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

cfb-2023q2

UNITED STATES

SECURITIES AND

EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

☒

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

For the quarterly period ended

June 30, 2023

☐

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 August 1, 2023, the registrant had

49,290,990

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

CROSSFIRST BANKSHARES, INC.

Form 10-Q for the Quarter Ended June 30, 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 business plans, expectations, or opportunities

for growth; the impact of the acquisition of Canyon

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

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

expected to be realized from those initiatives; our anticipated financial

results, expenses, cash requirements and sources of liquidity; and

our capital allocation strategies and plans.

Unless we state otherwise or the context otherwise requires, references

in this Form 10-Q to “we,” “our,” “us,” and the

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

References in this Form 10-Q to “CrossFirst Bank”

and the “Bank” refer to CrossFirst Bank, our wholly owned consolidated

bank subsidiary.

These forward-looking statements are not historical facts, and are based

on current expectations, estimates and projections about

our industry, management’s beliefs and certain assumptions made by management,

many of which, by their nature, are inherently

uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are

not a guarantee of future

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

that are difficult to predict. Although we believe that the

expectations reflected in these forward-looking statements are reasonable

as of the date made, actual results may prove to be materially

different from the results expressed or implied by the forward-looking

statements due to a number of factors, including, without

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

economic conditions and any regulatory responses thereto,

including uncertainty and volatility in the financial markets; interest rate fluctuations;

our ability to effectively execute our growth

strategy and manage our growth, including identifying and consummating

suitable mergers and acquisitions, entering new lines of

business or offering new or enhanced services or products; fluctuations in fair value

of our investments due to factors outside of our

control; our ability to successfully manage credit risk and the sufficiency of our

allowance; geographic concentration of our markets;

economic impact on our commercial real estate and commercial-based loan

portfolios, including declines in commercial and residential

real estate values; an increase in non-performing assets; our ability to

attract, hire and retain key personnel; maintaining and increasing

customer deposits, funding availability, liquidity and our ability to raise and

maintain sufficient capital; competition from banks, credit

unions and other financial services providers; the effectiveness of our risk

management framework; accounting estimates; our ability to

maintain effective internal control over financial reporting; our ability

to keep pace with technological changes; cyber incidents or other

failures, disruptions or security breaches; employee error, fraud committed

against the Company or our clients, or incomplete or

inaccurate information about clients and counterparties; mortgage markets; our

ability to maintain our reputation; costs and effects of

litigation; environmental liability; risk exposure from transactions with financial

counterparties; severe weather, natural disasters,

pandemics or other external events; changes in laws, rules, regulations,

interpretations or policies relating to financial institutions,

including stringent capital requirements, higher FDIC insurance premiums and

assessments, consumer protection laws and privacy laws;

volatility in our stock price; the ability of our Board to issue our preferred stock; risks

inherent with proposed business acquisitions and

the failure to achieve projected synergies; or other external events.

Additional discussion of these and other risk factors can be found in

our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“2022 Form 10-K”), filed with the Securities and

Exchange Commission (“SEC”) on March 3, 2023, and in our other filings

with the SEC.

Except as required by law, the Company undertakes no obligation to

update or revise forward-looking statements to reflect

changed assumptions, the occurrence of unanticipated events or

changes in our business, results of operations or financial condition over

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

on such forward-looking statements.

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

June 30, 2023

December 31, 2022

(Dollars in thousands)

Assets

Cash and cash equivalents

342,497

300,138

Available-for-sale securities - taxable

297,097

198,808

Available-for-sale securities - tax-exempt

446,803

488,093

Loans, net of unearned fees

5,796,599

5,372,729

Allowance for credit losses on loans

67,567

61,775

Loans, net of the allowance for credit losses on loans

5,729,032

5,310,954

Premises and equipment, net

68,539

65,984

Restricted equity securities

13,060

12,536

Interest receivable

33,303

29,507

Foreclosed assets held for sale

1,130

Goodwill and other intangible assets, net

27,457

29,081

Bank-owned life insurance

69,929

69,101

Other

92,461

95,754

Total assets

7,120,178

6,601,086

Liabilities and stockholders’ equity

Deposits

Non-interest-bearing

928,098

1,400,260

Savings, NOW and money market

3,333,514

3,305,481

Time

1,838,455

945,567

Total deposits

6,100,067

5,651,308

Federal Home Loan Bank advances

262,708

218,111

Other borrowings

14,320

35,457

Interest payable and other liabilities

91,600

87,611

Total liabilities

6,468,695

5,992,487

Stockholders’ equity

Preferred stock, $

0.01

par value:

Authorized -

15,000

shares, issued -

7,750

shares at

June 30, 2023 and

shares at December 31, 2022

Common stock, $

0.01

par value:

Authorized -

200,000,000

shares, issued -

53,241,885

and

53,036,613

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

respectively

532

530

Treasury stock, at cost:

4,588,398

shares held at June 30, 2023 and December 31,

2022

(64,127)

Additional paid-in capital

539,793

530,658

Retained earnings

238,147

206,095

Accumulated other comprehensive loss

(62,862)

(64,557)

Total stockholders’ equity

651,483

608,599

Total liabilities and stockholders’ equity

7,120,178

6,601,086

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Operations – Unaudited

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands except per share data)

Interest Income

Loans, including fees

98,982

47,327

188,600

90,055

Available-for-sale securities - taxable

2,622

1,086

4,471

2,130

Available-for-sale securities - tax-exempt

3,571

3,845

7,365

7,537

Deposits with financial institutions

1,609

369

3,623

521

Dividends on bank stocks

364

213

626

357

Total interest income

107,148

52,840

204,685

100,600

Interest Expense

Deposits

48,663

4,732

85,388

8,243

Fed funds purchased and repurchase agreements

Federal Home Loan Bank Advances

3,734

1,294

6,125

2,403

Other borrowings

212

366

Total interest expense

52,609

6,131

91,925

10,776

Net Interest Income

54,539

46,709

112,760

89,824

Provision for Credit Losses

2,640

2,135

7,061

1,510

Net Interest Income after Provision for Credit Losses

51,899

44,574

105,699

88,314

Non-Interest Income

Service charges and fees on customer accounts

2,110

1,546

3,939

2,954

ATM and credit card interchange income

1,213

1,521

2,477

4,185

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

(12)

(38)

Gain on sale of loans

1,205

1,392

Gains (losses) on equity securities, net

(71)

(174)

Income from bank-owned life insurance

418

407

829

795

Swap fees and credit valuation adjustments, net

174

130

Other non-interest income

743

798

1,310

1,291

Total non-interest income

5,779

4,201

10,200

9,143

Non-Interest Expense

Salaries and employee benefits

24,061

17,095

46,683

35,036

Occupancy

3,054

2,622

6,028

5,115

Professional fees

970

1,068

3,588

1,873

Deposit insurance premiums

1,881

713

3,412

1,450

Data processing

1,057

1,160

2,299

1,972

Advertising

649

757

1,401

1,449

Software and communication

1,655

1,198

3,306

2,468

Foreclosed assets, net

(21)

128

(38)

Other non-interest expense

3,304

4,555

7,035

7,505

Core deposit intangible amortization

802

1,624

Total non-interest expense

37,412

29,203

75,504

56,869

Net Income Before Taxes

20,266

19,572

40,395

40,588

Income tax expense

4,219

4,027

8,240

8,215

Net Income

16,047

15,545

32,155

32,373

Basic Earnings Per Common Share

0.33

0.31

0.66

0.65

Diluted Earnings Per Common Share

0.33

0.31

0.65

0.64

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Comprehensive Income (Loss) – Unaudited

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands)

Net Income

16,047

15,545

32,155

32,373

Other Comprehensive Income (Loss)

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

(10,430)

(39,026)

4,521

(97,982)

Less: income tax (benefit) expense

(2,482)

(9,554)

1,175

(23,987)

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

income tax

(7,948)

(29,472)

3,346

(73,995)

Reclassification adjustment for realized (loss) gain included in

income

(12)

(38)

Less: income tax expense (benefit)

(3)

(9)

Less: reclassification adjustment for realized (loss) gain included

in income, net of income tax

(9)

(29)

Unrealized (loss) gain on cash flow hedges

(3,632)

1,385

(2,092)

4,040

Less: income tax expense (benefit)

(865)

339

(496)

992

Unrealized (loss) gain on cash flow hedges, net of income tax

(2,767)

1,046

(1,596)

3,048

Reclassification adjustment for interest income included in

income

Less: income tax expense

Less: reclassification adjustment for interest income included in

income, net of income tax

Other comprehensive (loss) income

(10,722)

(28,417)

1,695

(70,918)

Comprehensive Income (Loss)

5,325

(12,872)

33,850

(38,545)

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

Loss

Total

Amount

(Dollars in thousands)

Balance at March 31, 2022

49,728,253

529

(45,109)

527,468

161,323

(21,012)

623,199

Net income

15,545

Other comprehensive loss - available-for-

sale securities

(29,463)

Other comprehensive gain - cash flow

hedges

1,046

Issuance of shares from equity-based

awards

45,689

(40)

Open market common share repurchases

(237,993)

(3,392)

Stock-based compensation

1,120

Balance at June 30, 2022

49,535,949

529

(48,501)

528,548

176,868

(49,429)

608,015

Preferred Stock

Common Stock

Treasury

Stock

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Loss

Total

Amount

(Dollars in thousands)

Balance at March 31, 2023

7,750

48,600,618

532

(64,127)

539,023

222,203

(52,140)

645,491

Net income

16,047

Other comprehensive loss - available-for-

sale securities

(7,948)

Other comprehensive loss - cash flow

hedges

(2,774)

Preferred dividends $

13.33

per share

(103)

Issuance of shares from equity-based

awards

52,869

(77)

Warrants exercised, cash settled

(418)

Stock-based compensation

1,265

Balance June 30, 2023

7,750

48,653,487

532

(64,127)

539,793

238,147

(62,862)

651,483

Preferred Stock

Common Stock

Treasury

Stock

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

Income (Loss)

Total

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

32,373

Other comprehensive loss - available-for-

sale securities

(73,966)

Other comprehensive gain - cash flow

hedges

3,048

Issuance of shares from equity-based

awards

382,229

(493)

(490)

Open market common share repurchases

(1,296,325)

(20,154)

Employee receivables from sale of stock

Stock-based compensation

2,235

Balance at June 30, 2022

49,535,949

529

(48,501)

528,548

176,868

(49,429)

608,015

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

Preferred Stock

Common Stock

Treasury

Stock

Additional

Paid-in

Capital

Retained

Earnings

Accumulated

Other

Comprehensive

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

32,155

Other comprehensive gain -available-for-

sale securities

3,298

Other comprehensive loss - cash flow

hedges

(1,603)

Issuance of preferred shares

7,750

Preferred dividends $

13.33

per share

(103)

Issuance of shares from equity-based

awards

205,272

(700)

(698)

Warrants exercised, cash settled

(418)

Stock-based compensation

2,503

Balance June 30, 2023

7,750

48,653,487

532

(64,127)

539,793

238,147

(62,862)

651,483

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

CROSSFIRST BANKSHARES, INC.

Consolidated Statements of Cash Flows – Unaudited

Six Months Ended

June 30,

2023

2022

(Dollars in thousands)

Operating Activities

Net income

32,155

32,373

Adjustments to reconcile net income to cash provided by

operating activities:

Depreciation and amortization

4,642

2,474

Provision for credit losses

7,061

1,510

Accretion of discounts on loans

(1,371)

Accretion of discounts and amortization of premiums on securities

1,732

2,192

Equity based compensation

2,503

2,235

Gain on disposal of fixed assets

(67)

Loss on sale of foreclosed assets and related impairments

Gain on sale of loans

(1,392)

Origination of loans held for sale

(23,550)

Proceeds from sales of loans held for sale

23,368

Deferred income taxes

(79)

2,557

Net increase in bank owned life insurance

(829)

(795)

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

(63)

Dividends on FHLB stock

(625)

Changes in:

Interest receivable

(3,796)

(1,886)

Other assets

3,057

3,780

Other liabilities

3,373

(21,268)

Net cash provided by operating activities

46,199

23,210

Investing Activities

Net change in loans

(426,834)

(274,206)

Purchases of available-for-sale securities

(121,251)

(73,399)

Proceeds from maturities of available-for-sale securities

11,605

22,513

Proceeds from sale of available-for-sale securities

54,572

Proceeds from the sale of foreclosed assets

1,050

237

Purchase of premises and equipment

(5,251)

(1,135)

Proceeds from the sale of premises and equipment and related

insurance claims

Purchase of restricted equity securities

(11,953)

(4,208)

Proceeds from sale of restricted equity securities

12,062

1,544

Net cash used in investing activities

(485,933)

(328,641)

Financing Activities

Net decrease in demand deposits, savings, NOW and

money market accounts

(444,129)

(47,861)

Net increase in time deposits

892,782

108,684

Net (decrease) increase in fed funds purchased and repurchase agreements

(20,000)

Proceeds from Federal Home Loan Bank advances

22,414

50,000

Repayment of Federal Home Loan Bank advances

(70,201)

(130,000)

Net proceeds of Federal Home Loan Bank line of credit

94,696

140,000

Proceeds from issuance of preferred shares, net of issuance

cost

7,750

Issuance of common shares, net of issuance cost

170

Proceeds from employee stock purchase plan

167

364

Repurchase of common stock

(20,154)

Acquisition of common stock for tax withholding obligations

(867)

(833)

Settlement of warrants

(418)

Dividends paid on preferred stock

(103)

Net decrease in employee receivables

Net cash provided by financing activities

482,093

100,382

Increase (Decrease) in Cash and Cash Equivalents

42,359

(205,049)

Cash and Cash Equivalents, Beginning of Period

300,138

482,727

Cash and Cash Equivalents, End of Period

342,497

277,678

Supplemental Cash Flows Information

Interest paid

83,157

10,862

Income taxes paid

7,754

3,880

Table of Contents

See Notes to Consolidated Financial Statements – Unaudited

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.

As described in "Note 16: Subsequent Events" below, the Company

added one full-service branch in Tucson, Arizona to the Company’s footprint on August 1, 2023 in connection with an acquisition

Basis of Presentation

The accompanying interim unaudited consolidated financial statements serve

to update the CrossFirst Bankshares, Inc. Annual

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

the Company, the Bank, CFI, CFBSA I, LLC

and CFBSA II, LLC. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and where applicable,

with general practices in the banking industry or guidelines

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

all information and notes necessary to constitute a complete set

of financial statements under GAAP applicable to annual periods and accordingly should be read

in conjunction with the financial

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

reflect all adjustments which are, in the opinion of management, necessary for a fair

statement of the results presented. All such

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

been eliminated in

consolidation. Certain reclassifications of prior years' amounts are made whenever

necessary to conform to current period presentation.

The results of operations for the interim period are not necessarily indicative of the

results that may be expected for the full year or any

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

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

and expenses, and

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

judgment and available information. Management

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

instruments, and the allowance for credit losses

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

process and future changes in market and economic

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

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

the unaudited consolidated financial statements are

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

December 31, 2022 and are contained in the

Company's Annual Report on Form 10-K for that period. There have been no significant changes to the application of

significant

accounting policies since December 31, 2022

Related Party Transactions

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

opinion, the loans and deposits were made

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

at the time with other persons. Related party loans

totaled $

million and $

million while related party deposits totaled $

million and $

million at June 30, 2023 and December 31,

2022, respectively.

Table of Contents

Note 2: Securities

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

gains and losses, of period end available-for-sale

securities consisted of the following:

June 30, 2023

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Approximate

Fair Value

(Dollars in thousands)

Available-for-sale securities

Mortgage-backed - GSE residential

297,941

216

25,224

272,933

Collateralized mortgage obligations - GSE residential

10,256

740

9,516

State and political subdivisions

504,236

464

51,751

452,949

Corporate bonds

9,749

1,247

8,502

Total available-for-sale securities

822,182

680

78,962

743,900

December 31, 2022

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Approximate

Fair Value

(Dollars in thousands)

Available-for-sale securities

Mortgage-backed - GSE residential

197,243

232

25,166

172,309

Collateralized mortgage obligations - GSE residential

11,629

743

10,886

State and political subdivisions

551,007

929

57,440

494,496

Corporate bonds

9,762

552

9,210

Total available-for-sale securities

769,641

1,161

83,901

686,901

The carrying value of securities pledged as collateral was $

million and $

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

respectively.

As of June 30, 2023 and December 31, 2022, the available-for-sale securities had $

million and $

million, respectively of

accrued interest, excluded from the amortized cost basis, and presented

in “interest receivable” on the consolidated statements of

financial condition.

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

of available-for-sale securities:

For the Three Months Ended

For the Six Months Ended

June 30, 2023

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Gain

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Gain

(Dollars in thousands)

Available-for-sale securities

(74)

267

(204)

For the Three Months Ended

For the Six Months Ended

June 30, 2022

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Loss

Gross

Realized

Gains

Gross

Realized

Losses

Net

Realized

Loss

(Dollars in thousands)

Available-for-sale securities

(14)

(12)

(41)

(38)

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

number of securities that are in an unrealized

loss position, and fair value of the Company’s investments with unrealized

losses, aggregated by investment class and length of time that

individual securities have been in a continuous unrealized loss position

at June 30, 2023 and December 31, 2022:

June 30, 2023

Less than 12 Months

12 Months or More

Total

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

(Dollars in thousands)

Available-for-sale

securities

Mortgage-backed -

GSE residential

100,527

1,751

131,007

23,473

231,534

25,224

Collateralized

mortgage obligations

- GSE residential

9,515

740

9,515

740

State and political

subdivisions

123,696

1,366

111

275,023

50,385

195

398,719

51,751

306

Corporate bonds

4,380

621

4,122

626

8,502

1,247

Total temporarily

impaired securities

228,603

3,738

140

419,667

75,224

259

648,270

78,962

399

December 31, 2022

Less than 12 Months

12 Months or More

Total

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

Fair Value

Unrealized

Losses

Number of

Securities

(Dollars in thousands)

Available-for-sale

securities

Mortgage-backed -

GSE residential

91,929

10,410

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 six-months

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

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

by interest rate changes.

As of June 30, 2023 the Company does not intend to sell the investments in loss positions, and it is not more

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

recovery of their amortized cost basis.

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

-sale securities at June 30, 2023, by contractual

maturity, are shown below:

June 30, 2023

Within

After One to

After Five to

After

One Year

Five Years

Ten Years

Total

(Dollars in thousands)

Available-for-sale securities

Mortgage-backed - GSE residential

(1)

Amortized cost

1,053

296,874

297,941

Estimated fair value

965

271,955

272,933

Weighted average yield

(2)

4.82

2.40

3.29

Collateralized mortgage obligations -

GSE residential

(1)

Amortized cost

2,296

7,960

10,256

Estimated fair value

2,165

7,351

9,516

Weighted average yield

(2)

2.77

2.34

2.43

State and political subdivisions

Amortized cost

1,068

5,900

91,244

406,024

504,236

Estimated fair value

1,076

5,966

90,275

355,632

452,949

Weighted average yield

(2)

3.55

4.32

3.10

2.72

2.81

Corporate bonds

Amortized cost

144

9,605

9,749

Estimated fair value

140

8,362

8,502

Weighted average yield

(2)

4.29

5.70

5.68

Total available-for-sale securities

Amortized cost

1,068

6,058

104,198

710,858

822,182

Estimated fair value

1,076

6,119

101,767

634,938

743,900

Weighted average yield

(2)

3.55

4.32

3.33

2.96

3.01

(1)

Actual maturities may differ from contractual maturities because issuers may have

the rights to call or prepay obligations with or

without prepayment penalties.

(2)

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

Tax-exempt securities are not tax effected.

Equity Securities

Equity securities consist of $

million of private equity investments as well as $

million of restricted equity securities. The

private equity investments are included in “other” assets on the

consolidated statements of financial condition.

The Company elected a measurement alternative for three private equity

investments that did not have a readily determinable fair

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

the net asset value per share.

A cost basis was

calculated for the equity investments.

The recorded balance will adjust for any impairment or any observable

price changes for an

identical or similar investment of the same issuer. No such events occurred

during the three- or six-month period ended June 30, 2023.

Table of Contents

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

securities recognized in net income:

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands)

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

(71)

(174)

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

during the reporting period

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

securities still held at the reporting date

(71)

(174)

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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 and $

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

June 30, 2023

December 31, 2022

Amount

% of Loans

Amount

% of Loans

(Dollars in thousands)

Commercial and industrial

2,057,912

1,974,932

Energy

232,863

173,218

Commercial real estate - owner-occupied

542,827

437,119

Commercial real estate - non-owner-occupied

2,480,282

2,314,600

Residential real estate

439,434

439,367

Consumer

43,281

33,493

Loans, net of unearned fees

5,796,599

100

5,372,729

100

Less: allowance for credit losses on loans

(67,567)

(61,775)

Loans, net of the allowance for credit losses on loans

5,729,032

5,310,954

Accrued interest of $

million and $

million at June 30, 2023 and December 31, 2022, respectively, presented

in “interest receivable” on the consolidated statements of

financial condition is excluded from the carrying value disclosed in

the above table.

The Company aggregates the loan portfolio by similar credit risk characteristics.

Effective with the second quarter of 2023, we revised the reported

loan segments to better

reflect how management monitors the portfolio, assesses credit risk and

evaluates the ACL.

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

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

●

Commercial and Industrial

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

use in property, plant, and equipment

purchases, business operations, expansions and for working capital

needs.

Loan terms typically require amortizing payments that decrease the outstanding

loan

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

maturities ranging from one-

to three-years. Lines of credit allow the borrower to draw

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

is primarily from the cash flow of a borrower’s principal business operation.

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

●

Energy

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

capital needs, exploration and production activities, and

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

risk is driven by creditworthiness of a borrower and the

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

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

●

Commercial Real Estate – Owner-Occupied

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

of financial services for the company

and/or the principals and the primary source of repayment is through the

cash flows generated by the borrowers’ business operations. Owner-occupied commercial

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

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

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

borrower’s market areas.

●

Commercial Real Estate – Non-Owner-Occupied

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

of these loans is

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

primarily as cash flow loans and secondarily as loans secured by real estate.

Table of Contents

Additionally, the category includes construction and land development

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

Independent appraisals and a financial analysis of the developers and

property owners are completed. Sources of repayment include secondary market

permanent

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

Company until permanent financing is obtained. These loans are higher risk than

other

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

changes, general economic conditions, and the availability of long-term

financing.

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

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

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

be impacted by the creditworthiness of a borrower, property values and

the local economies in

the borrower’s market areas.

●

Residential Real Estate

- The category includes loans that are generally secured by owner-occupied

1-4 family residences. Repayment of these loans is primarily

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

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

second lien positions on residential real estate.

Credit risk in these loans can be impacted by economic conditions within or

outside the borrower’s market areas that

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

●

Consumer

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

loans and loans for other personal purposes. Repayment is

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

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

general economic conditions in the borrower’s market area) and the

creditworthiness of a borrower.

Allowance for Credit Losses

The Company’s CECL committee meets at least quarterly to oversee the ACL methodology. The committee estimates the ACL using relevant available information, from

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

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

credit losses inherent in the loan portfolio at the statement of financial condition

date. The ACL is

adjusted for expected prepayments when appropriate and excludes

expected

extensions, renewals, and modifications.

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

(judgmental)

reserves.

Asset Specific -

When unique qualities cause a loan’s exposure to loss to be inconsistent with the

pooled reserves,

the loan is individually evaluated. Individual reserves are

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

and loans that are risk-rated doubtful or loss that are greater than a defined dollar threshold

Reserves on asset

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

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

and guarantor

support.

Quantitative

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

risk characteristics as of a particular time to

form a cohort. For example, the outstanding commercial and industrial

loans and commercial and industrial lines of credit loan segments as of quarter

-end are considered cohorts.

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

is exhausted. The Company used a lookback period of approximately six-years to establish the

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

a historical loss factor for each of its loan segments.

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Qualitative

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

Company primarily uses the following qualitative factors:

◾

The nature and volume of changes in risk ratings;

◾

The volume and severity of past due loans;

◾

The volume of non-accrual loans;

◾

The nature and volume of the loan portfolio, including the existence, growth, and

effect of any concentrations of credit;

◾

Changes in the Institute of Supply Management’s Purchasing Manager Indices

(“PMI”) for services and manufacturing;

◾

Changes in collateral values;

◾

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

◾

Changes in lending staff; and

◾

Changes in competition, legal and regulatory environments

In addition to the current condition qualitative adjustments, the Company uses the

Federal Reserve’s unemployment forecast to adjust the ACL based on forward looking

guidance. The Federal Reserve’s unemployment forecast extends three-years

and is eventually reverted to the mean of six percent by year 10.

Internal Credit Risk Ratings

The Company uses a weighted average risk rating factor to adjust the historical

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

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

concentrated within the regulatory “Pass” category. Risk ratings are established

for loans at origination and

are monitored on an ongoing basis. The rating assigned to a loan reflects the risks

posed by the borrower’s expected performance and the transaction’s structure.

Performance metrics

used to determine a risk rating include, but are not limited to, cash flow adequacy,

liquidity, and collateral. A description of the loan risk ratings follows:

Loan Grades

●

Pass (risk rating 1-4)

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

maintain good liquidity and

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

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

policies. Debt is programmed and timely repayment is expected.

●

Special Mention (risk rating 5)

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

imbalanced position in their balance

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

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

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

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

expose the Company to enough risk to warrant adverse classification.

●

Substandard (risk rating 6)

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

repayment. Credits are inadequately

protected by the current worth and paying capacity of the obligor or of the collateral

pledged. A

distinct possibility exists that the Company will sustain some loss if

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

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

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

and are broken out in the table below.

●

Doubtful (risk rating 7)

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

characteristics that these weaknesses make

collection or liquidation in full highly questionable or improbable based

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

pending factors,

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

deferred until its more exact status may be determined.

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●

Loss (risk rating 8)

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

as a bankable asset is not warranted.

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

based on internal rating categories and loan segments as of June 30, 2023 and December

31, 2022:

As of June 30, 2023

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial and industrial

Pass

283,048

306,846

207,224

60,219

44,139

43,384

946,803

37,305

1,928,968

Special mention

11,750

5,809

16,002

2,310

758

305

34,185

6,785

77,904

Substandard - accrual

1,419

157

983

844

20,303

17,610

41,447

Substandard - non-

accrual

(8)

8,511

1,033

9,593

Doubtful

Total

296,217

312,719

223,285

62,743

45,880

44,533

1,009,802

62,733

2,057,912

Energy

Pass

7,278

105

192

224,677

143

232,395

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

468

Total

7,278

105

192

225,145

143

232,863

Commercial real estate

- owner-occupied

Pass

43,160

77,915

134,076

59,154

49,994

37,095

72,630

39,009

513,033

Special mention

10,311

5,847

5,905

431

1,196

5,267

28,957

Substandard - accrual

203

407

837

Substandard - non-

accrual

Doubtful

Total

53,536

83,762

140,184

59,992

51,279

42,435

72,630

39,009

542,827

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As of June 30, 2023

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial real estate - non-owner-

occupied

Pass

292,061

915,099

298,948

147,121

79,500

80,385

535,380

89,707

2,438,201

Special mention

7,528

137

16,398

4,154

28,250

Substandard - accrual

10,092

365

314

439

11,210

Substandard - non-

accrual

2,448

173

2,621

Doubtful

Total

302,153

915,464

308,924

147,431

95,898

84,853

535,819

89,740

2,480,282

Residential real estate

Pass

19,066

76,723

86,898

115,256

39,976

67,055

26,962

431,936

Special mention

253

3,560

165

210

4,188

Substandard - accrual

3,125

Substandard - non-

accrual

185

Doubtful

Total

19,319

76,723

90,458

118,546

40,186

67,055

26,962

185

439,434

Consumer

Pass

8,007

6,360

621

113

245

123

27,776

43,245

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Total

8,007

6,360

621

142

245

130

27,776

43,281

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As of June 30, 2023

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Total

Pass

645,342

1,390,221

727,872

382,055

213,854

228,042

1,834,228

166,164

5,587,778

Special mention

22,314

11,656

32,995

3,043

18,562

9,733

34,185

6,818

139,306

Substandard - accrual

11,576

429

270

3,718

1,072

1,231

20,742

17,610

56,648

Substandard - non-

accrual

2,440

230

8,511

1,218

12,399

Doubtful

468

Total

679,232

1,402,306

763,577

389,046

233,488

239,006

1,898,134

191,810

5,796,599

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Internal Risk Rating

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

Loans

Revolving

Loans

converted to

Term Loans

Total

(Dollars in thousands)

Commercial and industrial

Pass

465,963

281,166

55,934

50,445

48,595

20,648

890,109

19,089

1,831,949

Special mention

2,531

23,055

14,573

2,951

4,947

49,861

98,045

Substandard - accrual

290

677

1,647

1,330

740

299

10,805

21,166

36,954

Substandard - non-

accrual

104

1,383

6,479

7,972

Doubtful

Loss

Total

468,784

305,002

72,154

54,732

55,665

21,045

957,254

40,296

1,974,932

Energy

Pass

7,585

306

228

162,834

171

171,124

Special mention

Substandard - accrual

1,476

Substandard - non-

accrual

Doubtful

618

Loss

Total

7,585

306

228

164,928

171

173,218

Commercial real estate

- owner-occupied

Pass

79,695

127,489

56,607

49,620

28,143

20,299

28,814

14,024

404,691

Special mention

17,292

6,603

452

1,330

2,486

2,469

30,730

Substandard - accrual

403

1,295

1,698

Substandard - non-

accrual

Doubtful

Loss

Total

96,987

134,092

57,462

50,950

28,241

24,080

28,814

16,493

437,119

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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

- non-owner-occupied

Pass

827,420

442,176

200,090

101,827

49,834

73,940

458,297

111,322

2,264,906

Special mention

5,931

7,727

114

6,460

1,853

2,429

9,852

34,366

Substandard - accrual

10,545

310

607

253

992

12,849

Substandard - non-

accrual

2,479

Doubtful

Loss

Total

843,896

452,692

200,811

101,909

56,354

76,046

460,726

122,166

2,314,600

Residential real estate

Pass

77,416

84,158

121,078

45,265

37,395

34,852

31,892

432,056

Special mention

253

3,272

187

226

3,938

Substandard - accrual

3,148

3,182

Substandard - non-

accrual

191

Doubtful

Loss

Total

77,703

87,430

124,413

45,491

37,395

34,852

31,892

191

439,367

Consumer

Pass

7,917

1,347

2,611

265

129

21,173

33,448

Special mention

Substandard - accrual

Substandard - non-

accrual

Doubtful

Loss

Total

7,917

1,347

2,643

265

142

21,173

33,493

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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)

Total

Pass

1,465,996

936,642

436,548

247,422

164,096

149,745

1,593,119

144,606

5,138,174

Special mention

26,007

40,657

15,326

4,507

11,513

4,425

52,290

12,362

167,087

Substandard - accrual

10,869

987

5,837

1,412

805

1,847

12,281

22,158

56,196

Substandard - non-

accrual

2,583

1,383

6,479

191

10,642

Doubtful

618

Loss

Total

1,502,872

980,869

457,711

253,347

177,797

156,029

1,664,787

179,317

5,372,729

Table of Contents

Loan Portfolio Aging Analysis

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

30, 2023 and December 31, 2022:

As of June 30, 2023

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial and industrial

30-59 days

2,946

152

3,100

60-89 days

1,536

843

2,490

Greater than 90 days

205

7,293

7,505

Total past due

205

11,775

995

13,095

Current

296,217

312,681

223,203

62,538

45,880

44,533

998,027

61,738

2,044,817

Total

296,217

312,719

223,285

62,743

45,880

44,533

1,009,802

62,733

2,057,912

Greater than 90 days

and accruing

148

242

397

Energy

30-59 days

60-89 days

Greater than 90 days

468

Total past due

468

Current

7,278

105

192

224,677

143

232,395

Total

7,278

105

192

225,145

143

232,863

Greater than 90 days

and accruing

Table of Contents

As of June 30, 2023

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial real estate

- owner-occupied

30-59 days

203

60-89 days

Greater than 90 days

Total past due

203

Current

53,536

83,762

139,981

59,992

51,279

42,435

72,630

39,009

542,624

Total

53,536

83,762

140,184

59,992

51,279

42,435

72,630

39,009

542,827

Greater than 90 days

and accruing

Commercial real estate - non-owner-occupied

30-59 days

60-89 days

6,029

Greater than 90 days

Total past due

6,029

Current

302,153

915,464

302,895

147,431

95,898

84,853

535,819

89,740

2,474,253

Total

302,153

915,464

308,924

147,431

95,898

84,853

535,819

89,740

2,480,282

Greater than 90 days

and accruing

Residential real estate

30-59 days

176

60-89 days

1,320

Greater than 90 days

Total past due

1,320

176

1,496

Current

19,319

76,723

89,138

118,546

40,186

67,055

26,786

185

437,938

Total

19,319

76,723

90,458

118,546

40,186

67,055

26,962

185

439,434

Greater than 90 days

and accruing

Table of Contents

As of June 30, 2023

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Consumer

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

8,007

6,324

620

128

245

130

27,776

43,230

Total

8,007

6,360

621

142

245

130

27,776

43,281

Greater than 90 days

and accruing

Total

30-59 days

205

3,122

152

3,479

60-89 days

7,430

1,536

843

9,854

Greater than 90 days

205

7,761

8,009

Total past due

7,635

219

12,419

995

21,342

Current

679,232

1,402,232

755,942

388,827

233,488

239,006

1,885,715

190,815

5,775,257

Total

679,232

1,402,306

763,577

389,046

233,488

239,006

1,898,134

191,810

5,796,599

Greater than 90 days

and accruing

148

242

433

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

2,814

8,667

60-89 days

980

430

1,465

Greater than 90 days

143

1,383

7,063

8,614

Total past due

4,982

1,383

1,061

10,857

430

18,746

Current

468,764

300,020

72,147

54,726

54,282

19,984

946,397

39,866

1,956,186

Total

468,784

305,002

72,154

54,732

55,665

21,045

957,254

40,296

1,974,932

Greater than 90 days

and accruing

584

630

Energy

30-59 days

60-89 days

Greater than 90 days

618

Total past due

618

Current

7,585

306

228

164,310

171

172,600

Total

7,585

306

228

164,928

171

173,218

Greater than 90 days

and accruing

Commercial real estate

- owner-occupied

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

96,987

134,092

57,462

50,950

28,241

24,080

28,814

16,493

437,119

Total

96,987

134,092

57,462

50,950

28,241

24,080

28,814

16,493

437,119

Greater than 90 days

and accruing

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Commercial real estate

- non-owner-occupied

30-59 days

4,293

1,180

5,473

60-89 days

Greater than 90 days

Total past due

4,293

1,180

5,473

Current

839,603

452,692

200,811

100,729

56,354

76,046

460,726

122,166

2,309,127

Total

843,896

452,692

200,811

101,909

56,354

76,046

460,726

122,166

2,314,600

Greater than 90 days

and accruing

Residential real estate

30-59 days

3,867

3,907

60-89 days

Greater than 90 days

120

Total past due

3,987

4,027

Current

77,703

83,443

124,413

45,481

37,395

34,852

31,862

191

435,340

Total

77,703

87,430

124,413

45,491

37,395

34,852

31,892

191

439,367

Greater than 90 days

and accruing

120

Consumer

30-59 days

60-89 days

Greater than 90 days

Total past due

Current

7,917

1,347

2,641

265

137

21,173

33,486

Total

7,917

1,347

2,643

265

142

21,173

33,493

Table of Contents

As of December 31, 2022

Amortized Cost Basis by Origination Year and Past Due Status

Amortized Cost Basis

2022

2021

2020

2019

2018

2017 and

Prior

Revolving

loans

Revolving

loans

converted to

term loans

Total

(Dollars in thousands)

Total

30-59 days

4,313

8,651

1,190

1,049

2,844

18,047

60-89 days

980

430

1,472

Greater than 90 days

263

1,383

7,681

9,352

Total past due

4,313

8,969

1,196

1,388

1,061

11,505

430

28,871

Current

1,498,559

971,900

457,702

252,151

176,409

154,968

1,653,282

178,887

5,343,858

Total

1,502,872

980,869

457,711

253,347

177,797

156,029

1,664,787

179,317

5,372,729

Greater than 90 days

and accruing

159

584

750

Table of Contents

Non-accrual Loan Analysis

Non-accrual loans are loans for which the Company does not record interest

income. The accrual of interest on loans is discontinued at the time the loan is 90 days past due

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

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

charged off at

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

are returned to accrual status when all the principal and interest amounts contractually due

are

brought current and future payments are reasonably assured. The following

tables present the Company’s non

-accrual loans by loan segments at June 30, 2023 and December 31,

2022:

As of June 30, 2023

Amortized Cost Basis by Origination Year and On Non-accrual

Amortized Cost Basis

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Total Non-

accrual

Loans

Non-accrual

Loans with no

Allowance

(Dollars in thousands)

Commercial and industrial

8,503

1,033

9,593

6,991

Energy

468

Commercial real estate -

owner-occupied

Commercial real estate -

non-owner-occupied

2,448

173

2,621

Residential real estate

185

Consumer

Total

2,448

230

8,971

1,218

12,867

10,265

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

6,479

7,984

Energy

618

Commercial real estate -

owner-occupied

Commercial real estate -

non-owner-occupied

2,479

Residential real estate

191

Consumer

Total

2,583

1,383

7,097

191

11,272

Interest income recognized on non-accrual loans was $

0.1

million and $

0.3

million for the three- and six-months ended June 30, 2023, respectively.

For the three-and six-months

ended June 30, 2022, the interest income recognized on non-accrual loans

was $

0.3

million and $

0.4

million, respectively.

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Allowance for Credit Losses

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

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

segment for the

three- and six-months ended June 30, 2023:

For the Three Months Ended June 30, 2023

Commercial

and Industrial

Energy

Commercial

Real Estate -

Owner-

occupied

Commercial

Real Estate -

Non-owner-

occupied

Residential

Real Estate

Consumer

Total

(Dollars in thousands)

Allowance for Credit Losses:

Beginning balance

27,660

4,679

5,610

23,807

3,265

109

65,130

Charge-offs

(738)

(5)

(743)

Recoveries

137

140

Provision

2,004

751

174

3,040

Ending balance

28,929

4,914

6,361

23,981

3,268

114

67,567

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

Beginning balance

461

541

226

6,819

8,113

Provision (release)

(12)

(45)

(21)

(323)

(7)

(400)

Ending balance

449

496

205

6,496

7,713

Table of Contents

For the Six Months Ended June 30, 2023

Commercial

and Industrial

Energy

Commercial

Real Estate -

Owner-

occupied

Commercial

Real Estate -

Non-owner-

occupied

Residential

Real Estate

Consumer

Total

(Dollars in thousands)

Allowance for Credit Losses:

Beginning balance

26,803

4,396

5,214

21,880

3,333

149

61,775

Charge-offs

(2,380)

(5)

(2,385)

Recoveries

137

141

Provision (release)

4,502

381

1,147

2,101

(65)

(30)

8,036

Ending balance

28,929

4,914

6,361

23,981

3,268

114

67,567

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

Beginning balance

319

787

221

7,323

8,688

Provision (release)

130

(291)

(16)

(827)

(3)

(975)

Ending balance

449

496

205

6,496

7,713

The ACL increased $

2.4

million during the quarter.

Provision expense of $

3.0

million was driven primarily by loan growth, and was partially offset by $

0.6

million in net

charge-offs, primarily due to two commercial and industrial loans.

The reserve on unfunded commitments decreased $

0.4

million due to a decrease in unfunded commitments in the

quarter.

The ACL increased $

5.8

million during the six-months ended June 30, 2023 and included provision

of $

8.0

million due to loan growth and changes in credit quality and

economic factors and an increase in reserves on impaired loans of $

0.8

million, partially offset by $

2.2

million in net charge-offs.

The reserve on unfunded commitments decreased

1.0

million due to a decrease in unfunded commitments.

Table of Contents

The following tables presents the Company’s gross charge-offs by year of

origination for the three- and six-months ended June 30, 2023:

For the Quarter Ended June 30, 2023

Gross Charge-offs by Origination Year

Gross Charge-offs

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Gross

Charge-

offs

(Dollars in thousands)

Commercial and industrial

569

150

738

Energy

Commercial real estate - owner-occupied

Commercial real estate - non-owner-occupied

Residential real estate

Consumer

Total

569

150

743

For the Six Months Ended June 30, 2023

Gross Charge-offs by Origination Year

Gross Charge-offs

2023

2022

2021

2020

2019

2018 and

Prior

Revolving

loans

Revolving

loans

converted

to term

loans

Gross

Charge-

offs

(Dollars in thousands)

Commercial and industrial

1,358

569

375

2,380

Energy

Commercial real estate - owner-occupied

Commercial real estate - non-owner-occupied

Residential real estate

Consumer

Total

1,363

569

375

2,385

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 June 30, 2023 and December 31, 2022:

As of June 30, 2023

Loan Segment and Collateral Description

Amortized Cost of

Collateral Dependent

Loans

Related Allowance for

Credit Losses

Amortized Cost of

Collateral Dependent

Loans with no related

Allowance

(Dollars in thousands)

Commercial and industrial

All business assets

7,984

883

6,065

Energy

Oil and natural gas properties

468

Commercial real estate - owner-occupied

Commercial real estate properties

Commercial real estate - non-owner-

occupied

Commercial real estate properties

Residential real estate

Residential real estate properties

Consumer

Vehicles & other personal assets

8,452

883

6,533

As of December 31, 2022

Loan Segment and Collateral Description

Amortized Cost of

Collateral Dependent

Loans

Related Allowance for

Credit Losses

Amortized Cost of

Collateral Dependent

Loans with no related

Allowance

(Dollars in thousands)

Commercial and industrial

All business assets

7,981

Energy

Oil and natural gas properties

618

Commercial real estate - owner-occupied

Commercial real estate properties

Commercial real estate - non-owner-

occupied

Commercial real estate properties

Residential real estate

Residential real estate properties

Consumer

Vehicles & other personal assets

8,728

8,689

Loan Modifications

The Company considers loans to borrowers experiencing financial difficulties

to be troubled loans.

Effective January 1, 2023, the

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

(“TDR”) and requires an

entity evaluate whether loan modifications represent a new loan or

a continuation of an existing loan.

Such troubled debt modifications

(“TDM”) may include principal forgiveness, interest rate reductions,

other-than-insignificant-payment delays, term extensions or any

combination thereof.

The Company adopted this accounting standard on a prospective basis.

Table of Contents

During the three- and six-months ended June 30, 2023, the Company modified

three

loans with an amortized cost basis of

4.7

million to facilitate repayment that are considered TDMs.

The following table presents, by loan segment, the amortized cost basis

as of the date shown for modified loans to borrowers experiencing financial difficulty:

June 30, 2023

Term Extension

Amortized Cost Basis

% of Loan Class

(Dollars in thousands)

Commercial and industrial

4,607

0.2

Commercial real estate - owner-occupied

0.0

Total Loans

4,672

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

June 30, 2023, of the amortized cost basis of loans that

have been modified since January 1, 2023:

June 30, 2023

Current

(Dollars in thousands)

Commercial and industrial

4,607

Commercial real estate - owner-occupied

Total Loans

4,672

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

the six-months ended June 30,

2023. For purposes of this disclosure, the Company considers “default” to mean

90 days or more past due on principal or interest. The

allowance for credit losses related to TDMs on non-accrual status is determined by

individual evaluation, including collateral adequacy,

using the same process as loans on non-accrual status which are not

classified as TDMs.

The following schedule presents the financial effect of the modifications

made to borrowers experiencing financial difficulty as of

June 30, 2023:

June 30, 2023

Financial Effect

Term Extension

Commercial and industrial

Added a weighted average

1.2

years to the life of loan, which reduced

monthly payment amounts

Commercial real estate - owner-occupied

Added a weighted average

0.6

years to the life of loan, which reduced

monthly payment amounts

Troubled Debt Restructurings

Prior to the adoption of ASU 2022-02, TDRs were extended to borrowers who were experiencing financial difficulty

and who had

been granted a concession, excluding loan modifications as a result of

the COVID-19 pandemic. The modification of terms typically

included

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

of the stated interest rate.

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

28.4

million and $

30.5

million as of

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

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

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

exposures unless the obligation is unconditionally

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

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

likelihood that funding will occur and an estimate of the

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 June 30, 2023 and December

31, 2022, respectively, are included in “interest

payable and other liabilities” on the statements of financial condition.

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

identified:

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

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

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

individual or business experiencing unpredictable cash

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

with non-revolving lines of credit is the

diversion of funds for other expenditures.

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

that the applicant will perform certain obligations

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

If the obligation is not met, it gives the beneficiary the right

to draw on the letter of credit.

Note 4:

Leases

The Company’s leases primarily include bank branches located

in Kansas City, Missouri; Tulsa, Oklahoma; Dallas, Texas; Frisco,

Texas; Phoenix, Arizona;

Denver, Colorado and Colorado Springs, Colorado. The remaining lease terms on these branch

leases range

from less than

one year

nineteen years

with certain options to renew. Renewal terms can extend the lease term between

five years

and

twenty years

. The exercise of lease renewal options is at the Company’s sole discretion. When it is reasonably certain

that the Company

will exercise its option to renew or extend the lease term, that option

is included in the estimated value of the right of use (“ROU”) asset

and lease liability. The Company’s lease agreements do not contain any material residual

value guarantees or material restrictive

covenants.

As of June 30, 2023, the Company recognized one finance lease and the

remaining Company leases are classified as

operating leases.

During the second quarter of 2023, the Company entered into a lease agreement

for a new bank branch in Oklahoma City,

Oklahoma.

The lease is expected to commence at the beginning of 2025. The lease will be recognized

in the Company’s consolidated

financial statements during the period that includes the lease’s commencement

date.

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

financial condition, and was $

million and $

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

to the ROU asset may be required for items such as

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

payable and other liabilities” on the consolidated

statements of financial condition and was $

million and $

million at June 30, 2023 and December 31, 2022, respectively.

As of June 30, 2023, the remaining weighted-average lease term is

11.3

years, and the weighted-average discount rate was

2.55

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

borrowing rate for borrowings of a similar term at the date of

lease commencement.

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The following table presents components of operating lease expense

in the accompanying consolidated statements of operations

for the three-and six-month periods ended June 30, 2023 and 2022:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2023

2022

2023

2022

(Dollars in thousands)

Finance lease amortization of right-of-use asset

141

Finance lease interest on lease liability

137

Operating lease expense

731

603

1,463

1,329

Variable lease expense

488

345

881

558

Short-term lease expense

Total lease expense

1,363

1,091

2,632

2,035

Future minimum commitments due under these lease agreements as of

June 30, 2023 are as follows:

Operating Leases

Finance Lease

(Dollars in thousands)

Remainder of 2023

2,059

245

2024

3,289

490

2025

3,309

490

2026

3,350

490

2027

3,340

528

Thereafter

12,619

8,296

Total lease payments

27,966

10,539

Less imputed interest

3,421

3,027

Total

24,545

7,512

Supplemental cash flow information –

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

lease liabilities were $

1.8

million and $

1.4

million for the six-months ended June 30, 2023 and 2022, respectively. Operating

cash flows

paid for finance lease amounts included in the measurement of lease liabilities was $

0.2

million and $

0.1

million for the six-months

ended June 30, 2023 and 2022, respectively. During the six-months ended

June 30, 2023, the Company did

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 six-months ended June 30, 2023.

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

Farmers & Stockmens acquisition over its estimated

useful life of approximately

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

intangible amortization expense of $

0.8

million and $

1.6

million for the three- and six-month periods ended June 30, 2023, respectively.

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

accumulated amortization of the CDI at June 30, 2023

and December 31, 2022 were:

Gross Carrying

Amount

Accumulated

Amortization

Net Carrying

Amount

(Dollars in thousands)

June 30, 2023

Goodwill

12,836

Core deposit intangible

17,479

2,858

14,621

Total goodwill and intangible assets

30,315

2,858

27,457

December 31, 2022

Goodwill

12,836

Core deposit intangible

17,479

1,234

16,245

Total goodwill and intangible assets

30,315

1,234

29,081

The following table shows the estimated future amortization expense for

the CDI as of June 30, 2023:

Amount

Years ending December 31,

(Dollars in thousands)

For the six months ending December 31, 2023

1,517

For the year ending December 31, 2024

2,762

For the year ending December 31, 2025

2,436

For the year ending December 31, 2026

2,109

For the year ending December 31, 2027

1,783

Note 6:

Derivatives and Hedging

The Company is exposed to certain risks arising from both its business operations and

economic conditions, including interest

rate, liquidity, and

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

activities to manage

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

of future known and uncertain cash amounts, the value

of which are determined by interest rates.

Cash Flow Hedges of Interest Rate Risk

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

and expense and to manage its exposure to interest

rate movements. To

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

rate risk

management strategy.

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

from a counterparty in

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

of the agreements without exchange of the underlying notional

amount. Interest rate collars designated as cash flow hedges involve

payments of variable-rate amounts if interest rates rise above the

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

if interest rates fall below the floor strike rate on the contract.

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

with existing variable-rate debt and loan assets.

Previously, five

swaps that were entered into in 2021 were terminated during the third quarter of 2022, however,

the amortization of the

gains on these instruments will start in 2023 based on the original effective dates

of these swaps. Derivatives designated and that qualify

as cash flow hedges include

five

instruments with a notional amount of $

340

million and

one

instrument with a notional amount of $

250

million at June 30, 2023 and December 31, 2022, respectively.

For derivatives designated and that qualify as cash flow hedges of interest rate

risk, the gain or loss on the derivative is recorded

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

income or expense in the

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

reclassified to interest income and expense as interest payments are received

and made on the Company’s variable-rate assets and debt.

The Company currently estimates that $

1.5

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

months.

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

transactions over a maximum period of

5.9

years.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and result from

a service provided to clients. The Company executes

interest rate swaps with customers to facilitate their respective risk management

strategies. Those interest rate swaps are simultaneously

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

such that the Company minimizes its net risk exposure

resulting from such transactions. Interest rate derivatives associated

with this program do not meet the strict hedge accounting

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

and the offsetting derivatives are recognized directly in

earnings.

Swap fees earned upon origination and credit valuation adjustments that represent

the risk of a counterparty’s default are reported

on the statements of operations as swap fee income, net. The effect of the Company’s derivative financial

instruments gain (loss) is

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

These

and

swaps had an aggregate notional amount of $

378

million and $

421

million at June 30, 2023 and December 31,

2022, respectively.

Fair Values

of Derivative Instruments on the Statements of Financial Condition

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

instruments and their classification on the

Statements of Financial Condition as of June 30, 2023 and December

31, 2022:

Asset Derivatives

Liability Derivatives

Statement of

Financial

Condition

June 30,

December 31,

Statement of

Financial

Condition

June 30,

December 31,

Location

2023

2022

Location

2023

2022

(Dollars in thousands)

Interest rate products:

Derivatives

designated as hedging

instruments

Other assets

and Interest

receivable

211

Interest payable

and other

liabilities

7,726

5,403

Derivatives not

designated as hedging

instruments

Other assets

and Interest

receivable

10,415

11,038

Interest payable

and other

liabilities

10,415

11,039

Total

10,626

11,038

18,141

16,442

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

(Loss) for the

three- and six-months ended June 30, 2023 and 2022.

Location of

Gain or (Loss)

Recognized

from

Accumulated

Other

Comprehensive

Income into

Earnings

Gain or

(Loss)

Recognized

in OCI on

Derivative

Gain or

(Loss)

Recognized

in OCI

Included

Component

Gain or

(Loss)

Recognized

in OCI

Excluded

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Included

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Excluded

Component

(Dollars in thousands)

For the Three Months Ended June 30, 2023

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Income

(3,839)

Interest Rate Products

Interest Expense

207

Total

(3,632)

For the Three Months Ended June 30, 2022

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Expense

1,385

Total

1,385

Location of

Gain or (Loss)

Recognized

from

Accumulated

Other

Comprehensive

Income into

Earnings

Gain or

(Loss)

Recognized

in OCI on

Derivative

Gain or

(Loss)

Recognized

in OCI

Included

Component

Gain or

(Loss)

Recognized

in OCI

Excluded

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Included

Component

Gain or

(Loss)

Reclassified

from

Accumulated

OCI into

Earnings

Excluded

Component

(Dollars in thousands)

For the Six Months Ended June 30, 2023

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Income

(2,299)

Interest Rate Products

Interest Expense

207

Total

(2,092)

For the Six Months Ended June 30, 2022

Derivatives in Cash Flow Hedging Relationships:

Interest Rate Products

Interest Expense

4,040

Total

4,040

As of June 30, 2023 and December 31, 2022, the Company had minimum collateral

thresholds with certain of its derivative

counterparties and has received collateral of $

2.8

million and $

4.9

million, respectively.

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Note 7:

Time Deposits and Borrowings

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

June 30, 2023 were as follows:

June 30, 2023

Within One

Year

One to Two

Years

Two to

Three Years

Three to

Four Years

Four to Five

Years

After Five

Years

Total

(Dollars in thousands)

Time deposits

1,709,991

122,995

1,849

2,208

1,181

231

1,838,455

FHLB borrowings

4,153

11,391

65,000

15,000

95,544

FHLB line of credit

167,164

Line of credit

7,500

SBA secured borrowing

5,731

Trust preferred securities

(1)

1,089

1,881,308

141,886

1,849

2,208

66,181

22,051

2,115,483

(1)

The contract value of the trust preferred securities is $

2.6

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

Note 8:

Income Tax

An income tax expense reconciliation at the statutory rate to the Company’s

actual income tax expense is shown below:

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands)

Computed at the statutory rate (21%)

4,256

4,110

8,483

8,523

Increase (decrease) resulting from

Tax-exempt income

(835)

(890)

(1,715)

(1,744)

Nondeductible expenses

111

160

193

State income taxes

670

728

1,302

1,424

Equity based compensation

(154)

Other adjustments

(19)

(47)

(25)

(27)

Actual tax expense

4,219

4,027

8,240

8,215

The tax effects of temporary differences related to deferred taxes located

in “other assets” on the consolidated statements of

financial condition are presented below:

June 30, 2023

December 31, 2022

(Dollars in thousands)

Deferred tax assets

Net unrealized loss on securities available-for-sale

19,634

20,295

Allowance for credit losses

17,857

16,710

Lease incentive

424

451

Loan fees

4,078

4,048

Accrued expenses

2,171

3,379

Deferred compensation

2,023

2,166

Other

1,419

1,469

Total deferred tax asset

47,606

48,518

Deferred tax liability

FHLB stock basis

(287)

(436)

Premises and equipment

(1,819)

(2,042)

Other

(1,062)

(1,018)

Total deferred tax liability

(3,168)

(3,496)

Net deferred tax asset

44,438

45,022

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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-

and

six-month periods ended June 30, 2023 and 2022, were as follows:

Three Months Ended

Six Months Ended

June 30,

Affected Line Item in the

2023

2022

2023

2022

Statements of Operations

(Dollars in thousands)

Realized (losses) gains on available-for-sale

securities

(12)

(38)

Realized gains (losses) on sale

of available-for-sale securities

Less: tax (benefit) expense effect

(3)

(9)

Income tax expense

Realized (losses) gains on available-for-sale

securities, net of income tax

(9)

(29)

Interest income on cash flow hedges

Interest expense - Deposits

Less: tax expense effect

Income tax expense

Interest income on cash flow hedges, net of

tax

Total reclassified amount

(9)

(29)

Note 10:

Regulatory Matters

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

administered by the federal banking agencies.

Failure to meet minimum capital requirements can initiate certain mandatory

and possibly additional discretionary actions by regulators

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

financial statements. Management believes that,

as of June 30, 2023, the Company and the Bank met all capital adequacy requirements

to which they are subject.

The capital rules require the Company to maintain a

2.5

% capital conservation buffer with respect to Common Equity Tier I

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

is included in the column “Required to be

Considered Adequately Capitalized” within the table below. A financial institution with a conservation buffer of less than the required

amount is subject to limitations on capital distributions, including dividend

payments and stock repurchases, as well as certain

discretionary bonus payments to executive officers.

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

tax, do not impact the Company’s or Bank’s regulatory capital ratios.

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The Company’s and the Bank’s actual capital amounts and ratios as of June 30,

2023 and December 31, 2022 are presented in the

following table:

Actual

Required to be Considered

Well Capitalized

Required to be Considered

Adequately Capitalized

(1)

Amount

Ratio

Amount

Ratio

Amount

Ratio

(Dollars in thousands)

June 30, 2023

Total Capital to Risk-Weighted Assets

Consolidated

763,079

10.7

N/A

751,833

10.5

Bank

765,483

10.7

715,561

10.0

751,339

10.5

Tier I Capital to Risk-Weighted Assets

Consolidated

687,799

9.6

N/A

608,626

8.5

Bank

690,203

9.6

572,449

8.0

608,227

8.5

Common Equity Tier 1 to Risk-Weighted Assets

Consolidated

678,960

9.5

N/A

501,222

7.0

Bank

690,203

9.6

465,115

6.5

500,893

7.0

Tier I Capital to Average Assets

Consolidated

687,799

9.9

N/A

279,015

4.0

Bank

690,203

9.9

348,828

5.0

279,063

4.0

December 31, 2022

Total Capital to Risk-Weighted Assets

Consolidated

715,416

10.5

N/A

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)

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

Includes capital conservation buffer of

2.5

Note 11:

Stock-Based Compensation

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

restricted stock, restricted stock units and stock

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

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

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

has an Employee Stock Purchase Plan that was reinstated during the

third quarter of 2020. The aggregate number of shares authorized for future issuance under the

Omnibus Plan is

1,275,410

shares as of

June 30, 2023.

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The table below summarizes the stock-based compensation for the

three- and six-months-ended June 30, 2023 and 2022:

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands)

Stock appreciation rights

141

187

Performance-based stock awards

298

200

534

411

Restricted stock units and awards

889

795

1,768

1,573

Employee stock purchase plan

Total stock-based compensation

1,265

1,120

2,503

2,235

Performance-Based Restricted Stock Units

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

key officers of the Company. The PBRSUs

typically cliff-vest at the end of

three years

based on attainment of certain performance metrics developed by the Compensation

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

is the product of the award target and the award

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

achievement range between

% of target

and

150

% of target.

During the six-month period ended June 30, 2023, the Company granted

128,005

PBRSUs. The performance metrics include

three-year

cumulative earnings per share and relative total shareholder return.

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

Performance-Based Restricted

Stock Unit Awards

Number of Shares

Weighted-Average

Grant Date Fair Value

Unvested, January 1, 2023

134,286

14.52

Granted

128,005

14.13

Vested

(20,736)

13.55

Forfeited

(5,335)

14.49

Unvested, June 30, 2023

236,220

14.40

Unrecognized stock-based compensation related to the performance

awards issued through June 30, 2023 was $

2.4

million and is

expected to be recognized over

2.3

years.

Restricted Stock Units and Restricted Stock Awards

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

stock awards (“RSAs”) to provide incentives to

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

the Compensation

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

RSAs typically cliff-vest after

one year

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

Restricted Stock Units and Awards

Number of Shares

Weighted-Average

Grant Date Fair Value

Unvested, January 1, 2023

416,980

14.13

Granted

333,979

13.20

Vested

(209,641)

13.74

Forfeited

(18,751)

14.31

Unvested, June 30, 2023

522,567

13.68

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

June 30, 2023 was $

6.0

million and is

expected to be recognized over

2.1

years.

Note 12:

Stock Warrants

The Company had

80,000

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

of $

5.00

per share as of

December 31, 2022. During the six-month period ended June 30, 2023, the

remaining, fully vested

80,000

warrants were exercised and

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

0.4

million. There were

outstanding warrants as of June 30, 2023.

Note 13: Stockholders’ Equity

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

common share:

Three Months Ended

Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands except per share data)

Earnings per Common Share

Net Income

16,047

15,545

32,155

32,373

Less: preferred stock dividends

103

Net income available to common stockholders

15,944

15,545

32,052

32,373

Weighted average common shares

48,744,507

49,758,263

48,690,509

50,003,418

Earnings per common share

0.33

0.31

0.66

0.65

Diluted Earnings per Common Share

Net Income

16,047

15,545

32,155

32,373

Less: preferred stock dividends

103

Net income available to common stockholders

15,944

15,545

32,052

32,373

Weighted average common shares

48,744,507

49,758,263

48,690,509

50,003,418

Effect of dilutive shares

198,818

445,462

304,298

558,450

Weighted average dilutive common shares

48,943,325

50,203,725

48,994,807

50,561,868

Diluted earnings per common share

0.33

0.31

0.65

0.64

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

antidilutive

920,812

711,375

917,479

450,541

Dividends of $

103

thousand related to the Series A Non-Cumulative Perpetual Preferred Stock were declared and paid during the

three-months ended June 30, 2023.

In July 2023, the Board of Directors declared a quarterly dividend on Series A Non-Cumulative

Perpetual Preferred Stock in the amount of $

20.00

per share to be payable on

September 15, 2023

to shareholders of record as of

August 31, 2023

Note 14:

Disclosures about Fair Value of Financial Instruments

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

in an orderly transaction between

market participants at the measurement date. Fair value measurements must maximize

the use of observable inputs and minimize the use

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

fair value:

Level 1

Quoted prices in active markets for identical assets or liabilities.

Level 2

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

prices in

markets that are not active; or other inputs that are observable or can be corroborated

by observable market data for

substantially the full term of the assets or liabilities.

Level 3

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

the fair value of the assets or liabilities.

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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 June 30, 2023 and December 31, 2022:

Fair Value Description

Valuation

Hierarchy

Level

Where Fair

Value Balance

Can Be Found

Available-for-

Sale Securities

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

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

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

securities with similar characteristics or independent asset pricing services

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

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

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

and cash flows.

Level 2

Note 2:

Securities

Derivatives

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

services based on quoted market prices for similar derivative contracts.

Level 2

Note 6:

Derivatives and

Hedging

Non-recurring Measurements

The following tables present assets measured at fair value on a non-recurring

basis and the level within the fair value hierarchy in

which the fair value measurements fall at June 30, 2023 and December

31, 2022:

June 30, 2023

Fair Value Measurements Using

Fair Value

Quoted Prices in Active

Markets for Identical Assets

(Level 1)

Significant Other

Observable Inputs

(Level 2)

Unobservable

Inputs

(Level 3)

(Dollars in thousands)

Collateral-dependent loans

8,452

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.

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

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obtained when the loan is determined to be collateral dependent and subsequently

as deemed necessary by the Office of the Chief Credit

Officer.

Appraisals are reviewed for accuracy and consistency by management. Appraisers are selected from the list of approved

appraisers maintained by management. The appraised values are reduced by discounts to

consider lack of marketability and estimated

cost to sell if repayment or satisfaction of the loan is dependent on the sale of the collateral. These discounts

and estimates are developed

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

Foreclosed Assets Held-for-Sale

The fair value of foreclosed assets-held-for-sale is based on the appraised fair value of

the collateral, less estimated cost to sell.

Unobservable (Level 3) Inputs

The following tables present quantitative information about unobservable

inputs used in non-recurring Level 3 fair value

measurements at June 30, 2023 and December 31, 2022:

June 30, 2023

Fair Value

Valuation Techniques

Unobservable

Inputs

Range

(Weighted Average)

(Dollars in thousands)

Market comparable

properties

Marketability

discount

Collateral dependent loans

8,452

(

December 31, 2022

Fair Value

Valuation Techniques

Unobservable

Inputs

Range

(Weighted Average)

(Dollars in thousands)

Market comparable

properties

Marketability

discount

100

Collateral dependent loans

8,728

(

Market comparable

properties

Marketability

discount

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 June 30, 2023 and December 31,

2022:

June 30, 2023

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

(Dollars in thousands)

Financial Assets

Cash and cash equivalents

342,497

Available-for-sale securities

743,900

Loans, net of allowance for credit losses

5,729,032

5,718,780

Restricted equity securities

13,060

Interest receivable

33,303

Equity securities

3,993

Derivative assets

10,626

Financial Liabilities

Deposits

6,100,067

928,098

5,142,980

Federal Home Loan Bank line of credit

167,164

Federal Home Loan Bank advances

95,544

88,189

Other borrowings

14,320

15,021

Interest payable

14,479

Derivative liabilities

18,141

December 31, 2022

Carrying

Fair Value Measurements

Amount

Level 1

Level 2

Level 3

(Dollars in thousands)

Financial Assets

Cash and cash equivalents

300,138

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 June 30, 2023 and December

31, 2022:

June 30, 2023

December 31, 2022

(Dollars in thousands)

Commitments to originate loans

118,369

134,961

Standby letters of credit

66,851

66,889

Lines of credit

2,518,588

2,705,730

Future lease commitments

5,833

1,888

Commitments related to investment fund

2,548

3,403

2,712,189

2,912,871

Note 16:

Subsequent Events

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

subsidiary,

Canyon Community Bank, N.A. (collectively, “Canyon”) whereby

Canyon Bancorporation, Inc. was ultimately merged with and into

CrossFirst Bankshares, Inc. and Canyon Community Bank, N.A. was merged

with and into CrossFirst Bank. Pursuant to the merger

agreement executed in April 2023, the Company paid approximately $

9.1

million of cash consideration and issued

597,645

shares of

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

the assets and liabilities of the Canyon entities with which they

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

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- and six-months ended June 30, 2023,

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

statements and related notes as of December 31, 2022

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

and 2020. This discussion and analysis contains forward-looking statements

that involve risks, uncertainties and assumptions that may cause actual results to differ

materially from management's expectations.

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

“Cautionary Note Regarding Forward-Looking

Statements” located elsewhere in this quarterly report and in Item 1A “Risk Factors” in our 2022 Form 10-K and should

be read

herewith.

Second Quarter 2023 Highlights

During the second quarter ended June 30, 2023, we accomplished the following:

●

Received regulatory approval for the acquisition of Canyon Bancorporation,

Inc. and its wholly owned subsidiary, Canyon

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

which is expected to add low-cost liquidity and deepen our Arizona

franchise; the transaction closed on August 1, 2023

●

Loans grew $149 million, or 2.6%, for the quarter and grew 7.9% year-to

date; loan growth was well diversified across

commercial and industrial, energy and commercial real estate – owner-occupied

●

Credit metrics remained strong with annualized net charge-offs of just 0.04% of

average total loans and a non-performing

assets to total assets ratio of 0.19%

●

Non-interest-bearing deposits stabilized, decreasing 4% from the prior quarter,

while total deposits increased 4.5% due to an

increase in wholesale funding sources at quarter-end

●

Identified meaningful non-interest expense savings for the remainder

of 2023, advancing our efficiency improvement goal

●

Book value per common share grew to $13.39 while tangible book value per common

(1)

grew to $12.67

(1)

Represents a non-GAAP financial measure.

See “Non-GAAP Financial Measures” below for a reconciliation of these measures.

Mergers and Acquisitions

Update

On August 1, 2023, the Company completed its acquisition of Canyon whereby Canyon Bancorporation, Inc.

was ultimately

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

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

accordance with the agreement, the Company paid approximately $9.1

million of cash consideration and issued 597,645 shares of

Company common stock, and the Company and the Bank assumed

all of the assets and liabilities of the Canyon entities with which they

merged by operation of law.

Table of Contents

Performance Measures

As of or For the Three Months

Ended

As of or For the Six Months

Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

2023

2022

(Dollars in thousands, except per share data)

Return on average assets

(1)

0.93

0.97

0.77

1.19

1.12

0.95

1.18

Adjusted return on average assets

(1)(2)

1.00

1.04

1.15

1.19

1.20

1.02

1.21

Return on average common equity

(1)

10.00

10.54

8.04

11.18

10.15

10.26

10.30

Adjusted return on average common

equity

(1)(2)

10.81

11.30

12.03

11.22

10.82

11.05

10.62

Earnings per common share - basic

0.33

0.25

0.35

0.31

0.66

0.65

Earnings per common share - diluted

0.33

0.24

0.35

0.31

0.65

0.64

Adjusted earnings per common share -

diluted

(1)

0.35

0.36

0.35

0.33

0.70

0.66

Efficiency ratio

(2)

62.02

60.81

62.40

53.20

57.36

61.41

57.46

Adjusted efficiency ratio - FTE

(2)(3)(4)

57.27

56.42

55.01

52.25

53.95

56.84

55.26

Ratio of equity to assets

9.15

9.36

9.22

9.93

10.65

9.15

10.65

(1)

Interim periods annualized

(2)

Represents a non-GAAP financial measure.

See "Non-GAAP Financial Measures"

below for a reconciliation of these measures.

(3)

We calculate efficiency ratio as non-interest expense

divided by the sum of net interest income and

non-interest income.

(4)

Tax exempt income (tax-free municipal securities)

is calculated on a tax equivalent basis.

The incremental tax rate used is 21.0%.

Results of Operations

Net Interest Income

Net interest income is presented on a fully tax equivalent basis.

We believe reporting on an FTE basis provides for improved

comparability between the various earning assets. Changes in interest

income and interest expense result from changes in average

balances (volume) of interest earning assets and interest-bearing liabilities,

as well as changes in average interest rates.

The following tables present, for the periods indicated, average statement

of financial condition information, interest income,

interest expense and the corresponding average yield and rates paid:

Table of Contents

Three Months Ended

June 30,

2023

2022

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

(Dollars in thousands)

Interest-earning assets:

Securities - taxable

336,446

2,986

3.55

220,763

1,299

2.35

Securities - tax-exempt

(1)

511,993

4,321

3.38

553,960

4,653

3.36

Interest-bearing deposits in other banks

145,559

1,609

4.43

198,210

369

0.75

Gross loans, net of unearned income

(2)(3)

5,776,137

98,982

6.87

4,437,917

47,327

4.28

Total interest-earning assets - FTE

(1)

6,770,135

107,898

6.39

5,410,850

53,648

3.98

Allowance for credit losses

(66,078)

(56,732)

Other non-interest-earning assets

225,915

191,539

Total assets

6,929,972

5,545,657

Interest-bearing liabilities

Transaction deposits

598,646

4,339

2.91

508,403

374

0.29

Savings and money market deposits

2,707,637

26,927

3.99

2,334,103

2,869

0.49

Time deposits

1,612,105

17,397

4.33

559,708

1,489

1.07

Total interest-bearing deposits

4,918,388

48,663

3.97

3,402,214

4,732

0.56

FHLB and short-term borrowings

349,763

3,888

4.46

330,064

1,368

1.66

Trust preferred securities, net of fair value

adjustments

1,077

21.60

1,024

11.94

Non-interest-bearing deposits

921,259

1,149,654

Cost of funds

6,190,487

52,609

3.41

4,882,956

6,129

0.50

Other liabilities

91,994

48,160

Stockholders’ equity

647,491

614,541

Total liabilities and stockholders’ equity

6,929,972

5,545,657

Net interest income - FTE

(1)

55,289

47,519

Net interest spread - FTE

(1)

2.98

3.48

Net interest margin - FTE

(1)

3.27

3.52

(1)

Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal income taxes. The incremental tax

rate used is 21.0%.

(2)

Loans, net of unearned income include non-accrual loans of $13 million and $28 million as of June 30, 2023 and 2022, respectively.

(3)

Loan interest income includes loan fees of $3 million for the three-months ended June 30, 2023 and 2022.

(4)

Actual unrounded values are used to calculate the reported yield or rate. Accordingly, recalculations using the amounts in thousands as disclosed in this

report may not produce the same amounts.

Table of Contents

Six Months Ended

June 30,

2023

2022

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

Average

Balance

Interest

Income /

Expense

Average

Yield /

Rate

(4)

(Dollars in thousands)

Interest-earning assets:

Securities - taxable

302,763

5,097

3.37

220,783

2,487

2.26

Securities - tax-exempt - FTE

(1)

527,047

8,912

3.38

543,873

9,120

3.35

Federal funds sold

873

1.39

Interest-bearing deposits in other banks

170,287

3,617

4.28

253,771

521

0.41

Gross loans, net of unearned income

(2)(3)

5,658,698

188,600

6.72

4,385,664

90,055

4.14

Total interest-earning assets - FTE

(1)

6,659,668

206,232

6.24

5,404,091

102,183

3.81

Allowance for credit losses

(64,664)

(57,324)

Other non-interest-earning assets

226,983

207,881

Total assets

6,821,987

5,554,648

Interest-bearing liabilities

Transaction deposits

570,661

7,839

2.77

546,982

596

0.22

Savings and money market deposits

2,794,201

50,496

3.64

2,318,415

4,716

0.41

Time deposits

1,357,688

27,053

4.02

573,503

2,931

1.03

Total interest-bearing deposits

4,722,550

85,388

3.65

3,438,900

8,243

0.48

FHLB and short-term borrowings

311,471

6,423

4.16

280,883

2,477

1.78

Trust preferred securities, net of fair value

adjustments

1,070

114

21.49

1,018

11.11

Non-interest-bearing deposits

1,057,268

1,153,499

Cost of funds

6,092,359

91,925

3.04

4,874,300

10,776

0.44

Other liabilities

95,702

46,312

Stockholders’ equity

633,926

634,036

Total liabilities and stockholders’ equity

6,821,987

5,554,648

Net interest income - FTE

(1)

114,307

91,407

Net interest spread - FTE

(1)

3.20

3.37

Net interest margin - FTE

(1)

3.46

3.41

(1)

Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal income taxes. The incremental tax

rate used is 21.0%.

(2)

Loans, net of unearned income include non-accrual loans of $13 million and $28 million as of June 30, 2023 and 2022, respectively.

(3)

Loan interest income includes loan fees of $7 million for the six-months ended June 30, 2023 and 2022.

(4)

Actual unrounded values are used to calculate the reported yield or rate. Accordingly, recalculations using the amounts in thousands as disclosed in this

report may not produce the same amounts.

Table of Contents

Net interest income

Net interest income and net interest income - FTE increased $7.8 million and $22.9 million

for the three- and six-

month periods

ended June 30, 2023 compared to the same periods in 2022, respectively.

Compared to the second quarter of 2022, net

interest margin - FTE for the second quarter of 2023 decreased 25 basis points

For the six-months ended June 30, 2023 compared to

the same period in 2022, net interest margin - FTE increased 5 basis points.

Average earning assets totaled $6.8

billion for the three-month period ended June 30, 2023 and $6.7 billion

for the six-month period

ended June 30, 2023, resulting in increases

of $1.4 billion, or 25%, and $1.3 billion, or 23%, respectively, compared to the same

periods

in 2022, inclusive of the impact of acquisition of Farmers & Stockmens Bank,

which we refer to herein as the Colorado and New

Mexico acquisition. The increases

were driven by higher average loan and investment portfolio balances,

partially offset by lower

average cash balances for the three- and six-month periods ended June 30, 2023

compared to the corresponding periods in 2022.

The FTE yield on earning assets increased 2.41% from the second

quarter of 2022 to the second quarter of 2023 and increased 2.43% for

the six-months ended June 30, 2023, compared to the same period in 2022

due to new loan production as well as repricing of variable

rate loans. The cost of funds increased 2.91% and 2.60% over the same periods due

to pricing pressure on deposits as well as client

migration into higher cost deposit products compared to the prior

year.

The Company currently anticipates net interest margin - FTE to remain

consistent with the current quarter and to be in a range of 3.20%

to 3.35% for the full year 2023.

Provision

For the Three Months Ended

For the Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands)

Provision for credit losses - loans

3,040

1,690

8,036

1,374

Provision for credit losses - off-balance sheet

(400)

445

(975)

136

Allowance for credit losses - loans

67,567

55,817

67,567

55,817

Allowance for credit losses - off-balance sheet

7,713

5,320

7,713

5,320

Net charge-offs

603

1,104

2,244

2,185

The ACL increased $2.4 million during the quarter.

Provision expense of $3.0 million was primarily driven by loan growth and

was partially offset by $0.6 million in net charge-offs, primarily due

to two commercial and industrial loans.

The reserve on unfunded

commitments decreased $0.4 million due to a decrease in unfunded

commitments in the quarter.

The ACL increased $5.8 million during the six-months ended June 30, 2023 and included provision of $8.0 million due to loan

growth and changes in credit quality and economic factors and an increase

in reserves on impaired loans of $0.8 million, partially offset

by $2.2 million in net charge-offs.

The reserve on unfunded commitments decreased $1.0 million due

to a decrease in unfunded

commitments.

Table of Contents

Non-Interest Income

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

Three Months Ended

Six Months Ended

June 30,

Change

2023

2022

2023

2022

(Dollars in thousands)

Service charges and fees on customer

accounts

2,110

1,546

564

3,939

2,954

985

ATM and credit card interchange income

1,213

1,521

(308)

(20)

2,477

4,185

(1,708)

(41)

Realized gains (losses) on available-for-sale

securities

(12)

N/M

(38)

101

N/M

Gain on sale of loans

1,205

N/M

1,392

N/M

Gains (losses) on equity securities, net

(71)

N/M

(174)

190

N/M

Income from bank-owned life insurance

418

407

829

795

Swap fees and credit valuation adjustments,

net

600

174

130

Other non-interest income

743

798

(55)

(7)

1,310

1,291

Total non-interest income

5,779

4,201

1,578

10,200

9,143

1,057

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

Service charges and fees on customer accounts

- The increases

for the three-

and six-month periods ended June 30, 2023 compared to

the corresponding periods in 2022 were driven primarily by increas

es in account analysis fees due to increased client volume from new

markets and acquired accounts as well as various fee increases on commercial

accounts.

ATM and credit card interchange income

- The decrease in ATM and credit card interchange income was driven primarily by a

decrease in credit card fees due to one large customer with pandemic-related

activity that did not occur in the current year.

Gain on sale of loans

– The increase for the three- and six-month periods ended June 30, 2023 compared to the same periods

for 2022

were primarily due to SBA loan sale activity. Our SBA lending team is a specialty lending vertical we augmented from the Colorado and

New Mexico acquisition in 2022.

Non-Interest Expense

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

Three Months Ended

Six Months Ended

June 30,

Change

2023

2022

2023

2022

(Dollars in thousands)

Salaries and employee benefits

24,061

17,095

6,966

46,683

35,036

11,647

Occupancy

3,054

2,622

432

6,028

5,115

913

Professional fees

970

1,068

(98)

(9)

3,588

1,873

1,715

Deposit insurance premiums

1,881

713

1,168

164

3,412

1,450

1,962

135

Data processing

1,057

1,160

(103)

(9)

2,299

1,972

327

Advertising

649

757

(108)

(14)

1,401

1,449

(48)

(3)

Software and communication

1,655

1,198

457

3,306

2,468

838

Foreclosed assets, net

(21)

(36)

N/M

128

(38)

166

N/M

Other non-interest expense

3,304

4,555

(1,251)

(27)

7,035

7,505

(470)

(6)

Core deposit intangible amortization

802

782

3,910

1,624

1,585

4,064

Total non-interest expense

37,412

29,203

8,209

75,504

56,869

18,635

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Non-interest expense increased $8.2 million and $18.6 million

for the three- and six-month periods ended June 30, 2023

compared to the same periods

in 2022. The second quarter of 2023 included $0.3 million of acquisition-related expenses, most of

which

were included in professional fees, and $1.3 million of employee separation costs included

in salaries and employee benefits. The six-

months ended June 30, 2023 included $1.8 million of acquisition-related

expenses, most of which were included in professional fees,

and $1.3 million of employee separation costs included in salaries and

employee benefits.

The three-

and six-month periods ended June

30, 2022 included $0.2 million of acquisition-related expenses, most of which

were included in professional fees, and $1.0 million of

employee separation costs included in other non-interest expense. The changes

in non-interest expense were driven primarily by the

following:

Salary and Employee Benefits

– For both the three- and six-months ended June 30, 2023 as compared to the

same periods in the prior

year, excluding the employee separation costs in 2023 previously mentioned

above, increases were primarily due to the addition of

employees from the Colorado and New Mexico acquisition, hiring

in new markets and merit increases.

Occupancy

– For both comparative periods,

the increases

in occupancy costs was driven by the addition of a second location in Dallas,

Texas and new properties

in Colorado and New Mexico.

Professional Fees

– Professional fees for both the three-

and six-months ended June 30, 2023 were consistent with the prior year

periods after adjusting for the acquisition related costs.

Deposit Insurance Premiums

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

increases

in assets for both comparative periods.

Software and communication

– For both the three-

and six-months ended June 30, 2023 as compared to the same periods in the prior

year, increases in software and communications were due to technology

for additional employees and clients as well as new technology

implementation.

Other Non-interest Expense

– For the three-months ended June 30, 2023 compared to the same period

in 2022, the decrease was due to

employee separation costs in 2022. For the six-months ended June 30, 2023

as compared to the same period in the prior year, the

decrease for employee separation costs was partially offset by increased

post-pandemic travel expenses

and transaction fraud-related

losses.

Core Deposit Intangible Amortization

– For both the three-

and six-months ended June 30, 2023 as compared to the same periods in

the prior year, increases

were due to expense related to the Colorado and New Mexico acquisition.

We currently anticipate non-interest expense to be in a range of $34 to $35 million

per quarter for the remainder of 2023. The

efficiency ratios were 62.02% and 61.41% and the adjusted efficiency ratios

– FTE

(1)

were 57.27%

and 56.84% for the three- and six-

month periods ended June 30, 2023,

respectively.

(1)

Represents a non-GAAP financial measure.

See "Non-GAAP Financial Measures"

below for a reconciliation of these measures.

Income Taxes

For the Three Months Ended

For the Six Months Ended

June 30,

2023

2022

2023

2022

(Dollars in thousands)

Income tax expense

4,219

4,027

8,240

8,215

Income before income taxes

20,266

19,572

40,395

40,588

Effective tax rate

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.

Table of Contents

During the three- and six-month periods

ended June 30, 2023 and 2022, the Company’s effective tax rate benefited primarily

from permanent tax differences related to tax-exempt interest.

We currently anticipate the Company’s effective tax rate to remain

within

the 20% to 22% range in the near term.

Table of Contents

Non-GAAP Financial Measures

In addition to disclosing financial measures determined in accordance

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

discloses certain non-GAAP

financial measures including “tangible common stockholders’ equity,” “tangible book value per common share,” “adjusted

efficiency ratio – FTE,” “adjusted net income,” “adjusted

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

assets,” and “adjusted return on average common equity.”

We consider the use of select non-GAAP financial

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

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

measures provide meaningful supplemental information

to investors regarding our performance by excluding certain expenditures or gains that we

believe are not indicative of our

primary business operating results. We believe that management and investors

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

planning, forecasting, analyzing,

and comparing past, present and future periods.

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

in accordance with GAAP and you should not rely on non-

GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used

by our peers or

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

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

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

that both measures and the individual components may be considered

when

analyzing our performance.

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

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

(Dollars in thousands, except per share data)

Adjusted net income:

Net income (GAAP)

16,047

16,108

11,946

17,280

15,545

32,155

32,373

Add: Acquisition costs

338

1,477

3,570

239

1,815

239

Add: Acquisition - Day 1 CECL

provision

4,400

Add: Employee separation

1,300

1,063

1,300

1,063

Less: Tax effect

(1)

(344)

(310)

(2,045)

(17)

(273)

(654)

(273)

Adjusted net income

17,341

17,275

17,871

17,344

16,574

34,616

33,402

Preferred stock dividends

103

Diluted weighted average common shares outstanding

48,943,325

49,043,621

49,165,578

49,725,207

50,203,725

48,994,807

50,561,868

Earnings per common share – diluted (GAAP)

0.33

0.24

0.35

0.31

0.65

0.64

Adjusted earnings per common share – diluted

0.35

0.36

0.35

0.33

0.70

0.66

(1)

Represents the tax impact of the adjustments at a tax rate

of 21.0%, plus permanent tax expense associated with

merger related transactions

Table of Contents

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

(Dollars in thousands)

Adjusted return on average assets:

Net income (GAAP)

16,047

16,108

11,946

17,280

15,545

32,155

32,373

Adjusted net income

17,341

17,275

17,871

17,344

16,574

34,616

33,402

Average assets

6,929,972

6,712,801

6,159,783

5,764,347

5,545,657

6,821,987

5,554,648

Return on average assets (GAAP)

0.93

0.97

0.77

1.19

1.12

0.95

1.18

Adjusted return on average assets

1.00

1.04

1.15

1.19

1.20

1.02

1.21

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

(Dollars in thousands)

Adjusted return on average common equity:

Net income (GAAP)

16,047

16,108

11,946

17,280

15,545

32,155

32,373

Preferred stock dividends

103

Net income attributable to common shareholders (GAAP)

15,944

16,108

11,946

17,280

15,545

32,052

32,373

Adjusted net income

17,341

17,275

17,871

17,344

16,574

34,616

33,402

Preferred stock dividends

103

Adjusted net income attributable to common shareholders

17,238

17,275

17,871

17,344

16,574

34,513

33,402

Average common equity

639,741

619,952

589,587

613,206

614,541

629,901

634,036

Return on average common equity (GAAP)

10.00

10.54

8.04

11.18

10.15

10.26

10.30

Adjusted return on average common equity

10.81

11.30

12.03

11.22

10.82

11.05

10.62

Quarter Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

(Dollars in thousands, except per share data)

Tangible common stockholders' equity:

Total stockholders' equity (GAAP)

651,483

645,491

608,599

580,547

608,016

Less: goodwill and other intangible assets

27,457

28,259

29,081

Less: preferred stock

7,750

Tangible common stockholders' equity

616,276

609,482

579,518

580,476

607,925

Tangible book value per common share:

Tangible common stockholders' equity

616,276

609,482

579,518

580,476

607,925

Common shares outstanding at end of period

48,653,487

48,600,618

48,448,215

48,787,696

49,535,949

Book value per common share (GAAP)

13.39

13.28

12.56

11.90

12.27

Tangible book value per common share

12.67

12.54

11.96

11.90

12.27

Table of Contents

Quarter Ended

Six Months Ended

6/30/2023

3/31/2023

12/31/2022

9/30/2022

6/30/2022

6/30/2023

6/30/2022

(Dollars in thousands)

Adjusted Efficiency Ratio - FTE

(1)

Non-interest expense

37,412

38,092

36,423

28,451

29,203

75,504

56,869

Less: Acquisition costs

(338)

(1,477)

(3,570)

(81)

(239)

(1,815)

(239)

Less: Core deposit intangible amortization

(802)

(822)

(291)

(1,624)

Less: Employee separation

(1,300)

(1,063)

(1,300)

(1,063)

Adjusted Non-interest expense (numerator)

34,972

35,793

32,562

28,370

27,901

70,765

55,567

Net interest income

54,539

58,221

54,015

49,695

46,709

112,760

89,824

Tax equivalent interest income

(1)

750

797

818

820

808

1,547

1,583

Non-interest income

5,779

4,421

4,359

3,780

4,201

10,200

9,143

Total tax-equivalent income (denominator)

61,068

63,439

59,192

54,295

51,718

124,507

100,550

Efficiency Ratio (GAAP)

62.02

60.81

62.40

53.20

57.36

61.41

57.46

Adjusted Efficiency Ratio - FTE

(1)

57.27

56.42

55.01

52.25

53.95

56.84

55.26

(1)

Tax exempt income (tax-free municipal securities) is

calculated on a tax equivalent basis. The incremental

tax rate used is 21.0%.

Table of Contents

Analysis of Financial Condition

Investment Portfolio

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

credit and interest rate risk, ensure adequate liquidity,

and meet pledging and regulatory capital requirements. Our investment

portfolio is also maintained to serve as a contingent, on-balance

sheet source of liquidity. As of June 30, 2023, available-for-sale investments totaled $744 million, an increase of $57

million from

December 31, 2022.

The increase in the investment portfolio was driven by the purchase of $107

million in SBA securities and $12 million in tax-

exempt municipal securities,

and a $4 million reduction in the unrealized loss on available-for-sale securities. The increase

was partially

offset by the sale of $55 million in tax-exempt municipal securities at a modest

gain and $9 million of paydowns and maturities in

mortgage-backed securities as we intentionally improved the liquidity

of the portfolio during the six-month period.

For additional

information, including information regarding other securities owned

by the Company, see “Note 2: Securities”

in the notes to

consolidated financial statements – unaudited.

The following table shows with respect to our portfolio of available-for-sale securities,

the estimated fair value, percent of the

portfolio of available-for-sale securities and weighted average yield of such securities

as of the dates indicated:

As of June 30, 2023

As of December 31, 2022

Estimated

Fair Value

Percent of

portfolio

Weighted

Average

Yield

(1)

Estimated

Fair Value

Percent of

portfolio

Weighted

Average

Yield

(1)

Available-for-sale securities

(Dollars in thousands)

Mortgage-backed - GSE residential

272,933

3.29

172,309

2.39

Collateralized mortgage obligations - GSE

residential

9,516

2.43

10,886

2.36

State and political subdivisions

452,949

2.81

494,496

2.80

Corporate bonds

8,502

5.68

9,210

5.70

Total available-for-sale securities

743,900

100

3.01

686,901

100

2.74

(1)

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

Tax-exempt securities are not tax effected.

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 June 30, 2023, gross loans, net of unearned fees increased $424 million

or 8% from December 31, 2022.

The following table presents the balance

and associated percentage change of each segment within our portfolio

as of the dates indicated:

As of June 30,

2023

As of December 31,

2022

December 31, 2022

vs.

June 30, 2023

% Change

(Dollars in thousands)

Commercial and industrial

2,057,912

1,974,932

4.2

Energy

232,863

173,218

34.4

Commercial real estate - owner-occupied

542,827

437,119

24.2

Commercial real estate - non-owner-occupied

2,480,282

2,314,600

7.2

Residential real estate

439,434

439,367

Consumer

43,281

33,493

29.2

Total

5,796,599

5,372,729

7.9

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

and owner-occupied real estate and 42% of loans in commercial real estate. There

remains diversity within our loan portfolios with the highest commercial real

estate property type accounting for 17% of total commercial real estate exposure,

and the largest

industry segment in commercial and industrial being manufacturing at

11% of commercial and industrial exposure.

Table of Contents

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

sensitivity to interest rate changes:

As of June 30, 2023

Due in One Year or Less

Due in One Year through

Five Years

Due in Five Year through

Fifteen Years

Due after Fifteen Years

Fixed Rate

Adjustable

Rate

Fixed Rate

Adjustable

Rate

Fixed Rate

Adjustable

Rate

Fixed Rate

Adjustable

Rate

Total

(Dollars in thousands)

Commercial and industrial

112,736

528,269

348,572

909,898

62,302

75,766

19,855

514

2,057,912

Energy

27,661

634

204,568

232,863

Commercial real estate -

owner-occupied

12,378

28,532

163,234

64,081

117,395

104,700

1,523

50,984

542,827

Commercial real estate - non-

owner-occupied

90,267

274,361

587,757

1,160,478

96,681

199,587

12,513

58,638

2,480,282

Residential real estate

7,381

4,316

21,434

8,758

69,479

21,973

4,333

301,760

439,434

Consumer

18,989

11,597

4,624

7,674

302

43,281

Total

241,751

874,736

1,126,255

2,355,457

346,159

402,121

38,224

411,896

5,796,599

Allowance for Credit Losses

The ACL at June 30, 2023 represents our best estimate of the expected credit losses in the Company’s loan portfolio and off-balance sheet

commitments, measured over the

contractual life of the underlying instrument.

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.

June 30, 2023

December 31, 2022

ACL

Amount

Percent of

ACL to

Total ACL

Percent of

Loans to

Total Loans

ACL

Amount

Percent of

ACL to

Total ACL

Percent of

Loans to

Total Loans

Loans

Off-

Balance

Sheet

Total

Loans

Off-

Balance

Sheet

Total

(Dollars in thousands)

Commercial and industrial

28,929

449

29,378

26,803

319

27,122

Energy

4,914

496

5,410

4,396

787

5,183

Commercial real estate -

owner-occupied

6,361

205

6,566

5,214

221

5,435

Commercial real estate -

non-owner-occupied

23,981

6,496

30,477

21,880

7,323

29,203

Residential real estate

3,268

3,335

3,333

3,368

Consumer

114

149

152

Total

67,567

7,713

75,280

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.

Charge-offs and Recoveries

Net charge-offs were $0.6 million and $2.2

million for the three- and six-month periods ended June 30, 2023, respectively. For

the three-month period ended June 30, 2023,

charge-offs were primarily related to charge-offs of two commercial and

industrial loans.

Recoveries primarily included a recovery related to an energy loan. For the

six-month

period ended June 30, 2023, charge-offs also included a charge-off

of a collateral-dependent commercial and industrial loan. The below table provides the ratio of net charge

-offs

(recoveries) to average loans outstanding based on our loan categories for

the periods indicated:

For the Quarter Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Commercial and industrial

0.14

0.31

(0.02)

0.48

(0.11)

Energy

(0.23)

(0.46)

1.19

4.77

Commercial real estate - owner-occupied

Commercial real estate - non-owner-occupied

(0.15)

(0.35)

Residential real estate

0.20

Consumer

0.04

(0.04)

Total net charge-offs to average loans

0.04

0.12

(0.02)

0.16

0.10

Table of Contents

Non-performing Assets and Other Asset Quality Metrics

Non-performing assets include: (i) non-performing loans, which

includes non-accrual loans, loans past due 90 days or more and still accruing

interest, and loans modified

prior to January 1, 2023 under TDRs that are not performing in accordance with their modified

terms; (ii) foreclosed assets held for sale; (iii) repossessed assets; and (iv) impaired

debt securities.

Credit quality metrics remained strong during the second quarter of 2023.

Non-performing assets increased $2.1 million during the quarter to $13.3

million at June 30, 2023

primarily due to two commercial and industrial loans moving to non-accrual,

partially

offset by the sale of one other real estate owned property.

The non-performing assets to total

assets ratio decreased from 0.54% at June 30, 2022 to 0.19% at June 30, 2023. Annualized net charge-offs were 0.04% for

the quarter compared to 0.12% in the prior quarter and

0.10% in the prior year second quarter.

The Company continues to monitor the U.S. economic indicators, including

the inflation rate, commodity prices, interest rates, and potential supply chain disruptions

and the

impact they may have on the Company’s markets, clients, and prospects. The Company is monitoring

the impact of a rising interest rate environment on the commercial real estate

market and enterprise and leverage loans that is currently partially mitigated

by low debt-to-equity ratios.

As of June 30, 2023, the Company did not identify any systemic issues

within its loan portfolio that would materially affect the credit quality of the loan portfolio.

However, there could be some risk rating migration in certain sectors of the commercial

real estate portfolio in the future as many projects are faced with higher interest rates,

operating costs, and property taxes.

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

the dates indicated:

For the Quarter Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Asset Quality

(Dollars in thousands)

Non-accrual loans

12,867

9,490

11,272

16,923

27,698

Loans past due 90 days or more and still accruing

433

868

750

303

2,163

Total non-performing loans

13,300

10,358

12,022

17,226

29,861

Foreclosed assets held for sale

855

1,130

973

Total non-performing assets

13,300

11,213

13,152

18,199

30,834

Loans 30-89 days past due

13,333

5,056

19,519

21,383

16,635

Asset quality metrics (%)

Non-performing loans to total loans

0.23

0.18

0.22

0.37

0.66

Non-performing assets to total assets

0.19

0.16

0.20

0.31

0.54

ACL to total loans

1.17

1.15

1.19

1.23

ACL + RUC to total loans

(1)

1.30

1.31

1.34

1.35

ACL to non-performing loans

508

629

514

324

187

Classified loans / (total capital + ACL)

9.7

9.4

10.1

11.3

12.1

Classified loans / (total capital + ACL + RUC)

(1)

9.6

9.3

10.0

11.2

12.0

(1)

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

Table of Contents

Deposits and Other Borrowings

At June 30, 2023, our deposits totaled $6.1 billion, an increase of $449 million or

8% from December 31, 2022. The increase included an $893 million increase in time deposits

and $28 million in money market, NOW and savings deposits, partially offset

by a decrease of $472 million in non-interest-bearing deposits. Approximately one

-third of the time

deposit increase was from new client money and shifts from other deposit categories

with the remainder representing an increase in wholesale funding. The decrease

in non-interest-

bearing deposits was primarily due to elevated deposits at year-end

that were deployed by clients late in the first quarter of 2023.

The following table sets forth the maturity of time deposits as of June 30, 2023:

As of June 30, 2023

Three Months

or Less

Three to Six Months

Six to Twelve

Months

After Twelve Months

Total

(Dollars in thousands)

Time deposits in excess of FDIC insurance limit

28,183

42,042

333,875

21,740

425,840

Time deposits below FDIC insurance limit

409,149

357,659

539,083

106,724

1,412,615

Total

437,332

399,701

872,958

128,464

1,838,455

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

borrowings, and our trust preferred security.

At June 30, 2023, other borrowings totaled $277

million, a $23 million, or 9% increase from December 31, 2022. During

the six-month period ended June 30, 2023, $31.0 million of FHLB advances matured

and were converted into a

drawdown on the FHLB line of credit, an additional $10.0 million matured

and $6.5 million of net FHLB advances were paid off.

The Company utilized an additional $61.2 million of

net draws on the FHLB line of credit and the conversion of $31.0 million of FHLB advances to

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

in a

balance of $167.2 million outstanding on the FHLB line of credit as of

June 30, 2023.

As of June 30, 2023, the Company’s

top 25 customer relationships represented approximately 20% or $1.2 billion of

total deposits, $0.5 billion of which are insured cash sweep

(“ICS”) deposits. The Company believes it has sufficient funding

sources, including on-balance sheet liquid assets and wholesale deposit options,

so that an immediate reduction in

these deposit balances would not be expected to have a material, detrimental

effect on the Company’s

financial position or operations.

As of June 30, 2023, the Company had approximately $2.3 billion of uninsured

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

used

for the Bank’s regulatory requirements.

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

correspondent financial institution, our uninsured deposits are $2.0

billion, or 32% of total deposits as of June 30, 2023. The average client account

balance as of June 30, 2023 is less than $250 thousand for both individual accounts

and business

accounts in total after excluding pass-through and ICS deposits. We

have geographic and industry diversity within our deposit base as the majority

of our deposits are located in our

footprint states of Kansas, Oklahoma, Texas,

Missouri,

and Colorado. The Company believes that its current capital ratios and liquidity

are sufficient to mitigate the risks of uninsured

deposits.

Table of Contents

Liquidity and Capital Resources

Contractual Obligations and Off-Balance Sheet Arrangements

The Company is subject to contractual obligations made in the ordinary

course of business. The obligations include deposit

liabilities, other borrowed funds, and operating leases. Refer to “Note 7: Time

Deposits and Other Borrowings” and “Note 4: Leases”

within the notes to consolidated financial statements – unaudited for

information regarding the Company’s significant

contractual cash

obligations and contractual obligations to third parties on lease obligations,

respectively.

As a financial services provider, the Company

is a party to various financial instruments with off-balance sheet risks, such

commitments to extend credit. Off-balance sheet arrangements

represent the Company’s future

cash requirements. However, a portion

of these commitments may expire without being drawn upon. Refer to

“Note 15: Commitments and Credit Risk” within the notes to

consolidated financial statements – unaudited for a listing of the Company’s

off-balance sheet arrangements.

The Company’s short-term and long

-term contractual obligations, including off-balance

sheet obligations, may be satisfied

through the Company’s on-balance

sheet and off-balance sheet liquidity discussed below.

Liquidity

We manage our liquidity based upon factors that include the level and quality of capital

and our overall financial condition, the

trend and volume of problem assets, our balance sheet risk exposure, the level

of deposits as a percentage of total loans, the amount of

non-deposit funding used to fund assets, the availability of unused funding sources

and off-balance sheet obligations, the availability of

assets to be readily converted into cash without undue loss, the amount of

cash and liquid securities we hold, and other factors. The

Company’s liquidity strategy is to maintain adequate, but not excessive, liquidity

to meet the daily cash flow needs of clients while

attempting to achieve adequate earnings for stockholders. The liquidity position is monitored

continuously by management. The

Company's short-term and long-term liquidity requirements are primarily

met through cash flow from operations, redeployment of

prepaying and maturing balances in our loan portfolio and security portfolio,

increases in client deposits and wholesale deposits.

Liquidity resources can be derived from two sources: (i) on-balance

sheet liquidity resources, which represent funds currently on the

statement of financial condition and (ii) off-balance sheet liquidity resources,

which represent funds available from third-party sources.

The Company’s on-balance sheet and off-balance sheet liquidity resources

consisted of the following as of the dates indicated:

June 30, 2023

December 31, 2022

(Dollars in thousands)

Total on-balance sheet liquidity

1,086,397

986,482

Total off-balance sheet liquidity

1,492,762

770,165

Total liquidity

2,579,159

1,756,647

On-balance sheet liquidity as a percent of assets

Total liquidity as a percent of assets

For the six-months ended June 30, 2023, the Company’s cash and cash equivalents

increased $42 million from December 31,

2022

to $342 million, representing 5% of total assets. During the six-month period ended June

30, 2023, the Company increased the

available-for-sale securities portfolio on an amortized cost basis by $53 million, net

of paydowns, maturities,

and amortization. As of

June 30, 2023, the Company had $282 million in securities that could be pledged

and $169 million that could be sold at a net gain based

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

loans by $427 million, net of payoffs and charge-offs

during the six-month period ended June 30, 2023 that reduced cash and

cash equivalents.

The Company’s time deposits increased by $893 million primarily from

wholesale funding, while savings and money market

deposits increased by $28 million. Non-interest-bearing deposits decreased

$472 million as elevated year-end balances were deployed

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

and money market accounts.

Other borrowings decreased $21

million during the six-month period ended June 30, 2023,

largely related to a reduction in Federal Funds purchased.

Table of Contents

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

2023. As of June 30, 2023, $16 million remains

available for repurchase under our share repurchase program. The amount and

timing of such future share repurchases will be dependent

on a number of factors, including the price of our common stock, overall capital levels

and cash flow needs. There is no assurance that

we will repurchase up to the full amount remaining under our program.

A dividend of $103 thousand related to the Series A

Non-cumulative Perpetual Preferred Stock was declared and paid by the

Company during the three-

and six-months

ended June, 2023. In July 2023, the Board of Directors declared a quarterly dividend on

Series A Non-Cumulative Perpetual Preferred Stock in the amount of $20.00 per share to be payable on September 15, 2023 to

shareholders of record as of August 31, 2023.

The Company believes that its current on and off-balance sheet liquidity

will be sufficient to meet anticipated cash requirements

for the next 12 months and thereafter. The Company believes that it has several on and off-balance

sheet options to address reductions in

cash and cash equivalents in order to maintain appropriate liquidity.

In addition, we expect the acquisition of Canyon will modestly

improve our liquidity position and loan-to-deposit ratio post-merger.

Capital Requirements

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

administered by the federal banking agencies.

The regulatory capital requirements involve quantitative measures of

the Company’s assets, liabilities, select off-balance sheet items and

equity. Failure to meet minimum capital requirements can initiate certain

mandatory and possibly additional discretionary actions by

regulators that, if undertaken, could have a direct material effect on the

Company’s consolidated financial statements. Refer to “Note 10:

Regulatory Matters” in the notes to consolidated financial statements – unaudited

for additional information. Management believes that

as of June 30, 2023, the Company and the Bank met all capital adequacy requirements

to which they are subject.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance

with GAAP and with general practices within the financial

services industry. Application of these principles requires management to make complex and subjective estimates and

assumptions that

affect the amounts reported in the financial statements and accompanying

notes. The Company bases estimates on historical experience

and on various other assumptions that it believes

to be reasonable under current circumstances. These assumptions form the basis for

management judgments about the carrying values of assets and liabilities that are

not readily available from independent, objective

sources. The Company evaluates estimates on an ongoing

basis. Use of alternative assumptions may have resulted in significantly

different estimates. Actual results may differ from these estimates.

A discussion of these policies can be found in the section captioned “Critical Accounting Policies and Estimates” in

Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2022 Form

10-K.

There have

been no changes in the Company’s application of critical accounting policies

and estimates since December 31, 2022.

Recent Accounting Pronouncements

Refer to “Note 1: Nature of Operations and Summary of Significant Accounting Policies” included in the notes to consolidated

financial statements – unaudited included elsewhere in this Form 10-Q.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

A primary component of market risk is interest rate volatility. Interest rate risk management is a key element of the Company’s

statement of financial condition management. Interest rate risk is the risk that net interest margins

will erode over time due to changing

market conditions. Many factors can cause margins to erode: (i) lower loan demand;

(ii) increased competition for funds; (iii) weak

pricing policies; (iv) statement of financial condition mismatches; and (v)

changing liquidity demands. The objective is to maximize

income while minimizing interest rate risk. The Company manages its sensitivity position using

its interest rate risk policy. The

management of interest rate risk is a three-step process and involves: (i)

measuring the interest rate risk position; (ii) policy constraints;

and (iii) strategic review and implementation.

Our exposure to interest rate risk is managed by the Asset/Liability Committee (“ALCO”). The ALCO uses a combination of

three systems to measure the statement of financial condition’s interest rate

risk position. The three systems in combination are expected

to provide a better overall result than a single system alone. The three systems include:

(i) gap reports; (ii) earnings simulation; and (iii)

economic value of equity. The ALCO’s primary tools to change the interest rate risk position are: (i) investment portfolio duration;

(ii)

deposit and borrowing mix; and (iii) on-balance sheet derivatives.

The ALCO evaluates interest rate risk using a rate shock method and rate ramp method. In a rate shock analysis, rates change

immediately,

and the change is sustained over the time horizon. In a rate ramp analysis, rate changes

occur gradually over time.

Management reviews and utilizes both methods in managing interest rate risk;

however, both methods represent a risk indicator, not a

forecast. The following tables summarize the simulated changes in net interest income and fair

value of equity over a 12-month horizon

using a rate shock and rate ramp method as of the dates indicated:

Hypothetical Change in Interest Rate - Rate Shock

June 30, 2023

June 30, 2022

Change in Interest

Rate (Basis Points)

Percent change in net

interest income

Percent change in fair

value of equity

Percent change in net

interest income

Percent change in fair

value of equity

+300

3.5

(18.1)

6.4

(9.2)

+200

2.2

(12.3)

4.1

(5.8)

+100

0.9

(5.9)

2.0

(3.0)

Base

-100

(1.4)

5.9

(2.7)

2.7

-200

(2.5)

12.4

(1)

-300

(4.5)

19.4

(1)

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

Hypothetical Change in Interest Rate - Rate Ramp

June 30, 2023

June 30, 2022

Change in Interest Rate

(Basis Points)

Percent change in net interest

income

Percent change in net interest

income

+300

0.2

3.1

+200

2.0

+100

(0.1)

1.0

Base

-100

(0.4)

(1.1)

-200

(0.4)

(1)

-300

(0.7)

(1)

The Company excluded a portion of 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 June 30, 2023, which

is less sensitive as compared to both June 30, 2022

and December 31, 2022 due to deposit mix changes with demand deposits as the main

driver. Compared to December 31, 2022, the

Company’s position is slightly less asset sensitive due to the reduction in demand

deposits. The aggregate beta assumption utilized as of

June 30, 2023 was approximately 60% which is unchanged from our

previous assumption. Other key assumptions updated year-to-date

2023 include updated deposit decay rates, new business spreads and

updating market yield curves. Other assumptions included in the

model that are periodically updated include loan prepayments and call provisions

within investment and debt holdings.

The Company is

monitoring interest rate sensitivity closely as $4.0 billion, or 69%, of

loans and $0.4 billion, or 32%, of investments mature or reprice

within the twelve-month period following June 30, 2023, including $2.7

billion and $0.4 billion, respectively,

that repriced in the first

month of the third quarter. $5.3

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

period. As of June

30, 2023 and December 31, 2022, the investment portfolio duration

was approximately 5.3 years. The Company is reviewing additional

options to manage the statement of financial condition sensitivity based

on the interest rate environment and anticipated composition of

assets and liabilities in the next twelve months and beyond.

The models the Company uses include assumptions regarding interest rates

while balances

remain unchanged. These assumptions

are inherently uncertain and, as a result, the model cannot precisely estimate net interest income

or precisely predict the impact of higher

or lower interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude,

and frequency

of interest rate changes as well as changes in market conditions, customer behavior

and management strategies, among other factors.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive

Officer and Chief Financial Officer, has

evaluated the effectiveness of the Company’s disclosure controls and procedures

(as defined in Rule 13a-15(e) under the Securities

Exchange Act of 1934 (“Exchange Act”)) as of June 30, 2023. Based on that evaluation, the Company’s Chief Executive Officer and

Chief Financial Officer concluded that the Company’s disclosure controls

and procedures were effective as of June 30, 2023.

Changes in Internal Control over Financial Reporting

Our internal control over financial reporting continues to be updated

as necessary to accommodate modifications to our business

processes and accounting procedures. There has been no change in our

internal control over financial reporting (as such term is defined

in Rule 13a-15(f) under the Exchange Act) during the second quarter of 2023

that has materially affected, or is reasonably likely to

materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are named or threatened to be named

as a defendant in various lawsuits. Management,

following consultation with legal counsel, does not expect the ultimate disposition

of any or a combination of these matters to have a

material adverse effect on our business, financial condition, results of operations,

cash flows or growth prospects. However, given the

nature, scope, and complexity of the extensive legal and regulatory

landscape applicable to our business (including laws and regulations

governing consumer protection, fair lending, fair labor, privacy, information

security and anti-money laundering and anti-terrorism

laws), we, like all banking organizations, are subject to heightened legal

and regulatory compliance and litigation risk.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully

consider the factors discussed in Part I, "Item 1A.

Risk Factors" in our 2022 Form 10-K, which could materially affect

our business, financial condition,

or results of operations in future

periods.

There were no material changes from the risk factors disclosed in the 2022 Form 10-K.

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

(a)

Not applicable.

(b)

Not applicable.

(c)

Share Repurchase Program

On May 10, 2022, the Company announced that its Board of Directors approved

a share repurchase program under which the

Company may repurchase up to $30 million of its common stock. No shares

were repurchased during the three-months ended June

30, 2023.

As of June 30, 2023, $16 million remains available for repurchase under

this share repurchase program. Repurchases

under the program may be made in the open market or privately negotiated

transactions in compliance with SEC Rule 10b-18,

subject to market conditions, applicable legal requirements,

and other relevant factors. The program does not obligate the Company

to acquire any amount of common stock and may be suspended at any time at the

Company's discretion. No time limit has been set

for completion of the program.

ITEM 5. OTHER INFORMATION

(a)

None

(b)

None

(c)

Trading Arrangements

During the three months ended June 30, 2023, no director or officer (as defined

in Rule 16a-1(f) under the Exchange Act) of the

Company

adopted

terminated

a “Rule 10b5-1 trading arrangement” or “

non-Rule 10b5-1

trading

arrangement

,” as each term is

defined in Item 408 of Regulation S-K.

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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

†

Form of Director Restricted Stock Award (Deferred Pursuant to Directors’ Deferred Fee Plan)

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

Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on

its

behalf by the undersigned thereunto duly authorized.

CrossFirst Bankshares, Inc.

Date:

August 4, 2023

/s/ Benjamin R. Clouse

Benjamin R. Clouse

Chief Financial Officer

(Duly authorized officer and principal financial officer)