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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from ______ to ______

Commission file number 001-39028

CROSSFIRST BANKSHARES, INC.
(Exact Name of Registrant as Specified in its Charter)

Kansas26-3212879
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
11440 Tomahawk Creek Parkway
Leawood,KS66211
(Address of principal executive offices)(Zip Code)
(913) 312-6822
(Registrant’s telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01 per shareCFBThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2021, the registrant had 51,580,761 shares of common stock, par value $0.01, outstanding.


CrossFirst Bankshares, Inc.
Form 10-Q for the Quarter Ended March 31, 2021
Index
Part I. Financial Information
Item 1. Financial Statements
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II. Other Information
Signatures

2
Table of Contents
Forward-Looking Information
This report may contain forward-looking statements that reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature.
These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such possible events or factors include: risks associated with the current outbreak of the novel coronavirus, or the COVID-19 pandemic, changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, governmental legislation and regulation, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company’s market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, and such other factors as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021, any subsequent quarterly report on Form 10-Q as well as in our other filings with the SEC.
We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
3
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CROSSFIRST BANKSHARES, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2021December 31, 2020
(Unaudited)
(Dollars in thousands)
Assets
Cash and cash equivalents$630,787 $408,810 
Available-for-sale securities - taxable192,031 177,238 
Available-for-sale securities - tax-exempt493,423 477,350 
 Loans, net of allowance for loan losses of $74,551 and $75,295 at March 31, 2021 and December 31, 2020, respectively
4,434,049 4,366,602 
Premises and equipment, net69,270 70,509 
Restricted equity securities14,080 15,543 
Interest receivable17,987 17,236 
Foreclosed assets held for sale2,347 2,347 
Bank-owned life insurance67,914 67,498 
Other76,186 56,170 
Total assets$5,998,074 $5,659,303 
Liabilities and stockholders’ equity
Deposits
Noninterest-bearing$794,559 $718,459 
Savings, NOW and money market3,325,220 2,932,799 
Time931,791 1,043,482 
Total deposits5,051,570 4,694,740 
Federal funds purchased and repurchase agreements3,294 2,306 
Federal Home Loan Bank advances283,100 293,100 
Other borrowings974 963 
Interest payable and other liabilities30,302 43,766 
Total liabilities5,369,240 5,034,875 
Stockholders’ equity
Common stock, $0.01 par value:
authorized - 200,000,000 shares, issued - 52,376,779 and 52,289,129 shares at March 31, 2021 and December 31, 2020, respectively
523 523 
Treasury stock, at cost:
698,110 and 609,613 shares held at March 31, 2021 and December 31, 2020, respectively
(7,113)(6,061)
Additional paid-in capital523,156 522,911 
Retained earnings89,722 77,652 
Accumulated other comprehensive income22,546 29,403 
Total stockholders’ equity628,834 624,428 
Total liabilities and stockholders’ equity$5,998,074 $5,659,303 

See Notes to Consolidated Financial Statements (unaudited)
4
Table of Contents
CROSSFIRST BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
Three Months Ended
March 31,
20212020
(Dollars in thousands except per share data)
Interest Income
Loans, including fees$43,758 $48,339 
Available-for-sale securities - taxable751 1,774 
Available-for-sale securities - tax-exempt3,351 3,312 
Deposits with financial institutions128 491 
Dividends on bank stocks165 292 
Total interest income48,153 54,208 
Interest Expense
Deposits5,728 14,272 
Fed funds purchased and repurchase agreements1 62 
Federal Home Loan Bank Advances1,283 1,611 
Other borrowings24 35 
Total interest expense7,036 15,980 
Net Interest Income41,117 38,228 
Provision for Loan Losses7,500 13,950 
Net Interest Income after Provision for Loan Losses33,617 24,278 
Non-Interest Income
Service charges and fees on customer accounts957 508 
Realized gains on available-for-sale securities10 393 
Income from bank-owned life insurance416 456 
Swap fees and credit valuation adjustments, net155 (9)
ATM and credit card interchange income2,328 485 
Other non-interest income278 254 
Total non-interest income4,144 2,087 
Non-Interest Expense
Salaries and employee benefits13,553 14,390 
Occupancy2,494 2,085 
Professional fees782 671 
Deposit insurance premiums1,151 1,016 
Data processing716 692 
Advertising303 500 
Software and communication1,065 876 
Foreclosed assets, net50 10 
Other non-interest expense2,704 1,975 
Total non-interest expense22,818 22,215 
Net Income Before Taxes14,943 4,150 
Income tax expense 2,908 293 
Net Income$12,035 $3,857 
Basic Earnings Per Share$0.23 $0.07 
Diluted Earnings Per Share$0.23 $0.07 

See Notes to Consolidated Financial Statements (unaudited)
5
Table of Contents
CROSSFIRST BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - UNAUDITED
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Net Income$12,035 $3,857 
Other Comprehensive Income (Loss)
Unrealized gain (loss) on available-for-sale securities(9,070)8,532 
Less: income tax expense (benefit)(2,221)2,084 
Unrealized gain (loss) on available-for-sale securities, net of income tax
(6,849)6,448 
Reclassification adjustment for realized gains included in income
10 393 
Less: income tax2 96 
Less: reclassification adjustment for realized gains included in income, net of income tax
8 297 
Other comprehensive income (loss)(6,857)6,151 
Comprehensive Income$5,178 $10,008 

See Notes to Consolidated Financial Statements (unaudited)
6
Table of Contents
CROSSFIRST BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED
Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive IncomeTreasury StockTotal
SharesAmount
(Dollars in thousands)
Balance at December 31, 2019
51,969,203 $520 $519,870 $64,803 $16,451 $— $601,644 
Net income— — — 3,857 — — 3,857 
Change in unrealized appreciation on available-for-sale securities
— — — — 6,151 — 6,151 
Issuance of shares from equity-based awards128,859 1 (671)— — — (670)
Employee receivables from sale of stock— — 1 29 — — 30 
Stock-based compensation— — 934 — — — 934 
Balance at March 31, 2020
52,098,062 $521 $520,134 $68,689 $22,602 $— $611,946 

Common StockAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive IncomeTreasury StockTotal
SharesAmount
(Dollars in thousands)
Balance at December 31, 2020
51,679,516 $523 $522,911 $77,652 $29,403 $(6,061)$624,428 
Net income— — — 12,035 — — 12,035 
Change in unrealized depreciation on available-for-sale securities
— — — — (6,857)— (6,857)
Issuance of shares from equity-based awards87,650 — (404)— — — (404)
Open market common share repurchases(88,497)— — — — (1,052)(1,052)
Employee receivables from sale of stock— — — 35 — — 35 
Stock-based compensation— — 649 — — — 649 
Balance at March 31, 2021
51,678,669 $523 $523,156 $89,722 $22,546 $(7,113)$628,834 

See Notes to Consolidated Financial Statements (unaudited)
7
Table of Contents
CROSSFIRST BANKSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Operating Activities
Net income$12,035 $3,857 
Items not requiring (providing) cash
Depreciation and amortization1,375 1,295 
Provision for loan losses7,500 13,950 
Accretion of discounts and amortization of premiums on securities1,310 1,473 
Equity based compensation649 934 
Deferred income taxes1,824 2,881 
Net realized gains on available-for-sale securities(10)(393)
Changes in
Interest receivable(751)(1,242)
Other assets(28,730)(717)
Other liabilities(4,937)(9,368)
Net cash provided by (used in) operating activities(9,735)12,670 
Investing Activities
Net change in loans(74,947)(169,595)
Purchases of available-for-sale securities(74,575)(11,861)
Proceeds from maturities of available-for-sale securities33,329 21,528 
Proceeds from sale of available-for-sale securities— 3,841 
Purchase of premises and equipment(118)(331)
Purchase of restricted equity securities— (970)
Proceeds from sale of restricted equity securities1,626 — 
Net cash used in investing activities(114,685)(157,388)
Financing Activities
Net increase in demand deposits, savings, NOW and money market accounts
468,521 185,747 
Net decrease in time deposits(111,691)(136,684)
Net increase in fed funds purchased and repurchase agreements988 24,025 
Proceeds from Federal Home Loan Bank advances— 70,000 
Repayment of Federal Home Loan Bank advances(10,000)(26,063)
Issuance of common shares, net of issuance cost— 1 
Repurchase of common stock(1,052)— 
Acquisition of common stock for tax withholding obligations(404)(671)
Net decrease in employee receivables35 30 
Net cash provided by financing activities346,397 116,385 
Increase (Decrease) in Cash and Cash Equivalents221,977 (28,333)
Cash and Cash Equivalents, Beginning of Period408,810 187,320 
Cash and Cash Equivalents, End of Period$630,787 $158,987 
Supplemental Cash Flows Information
Interest paid$7,287 $17,199 
Income taxes paid$130 $— 

See Notes to Consolidated Financial Statements (unaudited)
8
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”) that holds investments in marketable securities, CFBSA I, LLC that holds foreclosed assets and CFBSA II, LLC that holds foreclosed assets.
Basis of Presentation
The Company’s accounting and reporting policies conform to accounting principles generally accepted in the United States (“GAAP”). The consolidated financial statements include the accounts of the Company, the Bank, CFI, CFBSA I, LLC and CFBSA II, LLC. All significant intercompany accounts and transactions have been eliminated in consolidation.
The consolidated interim financial statements are unaudited and certain information and footnote disclosures presented in accordance with GAAP have been condensed or omitted and should be read in conjunction with the Company’s consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”), filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2021.
In the opinion of management, the interim financial statements include all adjustments which are of a normal, recurring nature necessary for the fair presentation of the financial position, results of operations, and cash flows of the Company and the disclosures made are adequate to make the interim financial information not misleading. The consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q adopted by the SEC.
No significant changes in the accounting policies of the Company occurred since December 31, 2020, the most recent date financial statements were provided within the Company’s 2020 Form 10-K. Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period.
Use of Estimates
The Company identified accounting policies and estimates that, due to the difficult, subjective or complex judgments and assumptions inherent in those policies and estimates and the potential sensitivity of the Company’s financial statements to those judgments and assumptions, are critical to an understanding of the Company’s financial condition and results of operations. Actual results could differ from those estimates. In particular, the novel coronavirus (“COVID-19”) pandemic and resulting impacts to economic conditions, as well as adverse impacts to the Company’s operations, may impact future estimates. The allowance for loan losses, deferred tax asset, and fair value of financial instruments are particularly susceptible to significant change.
Cash Equivalents
The Company had $541 million of cash and cash equivalents at the Federal Reserve Bank of Kansas City as of March 31, 2021. The reserve required at March 31, 2021 was $0.
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
The CARES Act gave financial institutions the right to elect to suspend GAAP principles and regulatory determinations for loan modifications relating to COVID-19 that would otherwise be categorized as TDRs from March 1, 2020, through December 31, 2020. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law, which extended the period during which the Company may suspend GAAP principles and regulatory determinations for loan modifications relating to COVID-19 that would otherwise be categorized as TDRs through January 1, 2022 or 60 days after the date when the national emergency concerning COVID-19 terminates. The Company elected to apply the guidance starting in the first quarter of 2020.
Changes Affecting Comparability
Beginning with the quarter ended March 31, 2021, the Company consolidated the “Goodwill and other intangible assets, net” into “other assets” within the Consolidated Balance Sheets. The consolidation was due to the immateriality of the remaining intangible assets. The change had no impact on net income.
9
Notes to Consolidated Financial Statements (unaudited)
For the quarter ended March 31, 2021, the Company consolidated “equipment costs, other asset depreciation and amortization” into “other noninterest expense” within the Consolidated Statements of Income. In addition, the Company broke out “foreclosed assets, net” that was previously consolidated. As a result, changes within the Consolidated Statements of Income in the prior periods were made to conform to the current period presentation. The changes: (i) consolidate lower balance line items or (ii) provide additional detail about the Company’s operations. The changes had no impact on net income.
Emerging Growth Company (“EGC”)
The Company is currently an EGC. 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. Among the reductions and reliefs, the Company elected to extend the transition period for complying with new or revised accounting standards affecting public companies. This means that the financial statements the Company files or furnishes, will not be subject to all new or revised accounting standards generally applicable to public companies for the transition period for so long as the Company remains an EGC or until the Company affirmatively and irrevocably opts out of the extended transition period under the JOBS Act.
Recent Accounting Pronouncements
The following table provides information about Accounting Standard Updates (“ASUs”) the Company anticipates to adopt in the future:
StandardAnticipated Date of AdoptionDescriptionEffect on Financial Statements or Other Significant Matters
ASU 2016-13

Financial Instruments-Credit Losses
If the Company maintains its EGC status, the Company is not required to implement this standard until January 2023. The Company anticipates an adoption date of January 2022.Requires an entity to utilize a new impairment model known as the current expected credit loss model to estimate its lifetime expected credit loss and record an allowance that, when deducted from amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset.The Company established a committee of individuals from applicable departments to oversee the implementation process. The Company completed the third-party software implementation phase that included data capture and portfolio segmentation amongst other items.

The Company completed parallel runs in 2019. During the period ended December 31, 2020, the Company continued to perform parallel runs using 2020 data and continued to recalibrate inputs as necessary. The Company is evaluating the internal control changes that will be necessary to transition to the third-party platform and third-party testing is anticipated later in 2021.

At this time, an estimate of the impact cannot be established as the Company continues to evaluate the inputs into the model. The actual impact could be significantly affected by the composition, characteristics, and quality of the underlying loan portfolio at the time of adoption.
ASU 2016-02

Leases (Topic 842)
The Company expects to implement this standard on January 1, 2022, unless the Company loses its EGC status during 2021. If EGC status changes, the Company would therefore be required to implement the ASU as of the beginning of 2021.Requires lessees and lessors to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements.

The update requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach with the option to elect certain practical expedients. The update will also increase disclosures around leases, including qualitative and specific quantitative measures.		The Company expects to apply the update as of the beginning of the period of adoption and the Company does not plan to restate comparative periods. The Company expects to elect certain optional practical expedients.

The Company gathered all potential lease and embedded lease agreements and is evaluating the applicability and impact to the financial statements.

The Company’s current operating leases relate primarily to four branch locations. Based on the current leases, the Company anticipates recognizing a lease liability and related right-to-use asset on its balance sheet, with an immaterial impact to its income statement compared to the current lease accounting model. However, the ultimate impact of the standard will depend on the Company's lease portfolio as of the adoption date.

10
Notes to Consolidated Financial Statements (unaudited)
Note 2:Earnings Per Share
The following table presents the computation of basic and diluted earnings per share:
Three Months Ended
March 31,
20212020
(Dollars in thousands except per share data)
Earnings per Share
Net income available to common stockholders$12,035 $3,857 
Weighted average common shares
51,657,204 52,071,484 
Earnings per share$0.23 $0.07 
Dilutive Earnings Per Share
Net income available to common stockholders$12,035 $3,857 
Weighted average common shares
51,657,204 52,071,484 
Effect of dilutive shares
724,270 588,786 
Weighted average dilutive common shares
52,381,474 52,660,270 
Diluted earnings per share$0.23 $0.07 
Stock-based awards not included because to do so would be antidilutive
669,112 905,406 

11
Notes to Consolidated Financial Statements (unaudited)
Note 3:Securities
The amortized cost and approximate fair values, together with gross unrealized gains and losses, of period end available-for-sale securities consisted of the following:
March 31, 2021
Amortized CostGross Unrealized GainsGross Unrealized LossesApproximate Fair Value
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential$138,231 $2,912 $1,464 $139,679 
Collateralized mortgage obligations - GSE residential
38,206 785 26 38,965 
State and political subdivisions474,912 28,517 862 502,567 
Corporate bonds4,251 74 82 4,243 
Total available-for-sale securities$655,600 $32,288 $2,434 $685,454 

December 31, 2020
Amortized CostGross Unrealized GainsGross Unrealized LossesApproximate Fair Value
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential$104,839 $4,277 $— $109,116 
Collateralized mortgage obligations - GSE residential
52,070 984 42 53,012 
State and political subdivisions454,486 33,642 31 488,097 
Corporate bonds4,259 104 — 4,363 
Total available-for-sale securities$615,654 $39,007 $73 $654,588 
12
Notes to Consolidated Financial Statements (unaudited)
The amortized cost and fair value of available-for-sale securities at March 31, 2021, by contractual maturity, are shown below:
March 31, 2021
WithinAfter One toAfter Five toAfter
One YearFive YearsTen YearsTen YearsTotal
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential(1)
Amortized cost$— $48 $181 $138,002 $138,231 
Estimated fair value$— $50 $193 $139,436 $139,679 
Weighted average yield(2)
— %4.60 %3.91 %1.72 %1.72 %
Collateralized mortgage obligations - GSE residential(1)
Amortized cost$— $— $2,469 $35,737 $38,206 
Estimated fair value$— $— $2,645 $36,320 $38,965 
Weighted average yield(2)
— %— %2.75 %1.59 %1.66 %
State and political subdivisions
Amortized cost$652 $5,947 $65,518 $402,795 $474,912 
Estimated fair value$654 $6,024 $70,889 $425,000 $502,567 
Weighted average yield(2)
3.54 %3.86 %3.32 %2.82 %2.90 %
Corporate bonds
Amortized cost$— $357 $3,894 $— $4,251 
Estimated fair value$— $366 $3,877 $— $4,243 
Weighted average yield(2)
— %4.10 %4.54 %— %4.51 %
Total available-for-sale securities
Amortized cost$652 $6,352 $72,062 $576,534 $655,600 
Estimated fair value$654 $6,440 $77,604 $600,756 $685,454 
Weighted average yield(2)
3.54 %3.88 %3.37 %2.48 %2.59 %
(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.

13
Notes to Consolidated Financial Statements (unaudited)
The following tables show the number of securities, unrealized loss, and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired (“OTTI”), aggregated by investment class and length of time that individual securities have been in a continuous unrealized loss position at March 31, 2021 and December 31, 2020:
March 31, 2021
Less than 12 Months12 Months or MoreTotal
Fair ValueUnrealized LossesNumber of SecuritiesFair ValueUnrealized LossesNumber of SecuritiesFair ValueUnrealized LossesNumber of Securities
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential
$55,185 $1,464 8$— $— —$55,185 $1,464 8
Collateralized mortgage obligations - GSE residential
7,591 26 6— — —7,591 26 6
State and political subdivisions
44,008 861 3224 1 144,032 862 33
Corporate bonds3,418 82 1— — —3,418 82 1
Total temporarily impaired securities
$110,202 $2,433 47$24 $1 1$110,226 $2,434 48

December 31, 2020
Less than 12 Months12 Months or MoreTotal
Fair ValueUnrealized LossesNumber of SecuritiesFair ValueUnrealized LossesNumber of SecuritiesFair ValueUnrealized LossesNumber of Securities
(Dollars in thousands)
Available-for-sale securities
Mortgage-backed - GSE residential
$— $— —$— $— —$— $— —
Collateralized mortgage obligations - GSE residential
9,933 42 5— — —9,933 42 5
State and political subdivisions
8,525 31 825 — 18,550 31 9
Corporate bonds— — —— — —— — —
Total temporarily impaired securities$18,458 $73 13$25 $— 1$18,483 $73 14

The Company expects to recover the amortized cost basis over the term of the securities. The Company does not intend to sell the investments and it is not more likely than not the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity.
Gains and losses on the sale of debt securities are recorded on the trade date and are determined using the specific identification method. Gross gains of $21 thousand and $402 thousand and gross losses of $11 thousand and $9 thousand resulting from sales of available-for-sale securities were realized for the three months ended March 31, 2021 and 2020, respectively. The gross gains as of March 31, 2020, included $75 thousand related to a previously disclosed OTTI municipal security that was settled in 2020.

14
Notes to Consolidated Financial Statements (unaudited)
Equity Securities
Equity securities consist of a $2 million investment in a Community Reinvestment Act (“CRA”) mutual fund and an $11 million privately-held security acquired in the fourth quarter of 2020 as part of a debt restructuring. Equity securities are included in “other assets” on the Consolidated Balance Sheets.
The privately-held security was acquired in partial satisfaction of debts previously contracted. The Company elected a measurement alternative that allows the security to remain at cost until an impairment is identified or an observable price change for an identical or similar investment of the same issuer occurs. Impairment is recorded when there is evidence that the expected fair value of the investment has declined to below the recorded cost. No changes to the cost basis occurred during the first quarter of 2021. The Company is required to make good faith efforts to dispose of the security. The shares may be held for a maximum of five years, subject to a five-year extension that would result in a change to Tier 1 capital.
The following is a summary of the unrealized and realized gains and losses recognized in net income on equity securities:
Three Months Ended
March 31,
20212020
(Dollars in thousands)
Net gains (losses) recognized during the reporting period on equity securities$(39)$34 
Less: net gains recognized during the reporting period on equity securities sold during the reporting period
— — 
Unrealized gain (losses) recognized during the reporting period on equity securities still held at the reporting date
$(39)$34 

Note 4:Loans and Allowance for Loan Losses (“ALLL”)
Categories of loans at March 31, 2021 and December 31, 2020 include:
March 31, 2021December 31, 2020
(Dollars in thousands)
Commercial$1,284,047 $1,338,757 
Energy342,899 345,233 
Commercial real estate1,191,634 1,179,534 
Construction and land development617,200 563,144 
Residential and multifamily real estate687,893 680,932 
Paycheck Protection Program (“PPP”)336,355 292,230 
Consumer62,917 55,270 
Gross loans4,522,945 4,455,100 
Less: Allowance for loan losses74,551 75,295 
Less: Net deferred loan fees and costs14,345 13,203 
Net loans$4,434,049 $4,366,602 
Allowance for Loan Losses
The ALLL is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the loan balance is not collectible. Subsequent recoveries, if any, are credited to the allowance.
The ALLL is evaluated on a regular basis by management and is based upon management’s periodic review of its ability to collect the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.
The ALLL consists of allocated and general components. The allocated component relates to loans that are classified as impaired. For those loans that are classified as impaired, an allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers all loans on
15
Notes to Consolidated Financial Statements (unaudited)
accrual and is based on historical charge-off experience and expected loss given default derived from the Company’s internal risk rating process and loan categories. Other adjustments may be made to the allowance for pools of loans after an assessment of internal or external influences on credit quality that are not fully reflected in the historical loss or risk rating data.
The Company evaluates the loan risk grading system definitions, portfolio segment definitions and ALLL methodology on an ongoing basis. No changes to loan definitions, segmentation, and ALLL methodology occurred during the first quarter of 2021.