares, Inc. and Canyon Community Bank, N.A. with and

into CrossFirst Bank. Canyon has a branch in Tucson,

Arizona. The transaction is currently expected to close in the second half of 2023,

subject to approval by bank regulatory authorities, as

well as the satisfaction or waiver of customary closing conditions.

On April 21, 2023, the Company’s remaining

80,000

outstanding, fully vested warrants were exercised. See “Note 12: Stock

Warrants” for additional information about these warrants.

Table of Contents

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 months ended March 31, 2023, and with

our 2022 Form 10-K, which includes our audited consolidated financial statements

and related notes as of 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.

First Quarter 2023 Highlights

During the first quarter ended March 31, 2023, we accomplished the following:

●

Completed the core systems conversion for Central

●

Loans grew $275 million for the quarter with our newer markets and verticals contributing

meaningfully as we realize scale

in those areas

●

Credit quality improved with non-performing assets decreasing

$2.0 million and the non-performing assets to total assets

ratio decreasing to 0.16% at quarter end

●

Recorded $4.4 million of provision expense during the quarter driven by loan growth

and net charge-offs of $1.6 million, or

0.12% of average loans

●

Deposits increased $186 million due to a $405 million increase in wholesale

deposits.

Non-interest-bearing accounts were

lower as elevated deposits at year-end were deployed early in the quarter

in addition to clients migrating into savings and

money market accounts

●

Net interest margin – fully tax equivalent (“FTE”) of 3.65% widened

four basis points for the quarter entirely due to the

benefit of non-interest-bearing deposits

●

Book value per common share increased to $13.28 at March 31, 2023 compared

to $12.56 at December 31, 2022. Tangible

book value per common share

(1)

as of March 31, 2023 increased to $12.54 compared to $11.96

at December 31, 2022

●

Issued $7.8 million of Series A Non-Cumulative Perpetual Preferred Stock, par value $0.01 per share (the Series A Preferred

Stock”), further bolstering our capital position

●

Received regulatory approval to expand into the Fort Worth, Texas market

(1)

Represents a non-GAAP financial measure.

See “Non-GAAP Financial Measures” below in Management’s Discussion and Analysis

of Financial Condition and Results of Operations for a reconciliation of these measures.

Banking Industry Events

The banking industry has faced significant upheaval since the collapse of

several banks in March 2023 related to their liquidity

and their significant concentration in certain industries, including exposure

to the technology sector and cryptocurrency.

We do not have

significant industry concentration or any significant exposure to the

technology or crypto sectors. Competition for deposits was

exacerbated by renewed focus on deposits in excess of FDIC insurance limits following

the failures, in addition to increased focus on

liquidity and interest rate management risks at all banks.

These challenges, combined with uncertainties around continued cost pressures

from inflation, potential FDIC special assessments and potential for higher

loan loss provisioning all led to a highly volatile market for

banks.

During the quarter, we focused on the following strategies and data:

●

Mobilized our business continuity team and aspects of our contingency funding

plan in response to the headline and publicity

risk created by the bank failures

●

Conducted frequent executive team meetings (including

daily during certain periods) during March to monitor our response

which was focused on client outreach and increasing liquidity

●

Expanded liquidity available by $220 million at the Federal Reserve Bank

by pledging additional loans

Table of Contents

●

Conducted proactive client outreach by bankers to communicate the strength,

stability and trust clients have come to expect

from CrossFirst Bank

●

Improved liquidity in our securities portfolio - as of March 31, 2023, $244

million of securities can be pledged and $222

million of securities could be sold with a net gain, based on current market

conditions

●

Our total on-balance sheet and off-balance sheet liquidity was $2.3 billion as of

March 31, 2023, or 33% of total assets

●

Expanded our partnership with IntraFi as we served clients who were interested

in the program; our IntraFi Cash Service

(“ICS”) partnership dates back to 2013

●

Estimated uninsured deposits after excluding pass-thru insured accounts

was 35% of total deposits

Mergers and Acquisitions

Update

On April 21, 2023, the Company announced its entry into a definitive agreement under which the Company

will acquire Canyon

Bancorporation, Inc. and its wholly owned subsidiary, Canyon Community

Bank, N.A. (collectively, “Canyon”) in a stock and cash

transaction.

The business combination transaction is expected to result in the mergers

of Canyon Bancorporation, Inc. with and into

CrossFirst Bankshares, Inc. and Canyon Community Bank, N.A. with and

into CrossFirst Bank.

Canyon has a branch in Tucson,

Arizona. In accordance with the agreement, the Company has agreed to pay

up to 50% of the merger consideration in the form of

Company common stock based on the election of the target stockholders and

subject to certain conditions. The Company's common

stock will be valued at a per share price of $14.11 for purposes of calculating the

merger consideration. The Company expects to issue

up to approximately 621,000 shares of its common stock at closing assuming:

(i) aggregate merger consideration of $17.5 million; and

(ii) that the Company issues 50% of such merger consideration in the form

of the Company's common stock.

The aggregate transaction

value was estimated at approximately $15.1 million based on the Company’s

stock price on April 20, 2023. The transaction is currently

expected to close in the second half of 2023, subject to approval by bank regulatory

authorities, as well as the satisfaction or waiver of

customary closing conditions.

Update to Customer Concentrations

As of March 31, 2023, the Company’s

top 25 customer relationships represented approximately 23% or $1.4 billion

of total

deposits,

$0.5 billion of which are 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. Deposits at March 31, 2023 are 70% commercial,

17%

consumer,

and 13% wholesale, which is consistent with our strategy.

We operate largely

in the Midwest and in strong markets, with a

diverse deposit composition by state which follows our branch footprint.

We also have diversity in depositors

by industry with no

industry concentrations above 5% outside of trusts and banking

institutions.

Our loan portfolio remains diversified with 45% of loans in commercial and

industrial and owner-occupied real estate and 44% of

loans in commercial real estate. We

have diversification within each portfolio

with the top 25 commercial and industrial clients

representing 27% of total commercial and industrial exposure or 10% of

total loan exposure and the top 25 commercial real estate

transactions representing 23% of commercial real estate exposure or

10% of total loan exposure.

There also 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 10% of commercial and industrial exposure.

Our

commercial real estate loan portfolio also has geographic diversity with concentrations

in high-quality markets including Dallas, Kansas

City, Phoenix, and Denver

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Performance Measures

As of or for the Quarter Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2023

2022

(Dollars in thousands, except per share data)

Return on average assets

(1)

0.97

0.77

1.19

1.12

1.23

Adjusted return on average assets

(1)(2)

1.04

1.15

1.19

1.20

1.23

Return on average equity

(1)

10.53

8.04

11.18

10.15

10.44

Adjusted return on average equity

(1)(2)

11.30

12.03

11.22

10.82

10.44

Earnings per common share – basic

0.33

0.25

0.35

0.31

0.33

Earnings per common share – diluted

0.33

0.24

0.35

0.31

0.33

Adjusted earnings per common share – diluted

(2)

0.35

0.36

0.35

0.33

Efficiency ratio

(3)

60.81

62.40

53.20

57.36

57.57

Adjusted efficiency ratio - FTE

(2)(3)(4)

56.42

55.01

52.25

53.95

56.66

Ratio of equity to assets

9.36

9.22

9.93

10.65

11.29

(1)

Interim periods annualized

(2)

Represents a non-GAAP financial measure.

See "Non-GAAP Financial Measures"

below in Management's Discussion and

Analysis of Financial Condition and

Results of Operations 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.

Table of Contents

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:

Three Months Ended

March 31, 2023

March 31, 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

268,705

2,111

3.14

220,802

1,188

2.15

Securities - tax-exempt - FTE

(1)

542,268

4,591

3.39

533,674

4,467

3.35

Federal funds sold

1,757

1.15

Interest-bearing deposits in other banks

195,289

2,009

4.17

309,948

152

0.20

Gross loans, net of unearned income

(2)(3)

5,539,954

89,618

6.56

4,332,831

42,728

4.00

Total interest-earning assets - FTE

(1)

6,547,973

98,334

6.08

5,397,255

48,535

3.64

Allowance for credit losses

(63,235)

(57,922)

Other non-interest-earning assets

228,063

224,405

Total assets

6,712,801

5,563,738

Interest-bearing liabilities

Transaction deposits

542,366

3,500

2.62

585,990

222

0.15

Savings and money market deposits

2,881,726

23,569

3.32

2,302,552

1,847

0.33

Time deposits

1,100,444

9,656

3.56

587,452

1,442

1.00

Total interest-bearing deposits

4,524,536

36,725

3.29

3,475,994

3,511

0.41

FHLB and short-term borrowings

272,754

2,535

3.77

231,156

1,109

1.95

Trust preferred securities, net of fair value

adjustments

1,062

21.39

1,012

10.25

Non-interest-bearing deposits

1,194,788

1,157,387

Cost of funds

5,993,140

39,316

2.66

4,865,549

4,645

0.39

Other liabilities

99,451

44,442

Stockholders’ equity

620,210

653,747

Total liabilities and stockholders’ equity

6,712,801

5,563,738

Net interest income - FTE

(1)

59,018

43,890

Net interest spread - FTE

(1)

3.42

3.25

Net interest margin - FTE

(1)

3.65

3.29

(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 $10 million and $33 million as of March 31, 2023 and 2022, respectively.

(3)

Loan interest income includes loan fees of $4 million and $4 million for the three months ended March 31, 2023 and 2022, respectively.

(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.

Table of Contents

Net interest income -

Net interest income increased $15.1 million for the three-month

period ended March 31, 2023 compared to the

same period in 2022 driven by increases in average earning assets from strong

loan growth and an increase in loan yields, partially offset

by a higher cost of funds due to the rising rate environment.

Compared to the first quarter of 2022, FTE net interest income increased

$15.1 million and net interest margin - FTE increased 36 basis points.

The higher income and margin were primarily due to increases in

average earning assets from strong loan growth and an increase in loan yields, partially

offset by a higher cost of funds due to the rising

rate environment.

Average earning assets totaled $6.5 billion for the three-month period

ended March 31, 2023 resulting in an increase of $1.2 billion or

21% compared to the same period in 2022, inclusive of the impact of

the Central acquisition. The increase was driven by higher average

loan and investment portfolio balances, partially offset by lower average

cash balances for the three-month period ended March 31, 2023

compared to the corresponding period in 2022.

The FTE yield on earning assets increased 2.44% from the first quarter

of 2022 to the first quarter of 2023 due to new loan production as

well as repricing of variable rate loans. The cost of funds increased 2.27% over the same period

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 to narrow from

the current quarter to be in the range of 3.40% to 3.55% for the

full-year 2023 based on changes in our funding mix. This may be partially offset with a

benefit of one to three basis points from any

additional rate increases due to our largely variable loan portfolio.

Non-Interest Income

The components of non-interest income were as follows for the periods

shown:

Three Months Ended

March 31,

Change

2023

2022

(Dollars in thousands)

Service charges and fees on customer accounts

1,829

1,408

421

ATM and credit card interchange income

1,264

2,664

(1,400)

(53)

Realized gains (losses) on available-for-sale securities

(26)

N/M

Gain on sale of loans

187

Gains (losses), net on equity securities

(103)

113

(110)

Income from bank-owned life insurance

411

388

Swap fees and credit valuation adjustments, net

118

(28)

(24)

Other non-interest income

567

493

Total non-interest income

4,421

4,942

(521)

(11)

Non-interest income to average assets (annualized)

0.27%

0.36%

The changes in non-interest income were driven primarily by the following:

Service charges and fees on customer accounts

- The increase for the three-month period ended March 31, 2023 compared to the

corresponding period in 2022 was driven primarily by increases in account

analysis fees due to client fee increases enacted in 2022.

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 months ended March 31, 2023 compared to the same period for 2022

was due to the

expansion of our mortgage business acquired through the 2022 acquisition

of Central.

Table of Contents

Non-Interest Expense

The components of non-interest expense were as follows for the periods indicated:

Three Months Ended

March 31,

Change

2023

2022

(Dollars in thousands)

Salary and employee benefits

22,622

17,941

4,681

Occupancy

2,974

2,493

481

Professional fees

2,618

805

1,813

225

Deposit insurance premiums

1,531

737

794

108

Data processing

1,242

812

430

Advertising

752

692

Software and communication

1,651

1,270

381

Foreclosed assets, net

149

(53)

202

N/M

Other non-interest expense

3,731

2,950

781

Core deposit intangible amortization

822

803

4,226

Total non-interest expense

38,092

27,666

10,426

Non-interest income to average assets (annualized)

2.30%

2.02%

Non-interest expense increased $10.4 million for the three-month

period ended March 31, 2023 compared to the same period in

2022 and included $1.5 million of transaction costs and $0.8 million of core deposit

intangible amortization related to the Central

acquisition.

The changes in non-interest expense were driven primarily by the following:

Salary and Employee Benefits

- Salary and employee benefit costs increased due to merit increases, hiring

in new markets and

verticals,

and the addition of employees as part of the Central acquisition.

Occupancy

– The increase in occupancy costs was driven by the addition of a second location in

Dallas, Texas during

2022 and new

properties in Colorado and New Mexico as part of the acquisition of Central.

Professional Fees

– The increase in professional fees was primarily due to increases in consulting

costs related to the acquisition of

Central and digital banking conversion, increased recruiting costs, and timing

of legal fees.

Deposit Insurance Premiums

– The increase in deposit insurance premiums was due to an increase in the assessment rate and

increases

in assets.

Data Processing

– The increase in data processing costs was driven primarily by increased costs associated with

the Company's digital

banking conversion.

Other Non-interest Expense

- Other non-interest expense increased primarily due to increased post-pandemic

travel expenses and

transaction fraud-related losses.

Core Deposit Intangible Amortization

– Core deposit intangible amortization increased due to a full quarter of expense

related to the

Central acquisition.

We currently anticipate non-interest expense to be in a range of $35-$36

million per quarter for the remainder of 2023. The

efficiency ratio was 60.81% and the adjusted efficiency ratio – FTE

(1)

was 56.42% for the three months ended March 31, 2023.

(1)

Represents a non-GAAP financial measure.

See "Non-GAAP Financial Measures"

below in Management’s Discussion and

Analysis of Financial Condition and

Results of Operations for a reconciliation of these measures.

Table of Contents

Income Taxes

For the Quarter Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2023

2022

(Dollars in thousands)

Income tax expense

4,021

3,348

4,410

4,027

4,188

Income before income taxes

20,129

15,294

21,690

19,572

21,016

Effective tax rate

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.

During the three-month periods

ended March 31, 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.

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

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

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.

Table of Contents

Quarter Ended

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

(Dollars in thousands, except per share data)

Adjusted net income:

Net income (GAAP)

16,108

11,946

17,280

15,545

16,828

Add: Acquisition costs

1,477

3,570

239

Add: Acquisition - Day 1 CECL

provision

4,400

Add: Employee separation

1,063

Less: Tax effect

(1)

(310)

(2,045)

(17)

(273)

Adjusted net income

17,275

17,871

17,344

16,574

16,828

Diluted weighted average common shares

outstanding

49,043,621

49,165,578

49,725,207

50,203,725

50,910,490

Earnings per common share – diluted (GAAP)

0.33

0.24

0.35

0.31

0.33

Adjusted earnings per common share – diluted

0.35

0.36

0.35

0.33

(1)

Represents the tax impact of the adjustments at a tax rate

of 21.0%, plus permanent tax expense associated with

merger related

transactions

Quarter Ended

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

(Dollars in thousands)

Adjusted return on average assets:

Net income (GAAP)

16,108

11,946

17,280

15,545

16,828

Adjusted net income

17,275

17,871

17,344

16,574

16,828

Average assets

6,712,801

6,159,783

5,764,347

5,545,657

5,563,738

Return on average assets (GAAP)

0.97

0.77

1.19

1.12

1.23

Adjusted return on average assets

1.04

1.15

1.19

1.20

1.23

Quarter Ended

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

(Dollars in thousands)

Adjusted return on average equity:

Net income (GAAP)

16,108

11,946

17,280

15,545

16,828

Adjusted net income

17,275

17,871

17,344

16,574

16,828

Average equity

620,210

589,587

613,206

614,541

653,747

Return on average equity (GAAP)

10.53

8.04

11.18

10.15

10.44

Adjusted return on average equity

11.30

12.03

11.22

10.82

10.44

Quarter Ended

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

(Dollars in thousands, except per share data)

Tangible common stockholders' equity:

Total stockholders' equity (GAAP)

645,491

608,599

580,547

608,016

623,199

Less: goodwill and other intangible assets

28,259

29,081

110

Less: preferred stock

7,750

Tangible common stockholders' equity

609,482

579,518

580,476

607,925

623,089

Tangible book value per common share:

Tangible common stockholders' equity

609,482

579,518

580,476

607,925

623,089

Common shares outstanding at end of period

48,600,618

48,448,215

48,787,696

49,535,949

49,728,253

Book value per common share (GAAP)

13.28

12.56

11.90

12.27

12.53

Tangible book value per common share

12.54

11.96

11.90

12.27

12.53

Table of Contents

Quarter Ended

3/31/2023

12/31/2022

9/30/2022

6/30/2022

3/31/2022

(Dollars in thousands)

Adjusted Efficiency Ratio - FTE

(1)

Non-interest expense

38,092

36,423

28,451

29,203

27,666

Less: Acquisition costs

(1,477)

(3,570)

(81)

(239)

Less: Core deposit intangible amortization

(822)

(291)

Less: Employee separation

(1,063)

Adjusted Non-interest expense (numerator)

35,793

32,562

28,370

27,901

27,666

Net interest income

58,221

54,015

49,695

46,709

43,115

Tax equivalent interest income

(1)

797

818

820

808

775

Non-interest income

4,421

4,359

3,780

4,201

4,942

Total tax-equivalent income (denominator)

63,439

59,192

54,295

51,718

48,832

Efficiency Ratio (GAAP)

60.81

62.40

53.20

57.36

57.57

Adjusted Efficiency Ratio - FTE

(1)

56.42

55.01

52.25

53.95

56.66

(1)

Tax exempt income (tax-free municipal securities) is

calculated on a tax equivalent basis. The incremental

tax rate used is 21.0%.

Analysis of Financial Condition

Investment portfolio

The objective of the investment portfolio is to optimize earnings, manage

credit and interest rate risk, ensure adequate liquidity,

and meet pledging and regulatory capital requirements. The securities portfolio is also maintained

to serve as a contingent, on-balance

sheet source of liquidity. As of March 31, 2023, available-for-sale investments totaled $751 million, an increase

of $64 million from

December 31, 2022.

The increase in the securities portfolio was driven by the purchase of

$81 million in SBA securities and $12 million in tax-exempt

municipal securities and a $15 million reduction in the unrealized loss on available

-for-sale securities. The increase was partially offset

by the sale of $37 million in tax-exempt municipal securities at a modest gain

as we intentionally improved the liquidity of the portfolio

during the quarter. For additional information, see “Note 2: Securities” in

the notes to consolidated financial statements

– unaudited.

Table of Contents

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 March 31, 2023, gross loans, net of unearned fees increased $275 million or

5% 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 March 31,

2023

As of December 31,

2022

December 31, 2022

vs.

March 31, 2023

% Change

(Dollars in thousands)

Commercial and industrial

986,636

1,017,678

(3.1)

Commercial and industrial lines of credit

1,047,280

957,254

9.4

Energy

193,859

173,218

11.9

Commercial real estate

1,808,888

1,718,947

5.2

Construction and land development

845,085

794,788

6.3

Residential real estate

412,334

409,124

0.8

Multifamily real estate

295,469

237,984

24.2

Consumer

58,088

63,736

(8.9)

Total

5,647,639

5,372,729

5.1

Table of Contents

The following table shows the contractual maturities of our gross loans and

sensitivity to interest rate changes:

As of March 31, 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

50,578

113,038

327,978

358,192

52,576

64,189

19,589

496

986,636

Commercial and industrial

lines of credit

74,724

395,100

29,926

512,736

17,668

17,126

1,047,280

Energy

30,660

775

162,424

193,859

Commercial real estate

78,596

218,319

502,179

480,495

185,242

276,256

6,462

61,339

1,808,888

Construction and land

development

27,932

105,116

72,762

541,254

28,483

15,881

4,747

48,910

845,085

Residential real estate

7,510

2,999

21,965

5,301

65,518

5,530

371

303,140

412,334

Multifamily real estate

4,340

43,640

108,450

123,038

4,808

10,410

783

295,469

Consumer

5,783

10,210

5,171

13,749

343

20,944

1,888

58,088

Total

249,463

919,082

1,069,206

2,197,189

354,638

410,336

31,169

416,556

5,647,639

Provision and Allowance for Credit Losses

The ACL at March 31, 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.

For the Quarter Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2023

2022

(Dollars in thousands)

Provision for credit losses - loans

4,996

4,700

1,923

1,690

(316)

Provision for credit losses - off-balance sheet

(575)

1,957

1,411

445

(309)

Allowance for credit losses - loans

65,130

61,775

55,864

55,817

55,231

Allowance for credit losses - off-balance sheet

8,113

8,688

6,731

5,320

4,875

Net charge-offs

1,641

(296)

1,876

1,104

1,081

The ACL increased $2.8 million during the quarter.

Provision expense of $4.4 million was driven by loan growth partially offset by improvement

in qualitative factors, in part

due to continued improvement in credit quality.

In addition, $1.6 million in charge-offs on two commercial and industrial

loans offset the provision expense for the quarter.

The

reserve on unfunded commitments decreased $0.6 million due to higher

line utilization in the quarter.

Table of Contents

The table below presents the allocation of the allowance for credit losses as of the dates

indicated.

The allocation in one portfolio segment does not preclude its availability to

absorb losses in other segments.

March 31, 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

12,022

174

12,196

12,272

245

12,517

Commercial and industrial

lines of credit

15,207

287

15,494

14,531

14,605

Energy

4,679

541

5,220

4,396

787

5,183

Commercial real estate

20,763

712

21,475

19,504

700

20,204

Construction and land

development

5,774

6,324

12,098

5,337

6,830

12,167

Residential real estate

3,061

3,112

3,110

3,145

Multifamily real estate

2,880

2,889

2,253

2,267

Consumer

744

759

372

375

Total

65,130

8,113

73,243

100

61,775

8,688

70,463

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.

Table of Contents

Charge-offs and Recoveries

Net charge-offs were $1.6 million for the three-month period ended

March 31, 2023 primarily related to 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

March 31,

December 31,

September 30,

June 30,

March 31,

2023

2022

Commercial and industrial

0.51

(0.02)

0.28

(0.27)

Commercial and industrial lines of credit

(0.01)

1.10

(0.56)

0.76

Energy

(0.46)

1.19

4.77

(1.02)

Commercial real estate

(0.21)

(0.45)

0.34

Construction and land development

Residential real estate

0.21

Multifamily real estate

Consumer

(0.03)

(0.05)

0.05

Total net charge-offs to average loans

0.12

(0.02)

0.16

0.10

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 generally improved during the first quarter of 2023.

Non-performing assets decreased to $11.2 million at March 31, 2023 primarily due

to a $1.8 million

decrease from the charge-off of one commercial and industrial loan,

as well as paydowns. The non-performing assets to total assets ratio decreased from 0.64% at

March 31, 2022 to

0.16% at March 31, 2023. In addition, classified loans decreased $0.7 million

during the first quarter of 2023. Net charge-offs were $1.6 million for the first quarter

of 2023

compared to net recoveries of ($0.3) million in the prior quarter and net charge-offs

of $1.1 million in the prior year first 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 March 31, 2023, the Company did not identify any systemic issues

within its loan portfolio that would significantly affect the credit quality of the

loan portfolio.

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The table below summarizes our non-performing assets and related ratios as of

the dates indicated:

For the Quarter Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2023

2022

Asset quality

(Dollars in thousands)

Non-accrual loans

9,490

11,272

16,923

27,698

33,071

Loans past due 90 days or more and still accruing

868

750

303

2,163

1,534

Total non-performing loans

10,358

12,022

17,226

29,861

34,605

Foreclosed assets held for sale

855

1,130

973

Total non-performing assets

11,213

13,152

18,199

30,834

35,578

Loans 30-89 days past due

5,056

19,519

21,383

16,635

15,950

Asset quality metrics (%)

Non-performing loans to total loans

0.18

0.22

0.37

0.66

0.79

Non-performing assets to total assets

0.16

0.20

0.31

0.54

0.64

ACL to total loans

1.15

1.19

1.23

1.27

ACL + RUC to total loans

(1)

1.30

1.31

1.34

1.35

1.38

ACL to non-performing loans

629

514

324

187

160

Classified loans / (total capital + ACL)

9.4

10.1

11.3

12.1

10.8

Classified loans / (total capital + ACL + RUC)

(1)

9.3

10.0

11.2

12.0

10.7

(1)

Includes the accrual for off-balance sheet credit risk from unfunded commitments.

Deposits and Other Borrowings

The following table sets forth the maturity of time deposits as of March

31, 2023:

As of March 31, 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

34,077

22,585

198,742

119,578

374,982

Time deposits below FDIC insurance limit

291,514

254,286

352,729

102,516

1,001,045

Total

325,591

276,871

551,471

222,094

1,376,027

At March 31, 2023, our deposits totaled $5.8 billion, an increase of $186 million

or 3% from December 31, 2022. The increase included $430 million in time deposits and

$186

million in money market, NOW and savings deposits,

partially offset by a decrease of $430 million in non-interest-bearing deposits.

The increase in time deposits was the result of a

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$405 million net increase in wholesale funding to support current and expected

loan growth and to partially supplement the decrease in client deposits. The

increase in money market,

NOW, and

savings deposits was driven primarily by increases in money market deposits.

Other borrowings include FHLB advances, a line of credit, SBA loan secured

borrowings, and our trust preferred security.

At March 31, 2023, other borrowings totaled $332

million, a $78 million, or 31% increase from December 31, 2022.

During the three-month period ended March 31, 2023, $6.0 million of FHLB advances matured

and were converted

into a drawdown on the FHLB line of credit and $6.5 million of net FHLB advances

were paid off.

The Company utilized an additional $102.5 million of net draws on the

FHLB line

of credit and the conversion of $6.0 million of FHLB advances

to the FHLB line of credit to support loan growth and changes in deposits, resulting in

a balance of $183.4 million

outstanding on the FHLB line of credit as of March 31, 2023.

As of March 31, 2023, the Company had approximately $2.4 billion of uninsured

deposits, which is an estimated amount based on the same methodologies and assumptions

used for the Bank’s regulatory requirements.

Excluding pass-thru accounts where clients have deposit insurance at the correspondent

financial institution, our uninsured deposits are

$2.0 billion, or 35% of total deposits as of March 31, 2023. The average

client account balance as of March 31, 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.

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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

a listing of 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

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

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:

March 31, 2023

December 31, 2022

(Dollars in thousands)

Total on-balance sheet liquidity

1,014,222

986,482

Total off-balance sheet liquidity

1,264,618

770,165

Total liquidity

2,278,840

1,756,647

On-balance sheet liquidity as a percent of assets

Total liquidity as a percent of assets

For the three months ended March 31, 2023, the Company’s cash and cash

equivalents declined $37 million from December 31,

2022

to $263 million, representing 4% of total assets. During the three-month period

ended March 31, 2023, the Company increased the

AFS securities portfolio on an amortized cost basis by $49 million, net

of paydowns,

maturities, and amortization.

As of March 31,

2023, the Company had $244 million in securities that could be pledged

and $222 million that could be sold at a net gain based on

market conditions at the time. In addition, the Company increased funded

loans by $276 million, net of payoffs and charge-offs during

the three-month period ended March 31, 2023 that reduced

cash and cash equivalents.

The Company’s time deposits increased by $430 million primarily from

wholesale funding, while savings and money market

deposits increased by $186 million. Non-interest-bearing deposits decreased

$430 million as elevated year-end balances were deployed

by clients in the quarter in addition to clients migrating into savings and

money market accounts.

Other borrowings decreased $17

million during the three-month period ended March 31, 2023, largely related

to a reduction in Federal Funds purchased.

The Company did not purchase any common stock during the first three months of

2023. As of March 31, 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.

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During March 2023, the Company offered and sold Series A Preferred Stock for an aggregate purchase price of $7.8 million. No

dividends related to the preferred stock were declared or paid during

the three months ended March 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 any resulting

reductions in cash and cash equivalents in order to maintain appropriate liquidity.

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 March 31, 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.

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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

March 31, 2023

March 31, 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

2.0

(18.4)

6.5

(8.1)

+200

1.3

(12.3)

3.9

(4.6)

+100

0.6

(5.8)

1.6

(2.0)

Base

-100

(0.7)

5.7

(1)

-200

(1.7)

11.7

(1)

-300

(5.3)

17.6

(1)

The Company excluded the down rate environment from its analysis due to the low interest rate environment.

Hypothetical Change in Interest Rate - Rate Ramp

March 31, 2023

March 31, 2022

Change in Interest Rate

(Basis Points)

Percent change in net interest

income

Percent change in net interest

income

+300

(0.1)

2.8

+200

(0.1)

1.6

+100

0.6

Base

-100

0.1

(1)

-200

0.1

(1)

-300

(0.6)

(1)

The Company excluded the down rate environment from its analysis due to the low interest rate environment.

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The Company’s position is slightly asset sensitive as of March 31, 2023

which decreased compared to both March 31, 2022 and

December 31, 2022 due to the drastic change in market rates from the prior year.

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 March 31,

2023 was approximately 60% which is slightly higher than our previous

assumption due to continued competitive and pricing pressure

on deposits. Other key assumptions updated this quarter 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 $4.2 billion or 62%

of earning assets

mature or reprice within the twelve-month period following March 31, 2023,

including $3.1 billion that repriced in the first month. $4.9

billion of interest-bearing liabilities mature or reprice over the same twelve-month

period. As of March 31, 2023 and December 31,

2022, the investment portfolio duration was approximately 5.2 years.

The Company is reviewing additional options to manage the

statement of financial condition sensitivity based on the interest rate environment

and 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 March 31, 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 March 31, 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 first 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.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Sales of Unregistered Securities.

On March 29, 2023, the Company entered into a Securities Purchase Agreement

with certain investors qualified as "accredited

investors," as such term is defined in Rule 501(a) of Regulation D ("Regulation

D") promulgated under the Securities Act of 1933,

as amended (the "Securities Act"), pursuant to which the Company offered and sold 7,750 shares of Series A Preferred Stock, for an

aggregate purchase price of $7,750,000. The offer and sale of the Series A Preferred Stock by the Company was made in reliance

upon the exemptions from registration available under Section 4(a)(2) of

the Securities Act and Rule 506(b) of Regulation D.

Pursuant to the Certificate of Designations for the Series A Preferred Stock filed March 29, 2023, holders of the Series A Preferred

Stock will be entitled to receive, only when, as and if declared by the Company’s

Board of Directors or a duly authorized committee

thereof, non-cumulative cash dividends on the liquidation preference

of $1,000 per share of Series A Preferred Stock at a rate of

8.00% per annum, payable quarterly in arrears. Such dividends are not mandatory

or cumulative and are payable only to the extent

declared by the Company’s Board of Directors or a duly authorized committee

thereof. The Series A

Preferred Stock is perpetual

and has no maturity date and is not subject to any mandatory redemption, sinking

fund, or other similar provisions. The holders of

the Series A

Preferred Stock will not have any right to require the redemption

or repurchase of their shares of Series A Preferred

Stock. The Company may, at its option and subject to required regulatory approval, redeem the Series A Preferred Stock (i) in whole

or in part, from time to time, on March 29, 2028, or on any dividend payment date on or

after March 29, 2028, or (ii) in whole but

not in part at any time within 90 days following a “regulatory capital treatment event”

(as defined in the Certificate of Designations)

in each case at a redemption price equal to $1,000 per share, plus the per share

amount of any declared and unpaid dividends,

without accumulation of any undeclared dividends.

The Company intends to use the net proceeds from the sale of the Series A Preferred Stock for general corporate purposes, including

providing capital to support strategic growth and for making contributions

to the capital of CrossFirst Bank, to support its lending,

investing and other banking activities.

(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 March

31, 2023.

As of March 31, 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.

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ITEM 5. OTHER INFORMATION

Effective May 1, 2023, the Company refined its organizational structure

to support future growth, new business lines, recent

acquisitions, and to effectively utilize the skills and expertise on our team as we optimize for

the future.

In connection with the

reorganization:

•

W. Randall Rapp will continue to serve as President of the Bank with overarching

responsibility for all markets and credit

administration.

•

Steve Peterson will continue to serve as Chief Banking Officer, with responsibility

for sales management, commercial and

industrial (C&I) strategy, and our business lines.

•

Amy Fauss will continue to serve as Chief Human Resources Officer and

will also assume the role of Chief Administrative

Officer with overarching responsibility for human resources, services

and support, and technology.

•

Jenny Payne will continue to serve as the Chief Risk Officer and will report to the

Chief Executive Officer of the Bank and

the Company.

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ITEM 6. EXHIBITS

Exhibit

Number

Exhibit Description

3.1

Articles of Incorporation of CrossFirst Bankshares, Inc. (incorporated by reference to Exhibit 3.1 to the Company's

Registration Statement on Form S-1 as filed with the SEC on July 18, 2019)

3.2

Amendment to Articles of Incorporation of CrossFirst Bankshares, Inc. (incorporated by reference to Exhibit 3.2 to the

Company’s Registration Statement on Form S-1 as filed with the SEC on July 18, 2019)

3.3

Bylaws of CrossFirst Bankshares, Inc. (incorporated by reference to Exhibit 3.3 to the Company's Registration

Statement on Form S-1 as filed with the SEC on July 18, 2019)

3.4

Certificate of Designations of Series A Non-Cumulative Perpetual Preferred Stock of CrossFirst Bankshares, Inc.

(incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on

March 31, 2023)

10.1†

Omnibus Plan – Form of Time-Based RSU Award Agreement (02.23) (incorporated by reference to Exhibit 10.13 to the

Company’s Annual Report on Form 10-K as filed with the SEC on March 3, 2023)

10.2†

Omnibus Plan – Form of Performance-Based RSU Award Agreement

10.3†

Omnibus Plan – Director Restricted Stock Award (incorporated by reference to Exhibit 10.17 to the Company’s Annual

Report on Form 10-K as filed with the SEC on March 3, 2023)

10.4†

Omnibus Plan – SAR Award Agreement (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report

on Form 10-K as filed with the SEC on March 3, 2023)

10.5†

Form Annual Incentive Plan Award (Executive Officers)

10.6

Form of Securities Purchase Agreement by and among CrossFirst Bankshares, Inc. and the Purchasers named therein

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on

March 31, 2023)

31.1

Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as adopted pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of

2002

101.INS*

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags

are embedded within the Inline XBRL document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

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

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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:

May 5, 2023

/s/ Benjamin R. Clouse

Benjamin R. Clouse

Chief Financial Officer

(Duly authorized officer and principal financial officer)