S-1 1 s002626x8_s1.htm S-1

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As filed with the Securities and Exchange Commission on July 18, 2019.

Registration No. 333-         

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

CROSSFIRST BANKSHARES, INC.
(Exact name of registrant as specified in its charter)

Kansas
(State or other jurisdiction of
incorporation or organization)
6022
(Primary Standard Industrial
Classification Code Number)
11440 Tomahawk Creek Parkway
Leawood, Kansas 66211
(913) 312-6822
26-3212879
(I.R.S. Employer
Identification Number)

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Aisha Reynolds
General Counsel & Corporate Secretary
CrossFirst Bankshares, Inc.
11440 Tomahawk Creek Parkway
Leawood, Kansas 66211
(913) 312-6822

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

C. Robert Monroe
James S. Swenson
B. Scott Gootee
Stinson LLP
1201 Walnut Street, Suite 2900
Kansas City, Missouri 64106
(816) 842-8600
(816) 412-1017 (facsimile)
David O’Toole
Chief Financial Officer
CrossFirst Bankshares, Inc.
11440 Tomahawk Creek Parkway
Leawood, Kansas 66211
(913) 312-6822
(913) 754-9701 (facsimile)
Peter G. Weinstock
Beth A. Whitaker
Hunton Andrews Kurth LLP
1445 Ross Avenue, Suite 3700
Dallas, Texas 75202
(214) 979-3000
(214) 880-0011 (facsimile)

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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 o
Accelerated filer o
Non-accelerated filer ☒
Smaller reporting company o
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 7(a)(2)(B) of the Securities Act. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of
Securities to Be Registered
Proposed Maximum
Aggregate
Offering Price(1)(2)
Amount of
Registration Fee
Common Stock, par value $0.01 per share
$
100,000,000
 
$
12,120
 

(1)Includes shares of common stock that the underwriters have the option to purchase from the registrant.
(2)Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended, based upon an estimate of the maximum aggregate offering price.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the Registration Statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JULY 18, 2019

PROSPECTUS

         Shares


   

Common Stock

This is the initial public offering of CrossFirst Bankshares, Inc. We are offering          shares of our common stock and the selling stockholders are offering          shares of our common stock. We will not receive any proceeds from the sales of shares by the selling stockholders.

Prior to this offering, there has been no established public market for our common stock. We anticipate that the public offering price of our common stock will be between $   and $   per share. We have applied to list our common stock on the Nasdaq Global Select Market under the symbol “CFB.”

We intend to use the net proceeds of this offering for general corporate purposes, including maintenance of required regulatory capital and to support our future growth. See “Use of Proceeds.”

Investing in our common stock involves risk. See “Risk Factors” beginning on page 20.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements.

 
Per Share
Total
Public offering price
$
         
 
$
         
 
Underwriting discounts(1)
 
 
 
 
 
 
Proceeds to us, before expenses
 
 
 
 
 
 
Proceeds to the selling stockholders, before expenses
 
 
 
 
 
 
(1)See “Underwriting” for additional information regarding underwriting compensation.

The underwriters have an option to purchase up to an additional          shares from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Shares of our common stock are not savings accounts or deposits and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The shares of common stock will be ready for delivery on or about         , 2019.

Keefe, Bruyette & Woods
RAYMOND JAMES
Stephens Inc.
A Stifel Company
 
 
 
Sandler O’Neill + Partners, L.P.
 

The date of this prospectus is         , 2019.

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*Kansas City branch will be relocated to a new location (as depicted in picture). Planned to open in 2020.

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About this Prospectus

You should rely only on the information contained in this prospectus or in any free writing prospectus that we authorize to be delivered to you. We, the selling stockholders and the underwriters have not authorized anyone to provide you with different or additional information. We, the selling stockholders and the underwriters are not making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus. Our business, financial condition, results of operations and prospects may have changed since that date.

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

This prospectus describes the specific details regarding this offering and the terms and conditions of our common stock being offered hereby and the risks of investing in our common stock. For additional information, please see the section entitled “Where You Can Find More Information.”

You should not interpret the contents of this prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our common stock.

Unless otherwise stated, all information in this prospectus gives effect to a two-for-one stock split of our common stock effected in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of December 19, 2018, which was distributed on December 21, 2018. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.

Unless otherwise stated, all information in this prospectus assumes that the underwriters have not exercised their option to purchase additional shares of our common stock from us.

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Market and Industry Data

Within this prospectus, we reference certain market, industry and demographic data, forecasts and other statistical information. We have obtained this data, forecasts and information from various independent, third party industry sources and publications. Nothing in the data, forecasts or information used or derived from third party sources should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review of industry publications and surveys and independent sources. We believe that these sources and estimates are reliable but have not independently verified them. Statements as to our market position are based on market data currently available to us. Although we are not aware of any misstatements regarding the economic, employment, industry and other market data presented herein, these estimates involve inherent risks and uncertainties and are based on assumptions that are subject to change.

Implications of Being an Emerging Growth Company

As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An EGC may take advantage of reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an EGC:

we may present as few as two years of audited financial statements and two years of related management discussion and analysis of financial condition and results of operations;
we are exempt from the requirement to obtain an attestation and report from our auditors on management’s assessment of our internal control over financial reporting under the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”);
we are permitted to provide less extensive disclosure about our executive compensation arrangements; and
we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.

In this prospectus we have elected to take advantage of the reduced disclosure requirements relating to the presentation and discussion of our audited financial statements and executive compensation, and in the future we may take advantage of any or all of these exemptions for so long as we remain an EGC. We will remain an EGC until the earliest of (i) the end of the fiscal year during which we have total annual gross revenues of $1.07 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the completion of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities and (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In addition to the relief described above, the JOBS Act permits us an extended transition period for complying with new or revised accounting standards affecting public companies. We have elected to take advantage of this extended transition period, which means that the financial statements included in this prospectus, as well as any financial statements that we file or furnish in the future, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as we remain an EGC or until we affirmatively and irrevocably opt out of the extended transition period under the JOBS Act.

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PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider in making your investment decision. You should read the following summary together with the entire prospectus, including the matters discussed in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and the historical financial statements and the accompanying notes before deciding to invest in our common stock. Some of the statements in this prospectus constitute forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.”

Our Company

CrossFirst Bankshares, Inc., a Kansas corporation and registered bank holding company, is the holding company for CrossFirst Bank. The Company was initially formed as a limited liability company, CrossFirst Holdings, LLC, on September 1, 2008 to become the holding company for the Bank and converted to a corporation in 2017. The Bank was established as a Kansas state-chartered bank in 2007 and provides a full suite of financial services to businesses, business owners, professionals and their personal networks throughout our five primary markets located in Kansas, Missouri, Oklahoma and Texas. As of March 31, 2019, we had total assets of $4.3 billion, total loans of $3.3 billion, total deposits of $3.4 billion and total stockholders’ equity of $480.5 million. We have highly engaged employees who are focused on driving profitability and sustainable growth across our markets of operation.

We are committed to a culture of serving our clients, stockholders and communities in extraordinary ways by providing personalized, relationship-based banking. We believe that success is achieved through establishing and growing the trust of our clients, employees, communities and stockholders. In addition to our strong culture, we believe our leadership has effectively aligned incentives for management and stockholders to aggressively pursue business opportunities in our designated markets. Our focus continues to be on middle market businesses and professionals to whom we can cross-sell our multiple products and services. Historically, our success has been evidenced by the significant growth in our franchise, growing assets at a compound annual growth rate (“CAGR”) of 48.8% between 2008 and 2018, and raising over $400.0 million in capital to fund such growth. Going forward, our focus will be on driving increased profitability combined with continued strong growth.

Our History and Growth

The Bank was organized by a group of financial executives and prominent business leaders with a shared vision to invest in highly experienced people and technology to offer unprecedented levels of personal service to our clients. We achieved initial profitability in the third quarter of 2009 and have since grown to be the third largest bank headquartered in the Kansas City metropolitan statistical area (“MSA”) by asset size. At the same time, we have expanded our operations to seven full-service banking offices primarily along the I-35 corridor, with locations in Leawood and Wichita, Kansas; Kansas City, Missouri; Tulsa and Oklahoma City, Oklahoma; and Dallas, Texas.

We have demonstrated significant balance sheet growth and an ability to organically expand into new markets with our relationship-based, branch-lite approach. We do so, in part, by hiring experienced, high-caliber bankers and banking teams that share our passion for delivering extraordinary client service. We have invested in scalable technology that allows us to compete for sophisticated business clients and to serve clients sufficiently without a large branch network. We have had the benefit of numerous high net worth investors and clients concentrated in our MSAs, who have provided important business relationships. Additionally, we have enhanced our growth and geographic presence by successfully integrating two strategic bank acquisitions.

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Our Strategy

Since inception, our strategy has been to build the most trusted bank serving our markets, which we believe has driven value for our stockholders. We establish the trust of our clients with our experienced and motivated teams of employees that provide superior products and services, with the goal of delivering on our promises and consistently exceeding our clients’ expectations. This trust has afforded our bankers the ability to effectively integrate into the local markets allowing for strong asset and loan growth, while maintaining superior asset quality. Historically, we have made significant investments in human capital to grow local market share. We remain focused on robust growth and are equally focused on building stockholder value through greater efficiency and increased profitability. We intend to execute our strategic plan through the following:

Continuing Our Organic Growth. We have been able to grow our balance sheet, as evidenced by loan growth of 317.4% since 2014, which we believe has been a result of our relationship-based approach and market expansion into major metropolitan areas. We have also grown our core deposits, which we define as total deposits less wholesale deposits, time deposits greater than $250.0 thousand and reciprocal deposits, by 205.1% since 2014. This balance sheet growth has translated into significant growth in operating revenue as illustrated below:

Operating Revenue ($M)(1)


(1)Net interest income plus non-interest income.

We also believe our geographic markets provide synergistic growth opportunities, as numerous clients throughout our markets operate in broader geographic footprints and continue to experience growth and

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a need for sophisticated financial services. Our strategy is to continue to focus on organic growth throughout our footprint by deepening ties within our communities, building upon current client relationships and further leveraging the extensive experience of our senior management team, commercial lenders and local stockholder base.

Improving Profitability and Operating Efficiency. The Company was built on the premise of achieving a sufficient size to compete with larger banks in the markets we serve. We achieved a modest level of profitability on an annual basis starting in 2010, and after enhancing our focus on profitability in 2018, in conjunction with the significant expansion of our Company, produced earnings growth since 2010 at a CAGR of 42.3% through the twelve months ended December 31, 2018. Since 2010, we have invested in talent and acquisitions to grow our market presence and expand into several new products such as an energy lending vertical. Our strategy includes continuing to pursue accretive initiatives to increase profitability. In addition, we believe that a branch-lite approach should continue to drive operating leverage and scale as we develop these markets. Although profitability in the first half of 2018 was impacted by several factors, including our start-up investment in the Dallas market and additional personnel required to execute our company-wide plans, we implemented a number of expense reduction strategies that have contributed to an improved efficiency ratio.

Efficiency Ratio


We calculate “non-GAAP core operating efficiency ratio” as non-interest expense adjusted to remove non-recurring non-interest expenses as defined under non-GAAP core operating income, divided by the sum of net interest income and non-interest income. Non-GAAP core operating efficiency ratio is a non-GAAP financial measure. The most directly comparable GAAP financial measure is the efficiency ratio. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this measure.

Attracting and Developing Talent within Our Organization. We believe that our teams of engaged employees have been, and will continue to be, an important factor in seeking to drive future organic growth and in cultivating relationships with current and potential clients. Since our inception, we have prioritized hiring highly experienced employees, which continues to be a core strategic focus. We seek employees who are capable and proficient in managing larger client relationships. We have a long-term talent development strategy and have been successful in promoting many of our employees to leadership positions. In addition, we have a performance-driven culture and an engaged well-being coach who adds to employee retention and motivation. Our partnership model requires certain members of senior management to purchase a minimum amount of common stock in the Company. We believe this requirement, in addition to our equity compensation program, aligns management’s interests with those of our stockholders and incentivizes the leadership to focus on business generation, relationship management, attracting and developing talented bankers and serving clients and communities in extraordinary ways.
Maintaining Our Branch-Lite Business Model with Strategically Placed Locations. Our offices have been strategically placed to provide financial services to businesses, business owners, professionals and their personal networks. We have one to three office locations in each of our markets creating the potential for a highly efficient business operating model located near attractive client opportunities. The Company has average deposits per location of $485.7 million as of March 31, 2019, with centralized

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processing located in its corporate headquarters. As of December 31, 2018, the Company ranked number one in deposits per location in Kansas City, Wichita and Tulsa, and ranked in the top 10 percent in deposits per location in our other locations of Oklahoma City and Dallas, according to data obtained through S&P Global Market Intelligence (“S&P Global”). In addition, our modern locations provide very unique and professional atmospheres for providing extraordinary banking services. Our strategic business model allows us to operate at an $11.8 million in assets-to-employee ratio as of March 31, 2019, as compared to a median $5.8 million per employee for banks between $1.0 and $10.0 billion in total assets as of December 31, 2018, according to data obtained through S&P Global. As part of our continued focus on improving efficiency, we plan to continue monitoring and improving how we deploy our human capital and utilize resources.

Leveraging Technology to Enhance the Client Experience and Improve Productivity. We strive to maximize client convenience through the use of technology and our mobile banking applications, along with our strategically placed banking locations. Since our founding, we have made significant investments in technology to offer online and mobile banking products that we believe are superior to those offered by many similar-sized competitors and comparable to those of the nation’s largest banks. We utilize a large bank core processing service provider that we believe can support our growth plan, bring the best technology solutions to the Company and its clients and monitor and address cyber security risks. Business and individual clients have the latest banking products, services, systems and security available to them, including traditional loan and deposit products, online and mobile banking applications, treasury management and mortgage and international services that we believe are superior to, or competitive with, those offered by other banks. In addition to client-facing technology, significant investments have been made in the technology and software utilized by our employees. This technology and software enable our employees to be more productive by enhancing workflow and internal and external management reporting, extracting unnecessary steps, reducing manual errors, as well as supporting our branch-lite business model.
Selectively Pursuing Opportunities to Expand through Acquisitions or New Market Development. We anticipate that we may selectively pursue future acquisitions and new market expansions to supplement current market growth or expand our geographic presence. Our business has been successfully built on synergistic acquisitions and new market expansion. We anticipate that any future acquisitions or new market expansions we may pursue would be consistent with our strategy of operating in attractive and adjacent metropolitan markets with a branch-lite structure and with banking teams that are proficient and knowledgeable of our target client base and that provide a strong cultural fit. In addition, our acquisition activity could occur in our existing core markets or as part of a new market initiative with an already established presence. We would seek acquisitions that provide meaningful financial benefits, long-term organic growth opportunities and economies of scale without compromising asset quality to the overall organization. While we evaluate and engage in discussions with potential acquisition candidates from time to time and will continue to evaluate opportunities for acquisitions, we do not have any current plans, arrangements or understandings to make any acquisitions at this time.

Competitive Strengths

We believe that the following strengths will help us achieve our principal financial objectives of continued balance sheet and earnings growth:

Experienced and Invested Leadership

Our executive leadership team is comprised of established industry veterans with a track record of profitable organic growth, operating efficiencies and strong risk management. Each member of our executive leadership team is a participant in our partnership program and has made a meaningful ownership investment in the Company. Our Board of Directors has decades of combined business experience from a variety of backgrounds and actively participates in and supports community activities, which we believe significantly benefits our business development efforts. In addition to our executive leadership team, we believe that we are supported by a deep and talented bench of business unit leaders, many of whom have been with the Company for much of its existence. We believe the following executive leadership team has the experience to execute on our strategic vision:

George F. Jones, Jr. – President & CEO of the Company. Mr. Jones joined the Company as Vice Chairman in 2016 after a two-year retirement from Texas Capital Bank. Mr. Jones was one of the

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founding executives of Texas Capital Bank in 1998 and led the bank through 50 consecutive profitable quarters and growth to $12.0 billion in assets. Previously, Mr. Jones was president and CEO of NorthPark National Bank of Dallas, president and CEO of Texas American Bank, Dallas, and manager of financial institutions for Mercantile National Bank, Dallas.

Mike Maddox – President & CEO of the Bank. Mr. Maddox joined CrossFirst Bank in 2008 after serving as Kansas City Regional President for Intrust Bank. He earned a business degree from the Kansas University School of Business. Additionally, he earned a law degree from the Kansas University School of Law and practiced for more than six years before joining Intrust. Mr. Maddox is a graduate of the Graduate School of Banking at the University of Wisconsin - Madison.
David O’Toole – Chief Financial Officer & Chief Investment Officer of the Company; Chief Financial Officer of the Bank. Mr. O’Toole has more than 40 years of experience in banking, accounting, valuation and investment banking. Mr. O’Toole is a founding stockholder and director of CrossFirst Bank and became CFO in 2008. Previously, Mr. O’Toole was co-founder and managing partner of a national bank consulting and accounting firm. He has served on numerous boards of directors of banks and private companies, including the Continental Airlines, Inc. travel agency advisory board.
W. Randall Rapp – Chief Credit Officer of the Bank. Mr. Rapp has more than 30 years of experience in credit and banking and has served as the Chief Credit Officer of the Bank since April 2019. Prior to joining the Bank, Mr. Rapp held various positions at Texas Capital Bank, N.A. from March 2000 until March 2019, including serving as Executive Vice President and Chief Credit Officer from May 2015 until March 2019, and as a Senior Credit Officer from 2013 until May 2015. Mr. Rapp holds a BBA in Accounting from The University of Texas at Austin and an MBA in Finance from Texas Christian University. He is also a licensed CPA.
Amy Fauss – Chief Operating Officer of the Bank. Ms. Fauss has more than 28 years of banking experience and joined the Bank in 2009 after serving as executive vice president and chief operating officer for Solutions Bank in Overland Park, Kansas. Previously, she was senior vice president of operations for $1.0 billion in assets at Hillcrest Bank. Ms. Fauss is a graduate of the Graduate School of Banking at the University of Wisconsin - Madison and earned an MBA at the University of Missouri - Kansas City.
Tom Robinson – Chief Risk Officer of the Company. Mr. Robinson has more than 35 years of industry experience and has served as Chief Risk Officer of the Company since January 2019. Mr. Robinson also served as Chief Credit Officer at CrossFirst Bank from 2011 until March 2019. Prior to joining CrossFirst Bank in 2011, Mr. Robinson was the chief lending officer for Morrill & Janes Bank and Trust Company. He is a past president of the Kansas City chapter of the Risk Management Association and graduated from the Graduate School of Banking at Colorado University – Boulder.

Disciplined Underwriting and Structured Credit Administration

Since 2014, we have driven tremendous balance sheet growth, with a CAGR in loans and assets of 40.0% and 34.2%, respectively. We have achieved this balance sheet growth while maintaining superior credit quality. We have established a strong risk management culture supported by comprehensive policies and procedures for credit underwriting and monitoring. We are guided by the following principles, which have served us well throughout our history:

focus on relationship lending;
commitment to diversification;
disciplined and standardized underwriting;
proactive problem asset management;
decisive response to market opportunities; and
highly competent and experienced bankers and credit officers.

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Our credit quality is proven out through our low net charge-off and nonperforming asset history. Since 2014, we have experienced a total of $10.8 million in net charge-offs relative to a volume of loans that have grown from $785.2 million as of December 31, 2014 to $3.3 billion as of March 31, 2019.

Net Charge-offs / Average Loans
Nonperforming Assets / Total Assets
   
 


   
 

We seek to be nimble and responsive in our credit underwriting and client mandates. We believe that our larger competitors require inflexible terms and requirements of their small and middle market clients. We recognize that businesses differ, and we tailor our lending to suit our clients’ needs. We believe our combination of local business unit leaders, disciplined and standardized underwriting and experienced credit officers enables us to meet varied borrowing needs. Additionally, our senior management review potential applications early in the process, which allows us to be more responsive than many of our larger competitors.

Scalable Infrastructure Designed to Accommodate Significant Growth

We have made significant investments in technology, risk management systems and people, and we believe that we have developed an infrastructure that can support significant additional asset growth with minimal capital investment. As described above, we utilize a large bank core processing service provider that we believe can support our growth plan. Each of our banking locations is structured to be able to provide extraordinary service with a heightened level of autonomy and accountability for performance. This means that with respect to each banking location: (i) a significant investment is made in the real property and improvements thereon, (ii) the location is led by an experienced local leader and staffed with talented bankers responsible for various lines of business, including real estate, commercial, corporate, private and relationship banking and (iii) comprehensive information is captured and disseminated to measure productivity and progress towards financial, business and strategic goals. In addition, we have organized our lending team into specialized areas of expertise, both geographically and by lines of business, and reinforced our team approach to building client relationships, which further fosters our ability to scale our business model. We believe that our scalable operating platform will allow us to manage our growth effectively, resulting in greater efficiency and enhanced profitability.

Sophisticated Suite of Banking Services to Facilitate Full-Service Commercial Relationships

We provide products and services that compete with large, national banks, but with the personalized attention and responsiveness of a relationship-focused community bank. We also offer technologically sophisticated cash and treasury management solutions to our clients to help build and maintain our commercial relationships. Ultimately, our focus on establishing a full-service relationship with our clients and incenting our employees to generate core funding has provided us with a strong base of core deposits to fund our loan growth, with over 75.4% of our loan relationships also maintaining deposit accounts with us as of March 31, 2019.

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We believe we have an attractive mix of loan and deposit products. As of March 31, 2019, approximately 35.4% of our loan portfolio was comprised of commercial loans and 28.8% was commercial real estate loans. Our focus on commercial lending increases the asset sensitivity of our balance sheet, with approximately 73.1% floating rate loans or maturing within one year. As of March 31, 2019, approximately 14.4% of our deposits were non-interest-bearing, with a deposit CAGR since 2014 of 34.6%. Non-interest-bearing deposit generation and overall enhancement of the funding base will continue to be a key initiative of the Bank.


Specialized Lending Verticals

As a result of our market expansions, we have developed a diverse portfolio of loans both geographically and by type. Each of our markets offers innovative and relevant lending verticals that we believe offer attractive risk-adjusted returns and will contribute to our future growth. These verticals include the following:

Energy Lending. Introduced in 2014, and based in our Tulsa market, we have a team of senior lenders with experience in energy lending throughout credit cycles and across various segments of the industry and nationwide. We have successfully grown this vertical to over $376.1 million in outstanding loan balances as of March 31, 2019 and maintain disciplined underwriting. The portfolio is comprised of reserve-based lending on proven production and is well-diversified across a number of regions.
Enterprise Value Lending. Introduced in our Kansas City market in 2017, our relationship-based Enterprise Value Lending services provide solutions designed to meet the needs of middle market manufacturers, distributors and service providers. As with our energy lending, our focus is on building relationships with clients who have strong cash flow, investor sponsorship and lower leverage.
Tribal Nations Lending. Introduced in 2017, and based in our Tulsa market, we have built relationships and developed expertise in providing services to tribal nations throughout the broader Midwest and Southwest regions of the United States.
Home Builder Lending. Introduced in 2017 in our Dallas market, our team of industry experts are focused on providing financing to large scale and high-volume residential developers and homebuilders. We focus primarily on home construction loans.

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Our Markets

We have a growing presence in what we believe are among the most attractive metropolitan markets in the United States, each generally situated along the I-35 corridor from Kansas City to the north through Dallas to the south.

 
As of March 31, 2019
 
Gross Loans
Deposits
Market
($)
(%)
($)
(%)
 
(Dollars in millions)
Kansas City, MO-KS
$
1,028
 
 
31.2
%
$
1,659
 
 
48.8
%
Wichita, KS
 
378
 
 
11.5
 
 
481
 
 
14.2
 
Oklahoma City, OK
 
229
 
 
7.0
 
 
331
 
 
9.7
 
Tulsa, OK
 
873
 
 
26.6
 
 
566
 
 
16.6
 
Dallas-Fort Worth-Arlington, TX
 
779
 
 
23.7
 
 
363
 
 
10.7
 
Total
$
3,287
 
 
100.0
%
$
3,400
 
 
100.0
%

The strength of these markets is demonstrated by their size, growth prospects and economic diversity. Each market presents unique opportunities with attractive business climates and skilled workforces. We believe that our current market areas provide opportunity for significant continued growth in loans and deposits. The following summarizes key statistics of each market:

Market
Population
(in millions)
Population
Change (%)
Projected Population
Growth (%)
Feb. 2019
Unemployment
Rate
Median
Household
Income
2010 - 2019
2019 - 2024
Kansas City, MO-KS
 
2.2
 
 
7.4
%
 
3.5
%
 
3.7
%
$
66,838
 
Wichita, KS
 
0.6
 
 
2.7
 
 
1.6
 
 
3.9
 
 
56,619
 
Oklahoma City, OK
 
1.4
 
 
12.3
 
 
5.1
 
 
3.2
 
 
59,019
 
Tulsa, OK
 
1.0
 
 
6.7
 
 
3.6
 
 
3.5
 
 
54,700
 
Dallas-Fort Worth-Arlington, TX
 
7.6
 
 
17.9
 
 
7.7
 
 
3.6
 
 
69,458
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
United States
 
329.2
 
 
6.6
%
 
3.6
%
 
4.1
%
$
63,174
 

Source: S&P Global

Kansas City MSA

We operate three full-service branches in the Kansas City MSA, two in Leawood, Kansas and one in Kansas City, Missouri. The Kansas City MSA has a population of approximately 2.2 million, according to S&P Global. This area is the largest contributor to assets, deposits and earnings for our Company. The market is characterized by its stable growth and central location. Kansas City continues to grow as a leading distribution hub due in part to its centralized location. The area outperformed the United States in terms of population growth, GDP growth and unemployment rate since the 2008 Great Recession. The Kansas City MSA’s major contributors to gross domestic product include financial services, professional and business services, government and manufacturing. Together, these industries contributed 58% of the area’s GDP. Private service-providing industries contributed over 80% of the area’s private GDP. Kansas City is home to notable company headquarters including Cerner Corporation (which is its largest private employer), HCA Midwest Health System, Hallmark Cards, Inc., H&R Block, Inc., Sprint Corporation and Garmin International, Inc. With over 10 years of operation in the Kansas City market, we believe we are well positioned to continue to benefit from our deep relationships in this large and growing metropolitan market.

Wichita MSA

We operate one full-service branch in the Wichita MSA. Wichita is the largest MSA in Kansas with a population of over 600,000. Known as the “Air Capital of the World,” aircraft manufacturing is Wichita’s largest industry with several companies across the supply chain based in the area including Textron Aviation, Learjet and Spirit AeroSystems. Other prominent corporations with a substantial Wichita presence include Koch Industries, Cargill Meat Solutions and The Coleman Company. In 2010 the city government, in partnership with local

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businesses, announced a 20-year vision to revitalize the downtown area. Over $1.0 billion has been invested in the city’s urban core with an estimated $1.1 billion economic impact as a result of the project in addition to the development of new residential units, retail stores and office space. Overall, given Wichita’s diverse employment universe which includes many highly-skilled workers, prudent focus on economic development, low cost of living and location at the confluence of major railroad systems, we believe the market is well-positioned for further growth.

Oklahoma City MSA

We have one full-service branch in the Oklahoma City MSA. The Oklahoma City MSA is the largest in the state of Oklahoma with a population of approximately 1.4 million, according to S&P Global. Historically, the economy had been primarily energy-focused, but today Oklahoma City hosts a wide range of businesses and employers. Agriculture, energy, aviation, government, health care, manufacturing and industry all play major roles in the city’s economic well-being. The city was named the most “recession proof city in America” in 2008 (during the Great Recession) by Forbes and has experienced consistent increases in employment, a strong housing market and stable growth in the energy, agriculture and manufacturing industries. Oklahoma City’s visionary capital improvement program, “MAPS” or Metropolitan Area Projects, has provided for new and upgraded sports, recreation, entertainment, cultural and convention facilities and is now entering into its fourth phase supporting a vibrant and growing city.

Tulsa MSA

We have one full-service branch in the Tulsa MSA, which also serves as the headquarters for our energy lending vertical. Tulsa is the second-largest city in the state of Oklahoma with a diverse economic landscape. The Tulsa MSA has a population of approximately 1.0 million, according to S&P Global. Tulsa is home to some of the nation’s largest companies, with key industry sectors that include aerospace, energy, health care, technology, manufacturing and transportation. Tulsa is also home to the Port of Catoosa, an inland river port, which is a major economic engine for the region. The port has five public terminals that can transfer inbound and outbound bulk freight between barges, trucks and railroad cars. Two Fortune 500 companies are based in Tulsa - Oneok, Inc. and Williams Companies.

Dallas MSA

We operate one full-service branch in the Dallas MSA, which serves as one of the economic hubs of Texas and is part of the Dallas/Fort Worth MSA, the fourth largest MSA in the United States, both by population and by GDP. The Dallas/Fort Worth MSA has a population of approximately 7.6 million, according to S&P Global. The Dallas/Fort Worth MSA continues to attract business relocations, with one recent notable move being Core-Mark, which will become the 23rd Fortune 500 company headquartered in Dallas when it moves its headquarters from San Francisco. Businesses are attracted to the highly skilled and diverse workforce, business-friendly climate, lower taxation, central location and two international airports. According to the data from the Bureau of Economic Analysis, the Dallas/Fort Worth MSA was responsible for producing nearly 33% of the state’s total gross domestic product in 2017. The Dallas/Fort Worth MSA is an important market for us to continue to pursue our outsized loan growth. We are currently considering the opening of a second smaller full-service branch in the Dallas MSA. This process is in the preliminary stages and there can be no assurance as to whether or when a second branch will be opened.

Recent Developments

Stock Split

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

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Preferred Stock Redemption

On December 18, 2018, we provided notice to all holders of our 7.00% Series A Non-Cumulative Perpetual Preferred Stock (“Series A Preferred Shares”) of our intent to redeem all 1,200,000 outstanding Series A Preferred Shares on January 30, 2019 (the “Redemption Date”). On the Redemption Date, we redeemed each outstanding Series A Preferred Share at a redemption price of $25.00 per share and paid a pro rata share of a 30-day dividend for January 2019 in the aggregate amount of $175.0 thousand. From and after the Redemption Date, all of the Series A Preferred Shares ceased to be outstanding, all dividends with respect to the Series A Preferred Shares ceased to accrue and all rights with respect to the Series A Preferred Shares ceased and were terminated.

Risks Related to Our Company and an Investment in Our Common Stock

An investment in our common stock involves substantial risks and uncertainties. These risks are more fully discussed in the section titled “Risk Factors,” beginning on page 20, and include, among others, the following:

we may not be able to effectively implement or manage the risks of our growth strategy or profitability improvement plan;
because a significant portion of our business is tied to Kansas, Missouri, Oklahoma and Texas, we are more sensitive than our more geographically diversified competitors to adverse changes in the economy, including downturns in the real estate market and energy markets, the effect of which could adversely impact our growth and profitability of our lending and deposit operations;
we operate in a highly regulated environment and our noncompliance with the laws and regulations that govern our business, operations, corporate governance, executive compensation and accounting principles could subject us to regulatory action or penalties;
a disruption in our operational systems or infrastructure, whether as a result of cyber-attacks or third parties, could impair our liquidity, result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses; and
we rely heavily on our executive management team and other key employees, and the unexpected loss of any of their services could adversely impact our business or reputation.

Corporate Information

Our principal executive office is located at 11440 Tomahawk Creek Parkway, Leawood, Kansas 66211, telephone number: (913) 312-6822. Our website address is www.crossfirstbank.com. Neither this website nor the information on or accessible through this website is included or incorporated in, or is a part of, this prospectus.

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THE OFFERING

Common stock offered by us
         shares.
Common stock offered by the selling stockholders
         shares.
Underwriters’ overallotment option
         shares from us.
Common stock outstanding after completion of this offering
         shares (or           shares if the underwriters exercise in full their option to purchase additional shares of common stock).
Use of proceeds
Assuming an initial public offering price of $       per share, which is the midpoint of the price range set forth on the cover page of this prospectus, we estimate that the net proceeds to us from this offering, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $       million (or approximately $       million if the underwriters exercise in full their option to purchase additional shares of common stock). We intend to use the net proceeds of this offering for general corporate purposes, including maintenance of required regulatory capital and to support our future growth. We do not have any current plan to establish any new bank branches or to make any acquisitions, except that we are currently considering the opening of a second smaller full-service branch in the Dallas MSA. The estimated cost for a second branch has not been determined since this project is still in the early development stage. If we proceed with opening a second branch, the cost of establishing the branch will depend upon many factors such as whether the facility is owned or leased, the location of the branch, the size of the facility and the type of improvements and furnishings used in the facility. Opening a second branch would also be subject to obtaining required regulatory approvals. This process is in the preliminary stages and there can be no assurance as to whether or when a second branch will be opened. The precise amounts and timing of our use of the proceeds will depend upon market conditions and other factors. The principal reasons for conducting this offering are to increase our available cash resources, provide liquidity for our selling stockholders and create a public market for our common stock. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders. See “Use of Proceeds.”
Dividends
We have not declared or paid any cash dividends on our common stock and we do not currently anticipate paying any cash dividends on our common stock in the foreseeable future. Instead, we anticipate that our earnings in the foreseeable future will be retained to support our operations and finance the growth and development of our business. Any future determination to pay dividends on our common stock will be made by our Board of Directors and will depend upon our

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results of operations, our financial condition, capital requirements, general economic conditions, regulatory and contractual restrictions, our business strategy, our ability to service any equity or debt obligations senior to our common stock and other factors that our Board of Directors deems relevant. See “Market Price of Common Stock—Dividend Policy.”

Directed share program
At our request, the underwriters have reserved for sale, at the initial public offering price, up to       shares offered by this prospectus for sale to our directors, executive officers, employees and business associates and certain other related persons. If these persons purchase reserved shares, it will reduce the number of shares available for sale to the general public. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus.
Securities owned by directors and executive officers
As of June 30, 2019, our directors and executive officers beneficially owned 10.36% of our outstanding common stock. Following the completion of this offering, we anticipate that our directors and executive officers will beneficially own approximately      % of our common stock (or      % if the underwriters exercise their option to purchase additional shares of common stock in full). See “Principal and Selling Stockholders.”
Risk factors
Investing in shares of our common stock involves a high degree of risk. See “Risk Factors,” beginning on page 20, for a discussion of certain factors you should consider carefully before deciding to invest.
Listing
We have applied to list our common stock on the Nasdaq Global Select Market under the trading symbol “CFB.”

Unless otherwise indicated, all information in this prospectus relating to the number of shares of common stock to be outstanding immediately after the completion of this offering is based on 45,367,641 shares issued and outstanding as of June 30, 2019. Unless expressly indicated or the context otherwise requires, all information in this prospectus:

gives effect to a two-for-one stock split effected in the form of stock dividend completed on December 21, 2018, and the effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus;
assumes no exercise by the underwriters of their option to purchase up to an additional       shares of our common stock from us;
assumes that the shares of common stock sold in this offering are sold at $      per share, which is the midpoint of the price range set forth on the cover of this prospectus;
does not attribute to any director, executive officer or principal stockholder any purchases of shares of our common stock in this offering, including through the directed share program described in “Underwriting—Directed Share Program;”
excludes 2,466,363 shares of common stock issuable upon the exercise or settlement of equity awards and warrants outstanding at June 30, 2019; and
excludes 2,319,364 shares of common stock reserved and available for future awards under our CrossFirst Bankshares, Inc. 2018 Omnibus Equity Incentive Plan at June 30, 2019.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING INFORMATION

The following table sets forth (i) selected historical consolidated financial and operating data as of and for the three months ended March 31, 2019 and 2018 and as of and for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 and (ii) selected ratios as of and for the periods indicated. Selected financial data as of and for the years ended December 31, 2018 and 2017 has been derived from our audited consolidated financial statements included elsewhere in this prospectus, and the selected historical consolidated financial information as of and for the years ended December 31, 2016, 2015 and 2014 has been derived from our audited consolidated financial statements not appearing in this prospectus. We have derived selected financial data as of March 31, 2018 from our unaudited consolidated financial statements not included in this prospectus. Selected financial data as of and for the three months ended March 31, 2019 and for the three months ended March 31, 2018 has been derived from our unaudited consolidated financial statements included elsewhere in this prospectus and has not been audited, but in the opinion of our management, contain all adjustments (consisting of only normal or recurring adjustments) necessary to present fairly in all material respects our financial position and results of operations for the period in accordance with generally accepted accounting principles (“GAAP”). The historical results set forth below and elsewhere in this prospectus are not necessarily indicative of our future performance. The performance, asset quality and capital ratios are unaudited and derived from our audited and unaudited financial statements as of and for the periods presented. Average balances have been calculated using daily averages.

You should read the following financial data in conjunction with the other information contained in this prospectus, including under “Risk Factors,” “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the financial statements and related notes included elsewhere in this prospectus.

 
As of or for the
Three Months Ended
March 31,
As of or for the Year Ended
December 31,
 
2019
2018
2018
2017
2016
2015
2014
 
(Dollars in thousands, except per share data)
Income Statement Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
$
51,317
 
$
32,131
 
$
156,880
 
$
97,816
 
$
69,069
 
$
54,116
 
$
39,320
 
Interest expense
 
17,712
 
 
8,994
 
 
46,512
 
 
22,998
 
 
15,016
 
 
11,849
 
 
8,230
 
Net interest income
 
33,605
 
 
23,137
 
 
110,368
 
 
74,818
 
 
54,053
 
 
42,267
 
 
31,090
 
Provision for loan losses
 
2,850
 
 
3,000
 
 
13,500
 
 
12,000
 
 
6,500
 
 
5,975
 
 
3,915
 
Non-interest income
 
1,645
 
 
1,973
 
 
6,083
 
 
3,679
 
 
3,407
 
 
2,365
 
 
1,904
 
Non-interest expense
 
22,631
 
 
20,158
 
 
85,755
 
 
62,089
 
 
40,587
 
 
30,562
 
 
24,640
 
Income before taxes
 
9,769
 
 
1,952
 
 
17,196
 
 
4,408
 
 
10,373
 
 
8,095
 
 
4,439
 
Income tax expense (benefit)
 
419
 
 
(672
)
 
(2,394
)
 
(1,441
)
 
62
 
 
626
 
 
296
 
Net income
 
9,350
 
 
2,624
 
 
19,590
 
 
5,849
 
 
10,311
 
 
7,469
 
 
4,143
 
Preferred stock dividends
 
175
 
 
525
 
 
2,100
 
 
2,100
 
 
2,100
 
 
2,066
 
 
1,485
 
Net income available to common stockholders
 
9,175
 
 
2,099
 
 
17,490
 
 
3,749
 
 
8,211
 
 
5,403
 
 
2,658
 
Non-GAAP core operating income(1)
 
7,989
 
 
2,624
 
 
19,940
 
 
9,716
 
 
10,311
 
 
7,469
 
 
4,143
 
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
117,317
 
$
191,322
 
$
216,541
 
$
130,820
 
$
155,972
 
$
79,418
 
$
18,084
 
Available-for-sale securities
 
707,430
 
 
738,983
 
 
663,678
 
 
703,581
 
 
593,012
 
 
460,542
 
 
375,039
 
Gross loans (net of unearned income)
 
3,277,598
 
 
2,137,341
 
 
3,060,747
 
 
1,996,029
 
 
1,296,886
 
 
992,726
 
 
785,193
 
Allowance for loan losses
 
40,001
 
 
27,818
 
 
37,826
 
 
26,091
 
 
20,786
 
 
15,526
 
 
9,905
 
Goodwill and other intangibles
 
7,770
 
 
7,872
 
 
7,796
 
 
7,897
 
 
7,998
 
 
8,100
 
 
8,201
 
Total assets
 
4,266,369
 
 
3,206,791
 
 
4,107,215
 
 
2,961,118
 
 
2,133,106
 
 
1,574,346
 
 
1,220,281
 
Non-interest-bearing deposits
 
488,375
 
 
332,427
 
 
484,284
 
 
290,906
 
 
198,088
 
 
123,430
 
 
92,332
 
Total deposits
 
3,399,899
 
 
2,527,792
 
 
3,208,097
 
 
2,303,364
 
 
1,694,301
 
 
1,294,812
 
 
961,623
 
Borrowings and repurchase agreements
 
368,597
 
 
387,538
 
 
388,391
 
 
357,837
 
 
216,709
 
 
112,430
 
 
115,241
 
Preferred stock, liquidation value
 
 
 
30,000
 
 
30,000
 
 
30,000
 
 
30,000
 
 
30,000
 
 
28,614
 
Total stockholders’ equity
 
480,514
 
 
282,962
 
 
490,336
 
 
287,147
 
 
214,837
 
 
160,004
 
 
137,098
 

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As of or for the
Three Months Ended
March 31,
As of or for the Year Ended
December 31,
 
2019
2018
2018
2017
2016
2015
2014
 
(Dollars in thousands, except per share data)
Share and Per Share Data(2):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings per share
$
0.20
 
$
0.07
 
$
0.48
 
$
0.12
 
$
0.39
 
$
0.29
 
$
0.17
 
Diluted earnings per share
 
0.20
 
 
0.07
 
 
0.47
 
 
0.12
 
 
0.39
 
 
0.28
 
 
0.17
 
Book value per share
 
10.63
 
 
8.12
 
 
10.21
 
 
8.38
 
 
7.34
 
 
6.61
 
 
6.06
 
Tangible book value per share(3)
 
10.46
 
 
7.87
 
 
10.04
 
 
8.12
 
 
7.02
 
 
6.20
 
 
5.60
 
Weighted average common shares outstanding – basic
 
45,093,442
 
 
30,794,758
 
 
36,422,612
 
 
30,086,530
 
 
20,820,784
 
 
18,640,678
 
 
15,381,950
 
Weighted average common shares outstanding – diluted
 
45,960,267
 
 
32,097,870
 
 
37,492,567
 
 
30,963,424
 
 
21,305,874
 
 
19,378,290
 
 
15,611,950
 
Shares outstanding at end of period
 
45,202,370
 
 
31,135,720
 
 
45,074,322
 
 
30,686,256
 
 
25,194,872
 
 
19,661,718
 
 
17,908,862
 
Selected Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets(9)
 
0.91
%
 
0.35
%
 
0.56
%
 
0.24
%
 
0.56
%
 
0.53
%
 
0.41
%
Non-GAAP core operating return on average assets(4)(9)
 
0.78
 
 
0.35
 
 
0.57
 
 
0.40
 
 
0.56
 
 
0.53
 
 
0.41
 
Return on average common equity(9)
 
7.98
 
 
3.38
 
 
5.34
 
 
1.53
 
 
5.51
 
 
4.60
 
 
3.08
 
Non-GAAP core operating return on average common equity(5)(9)
 
6.79
 
 
3.38
 
 
5.45
 
 
3.11
 
 
5.51
 
 
4.60
 
 
3.08
 
Yield on earning assets - tax equivalent(6)
 
5.25
 
 
4.53
 
 
4.77
 
 
4.37
 
 
4.08
 
 
4.14
 
 
4.25
 
Yield on securities - tax equivalent(6)
 
3.59
 
 
3.66
 
 
3.62
 
 
3.85
 
 
3.63
 
 
3.72
 
 
3.69
 
Yield on loans
 
5.75
 
 
5.09
 
 
5.34
 
 
4.89
 
 
4.60
 
 
4.62
 
 
5.01
 
Cost of funds
 
1.96
 
 
1.31
 
 
1.49
 
 
1.06
 
 
0.91
 
 
0.94
 
 
0.92
 
Cost of interest-bearing deposits
 
2.30
 
 
1.42
 
 
1.71
 
 
1.12
 
 
0.96
 
 
1.01
 
 
0.98
 
Cost of total deposits
 
1.96
 
 
1.24
 
 
1.44
 
 
0.99
 
 
0.87
 
 
0.91
 
 
0.88
 
Net interest margin - tax equivalent(6)
 
3.46
 
 
3.29
 
 
3.39
 
 
3.40
 
 
3.24
 
 
3.27
 
 
3.40
 
Non-interest expense to average assets
 
2.20
 
 
2.66
 
 
2.45
 
 
2.53
 
 
2.21
 
 
2.17
 
 
2.45
 
Efficiency ratio(7)
 
64.20
 
 
80.28
 
 
73.64
 
 
79.10
 
 
70.64
 
 
68.48
 
 
74.68
 
Non-GAAP core operating efficiency ratio(8)
 
64.20
 
 
80.28
 
 
69.47
 
 
77.23
 
 
70.64
 
 
68.48
 
 
74.68
 
Non-interest-bearing deposits to total deposits
 
14.36
 
 
13.15
 
 
15.10
 
 
12.63
 
 
11.69
 
 
9.53
 
 
9.60
 
Loans to deposits
 
96.40
 
 
84.55
 
 
95.41
 
 
86.66
 
 
76.54
 
 
76.67
 
 
81.65
 
Credit Quality Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for loans losses to total loans
 
1.22
%
 
1.30
%
 
1.23
%
 
1.30
%
 
1.60
%
 
1.56
%
 
1.26
%
Nonperforming assets to total assets
 
0.36
 
 
0.69
 
 
0.43
 
 
0.18
 
 
0.20
 
 
0.08
 
 
0.27
 
Nonperforming loans to total loans
 
0.40
 
 
1.04
 
 
0.58
 
 
0.27
 
 
0.33
 
 
0.12
 
 
0.41
 
Allowance for loans losses to nonperforming loans
 
307.27
 
 
125.33
 
 
212.30
 
 
481.68
 
 
493.14
 
 
1,336.38
 
 
310.43
 
Net charge-offs to average loans(9)
 
0.09
 
 
0.25
 
 
0.07
 
 
0.44
 
 
0.11
 
 
0.04
 
 
0.02
 
Capital Ratios:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total stockholders’ equity to total assets
 
11.26
%
 
8.82
%
 
11.94
%
 
9.70
%
 
10.07
%
 
10.16
%
 
11.23
%
Tier 1 leverage ratio
 
11.15
 
 
8.97
 
 
12.43
 
 
9.71
 
 
10.48
 
 
9.72
 
 
13.51
 
Common equity tier 1 capital ratio
 
11.23
 
 
8.26
 
 
11.75
 
 
8.62
 
 
9.78
 
 
8.50
 
 
N/A
 
Tier 1 risk-based capital ratio
 
11.23
 
 
9.26
 
 
12.53
 
 
9.70
 
 
11.38
 
 
10.70
 
 
10.58
 
Total risk-based capital ratio
 
12.20
 
 
10.20
 
 
13.51
 
 
10.65
 
 
12.51
 
 
11.82
 
 
12.50
 

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(1)We calculate “non-GAAP core operating income” as net income adjusted to remove non-recurring or non-core income and expense items related to restructuring charges associated with our CEO transition, impairment charges associated with two buildings that were held-for-sale, state tax credits and a one-time charge to income related to the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”). Non-GAAP core operating income is a non-GAAP financial measure. The most directly comparable measure under GAAP is net income. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this measure.
(2)All share and per share information reflects the two-for-one stock split of our common stock effected in the form of a stock dividend, whereby each holder of our common stock received one additional share of common stock for each share owned as of the record date of December 19, 2018, which was distributed on December 21, 2018. The effect of the stock dividend on outstanding shares and per share figures has been retroactively applied to all periods presented in this prospectus.
(3)We calculate “tangible book value per share” as total stockholders’ equity less goodwill and intangible assets and preferred stock divided by the number of outstanding shares of our common stock at the end of the relevant period. Tangible book value per share is a non-GAAP financial measure. The most directly comparable GAAP measure is book value per share. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this measure.
(4)We calculate “non-GAAP core operating return on average assets” as non-GAAP core operating income (defined above) divided by average assets. Non-GAAP core operating return on average asset is a non-GAAP financial measure. The most directly comparable GAAP financial measure is return on average assets. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this measure.
(5)We calculate “non-GAAP core operating return on average common equity” as non-GAAP core operating income (defined above) less preferred dividends divided by average common equity. Non-GAAP core operating return on average common equity is a non-GAAP financial measure. The most directly comparable GAAP financial measure is return on average common equity. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this measure.
(6)Tax-exempt income is calculated on a tax equivalent basis. Tax-exempt income includes municipal securities, which are exempt from federal taxation. A tax rate of 21% is used for fiscal year 2018 and interim periods and a tax rate of 35% is used for fiscal years 2017 and prior.
(7)We calculate efficiency ratio as non-interest expense divided by the sum of net interest income and non-interest income.
(8)We calculate non-GAAP core operating efficiency ratio” as non-interest expense adjusted to remove non-recurring non-interest expenses as defined under non-GAAP core operating income divided by the sum of net interest income and non-interest income. Non-GAAP core operating efficiency ratio is a non-GAAP financial measure. The most directly comparable GAAP financial measure is the efficiency ratio. See “GAAP Reconciliation and Management Explanation of Non-GAAP Financial Measures” for a reconciliation of this measure.
(9)Interim periods are annualized.

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GAAP RECONCILIATION AND MANAGEMENT EXPLANATION
OF NON-GAAP FINANCIAL MEASURES

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. Some of the financial measures included in this prospectus are not measures of financial performance recognized by GAAP. These non-GAAP financial measures are used by management to evaluate our performance. A financial measure is considered non-GAAP if the measure (i) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in its most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows of the issuer or (ii) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure calculated and presented in accordance with GAAP.

The non-GAAP financial measures that we discuss in this prospectus should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting measures with similar names. It is important to understand how other banking organizations calculate their financial measures with names similar to the non-GAAP financial measures we have discussed in this prospectus when comparing such non-GAAP financial measures.

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

Restructuring charges associated with the transition of our former CEO - In connection with the departure of our former CEO in the second quarter of 2018, we incurred restructuring charges related to the acceleration of certain stock-based compensation and employee costs.
Impairment charges associated with two buildings that were held-for-sale - We acquired a new, larger corporate headquarters to accommodate our business needs, which eliminated the need for two smaller support buildings. The two smaller support buildings had been acquired recently and were extensively remodeled, which resulted in a difference between book and market value for those assets. We sold one of the buildings in 2018.
State tax credits as a result of the purchase and improvement of our new corporate headquarters − We acquired a new, larger corporate headquarters to accommodate our business needs. Our purchase and improvement of the new headquarters resulted in state tax credits.
One-time charge to income related to the 2017 Tax Act - Our corporate income tax rate was reduced as a result of the 2017 Tax Act, which caused a revaluation of our deferred tax assets and liabilities. We were required to write down the value of the net deferred tax assets based upon the difference between the then current tax rate and the new tax rate, resulting in a one-time charge to income.

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

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

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

Management believes that non-GAAP core operating income, non-GAAP core operating return on average assets and non-GAAP core operating return on average common equity removes events that are not recurring and not part of core business activities and are useful analytical tools for investors to compare periods excluding these non-recurring or non-core expenses and charges.

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The following table reconciles, as of the dates set forth below, net income to non-GAAP core operating income, non-GAAP core operating return on average assets and non-GAAP core operating return on average common equity:

 
As of or for the
Three Months Ended
March 31,
As of or for the Year Ended
December 31,
 
2019
2018
2018
2017
2016
2015
2014
 
(Dollars in thousands)
Non-GAAP core operating income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
9,350
 
$
2,624
 
$
19,590
 
$
5,849
 
$
10,311
 
$
7,469
 
$
4,143
 
Add: Restructuring charges
 
 
 
 
 
4,733
 
 
 
 
 
 
 
 
 
Less: Tax effect(1)
 
 
 
 
 
1,381
 
 
 
 
 
 
 
 
 
Restructuring charges, net of tax
 
 
 
 
 
3,352
 
 
 
 
 
 
 
 
 
Add: Fixed asset impairments
 
 
 
 
 
171
 
 
1,903
 
 
 
 
 
 
 
Less: Tax effect(2)
 
 
 
 
 
44
 
 
737
 
 
 
 
 
 
 
Fixed asset impairments, net of tax
 
 
 
 
 
127
 
 
1,166
 
 
 
 
 
 
 
Add: State tax credit(3)
 
(1,361
)
 
 
 
(3,129
)
 
 
 
 
 
 
 
 
Add: 2017 Tax Cut and Jobs Act(3)
 
 
 
 
 
 
 
2,701
 
 
 
 
 
 
 
Non-GAAP core operating income
$
7,989
 
$
2,624
 
$
19,940
 
$
9,716
 
$
10,311
 
$
7,469
 
$
4,143
 
Non-GAAP core operating return on average assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
9,350
 
$
2,624
 
$
19,590
 
$
5,849
 
$
10,311
 
$
7,469
 
$
4,143
 
Non-GAAP core operating income
 
7,989
 
 
2,624
 
 
19,940
 
 
9,716
 
 
10,311
 
 
7,469
 
 
4,143
 
Average assets
 
4,168,243
 
 
3,071,454
 
 
3,494,655
 
 
2,452,797
 
 
1,839,563
 
 
1,410,447
 
 
1,003,991
 
GAAP return on average assets(4)
 
0.91
%
 
0.35
%
 
0.56
%
 
0.24
%
 
0.56
%
 
0.53
%
 
0.41
%
Non-GAAP core operating return on average assets(4)
 
0.78
%
 
0.35
%
 
0.57
%
 
0.40
%
 
0.56
%
 
0.53
%
 
0.41
%
Non-GAAP core operating return on average equity:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
$
9,350
 
$
2,624
 
$
19,590
 
$
5,849
 
$
10,311
 
$
7,469
 
$
4,143
 
Non-GAAP core operating income
 
7,989
 
 
2,624
 
 
19,940
 
 
9,716
 
 
10,311
 
 
7,469
 
 
4,143
 
Less: Preferred stock dividends
 
175
 
 
525
 
 
2,100
 
 
2,100
 
 
2,100
 
 
2,066
 
 
1,485
 
Net income available to common stockholders
 
9,175
 
 
2,099
 
 
17,490
 
 
3,749
 
 
8,211
 
 
5,403
 
 
2,658
 
Non-GAAP core operating income available to common stockholders
 
7,814
 
 
2,099
 
 
17,840
 
 
7,616
 
 
8,211
 
 
5,403
 
 
2,658
 
Average common equity
 
466,506
 
 
251,704
 
 
327,446
 
 
245,193
 
 
149,132
 
 
117,343
 
 
86,273
 
GAAP return on average equity(4)
 
7.98
%
 
3.38
%
 
5.34
%
 
1.53
%
 
5.51
%
 
4.60
%
 
3.08
%
Non-GAAP core operating return on average equity(4)
 
6.79
%
 
3.38
%
 
5.45
%
 
3.11
%
 
5.51
%
 
4.60
%
 
3.08
%
(1)Represents the tax impact of the adjustments above at a tax rate of 25.73%, plus a permanent tax benefit associated with stock-based grants that were exercised prior to our former CEO’s departure.
(2)Represents the tax impact of the adjustments above at a tax rate of 25.73% for fiscal year 2018 and 38.73% for fiscal years prior to 2018.
(3)No tax effect associated with the 2017 Tax Act adjustment or state tax credit.
(4)Interim periods have been annualized.

We calculate “tangible common stockholders’ equity” as total stockholders’ equity less goodwill and other intangible assets and preferred stock. The most directly comparable GAAP financial measure is total stockholders’ equity.

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

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

 
As of or for the
Three Months Ended
March 31,
As of or for the Year Ended
December 31,
 
2019
2018
2018
2017
2016
2015
2014
 
(Dollars in thousands, except per share data)
Tangible common stockholders’ equity and tangible book value per share: