UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, ~~2023~~2024

☐ 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: 001-35654

NATIONAL BANK HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware		27-0563799
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7800 East Orchard Road, Suite 300, Greenwood Village, Colorado 80111

(Address of principal executive offices) (Zip Code)

Registrant’s telephone, including area code: (303) 892-8715

Securities registered pursuant to Section 12(b) of the Act:


Title of each class:	Trading Symbol	Name of each exchange on which registered:
Class A Common Stock	NBHC	NYSE

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 (§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 ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~May 5, 2023,~~April 26, 2024, the registrant had outstanding ~~37,710,702~~37,825,413 shares of Class A voting common stock, each with $0.01 par value per share, excluding ~~195,287~~378,082 shares of restricted Class A common stock issued but not yet vested.


		Page
Part I. Financial Information

Item 1.	Financial Statements (Unaudited)	6

	Consolidated Statements of Financial Condition as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023	6

	Consolidated Statements of Operations for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023	7

	Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023	8

	Consolidated Statements of Changes in Shareholders’ Equity for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023	9

	Consolidated Statements of Cash Flows for the three months ended March 31, ~~2023~~2024 and ~~2022~~2023	10

	Notes to Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4846

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7470

Item 4.	Controls and Procedures	7470

Part II. Other Information

Item 1.	Legal Proceedings	7672

Item 1A.	Risk Factors	7672

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7772

Item 5.	Other Information	7772

Item 6.	Exhibits	7873

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, notwithstanding that such statements are not specifically identified. Any statements about our expectations, beliefs, plans, predictions, forecasts, objectives, assumptions or future events or performance are not historical facts and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “anticipate,” “believe,” “can,” “would,” “should,” “could,” “may,” “predict,” “seek,” “potential,” “will,” “estimate,” “target,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “intend” and similar words or phrases. These statements are only predictions and involve estimates, known and unknown risks, assumptions and uncertainties. We have based these statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, liquidity, results of operations, business strategy and growth prospects.

Forward-looking statements involve certain important risks, uncertainties and other factors, any of which could cause actual results to differ materially from those in such statements and, therefore, you are cautioned not to place undue reliance on such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to:

● the impact of ~~recent high profile large bank closures, including~~ potential regulatory changes to capital requirements, treatment of investment securities and FDIC deposit insurance levels and ~~costs, along with potential changes in short-term and long-term consumer behavior in response to these closures and volatility in the banking sector;~~costs;

● our ability to execute our business strategy, including our digital strategy, as well as changes in our business

strategy or development plans;

● business and economic conditions generally and in the financial services industry;

● effects of any potential government shutdowns;

● economic, market, operational, liquidity, credit and interest rate risks associated with our business, including increased competition for deposits due to prevailing market interest ~~rates and banking sector volatility;~~

● ~~economic, market, operational, liquidity, credit and interest rate risks associated with our business, including increased competition for deposits due to prevailing market~~ rates and banking sector volatility;

● effects of any changes in trade, monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board;

● changes imposed by regulatory agencies to increase our capital to a level greater than the current level required for well-capitalized financial institutions;

● effects of inflation, including its associated impact on labor costs, as well as, interest rate, securities market and monetary supply fluctuations;

● changes in the economy or supply-demand imbalances affecting local real estate values;

● changes in consumer spending, borrowings and savings habits;

● changes in the fair value of our investment securities due to market conditions outside of our control;

● financial or reputational impacts associated with the increased prevalence of fraud or other financial crimes;

●with respect to our mortgage business, our inability to negotiate our fees with Fannie Mae, Freddie Mac, Ginnie Mae or other investors for the purchase of our loans, our obligation to indemnify purchasers or to repurchase the related loans if the loans fail to meet certain criteria, or higher rate of delinquencies and defaults as a result of the geographic concentration of our servicing portfolio;

● our ability to identify potential candidates for, obtain regulatory approval for, and consummate, acquisitions, consolidations or other expansion opportunities on attractive terms, or at all;

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●our ability to integrate acquisitions, such as Community Bancorporation, Bancshares of Jackson Hole Incorporated or Cambr Solutions, LLC, or consolidations and to achieve synergies, operating efficiencies and/or other expected benefits within expected time-frames, or at all, or within expected cost projections, and to preserve the goodwill of any acquired institutions;

● our ability to integrate acquisitions ~~such as Community Bancorporation and Bancshares of Jackson Hole Incorporated (the “2022 Mergers”),~~ or consolidations and to achieve synergies, operating efficiencies and/or other expected benefits within expected time-frames, or at all, or within expected cost projections, and to preserve the goodwill of acquired financial institutions;

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● our ability to realize the anticipated benefits from enhancements or updates to our core operating systems from time to time without significant change in our client service or risk to our control environment;

● our dependence on information technology and telecommunications systems of third-party service providers and the risk of system failures, interruptions or breaches of security, including those that could result in disclosure or misuse of confidential or proprietary client or other information;

● our ability to achieve organic loan and deposit growth and the competition for, and composition of, such growth;

● changes in sources and uses of funds, including loans, deposits and borrowings;

● increased competition in the financial services industry, nationally, regionally or locally, resulting in, among other things, lower returns;

● continued consolidation in the financial services industry;

● our ability to maintain or increase market share and control expenses;

● regulatory and financial impacts associated with the Company growing to over $10 billion in consolidated assets;

● increases in claims and litigation related to our fiduciary responsibilities in connection with our trust and wealth

management business;

●the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies, as well as the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) and other accounting standard setters;

● the trading price of shares of the Company's stock;

● the effects of tax legislation, including the potential of future changes to prevailing tax rates, or challenges to our

positions;

● our ability to realize deferred tax assets or the need for a valuation allowance, or the effects of changes in tax laws on our deferred tax assets;

● costs and effects of changes in laws and regulations and of other legal and regulatory developments, including, but not limited to, changes in regulation that affect the fees that we charge, the resolution of legal proceedings or regulatory or other governmental inquiries, and the results of regulatory examinations, reviews or other inquiries; and changes in regulations that apply to us as a Colorado state-chartered bank and a Wyoming state-chartered bank;

● technological ~~changes;~~changes, including with respect to the advancement of artificial intelligence;

● the timely development and acceptance of new products and services, including in the digital technology space and our digital solution 2UniFi^SM, and perceived overall value of these products and services by our clients;

● changes in our management personnel and our continued ability to attract, hire and retain qualified personnel;

● ability to implement and/or improve operational management and other internal risk controls and processes and our reporting system and procedures;

● regulatory limitations on dividends from our bank subsidiaries;

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● changes in estimates of future credit reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements;

● financial, reputational, or strategic risks associated with our investments in financial technology companies and initiatives;

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● widespread natural and other disasters, dislocations, political instability, pandemics, acts of war or terrorist activities, cyberattacks or international hostilities through impacts on the economy and financial markets generally or on us or our counterparties specifically;

● a ~~cyber-security~~cybersecurity incident, data breach or a failure of a key information technology system;

● impact of reputational risk on such matters as business generation and retention;

● other risks and uncertainties listed from time to time in the Company’s reports and documents filed with the Securities and Exchange Commission; and

● our success at managing the risks involved in the foregoing items.

Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by applicable law.

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PART I: FINANCIAL INFORMATION

Item 1: FINANCIAL STATEMENTS

NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Financial Condition (Unaudited)

(In thousands, except share and per share data)


	March 31, 2023		December 31, 2022		March 31, 2024		December 31, 2023
ASSETS
Cash and due from banks	$	368,956	$	194,756
Interest bearing bank deposits		749		749
Cash and cash equivalents		369,705		195,505	$	292,931	$	190,826
Investment securities available-for-sale (at fair value)		695,485		706,289		685,666		628,829
Investment securities held-to-maturity (fair value of $555,256 and $559,924 at March 31, 2023 and December 31, 2022, respectively)		637,921		651,527
Investment securities held-to-maturity (fair value of $485,776 and $504,328 at March 31, 2024 and December 31, 2023, respectively)						570,850		585,052
Non-marketable securities		120,733		89,049		73,439		90,477
Loans		7,345,298		7,220,469		7,569,052		7,698,758
Allowance for credit losses		(90,343)		(89,553)		(97,607)		(97,947)
Loans, net		7,254,955		7,130,916		7,471,445		7,600,811
Loans held for sale		24,594		22,767		14,065		18,854
Other real estate owned		3,458		3,731		4,064		4,088
Premises and equipment, net		140,417		136,111		168,956		162,733
Goodwill		279,132		279,132		306,043		306,043
Intangible assets, net		58,619		59,887		64,212		66,025
Other assets		332,204		298,329		315,805		297,326
Total assets	$	9,917,223	$	9,573,243	$	9,967,476	$	9,951,064
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Deposits:
Non-interest bearing demand deposits	$	2,920,891	$	3,134,716	$	2,292,917	$	2,361,367
Interest bearing demand deposits		1,098,172		913,852		1,427,856		1,480,042
Savings and money market		2,584,128		2,950,658		3,801,013		3,367,012
Time deposits		978,489		873,400		995,976		981,970
Total deposits		7,581,680		7,872,626		8,517,762		8,190,391
Securities sold under agreements to repurchase		21,492		20,214		19,577		19,627
Long-term debt, net		53,968		53,890		54,278		54,200
Federal Home Loan Bank advances		1,000,000		385,000		—		340,000
Other liabilities		126,356		149,311		144,029		134,039
Total liabilities		8,783,496		8,481,041		8,735,646		8,738,257
Shareholders’ equity:
Common stock, par value $0.01 per share: 400,000,000 shares authorized; 51,487,907 and 51,487,907 shares issued; 37,641,381 and 37,608,519 shares outstanding at March 31, 2023 and December 31, 2022, respectively		515		515
Common stock, par value $0.01 per share: 400,000,000 shares authorized; 51,487,888 and 51,487,907 shares issued; 37,806,148 and 37,784,851 shares outstanding at March 31, 2024 and December 31, 2023, respectively						515		515
Additional paid-in capital		1,160,436		1,159,508		1,163,773		1,162,269
Retained earnings		361,440		330,721		454,211		433,126
Treasury stock of 13,680,348 and 13,714,251 shares at March 31, 2023 and December 31, 2022, respectively, at cost		(310,037)		(310,338)
Treasury stock of 13,444,078 and 13,462,472 shares at March 31, 2024 and December 31, 2023, respectively, at cost						(306,460)		(306,702)
Accumulated other comprehensive loss, net of tax		(78,627)		(88,204)		(80,209)		(76,401)
Total shareholders’ equity		1,133,727		1,092,202		1,231,830		1,212,807
Total liabilities and shareholders’ equity	$	9,917,223	$	9,573,243	$	9,967,476	$	9,951,064

See accompanying notes to the consolidated interim financial statements.

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NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share data)

For the three months ended

March 31,

2023

2022
Interest and dividend income:

Interest and fees on loans
$
105,121

$
44,095
Interest and dividends on investment securities

6,861

4,862
Dividends on non-marketable securities

898

209
Interest on interest-bearing bank deposits

653

359
Total interest and dividend income

113,533

49,525
Interest expense:

Interest on deposits

11,049

2,531
Interest on borrowings

7,595

333
Total interest expense

18,644

2,864
Net interest income before provision for credit losses

94,889

46,661
Provision for credit loss expense (release)

900

(322)
Net interest income after provision for credit losses

93,989

46,983
Non-interest income:

Service charges

4,101

3,710
Bank card fees

4,637

4,123
Mortgage banking income

3,216

9,666
Bank-owned life insurance income

645

532
Other non-interest income

2,066

1,023
Total non-interest income

14,665

19,054
Non-interest expense:

Salaries and benefits

32,989

29,336
Occupancy and equipment

9,073

6,396
Data processing

3,752

2,381
Marketing and business development

870

673
FDIC deposit insurance

2,178

482
Bank card expenses

1,328

1,268
Professional fees

2,590

814
Other non-interest expense

4,149

2,436
Other intangible assets amortization

1,363

296
Total non-interest expense

58,292

44,082
Income before income taxes

50,362

21,955
Income tax expense

10,079

3,603
Net income
$
40,283

$
18,352
Earnings per share—basic
$
1.06

$
0.61
Earnings per share—diluted

1.06

0.60
Weighted average number of common shares outstanding:

Basic

37,785,488

30,120,195
Diluted

38,074,973

30,479,261


	For the three months ended
	March 31,
	2024		2023
Interest and dividend income:
Interest and fees on loans	$	123,736	$	105,121
Interest and dividends on investment securities		6,617		6,861
Dividends on non-marketable securities		616		898
Interest on interest-bearing bank deposits		763		653
Total interest and dividend income		131,732		113,533
Interest expense:
Interest on deposits		43,998		11,049
Interest on borrowings		3,704		7,595
Total interest expense		47,702		18,644
Net interest income before provision for credit losses		84,030		94,889
Provision for credit loss expense		—		900
Net interest income after provision for credit losses		84,030		93,989
Non-interest income:
Service charges		4,391		4,101
Bank card fees		4,578		4,637
Mortgage banking income		2,655		3,216
Bank-owned life insurance income		733		645
Other non-interest income		5,337		2,066
Total non-interest income		17,694		14,665
Non-interest expense:
Salaries and benefits		36,520		32,989
Occupancy and equipment		9,941		9,073
Data processing		4,066		3,752
Marketing and business development		962		870
FDIC deposit insurance		1,345		2,178
Bank card expenses		1,349		1,328
Professional fees		1,646		2,590
Other non-interest expense		4,997		4,149
Other intangible assets amortization		2,008		1,363
Total non-interest expense		62,834		58,292
Income before income taxes		38,890		50,362
Income tax expense		7,499		10,079
Net income	$	31,391	$	40,283
Earnings per share—basic	$	0.82	$	1.06
Earnings per share—diluted		0.82		1.06
Weighted average number of common shares outstanding:
Basic		38,031,358		37,785,488
Diluted		38,188,480		38,074,973

See accompanying notes to the consolidated interim financial statements.

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NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income ~~(Loss)~~ (Unaudited)

(In thousands)


	For the three months ended				For the three months ended
	March 31,				March 31,
	2023		2022		2024		2023
Net income	$	40,283	$	18,352	$	31,391	$	40,283
Other comprehensive income (loss), net of tax:
Other comprehensive (loss) income, net of tax:
Securities available-for-sale:
Net unrealized gains (losses) arising during the period, net of tax (expense) benefit of ($2,731) and $9,837 for the three months ended March 31, 2023 and 2022, respectively		8,955		(31,579)
Less: amortization of net unrealized holding gains to income, net of tax benefit of $16 and $28 for the three months ended March 31, 2023 and 2022, respectively		(51)		(91)
Net unrealized (losses) gains arising during the period, net of tax benefit (expense) of $985 and ($2,731) for the three months ended March 31, 2024 and 2023, respectively						(3,090)		8,955
Less: amortization of net unrealized holding gains to income, net of tax benefit of $8 and $16 for the three months ended March 31, 2024 and 2023, respectively						(25)		(51)
Cash flow hedges:
Net unrealized gains arising during the period, net of tax expense of $173 for the three months ended March 31, 2023		566		—
Less: reclassification adjustment for gains included in net income, net of tax expense of $32 for the three months ended March 31, 2023		107		—
Other comprehensive income (loss)		9,577		(31,670)
Comprehensive income (loss)	$	49,860	$	(13,318)
Net unrealized gains arising during the period, net of tax expense of $48 and $173 for the three months ended March 31, 2024 and 2023, respectively						203		566
Less: reclassification for (losses) gains included in net income, net of tax benefit (expense) of $269 and ($32) for the three months ended March 31, 2024 and 2023, respectively						(896)		107
Other comprehensive (loss) income						(3,808)		9,577
Comprehensive income					$	27,583	$	49,860

See accompanying notes to the consolidated interim financial statements.

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NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

Three months ended March 31, ~~2023~~2024 and ~~2022~~2023

(In thousands, except share and per share data)


									Accumulated												Accumulated
			Additional						other						Additional						other
	Common		paid-in		Retained		Treasury		comprehensive				Common		paid-in		Retained		Treasury		comprehensive
	stock		capital		earnings		stock		loss, net		Total		stock		capital		earnings		stock		loss, net		Total
Balance, December 31, 2021	$	515	$	1,014,294	$	289,876	$	(457,616)	$	(6,963)	$	840,106
Net income		—		—		18,352		—		—		18,352
Stock-based compensation		—		1,151		—		—		—		1,151
Issuance of stock under purchase and equity compensation plans, including gain on reissuance of treasury stock of $1,104, net		—		(1,113)		—		397		—		(716)
Cash dividends declared ($0.23 per share)		—		—		(7,008)		—		—		(7,008)
Other comprehensive loss		—		—		—		—		(31,670)		(31,670)
Balance, March 31, 2022	$	515	$	1,014,332	$	301,220	$	(457,219)	$	(38,633)	$	820,215
Balance, December 31, 2022	$	515	$	1,159,508	$	330,721	$	(310,338)	$	(88,204)	$	1,092,202	$	515	$	1,159,508	$	330,721	$	(310,338)	$	(88,204)	$	1,092,202
Net income		—		—		40,283		—		—		40,283		—		—		40,283		—		—		40,283
Stock-based compensation		—		1,427		—		—		—		1,427		—		1,427		—		—		—		1,427
Issuance of stock under purchase and equity compensation plans, including gain on reissuance of treasury stock of $753, net		—		(499)		—		301		—		(198)		—		(499)		—		301		—		(198)
Cash dividends declared ($0.25 per share)		—		—		(9,564)		—		—		(9,564)		—		—		(9,564)		—		—		(9,564)
Other comprehensive income		—		—		—		—		9,577		9,577		—		—		—		—		9,577		9,577
Balance, March 31, 2023	$	515	$	1,160,436	$	361,440	$	(310,037)	$	(78,627)	$	1,133,727	$	515	$	1,160,436	$	361,440	$	(310,037)	$	(78,627)	$	1,133,727
Balance, December 31, 2023													$	515	$	1,162,269	$	433,126	$	(306,702)	$	(76,401)	$	1,212,807
Net income														—		—		31,391		—		—		31,391
Stock-based compensation														—		1,576		—		—		—		1,576
Issuance of stock under purchase and equity compensation plans, including gain on reissuance of treasury stock of $369, net														—		(72)		—		242		—		170
Cash dividends declared ($0.27 per share)														—		—		(10,306)		—		—		(10,306)
Other comprehensive loss														—		—		—		—		(3,808)		(3,808)
Balance, March 31, 2024													$	515	$	1,163,773	$	454,211	$	(306,460)	$	(80,209)	$	1,231,830

See accompanying notes to the consolidated interim financial statements.

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NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	For the three months ended March 31,				For the three months ended March 31,
	2023		2022		2024		2023
Cash flows from operating activities:
Net income	$	40,283	$	18,352	$	31,391	$	40,283
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Provision for credit loss expense (release)		900		(322)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for credit loss expense						—		900
Depreciation and amortization		5,117		3,422		6,021		5,117
Change in current income tax receivable		9,551		1,398		7,485		9,551
Change in deferred income taxes		3,392		(7,750)		(1,277)		3,392
Discount accretion, net of premium amortization on securities		(116)		724		(202)		(116)
Gain on sale of mortgages, net		(2,370)		(8,409)		(2,162)		(2,370)
Origination of loans held for sale, net of repayments		(99,105)		(282,614)		(62,542)		(99,105)
Proceeds from sales of loans held for sale		97,311		342,071		69,160		97,311
Originations of mortgage serving rights		(275)		(1,679)
Originations of mortgage servicing rights						(115)		(275)
Gain on sale of fixed assets		—		(696)		(637)		—
Stock-based compensation		1,427		1,151		1,576		1,427
Operating lease payments		(1,411)		(1,201)		(1,637)		(1,411)
Change in other assets		(49,455)		(3,017)		(24,527)		(49,455)
Change in other liabilities		(24,044)		(12,669)		7,423		(24,044)
Net cash (used in) provided by operating activities		(18,795)		48,761
Net cash provided by (used in) operating activities						29,957		(18,795)
Cash flows from investing activities:
Proceeds from non-marketable securities		4,662		60		27,114		4,662
Proceeds from maturities of investment securities available-for-sale		22,502		39,108
Proceeds from maturities of investment securities held-to-maturity		16,201		41,422
Proceeds from maturities and paydowns of investment securities available-for-sale						45,662		22,502
Proceeds from maturities and paydowns of investment securities held-to-maturity						14,367		16,201
Proceeds from sales of other real estate owned		249		2,068		21		249
Purchase of non-marketable securities		(35,901)		(4,027)
Purchase of investment securities available-for-sale		—		(179,369)
Purchase of investment securities held-to-maturity		(2,451)		—
(Purchases) sales of premises and equipment, net		(6,701)		420
Net increase in loans		(122,451)		(140,033)
Net cash used in investing activities		(123,890)		(240,351)
Purchases of non-marketable securities						(10,302)		(35,901)
Purchases of investment securities available-for-sale						(106,554)		—
Purchases of investment securities held-to-maturity						—		(2,451)
Purchases of premises and equipment, net						(5,482)		(6,701)
Net decrease (increase) in loans						128,793		(122,451)
Net cash provided by (used in) investing activities						93,619		(123,890)
Cash flows from financing activities:
Net (decrease) increase in deposits		(291,138)		136,637
Net increase in repurchase agreements and other short-term borrowings		1,278		1,976
Net increase (decrease) in deposits						327,260		(291,138)
Net (decrease) increase in repurchase agreements and other short-term borrowings						(50)		1,278
Advances from the Federal Home Loan Bank		990,000		—		419,610		990,000
Federal Home Loan Bank repayments		(375,000)		—		(759,610)		(375,000)
Issuance of stock under purchase and equity compensation plans		(237)		(760)		131		(237)
Proceeds from exercise of stock options		—		8
Payment of dividends		(9,532)		(7,092)		(10,312)		(9,532)
Net cash provided by financing activities		315,371		130,769
Increase (decrease) in cash, cash equivalents and restricted cash⁽¹⁾		172,686		(60,821)
Net cash (used in) provided by financing activities						(22,971)		315,371
Increase in cash, cash equivalents and restricted cash⁽¹⁾						100,605		172,686
Cash, cash equivalents and restricted cash at beginning of the year⁽¹⁾		198,519		850,220		192,326		198,519
Cash, cash equivalents and restricted cash at end of period⁽¹⁾	$	371,205	$	789,399	$	292,931	$	371,205
Supplemental disclosure of cash flow information during the period:
Cash paid for interest	$	15,348	$	2,269	$	45,172	$	15,348
Net tax payments		37		89		76		37
Supplemental schedule of non-cash activities:
Increase in loans purchased but not settled	$	—	$	22,739
Loans transferred from loans held for sale to loans		2,337		2,058		333		2,337


(1)		Included in restricted cash at March 31, 2023 ~~and 2022 is~~was $1.5 million ~~and $3.0 million, respectively,~~ placed in escrow for certain potential liabilities, for which the Company iswas indemnified, resulting from a previous acquisition. The restricted cash iswas included in other assets in the Company’s consolidated statements of financial condition. At March 31, 2024, there was no restricted cash.

See accompanying notes to the consolidated interim financial statements.

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NATIONAL BANK HOLDINGS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

March 31, ~~2023~~2024

Note 1 Basis of Presentation

National Bank Holdings Corporation ("NBHC" or the "Company") is a bank holding company that was incorporated in the State of Delaware in 2009. The Company is headquartered in Greenwood Village, Colorado, and its primary operations are conducted through its wholly owned subsidiaries NBH Bank and Bank of Jackson Hole Trust. NBH Bank is a Colorado state-chartered bank and a member of the Federal Reserve System, and Bank of Jackson Hole Trust is a Wyoming state-chartered bank and a member of the Federal Reserve System. The Company provides a variety of banking products to both commercial and consumer clients through a network of over 9590 banking centers, as of March 31, ~~2023,~~2024, located primarily in Colorado, the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho, as well as through online and mobile banking products and services.

The accompanying interim unaudited consolidated financial statements serve to update the National Bank Holdings Corporation Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 and include the accounts of the Company and its wholly owned subsidiaries, NBH Bank, ~~and~~ Bank of Jackson Hole ~~Trust.~~Trust and 2UniFi, LLC. The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and where applicable, with general practices in the banking industry or guidelines prescribed by bank regulatory agencies. However, they may not include all information and notes necessary to constitute a complete set of financial statements under GAAP applicable to annual periods and accordingly should be read in conjunction with the financial information contained in the Company's most recent Form 10-K. The unaudited consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results presented. All such adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications of prior years' amounts are made whenever necessary to conform to current period presentation. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the full year or any other interim period. All amounts are in thousands, except share data, or as otherwise noted.

GAAP requires management to make estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosures of contingent assets and liabilities. By their nature, estimates are based on judgment and available information. Management has made significant estimates in certain areas, such as the fair values of financial instruments, contingent liabilities and the allowance for credit losses (“ACL”). Because of the inherent uncertainties associated with any estimation process and future changes in market and economic conditions, it is possible that actual results could differ significantly from those estimates.

The Company's significant accounting policies followed in the preparation of the unaudited consolidated financial statements are disclosed in note 2 of the audited financial statements and notes for the year ended December 31, ~~2022~~2023 and are contained in the Company's Annual Report on Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, ~~2022.~~2023.

Note 2 Recent Accounting Pronouncements

The Company has not adopted any recent accounting pronouncements in addition to those disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2022, except for the following:~~2023.

~~In March 2022, the FASB issued ASU 2022-02,~~ ~~Financial Instruments—Credit Losses~~ ~~(Topic 326):~~ ~~Troubled Debt Restructurings and Vintage Disclosures~~, which eliminates the accounting guidance on troubled debt restructurings (“TDR”) and requires disclosure of current-period gross write-offs by year of origination. The guidance also updates the requirements related to accounting for credit losses under ASC Topic 326 and adds enhanced disclosures for creditors with respect to loan refinancing and modifications of loans for borrowers experiencing financial difficulty. The Company adopted ASU 2022-02 on January 1, 2023 using a modified retrospective approach. A cumulative effect adjustment was not booked to retained earnings as it was immaterial. The update has not had a material impact to our financial statements apart from changes in disclosures.Note 3 Investment Securities

InThe Company’s investment securities portfolio is comprised of available-for-sale and held-to-maturity investment securities. These investment securities totaled $1.3 billion at March ~~2022, the FASB issued ASU 2022-01,~~ ~~Derivatives~~31, 2024 and ~~Hedging~~ ~~(Topic 815):~~ ~~Fair Value Hedging – Portfolio Layer Method~~~~. The purpose~~included $0.7 billion of ~~this updated guidance is to further align risk management objectives with hedge accounting results on the application~~available-for-sale securities and $0.6 billion of ~~the last-of-layer method, which was first introduced in ASU 2017-12,~~ ~~Derivatives~~held-to-maturity securities. At December 31, 2023, investment securities totaled $1.2 billion and ~~Hedging~~ ~~(Topic 815):~~ ~~Targeted Improvements to Accounting for Hedging Activities~~~~. The Company adopted ASU 2022-01 on January 1, 2023,~~included $0.6 billion of available-for-sale securities and ~~the update has not had a material impact on its financial statements.~~$0.6 billion of held-to-maturity securities.

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~~Note 3 Investment Securities~~

The Company’s investment securities portfolio is comprised of available-for-sale and held-to-maturity investment securities. These investment securities totaled $1.3 billion at March 31, 2023 and included $0.7 billion of available-for-sale securities and $0.6 billion of held-to-maturity securities. At December 31, 2022, investment securities totaled $1.4 billion and included $0.7 billion of available-for-sale securities and $0.7 billion of held-to-maturity securities.

Available-for-sale

Available-for-sale securities are summarized as follows as of the dates indicated:


	March 31, 2023								March 31, 2024
	Amortized		Gross		Gross				Amortized		Gross		Gross
	cost		unrealized gains		unrealized losses		Fair value		cost		unrealized gains		unrealized losses		Fair value
U.S. Treasury securities	$	74,148	$	—	$	(1,994)	$	72,154	$	74,125	$	5	$	(1,479)	$	72,651
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		256,267		18		(34,076)		222,209		226,494		56		(32,974)		193,576
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		463,907		—		(65,625)		398,282		485,221		17		(68,558)		416,680
Municipal securities		155		—		(1)		154		80		—		(1)		79
Corporate debt		2,000		—		(108)		1,892		2,000		—		(130)		1,870
Other securities		794		—		—		794		810		—		—		810
Total investment securities available-for-sale	$	797,271	$	18	$	(101,804)	$	695,485	$	788,730	$	78	$	(103,142)	$	685,666


	December 31, 2022								December 31, 2023
	Amortized		Gross		Gross				Amortized		Gross		Gross
	cost		unrealized gains		unrealized losses		Fair value		cost		unrealized gains		unrealized losses		Fair value
U.S. Treasury securities	$	74,031	$	—	$	(2,643)	$	71,388	$	74,508	$	—	$	(1,464)	$	73,044
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		263,939		1		(37,809)		226,131		233,264		57		(31,512)		201,809
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		478,866		—		(72,940)		405,926		417,155		—		(65,913)		351,242
Municipal securities		155		—		(2)		153		80		—		(1)		79
Corporate debt		2,000		—		(80)		1,920		2,000		—		(157)		1,843
Other securities		771		—		—		771		812		—		—		812
Total investment securities available-for-sale	$	819,762	$	1	$	(113,474)	$	706,289	$	727,819	$	57	$	(99,047)	$	628,829

Purchases of available-for-sale securities during the three months ended March 31, 2024 totaled $106.6 million. During the three months ended March 31, 2023, there were no purchases of available-for-sale securities. ~~During the three months ended March 31, 2022, purchases of available-for-sale securities totaled $179.4 million.~~ Maturities and paydowns of available-for-sale securities during the three months ended March 31, 2024 and 2023 ~~and 2022~~ totaled ~~$22.5~~$45.7 million and ~~$39.1~~$22.5 million, respectively. There were no sales of available-for-sale securities during the three months ended March 31, ~~2023~~2024 or ~~2022.~~2023.

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company’s available-for-sale investment portfolio was primarily comprised of U.S. Treasury securities and mortgage-backed ~~securities.~~securities (“MBS”). All mortgage-backed securities were backed by government sponsored enterprises (“GSE”) collateral such as Federal Home Loan Mortgage Corporation (“FHLMC”) and Federal National Mortgage Association (“FNMA”), and the government owned agency Government National Mortgage Association (“GNMA”).

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The tables below summarize the available-for-sale securities with unrealized losses as of the dates shown, along with the length of the impairment period:


	March 31, 2023												March 31, 2024
	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	value		losses		value		losses		value		losses		value		losses		value		losses		value		losses
U.S. Treasury securities	$	72,153	$	(1,994)	$	—	$	—	$	72,153	$	(1,994)	$	—	$	—	$	48,133	$	(1,479)	$	48,133	$	(1,479)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		43,304		(2,112)		175,914		(31,964)		219,218		(34,076)		—		—		190,255		(32,974)		190,255		(32,974)
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		25,905		(1,745)		372,230		(63,880)		398,135		(65,625)		38,658		(313)		335,986		(68,245)		374,644		(68,558)
Municipal securities		154		(1)		—		—		154		(1)		—		—		79		(1)		79		(1)
Corporate debt		1,892		(108)		—		—		1,892		(108)		—		—		1,870		(130)		1,870		(130)
Total	$	143,408	$	(5,960)	$	548,144	$	(95,844)	$	691,552	$	(101,804)	$	38,658	$	(313)	$	576,323	$	(102,829)	$	614,981	$	(103,142)


	December 31, 2022												December 31, 2023
	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	value		losses		value		losses		value		losses		value		losses		value		losses		value		losses
U.S. Treasury securities	$	71,388	$	(2,643)	$	—	$	—	$	71,388	$	(2,643)	$	—	$	—	$	73,044	$	(1,464)	$	73,044	$	(1,464)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		83,748		(6,686)		141,272		(31,123)		225,020		(37,809)		9		—		199,000		(31,512)		199,009		(31,512)
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		196,449		(22,809)		209,477		(50,131)		405,926		(72,940)		138		(1)		351,104		(65,912)		351,242		(65,913)
Municipal securities		153		(2)		—		—		153		(2)		—		—		79		(1)		79		(1)
Corporate debt		1,920		(80)		—		—		1,920		(80)		—		—		1,843		(157)		1,843		(157)
Total	$	353,658	$	(32,220)	$	350,749	$	(81,254)	$	704,407	$	(113,474)	$	147	$	(1)	$	625,070	$	(99,046)	$	625,217	$	(99,047)

Management evaluated all of the available-for-sale securities in an unrealized loss position at March 31, ~~2023~~2024 and December 31, ~~2022.~~2023. The portfolio included ~~238~~231 securities, which were in an unrealized loss position at March 31, ~~2023,~~2024, compared to ~~244~~230 securities at December 31, ~~2022.~~2023. The unrealized losses in the Company's investment portfolio at March 31, 2024 and December 31, 2023 were caused by changes in interest rates. The Company has no intention to sell these securities and believes it will not be required to sell the securities before the recovery of their amortized cost. Management believes that default of the available-for-sale securities is highly unlikely. FHLMC, FNMA and GNMA guaranteed mortgage-backed securities and U.S. Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk.

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The tables below summarize the credit quality indicators, by fair value, of available-for-sale securities as of the dates shown:


	March 31, 2023						March 31, 2024
	AAA		Not rated		Total		AAA		Not rated		Total
U.S. Treasury securities	$	72,154	$	—	$	72,154	$	72,651	$	—	$	72,651
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		222,209		—		222,209		193,576		—		193,576
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		398,282		—		398,282		416,680		—		416,680
Municipal securities		—		154		154		—		79		79
Corporate debt		—		1,892		1,892		—		1,870		1,870
Other securities		—		794		794		—		810		810
Total investment securities available-for-sale	$	692,645	$	2,840	$	695,485	$	682,907	$	2,759	$	685,666


	December 31, 2022						December 31, 2023
	AAA		Not rated		Total		AAA		Not rated		Total
U.S. Treasury securities	$	71,388	$	—	$	71,388	$	73,044	$	—	$	73,044
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		226,131		—		226,131		201,809		—		201,809
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		405,926		—		405,926		351,242		—		351,242
Municipal securities		—		153		153		—		79		79
Corporate debt		—		1,920		1,920		—		1,843		1,843
Other securities		—		771		771		—		812		812
Total investment securities available-for-sale	$	703,445	$	2,844	$	706,289	$	626,095	$	2,734	$	628,829

Certain securities are pledged as collateral for public deposits, securities sold under agreements to repurchase and to secure borrowing capacity at the Federal Reserve Bank (“FRB”), if needed. The fair value of available-for-sale investment securities pledged as collateral totaled ~~$267.6~~$301.2 million and ~~$484.9~~$312.4 million at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. The ~~Bank~~Company may also pledge available-for-sale investment securities as collateral for Federal Home Loan Bank (“FHLB”) advances. No securities were pledged for this purpose at March 31, ~~2023~~2024 or December 31, ~~2022.~~2023.

A summary of the available-for-sale securities by maturity is shown in the following table as of March 31, ~~2023.~~2024. Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments and are therefore not included in the table below. Additionally, the Company holds other available-for-sale securities with an amortized cost and fair value of $0.8 million as of March 31, 2024 that have no stated contractual maturity date.

March 31, 2023

Weighted

Amortized Cost

Fair Value

Average Yield
U.S. Treasury securities

After one but within five years

$
74,148

$
72,154

2.54%
Municipal securities

After one but within five years

155

154

3.17%
Corporate debt

After five but within ten years

2,000

1,892

5.87%

As of March 31, 2023 and December 31, 2022, accrued interest receivable (“AIR”) from available-for-sale investment securities totaled $1.4 million and $1.5 million, respectively, and was included within other assets in the consolidated statements of financial condition.


	March 31, 2024
					Weighted
	Amortized Cost		Fair Value		Average Yield
U.S. Treasury securities
Within one year	$	49,323	$	48,752	3.93%
After one but within five years		24,802		23,899	2.77%
Total U.S. Treasury securities		74,125		72,651	3.55%
Municipal securities
Within one year		80		79	3.17%
Corporate debt
After five but within ten years		2,000		1,870	5.87%
Total	$	76,205	$	74,600

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As of March 31, 2024 and December 31, 2023, accrued interest receivable (“AIR”) from available-for-sale investment securities totaled $1.6 million and $1.3 million, respectively, and was included within other assets in the consolidated statements of financial condition.

Held-to-maturity

Held-to-maturity investment securities are summarized as follows as of the dates indicated:


	March 31, 2023								March 31, 2024
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized				Amortized		unrealized		unrealized
	cost		gains		losses		Fair value		cost		gains		losses		Fair value
U.S. Treasury securities	$	49,117	$	—	$	(976)	$	48,141	$	49,412	$	—	$	(1,223)	$	48,189
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		331,996		529		(37,279)		295,246		290,450		42		(36,578)		253,914
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		256,808		28		(44,967)		211,869		230,988		—		(47,315)		183,673
Total investment securities held-to-maturity	$	637,921	$	557	$	(83,222)	$	555,256	$	570,850	$	42	$	(85,116)	$	485,776


	December 31, 2022								December 31, 2023
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized				Amortized		unrealized		unrealized
	cost		gains		losses		Fair value		cost		gains		losses		Fair value
U.S. Treasury securities	$	49,045	$	—	$	(1,416)	$	47,629	$	49,338	$	—	$	(1,004)	$	48,334
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		339,815		163		(41,162)		298,816		299,337		226		(34,552)		265,011
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		262,667		—		(49,188)		213,479		236,377		2		(45,396)		190,983
Total investment securities held-to-maturity	$	651,527	$	163	$	(91,766)	$	559,924	$	585,052	$	228	$	(80,952)	$	504,328

There were no purchases of held-to-maturity securities during the three months ended March 31, 2024. During the three months ended March 31, 2023, purchases of held-to-maturity securities totaled $2.5 million. ~~There were no purchases~~Maturities and paydowns of held-to-maturity securities totaled $14.4 million and $16.2 million during the three months ended March 31, ~~2022. Maturities~~2024 and ~~paydowns of held-to-maturity securities totaled $16.2 million and $41.4 million during the first quarter of~~ 2023, ~~and 2022,~~ respectively.

The held-to-maturity portfolio included ~~111~~155 securities which were in an unrealized loss position as of March 31, ~~2023~~2024 compared to ~~129~~123 securities at December 31, ~~2022.~~2023. The tables below summarize the held-to-maturity securities with unrealized losses as of the dates shown, along with the length of the impairment period:


	March 31, 2023												March 31, 2024
	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	value		losses		value		losses		value		losses		value		losses		value		losses		value		losses
U.S. Treasury securities	$	48,141	$	(976)	$	—	$	—	$	48,141	$	(976)	$	—	$	—	$	48,189	$	(1,223)	$	48,189	$	(1,223)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		48,855		(1,481)		195,980		(35,798)		244,835		(37,279)		39,333		(383)		210,673		(36,195)		250,006		(36,578)
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		23,337		(684)		185,348		(44,283)		208,685		(44,967)		2,946		(53)		180,728		(47,262)		183,674		(47,315)
Total	$	120,333	$	(3,141)	$	381,328	$	(80,081)	$	501,661	$	(83,222)	$	42,279	$	(436)	$	439,590	$	(84,680)	$	481,869	$	(85,116)

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December 31, 2022

Less than 12 months

12 months or more

Total


Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

value

losses

value

losses

value

losses
U.S. Treasury securities

$
47,629

$
(1,416)

$
—

$
—

$
47,629

$
(1,416)
Mortgage-backed securities:

Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises

83,323

(3,804)

182,159

(37,358)

265,482

(41,162)
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises

34,704

(1,145)

178,776

(48,043)

213,480

(49,188)
Total

$
165,656

$
(6,365)

$
360,935

$
(85,401)

$
526,591

$
(91,766)


	December 31, 2023
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	value		losses		value		losses		value		losses
U.S. Treasury securities	$	—	$	—	$	48,334	$	(1,004)	$	48,334	$	(1,004)
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		14,689		(72)		217,467		(34,480)		232,156		(34,552)
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		2,289		(37)		187,021		(45,359)		189,310		(45,396)
Total	$	16,978	$	(109)	$	452,822	$	(80,843)	$	469,800	$	(80,952)

The Company does not measure expected credit losses on a financial asset, or group of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Management evaluated held-to-maturity securities noting they are backed by loans guaranteed by either U.S. government agencies or U.S. government sponsored entities, and management believes that default is highly unlikely given this governmental backing and long history without credit losses. Additionally, management notes that yields on which the portfolio generally trades are based upon market views of prepayment and liquidity risk and not credit risk. The Company has no intention to sell any held-to-maturity securities and believes it will not be required to sell any held-to-maturity securities before the recovery of their amortized cost.

The tables below summarize the credit quality indicators, by amortized cost, of held-to-maturity securities as of the dates shown:

March 31, 2023

AAA
U.S. Treasury securities

$
49,117
Mortgage-backed securities:

Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises

331,996
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises

256,808
Total investment securities held-to-maturity

$
637,921


	December 31, 2022		March 31, 2024		December 31, 2023
	AAA		AAA		AAA
U.S. Treasury securities	$	49,045	$	49,412	$	49,338
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		339,815		290,450		299,337
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		262,667		230,988		236,377
Total investment securities held-to-maturity	$	651,527	$	570,850	$	585,052

Certain securities are pledged as collateral for public deposits, securities sold under agreements to repurchase and to secure borrowing capacity at the FRB, if needed. The carrying value of held-to-maturity investment securities pledged as collateral totaled ~~$590.6~~$543.2 million and ~~$355.3~~$559.3 million at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. The Company may also pledge held-to-maturity investment securities as collateral for FHLB advances. No held-to-maturity investment securities were pledged for this purpose at March 31, ~~2023~~2024 or December 31, ~~2022.~~2023.

~~Table of Contents~~

A summary of the held-to-maturity securities by maturity is shown in the following table as of March 31, ~~2023.~~2024. Actual maturities of mortgage-backed securities may differ from scheduled maturities depending on the repayment characteristics and experience of the underlying financial instruments and are therefore not included in the table below.


	March 31, 2023					March 31, 2024
					Weighted					Weighted
	Amortized Cost		Fair Value		Average Yield	Amortized Cost		Fair Value		Average Yield
U.S. Treasury securities
After one but within five years	$	49,117	$	48,141	3.14%	$	49,412	$	48,189	3.14%

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, AIR from held-to-maturity investment securities totaled ~~$1.4~~$1.3 million and ~~$1.1~~$1.0 million, respectively, and was included within other assets in the consolidated statements of financial condition.

Table of Contents

Note 4 Non-marketable Securities

The carrying balance of non-marketable securities are summarized as follows as of the dates indicated:


	March 31, 2024		December 31, 2023
Federal Reserve Bank stock	$	24,062	$	24,062
Federal Home Loan Bank stock		779		16,828
Convertible preferred stock		24,415		25,000
Equity method investments		24,183		24,587
Total	$	73,439	$	90,477

Non-marketable securities ~~totaled $120.7 million and $89.0 million at March 31, 2023 and December 31, 2022, respectively, and~~ included FRB stock, FHLB stock and other non-marketable securities. During the three months ended March 31, ~~2023~~2024, purchases of non-marketable securities totaled $10.3 million, and ~~2022,~~proceeds from non-marketable securities totaled $27.1 million. Purchases consisted primarily of FHLB stock, and proceeds consisted of redemptions of FHLB stock. Changes in the Company’s FHLB stock holdings were directly correlated to FHLB line of credit advances and paydowns. During the three months ended March 31, 2023, purchases of non-marketable securities totaled $35.9 million, and ~~$4.0 million, respectively. Proceeds~~proceeds from non-marketable securities totaled $4.7 ~~million~~million.

FRB and ~~$60 thousand during three months ended March 31, 2023 and 2022, respectively.~~FHLB stock

At March 31, 2024 and December 31, 2023, the Company held ~~$45.6 million of FHLB~~FRB stock and ~~$23.7 million of FRB~~FHLB stock for regulatory or debt facility purposes. At December 31, 2022, the Company held $20.3 million of FHLB stock and $18.1 million of FRB stock. Purchases of FHLB and FRB stock totaled $35.9 million and zero during the three months ended March 31, 2023 and 2022, respectively. These are restricted securities which, lacking a market, are carried at cost. There have been no identified events or changes in circumstances that may have an adverse effect on the ~~investments~~FRB and FHLB stock carried at cost.

~~At March 31, 2023, other~~Other non-marketable securities ~~totaled $51.4 million and consisted~~

Other non-marketable securities consist of equity method investments ~~totaling $22.4 million~~ and convertible preferred stock without a readily determinable fair value totaling $29.0 million. At December 31, 2022, other non-marketable securities totaled $50.7 million and consisted of equity method investments totaling $21.7 million and convertible preferred stock without a readily determinable fair value totaling $29.0 million.value. During the three months ended March 31, 2024 and 2023, the Company recorded net unrealized losses on equity method investments totaling $49.7 thousand and ~~2022, purchases of other non-marketable securities totaled zero and $4.0~~net unrealized gains on equity method investments totaling $0.2 million, respectively. These gains and losses were recorded in other non-interest income in the Company’s consolidated statements of operations. No impairments were recorded during the three months ended March 31, 2024 or 2023.

Note 5 Loans

The loan portfolio is comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions.

The tables below show the loan portfolio composition including carrying value by segment as of the dates shown. The carrying value of loans is net of discounts, fees, costs and fair value marks of ~~$37.5~~$33.3 million and ~~$38.8~~$33.6 million as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.


	March 31, 2023			March 31, 2024
	Total loans		% of total	Total loans		% of total
Commercial	$	4,228,950	57.6%	$	4,381,780	57.9%
Commercial real estate non-owner occupied		1,824,524	24.8%		1,860,199	24.6%
Residential real estate		1,271,798	17.3%		1,310,204	17.3%
Consumer		20,026	0.3%		16,869	0.2%
Total	$	7,345,298	100.0%	$	7,569,052	100.0%


	December 31, 2022			December 31, 2023
	Total loans		% of total	Total loans		% of total
Commercial	$	4,251,780	58.9%	$	4,499,035	58.4%
Commercial real estate non-owner occupied		1,696,050	23.5%		1,856,750	24.1%
Residential real estate		1,251,281	17.3%		1,323,787	17.2%
Consumer		21,358	0.3%		19,186	0.3%
Total	$	7,220,469	100.0%	$	7,698,758	100.0%

Table of Contents

Information about delinquent and non-accrual loans is shown in the following tables at March 31, ~~2023~~2024 and December 31, ~~2022:~~2023:


	March 31, 2023												March 31, 2024
			Greater												Greater
	30-89 days		than 90 days				Total past						30-89 days		than 90 days				Total past
	past due and		past due and		Non-accrual		due and						past due and		past due and		Non-accrual		due and
	accruing		accruing		loans		non-accrual		Current		Total loans		accruing		accruing		loans		non-accrual		Current		Total loans
Commercial:
Commercial and industrial	$	1,224	$	—	$	1,631	$	2,855	$	1,987,928	$	1,990,783	$	499	$	—	$	8,817	$	9,316	$	1,900,544	$	1,909,860
Municipal and non-profit		—		—		—		—		980,117		980,117		—		—		—		—		1,062,581		1,062,581
Owner occupied commercial real estate		—		—		2,200		2,200		920,914		923,114		49		—		752		801		1,108,988		1,109,789
Food and agribusiness		75		141		620		836		334,100		334,936		—		—		5,476		5,476		294,074		299,550
Total commercial		1,299		141		4,451		5,891		4,223,059		4,228,950		548		—		15,045		15,593		4,366,187		4,381,780
Commercial real estate non-owner occupied:
Construction		—		—		—		—		341,197		341,197		—		—		—		—		356,564		356,564
Acquisition/development		—		—		—		—		123,696		123,696		—		—		—		—		90,323		90,323
Multifamily		—		—		—		—		270,532		270,532		—		—		—		—		347,421		347,421
Non-owner occupied		—		—		149		149		1,088,950		1,089,099		572		—		13,472		14,044		1,051,847		1,065,891
Total commercial real estate		—		—		149		149		1,824,375		1,824,524
Total commercial real estate and non-owner occupied														572		—		13,472		14,044		1,846,155		1,860,199
Residential real estate:
Senior lien		633		30		4,268		4,931		1,176,742		1,181,673		735		—		6,293		7,028		1,212,617		1,219,645
Junior lien		342		10		605		957		89,168		90,125		1,439		—		957		2,396		88,163		90,559
Total residential real estate		975		40		4,873		5,888		1,265,910		1,271,798		2,174		—		7,250		9,424		1,300,780		1,310,204
Consumer		34		4		73		111		19,915		20,026		201		1		50		252		16,617		16,869
Total loans	$	2,308	$	185	$	9,546	$	12,039	$	7,333,259	$	7,345,298	$	3,495	$	1	$	35,817	$	39,313	$	7,529,739	$	7,569,052


	March 31, 2023						March 31, 2024
	Non-accrual loans		Non-accrual loans				Non-accrual loans		Non-accrual loans
	with a related		with no related				with a related		with no related
	allowance for		allowance for		Non-accrual		allowance for		allowance for		Non-accrual
	credit loss		credit loss		loans		credit loss		credit loss		loans
Commercial:
Commercial and industrial	$	1,631	$	—	$	1,631	$	8,756	$	61	$	8,817
Municipal and non-profit		—		—		—		—		—		—
Owner occupied commercial real estate		781		1,419		2,200		752		—		752
Food and agribusiness		34		586		620		4,890		586		5,476
Total commercial		2,446		2,005		4,451		14,398		647		15,045
Commercial real estate non-owner occupied:
Construction		—		—		—		—		—		—
Acquisition/development		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Non-owner occupied		149		—		149		13,472		—		13,472
Total commercial real estate		149		—		149
Total commercial real estate non-owner occupied								13,472		—		13,472
Residential real estate:
Senior lien		3,138		1,130		4,268		3,613		2,680		6,293
Junior lien		302		303		605		429		528		957
Total residential real estate		3,440		1,433		4,873		4,042		3,208		7,250
Consumer		66		7		73		50		—		50
Total loans	$	6,101	$	3,445	$	9,546	$	31,962	$	3,855	$	35,817

Table of Contents


	December 31, 2022												December 31, 2023
			Greater												Greater
	30-89 days		than 90 days				Total past						30-89 days		than 90 days				Total past
	past due and		past due and		Non-accrual		due and						past due and		past due and		Non-accrual		due and
	accruing		accruing		loans		non-accrual		Current		Total loans		accruing		accruing		loans		non-accrual		Current		Total loans
Commercial:
Commercial and industrial	$	919	$	53	$	2,601	$	3,573	$	2,021,262	$	2,024,835	$	9,179	$	—	$	2,250	$	11,429	$	1,955,480	$	1,966,909
Municipal and non-profit		—		—		—		—		959,626		959,626		—		—		—		—		1,083,756		1,083,756
Owner occupied commercial real estate		—		—		6,551		6,551		906,789		913,340		—		—		755		755		1,123,018		1,123,773
Food and agribusiness		699		—		2,148		2,847		351,132		353,979		—		12		5,762		5,774		318,823		324,597
Total commercial		1,618		53		11,300		12,971		4,238,809		4,251,780		9,179		12		8,767		17,958		4,481,077		4,499,035
Commercial real estate non-owner occupied:
Construction		—		—		—		—		341,325		341,325		—		—		—		—		405,250		405,250
Acquisition/development		—		—		—		—		129,102		129,102		1,077		—		—		1,077		99,019		100,096
Multifamily		—		—		—		—		213,677		213,677		—		—		—		—		311,770		311,770
Non-owner occupied		629		—		685		1,314		1,010,632		1,011,946		60		—		13,472		13,532		1,026,102		1,039,634
Total commercial real estate		629		—		685		1,314		1,694,736		1,696,050
Total commercial real estate and non-owner occupied														1,137		—		13,472		14,609		1,842,141		1,856,750
Residential real estate:
Senior lien		446		—		4,174		4,620		1,149,728		1,154,348		1,410		50		5,488		6,948		1,226,651		1,233,599
Junior lien		255		—		341		596		96,337		96,933		375		528		448		1,351		88,837		90,188
Total residential real estate		701		—		4,515		5,216		1,246,065		1,251,281		1,785		578		5,936		8,299		1,315,488		1,323,787
Consumer		38		42		12		92		21,266		21,358		131		1		53		185		19,001		19,186
Total loans	$	2,986	$	95	$	16,512	$	19,593	$	7,200,876	$	7,220,469	$	12,232	$	591	$	28,228	$	41,051	$	7,657,707	$	7,698,758


	December 31, 2022						December 31, 2023
	Non-accrual loans		Non-accrual loans				Non-accrual loans		Non-accrual loans
	with a related		with no related				with a related		with no related
	allowance for		allowance for		Non-accrual		allowance for		allowance for		Non-accrual
	credit loss		credit loss		loans		credit loss		credit loss		loans
Commercial:
Commercial and industrial	$	1,640	$	961	$	2,601	$	2,250	$	—	$	2,250
Municipal and non-profit		—		—		—		—		—		—
Owner occupied commercial real estate		693		5,858		6,551		755		—		755
Food and agribusiness		455		1,693		2,148		5,176		586		5,762
Total commercial		2,788		8,512		11,300		8,181		586		8,767
Commercial real estate non-owner occupied:
Construction		—		—		—		—		—		—
Acquisition/development		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Non-owner occupied		685		—		685		13,472		—		13,472
Total commercial real estate		685		—		685
Total commercial real estate non-owner occupied								13,472		—		13,472
Residential real estate:
Senior lien		3,019		1,155		4,174		3,277		2,211		5,488
Junior lien		341		—		341		448		—		448
Total residential real estate		3,360		1,155		4,515		3,725		2,211		5,936
Consumer		12		—		12		53		—		53
Total loans	$	6,845	$	9,667	$	16,512	$	25,431	$	2,797	$	28,228

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Loans to borrowers experiencing financial difficulties may be modified. Modified loans are discussed in more detail below. There was no interest income recognized from non-accrual loans during the three months ended March 31, ~~2023~~2024 or ~~2022.~~2023.

The Company’s internal risk rating system uses a series of grades, which reflect our assessment of the credit quality of loans based on an analysis of the borrower's financial condition, liquidity and ability to meet contractual debt service requirements and are categorized as “Pass”, “Special mention”, “Substandard” and “Doubtful”. For a description of the general characteristics of the risk grades, refer to note 2 Summary of Significant Accounting Policies in our audited consolidated financial statements in our ~~2022~~2023 Annual Report on Form 10-K.

Table of Contents

The amortized cost basis and current period gross charge offs for all loans as determined by the Company’s internal risk rating system and year of origination is shown in the following ~~table~~tables as of and for the three months ended March 31, 2024 and year ended December 31, 2023:


	March 31, 2023																		March 31, 2024
													Revolving		Revolving																Revolving		Revolving
													loans		loans																loans		loans
	Origination year												amortized		converted				Origination year												amortized		converted
	2023		2022		2021		2020		2019		Prior		cost basis		to term		Total		2024		2023		2022		2021		2020		Prior		cost basis		to term		Total
Commercial:
Commercial and industrial:
Pass	$	69,538	$	467,029	$	341,901	$	113,152	$	91,494	$	149,917	$	711,784	$	4,261	$	1,949,076	$	96,569	$	335,134	$	378,386	$	269,460	$	80,650	$	141,401	$	467,602	$	11,284	$	1,780,486
Special mention		—		7,325		1,877		9,093		1,115		4,353		5,266		—		29,029		900		6,390		27,376		31,292		11,208		2,335		21,194		1,244		101,939
Substandard		—		32		36		1,264		210		10,843		2		50		12,437		—		11,703		3,367		1,347		6,950		575		808		—		24,750
Doubtful		—		—		—		241		—		—		—		—		241		—		2,033		—		35		617		—		—		—		2,685
Total commercial and industrial		69,538		474,386		343,814		123,750		92,819		165,113		717,052		4,311		1,990,783		97,469		355,260		409,129		302,134		99,425		144,311		489,604		12,528		1,909,860
Gross charge-offs: Commercial and industrial																				—		—		—		—		—		24		—		—		24
Municipal and non-profit:
Pass		14,917		137,012		249,393		89,199		57,423		430,505		1,668		—		980,117		4,593		144,702		141,468		245,572		79,289		411,316		33,607		—		1,060,547
Special mention																				—		—		—		—		2,034		—		—		—		2,034
Total municipal and non-profit		14,917		137,012		249,393		89,199		57,423		430,505		1,668		—		980,117		4,593		144,702		141,468		245,572		81,323		411,316		33,607		—		1,062,581
Owner occupied commercial real estate:
Pass		19,585		276,224		201,657		94,484		88,505		185,546		17,457		2,575		886,033		21,089		230,577		262,466		172,534		97,300		245,581		13,586		270		1,043,403
Special mention		—		—		2,053		—		6,894		22,164		—		—		31,111		—		1,664		22,879		9,698		—		25,858		299		—		60,398
Substandard		—		—		1,761		1,952		885		629		—		—		5,227		—		—		515		2,378		—		2,587		—		—		5,480
Doubtful		—		—		—		—		69		674		—		—		743		—		—		6		—		—		502		—		—		508
Total owner occupied commercial real estate		19,585		276,224		205,471		96,436		96,353		209,013		17,457		2,575		923,114		21,089		232,241		285,866		184,610		97,300		274,528		13,885		270		1,109,789
Food and agribusiness:
Pass		11,556		38,482		22,437		24,318		10,923		46,699		143,594		40		298,049		2,518		11,712		72,805		12,532		9,174		43,007		133,071		477		285,296
Special mention		—		—		204		—		—		6,612		28,917		—		35,733		—		—		—		4,482		—		3,683		—		450		8,615
Substandard		—		—		586		—		12		306		—		—		904		—		—		—		586		—		178		1,587		—		2,351
Doubtful		—		—		—		250		—		—		—		—		250		—		—		—		—		—		—		3,288		—		3,288
Total food and agribusiness		11,556		38,482		23,227		24,568		10,935		53,617		172,511		40		334,936		2,518		11,712		72,805		17,600		9,174		46,868		137,946		927		299,550
Total commercial		115,596		926,104		821,905		333,953		257,530		858,248		908,688		6,926		4,228,950		125,669		743,915		909,268		749,916		287,222		877,023		675,042		13,725		4,381,780
Gross charge-offs: Commercial																				—		—		—		—		—		24		—		—		24
Commercial real estate non-owner occupied:
Construction:
Pass		8,817		109,043		116,125		59,177		14,710		212		33,113		—		341,197		1,860		61,438		141,828		41,016		66,519		—		43,158		745		356,564
Total construction		8,817		109,043		116,125		59,177		14,710		212		33,113		—		341,197		1,860		61,438		141,828		41,016		66,519		—		43,158		745		356,564
Acquisition/development:
Pass		2,203		62,121		34,395		7,779		1,445		10,525		5,228		—		123,696		85		10,100		38,832		20,641		2,532		9,299		3,438		4,319		89,246
Special mention																				—		—		1,077		—		—		—		—		—		1,077
Total acquisition/development		2,203		62,121		34,395		7,779		1,445		10,525		5,228		—		123,696		85		10,100		39,909		20,641		2,532		9,299		3,438		4,319		90,323
Multifamily:
Pass		27,067		107,963		26,661		17,568		39,457		33,155		18,661		—		270,532		9,033		16,455		117,430		104,263		16,872		70,794		832		—		335,679
Special mention																				—		—		11,742		—		—		—		—		—		11,742
Total multifamily		27,067		107,963		26,661		17,568		39,457		33,155		18,661		—		270,532		9,033		16,455		129,172		104,263		16,872		70,794		832		—		347,421
Non-owner occupied
Pass		90,371		252,860		171,318		120,123		121,691		268,884		8,319		4,866		1,038,432		4,031		109,914		274,414		161,436		90,611		353,135		5,988		299		999,828
Special mention		—		—		—		7,275		3,999		29,351		—		—		40,625		—		—		9,181		1,820		20,363		6,246		—		—		37,610
Substandard		—		—		—		—		—		7,112		—		—		7,112		—		—		—		5,207		—		20,013		—		—		25,220
Doubtful		—		—		—		280		—		2,650		—		—		2,930		—		—		—		—		—		3,233		—		—		3,233
Total non-owner occupied		90,371		252,860		171,318		127,678		125,690		307,997		8,319		4,866		1,089,099		4,031		109,914		283,595		168,463		110,974		382,627		5,988		299		1,065,891
Total commercial real estate non-owner occupied		128,458		531,987		348,499		212,202		181,302		351,889		65,321		4,866		1,824,524		15,009		197,907		594,504		334,383		196,897		462,720		53,416		5,363		1,860,199
Residential real estate:
Senior lien
Pass		25,405		376,497		327,259		127,907		46,389		216,942		51,953		229		1,172,581		9,135		91,141		436,360		308,130		110,679		206,637		48,761		107		1,210,950
Special mention		—		—		—		—		—		387		—		—		387		—		—		745		—		—		505		—		—		1,250
Substandard		—		188		185		4,462		833		2,989		—		—		8,657		—		1,537		1,582		986		415		2,863		—		—		7,383
Doubtful		—		—		—		—		—		48		—		—		48		—		—		29		—		33		—		—		—		62
Total senior lien		25,405		376,685		327,444		132,369		47,222		220,366		51,953		229		1,181,673		9,135		92,678		438,716		309,116		111,127		210,005		48,761		107		1,219,645
Junior lien
Pass		1,261		4,981		2,055		3,085		2,572		5,790		68,406		832		88,982		795		5,916		4,367		1,768		2,117		6,871		63,514		4,183		89,531
Special mention		—		—		—		—		—		27		—		—		27		—		—		—		—		—		27		—		—		27
Substandard		—		95		—		251		—		258		—		303		907		—		—		146		236		297		322		—		—		1,001
Doubtful		—		—		—		209		—		—		—		—		209
Total junior lien		1,261		5,076		2,055		3,545		2,572		6,075		68,406		1,135		90,125		795		5,916		4,513		2,004		2,414		7,220		63,514		4,183		90,559
Total residential real estate		26,666		381,761		329,499		135,914		49,794		226,441		120,359		1,364		1,271,798		9,930		98,594		443,229		311,120		113,541		217,225		112,275		4,290		1,310,204
Consumer
Pass		3,492		5,858		3,403		1,851		479		649		4,175		47		19,954		976		5,235		2,512		1,890		835		440		4,884		47		16,819
Substandard		—		3		2		5		—		54		3		5		72		—		—		—		—		—		47		3		—		50
Total consumer		3,492		5,861		3,405		1,856		479		703		4,178		52		20,026		976		5,235		2,512		1,890		835		487		4,887		47		16,869
Gross charge-offs: Consumer		322		—		—		—		—		3		—		—		325		198		18		3		3		—		32		—		—		254
Total loans	$	274,212	$	1,845,713	$	1,503,308	$	683,925	$	489,105	$	1,437,281	$	1,098,546	$	13,208	$	7,345,298	$	151,584	$	1,045,651	$	1,949,513	$	1,397,309	$	598,495	$	1,557,455	$	845,620	$	23,425	$	7,569,052
Gross charge-offs: Total loans		322		—		—		—		—		3		—		—		325		198		18		3		3		—		56		—		—		278

Table of Contents

~~The amortized cost basis for all loans as determined by the Company’s internal risk rating system and year of origination is shown in the following table as of December 31, 2022:~~


	December 31, 2023
													Revolving		Revolving
													loans		loans
	Origination year												amortized		converted
	2023		2022		2021		2020		2019		Prior		cost basis		to term		Total
Commercial:
Commercial and industrial:
Pass	$	348,103	$	396,618	$	271,201	$	87,234	$	41,261	$	106,711	$	563,924	$	31,620	$	1,846,672
Special mention		4,775		12,259		31,895		20,340		2,202		683		18,344		3,470		93,968
Substandard		13,729		4,555		4,248		1,314		179		347		910		—		25,282
Doubtful		600		—		—		387		—		—		—		—		987
Total commercial and industrial		367,207		413,432		307,344		109,275		43,642		107,741		583,178		35,090		1,966,909
Gross charge-offs: Commercial and industrial		—		12		215		—		47		3		—		—		277
Municipal and non-profit:
Pass		139,591		140,626		246,088		82,590		53,460		389,867		31,534		—		1,083,756
Total municipal and non-profit		139,591		140,626		246,088		82,590		53,460		389,867		31,534		—		1,083,756
Owner occupied commercial real estate:
Pass		236,897		275,644		181,472		97,523		86,761		163,997		18,281		—		1,060,575
Special mention		2,074		19,191		7,808		—		2,650		27,653		—		—		59,376
Substandard		—		515		1,732		—		687		234		—		—		3,168
Doubtful		—		6		—		—		—		648		—		—		654
Total owner occupied commercial real estate		238,971		295,356		191,012		97,523		90,098		192,532		18,281		—		1,123,773
Food and agribusiness:
Pass		16,917		69,212		14,159		15,379		10,417		34,592		149,125		51		309,852
Special mention		—		—		4,646		—		—		3,724		450		—		8,820
Substandard		—		—		586		—		—		180		1,786		—		2,552
Doubtful		—		—		—		—		—		—		3,373		—		3,373
Total food and agribusiness		16,917		69,212		19,391		15,379		10,417		38,496		154,734		51		324,597
Total commercial		762,686		918,626		763,835		304,767		197,617		728,636		787,727		35,141		4,499,035
Gross charge-offs: Commercial		—		12		215		—		47		3		—		—		277
Commercial real estate non-owner occupied:
Construction:
Pass		43,385		190,826		59,477		63,486		1,006		—		47,070		—		405,250
Total construction		43,385		190,826		59,477		63,486		1,006		—		47,070		—		405,250
Acquisition/development:
Pass		13,228		39,000		21,011		5,992		597		8,814		7,416		2,961		99,019
Special mention		—		1,077		—		—		—		—		—		—		1,077
Total acquisition/development		13,228		40,077		21,011		5,992		597		8,814		7,416		2,961		100,096
Multifamily:
Pass		16,450		113,936		92,574		16,938		39,371		31,671		830		—		311,770
Total multifamily		16,450		113,936		92,574		16,938		39,371		31,671		830		—		311,770
Non-owner occupied
Pass		116,168		241,563		172,042		91,188		124,291		236,694		6,694		—		988,640
Special mention		—		—		—		21,268		3,876		2,489		—		—		27,633
Substandard		—		—		—		—		—		19,848		—		—		19,848
Doubtful		—		—		—		280		—		3,233		—		—		3,513
Total non-owner occupied		116,168		241,563		172,042		112,736		128,167		262,264		6,694		—		1,039,634
Total commercial real estate non-owner occupied		189,231		586,402		345,104		199,152		169,141		302,749		62,010		2,961		1,856,750
Residential real estate:
Senior lien
Pass		87,608		434,963		316,080		112,582		42,752		183,890		48,462		94		1,226,431
Special mention		—		—		—		—		—		515		—		—		515
Substandard		1,555		1,119		740		415		620		2,167		—		—		6,616
Doubtful		—		—		—		—		—		37		—		—		37
Total senior lien		89,163		436,082		316,820		112,997		43,372		186,609		48,462		94		1,233,599
Gross charge-offs: Senior lien		—		—		—		—		—		48		—		—		48
Junior lien
Pass		4,920		4,464		1,712		2,947		2,270		4,729		66,441		684		88,167
Special mention		—		—		—		—		—		27		249		—		276
Substandard		263		149		236		758		—		339		—		—		1,745
Total junior lien		5,183		4,613		1,948		3,705		2,270		5,095		66,690		684		90,188
Total residential real estate		94,346		440,695		318,768		116,702		45,642		191,704		115,152		778		1,323,787
Gross charge-offs: Residential real estate		—		—		—		—		—		48		—		—		48
Consumer
Pass		5,945		3,330		2,233		997		244		410		5,947		27		19,133
Substandard		—		—		—		—		—		50		3		—		53
Total consumer		5,945		3,330		2,233		997		244		460		5,950		27		19,186
Gross charge-offs: Consumer		1,225		13		1		2		1		8		—		—		1,250
Total loans	$	1,052,208	$	1,949,053	$	1,429,940	$	621,618	$	412,644	$	1,223,549	$	970,839	$	38,907	$	7,698,758
Gross charge-offs: Total loans		1,225		25		216		2		48		59		—		—		1,575

December 31, 2022

Revolving

Revolving

loans

loans

Origination year

amortized

converted

2022

2021

2020

2019

2018

Prior

cost basis

to term

Total
Commercial:

Commercial and industrial:

Pass

$
528,180

$
351,003

$
129,453

$
95,003

$
101,951

$
88,038

$
688,398

$
17,883

$
1,999,909
Special mention

66

137

388

2,887

588

4,440

3,512

—

12,018
Substandard

34

7

1,882

200

189

10,270

50

30

12,662
Doubtful

—

—

246

—

—

—

—

—

246
Total commercial and industrial

528,280

351,147

131,969

98,090

102,728

102,748

691,960

17,913

2,024,835
Municipal and non-profit:

Pass

105,630

246,696

89,562

59,066

73,013

383,158

2,501

—

959,626
Total municipal and non-profit

105,630

246,696

89,562

59,066

73,013

383,158

2,501

—

959,626
Owner occupied commercial real estate:

Pass

263,635

203,628

100,522

92,653

70,447

121,448

24,930

894

878,157
Special mention

—

515

—

6,956

2,616

17,360

—

—

27,447
Substandard

—

—

1,185

4,612

—

931

—

234

6,962
Doubtful

—

—

—

85

108

581

—

—

774
Total owner occupied commercial real estate

263,635

204,143

101,707

104,306

73,171

140,320

24,930

1,128

913,340
Food and agribusiness:

Pass

36,505

23,907

25,285

11,035

19,689

31,210

191,785

1,663

341,079
Special mention

—

204

4,573

—

3,486

195

1,750

—

10,208
Substandard

—

1,747

—

12

—

324

—

173

2,256
Doubtful

—

186

250

—

—

—

—

—

436
Total food and agribusiness

36,505

26,044

30,108

11,047

23,175

31,729

193,535

1,836

353,979
Total commercial

934,050

828,030

353,346

272,509

272,087

657,955

912,926

20,877

4,251,780
Commercial real estate non-owner occupied:

Construction:

Pass

106,197

139,012

56,489

14,387

—

213

25,027

—

341,325
Total construction

106,197

139,012

56,489

14,387

—

213

25,027

—

341,325
Acquisition/development:

Pass

57,773

33,663

7,810

1,921

3,939

16,648

7,348

—

129,102
Total acquisition/development

57,773

33,663

7,810

1,921

3,939

16,648

7,348

—

129,102
Multifamily:

Pass

99,988

22,022

17,658

39,547

17,358

16,009

1,095

—

213,677
Total multifamily

99,988

22,022

17,658

39,547

17,358

16,009

1,095

—

213,677
Non-owner occupied

Pass

235,958

172,648

120,871

138,711

42,489

249,461

11,707

—

971,845
Special mention

—

—

7,313

4,048

3,947

12,658

—

—

27,966
Substandard

—

—

—

—

629

7,912

—

—

8,541
Doubtful

—

—

280

—

—

3,314

—

—

3,594
Total non-owner occupied

235,958

172,648

128,464

142,759

47,065

273,345

11,707

—

1,011,946
Total commercial real estate non-owner occupied

499,916

367,345

210,421

198,614

68,362

306,215

45,177

—

1,696,050
Residential real estate:

Senior lien

Pass

361,405

323,984

133,847

47,557

30,283

184,998

66,792

496

1,149,362
Special mention

—

—

—

—

—

362

—

—

362
Substandard

191

186

468

854

105

2,769

—

—

4,573
Doubtful

—

—

—

—

51

—

—

—

51
Total senior lien

361,596

324,170

134,315

48,411

30,439

188,129

66,792

496

1,154,348
Junior lien

Pass

6,429

5,977

3,010

4,163

1,726

3,773

69,059

1,286

95,423
Special mention

—

—

—

—

—

351

—

—

351
Substandard

9

—

89

—

54

242

305

251

950
Doubtful

—

—

—

—

—

—

—

209

209
Total junior lien

6,438

5,977

3,099

4,163

1,780

4,366

69,364

1,746

96,933
Total residential real estate

368,034

330,147

137,414

52,574

32,219

192,495

136,156

2,242

1,251,281
Consumer:

Pass

8,576

4,816

2,209

607

282

531

4,292

33

21,346
Substandard

3

—

—

—

—

5

4

—

12
Total consumer

8,579

4,816

2,209

607

282

536

4,296

33

21,358
Total loans

$
1,810,579

$
1,530,338

$
703,390

$
524,304

$
372,950

$
1,157,201

$
1,098,555

$
23,152

$
7,220,469

Table of Contents

Loans evaluated individually

We evaluate loans individually when they no longer share risk characteristics with pooled loans. These loans include loans on non-accrual status, loans in bankruptcy, and modified loans as described below. If a specific allowance is warranted based on the borrower’s overall financial condition, the specific allowance is calculated based on discounted expected cash flows using the loan’s initial contractual effective interest rate or the fair value of the collateral less selling costs for collateral-dependent loans.

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Management individually evaluates collateral-dependent loans with an amortized cost basis of $250 thousand or more and includes collateral-dependent loans less than $250 thousand within the general allowance population. The amortized cost basis of collateral-dependent loans over $250 thousand was as follows at March 31, ~~2023~~2024 and December 31, ~~2022:~~2023:


	March 31, 2023						March 31, 2024
					Total amortized						Total amortized
	Real property		Business assets		cost basis		Real property		Business assets		cost basis
Commercial
Commercial and industrial	$	2,181	$	32	$	2,213	$	2,905	$	5,882	$	8,787
Owner-occupied commercial real estate		2,658		150		2,808		1,872		—		1,872
Food and agribusiness		1,680		—		1,680		586		4,875		5,461
Total Commercial		6,519		182		6,701		5,363		10,757		16,120
Commercial real estate non owner-occupied
Non-owner occupied		6,519		—		6,519		18,770		—		18,770
Total commercial real estate		6,519		—		6,519
Total commercial real estate non owner-occupied								18,770		—		18,770
Residential real estate
Senior lien		5,585		—		5,585		3,565		—		3,565
Junior lien		763		—		763		421		108		529
Total residential real estate		6,348		—		6,348		3,986		108		4,094
Consumer		—		7		7
Total loans	$	19,386	$	189	$	19,575	$	28,119	$	10,865	$	38,984


	December 31, 2022						December 31, 2023
					Total amortized						Total amortized
	Real property		Business assets		cost basis		Real property		Business assets		cost basis
Commercial
Commercial and industrial	$	2,869	$	791	$	3,660	$	1,946	$	220	$	2,166
Owner-occupied commercial real estate		6,711		1,346		8,057		1,883		—		1,883
Food and agribusiness		3,020		173		3,193		586		5,159		5,745
Total Commercial		12,600		2,310		14,910		4,415		5,379		9,794
Commercial real estate non owner-occupied
Non-owner occupied		8,561		—		8,561		19,993		—		19,993
Total commercial real estate		8,561		—		8,561
Total commercial real estate non owner-occupied								19,993		—		19,993
Residential real estate
Senior lien		2,806		—		2,806		2,661		—		2,661
Junior lien		460		—		460
Total residential real estate		3,266		—		3,266		2,661		—		2,661
Total loans	$	24,427	$	2,310	$	26,737	$	27,069	$	5,379	$	32,448

Loan modifications

The Company’s policy is to review each prospective credit to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include modifying a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. The Company considers loans to borrowers experiencing financial difficulties, where such a concession is utilized, to be troubled ~~loans. In March 2022, the FASB issued ASU 2022-02,~~ ~~Financial Instruments—Credit Losses~~ ~~(Topic 326):~~ ~~Troubled Debt Restructurings and Vintage Disclosures~~~~, which became effective for the Company on January 1, 2023. The guidance eliminates the accounting for troubled~~ debt ~~restructures and requires that an entity evaluate whether loan~~ modifications ~~represent a new loan~~(“TDM”). TDMs may include principal forgiveness, interest rate reductions, other-than-insignificant-payment delays, term extensions or ~~a continuation of an existing loan. Such troubled debt~~any combination thereof.

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~~modifications (“TDM”) may include principal forgiveness, interest rate reductions, other-than-insignificant-payment delays, term extensions or any combination thereof.~~

~~During the three months ended March 31, 2023, the Company modified three loans with an amortized cost basis of $4.3 million to facilitate repayment that are considered TDMs.~~ The following ~~schedule presents,~~schedules present, by loan class, the amortized costs basis as of the dates shown for modified loans to borrowers experiencing financial difficulty:


							March 31, 2024
	March 31, 2023												Combination - interest rate			Combination - term extension
	Term extension			Payment delay			Term extension			Payment delay			reduction and term extension			and payment delay
	Amortized		% of loan	Amortized		% of loan	Amortized		% of loan	Amortized		% of loan	Amortized		% of loan	Amortized		% of loan
	cost basis		class	cost basis		class	cost basis		class	cost basis		class	cost basis		class	cost basis		class
Commercial:
Commercial and industrial	$	—	0.0%	$	154	0.0%	$	—	0.0%	$	8,561	0.4%	$	—	0.0%	$	—	0.0%
Owner occupied commercial real estate		—	0.0%		116	0.0%		—	0.0%		1,664	0.1%		—	0.0%		—	0.0%
Total commercial		—	0.0%		270	0.0%		—	0.0%		10,225	0.2%		—	0.0%		—	0.0%
Commercial real estate non-owner occupied:
Non-owner occupied								18,770	1.8%		—	0.0%		—	0.0%		—	0.0%
Total commercial real estate non-owner occupied								18,770	1.0%		—	0.0%		—	0.0%		—	0.0%
Residential real estate:
Senior lien		4,000	0.3%		—	0.0%		—	0.0%		869	0.1%		651	0.1%		382	0.0%
Total residential real estate		4,000	0.3%		—	0.0%		—	0.0%		869	0.1%		651	0.0%		382	0.0%
Total loans	$	4,000	0.1%	$	270	0.0%	$	18,770	0.2%	$	11,094	0.1%	$	651	0.0%	$	382	0.0%


	March 31, 2023

	Term extension			Payment delay
	Amortized		% of loan	Amortized		% of loan
	cost basis		class	cost basis		class
Commercial:
Commercial and industrial	$	—	0.0%	$	154	0.0%
Owner occupied commercial real estate		—	0.0%		116	0.0%
Total commercial		—	0.0%		270	0.0%
Residential real estate:
Senior lien		4,000	0.3%		—	0.0%
Total residential real estate		4,000	0.3%		—	0.0%
Total loans	$	4,000	0.1%	$	270	0.0%

The following ~~schedule presents the payment status,~~schedules present, by loan class, the ~~amortized cost basis~~payment status of loans that have been modified in the last ~~three~~twelve months as of ~~March 31, 2023:~~the dates presented on an amortized cost basis:


	March 31, 2024

	Current		Non-accrual
Commercial:
Commercial and industrial	$	3,129	$	5,354
Owner occupied commercial real estate		1,664		—
Total commercial		4,793		5,354
Commercial real estate non-owner occupied:
Non-owner occupied		5,298		13,472
Total commercial real estate non-owner occupied		5,298		13,472
Residential real estate:
Senior lien		651		1,251
Total loans	$	10,742	$	20,077

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	March 31, 2023
	Current		Non-accrual
Commercial:
Commercial and industrial	$	154	$	—
Owner occupied commercial real estate		—		116
Total commercial		154		116
Residential real estate:
Senior lien		4,000		—
Total residential real estate		4,000		—
Total loans	$	4,154	$	116

Accrual of interest is resumed on loans that were previously on non-accrual only after the loan has performed sufficiently for a period of time. The Company had nofour TDMs with an amortized cost totaling $18.8 million that were modified within the past twelve months, utilizing a term extension and ~~had~~payment delays, that defaulted on their modified terms during the 12 months ended March 31, 2024. During the three months ended March 31, ~~2023.~~2023, the Company had no TDMs that were modified within the preceding twelve months that defaulted on their modified terms. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due on principal or interest. The allowance for credit losses related to TDMs on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as TDMs.

The following ~~schedule presents~~schedules present the financial effect of the modifications made to borrowers experiencing financial difficulty as of March 31, 2024 and 2023:


	March 31, 2024
	Financial effect
		Term extension	Payment delay	Combination - Interest Rate Reduction and Term Extension	Combination - Term Extension and Payment Delay
Commercial:
Commercial and industrial			Delayed payments for a weighted average of 0.5 years
Owner occupied commercial real estate			Delayed payments for a weighted average of 0.5 years
Commercial real estate non-owner occupied:
Non-owner occupied		Extended a weighted average of 0.3 years to the life of loans, which reduced monthly payment amounts
Residential real estate:
Senior lien			Delayed payments for a weighted average of 0.3 years	Reduced weighted average contractual interest rate by 2.5% and renewed with a weighted average life of 30 years, which reduced monthly payment amounts	Added weighted average of 0.7 years to the life of loans, which reduced monthly payment amounts and delayed payments for a weighted average of 0.7 years

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	March 31, 2023
	Financial effect
		Term extension	Payment delay
Commercial:
Commercial and industrial			Delayed payments for a weighted average of 0.2 years
Owner occupied commercial real estate			Delayed payments for a weighted average of 0.5 years
Residential real estate:
Senior lien		~~Added~~Extended a weighted average 0.5 years to the life of loans, which reduced monthly payment amounts

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Prior to the adoption of ASU 2022-02, the Company disclosed troubled debt restructurings (“TDR”) in accordance with ASC 310-40. During 2022, the Company restructured 10 loans with an amortized cost basis of $1.1 million to facilitate repayment that were considered TDRs. Troubled debt restructurings were a reduction of the principal payment, a reduction in interest rate, or an extension of term. The table below provides additional information related to accruing TDRs at December 31, 2022:

December 31, 2022

Amortized

Average year-to-date

Unpaid

Unfunded commitments

cost basis

amortized cost basis

principal balance

to fund TDRs
Commercial

$
2,160

$
2,348

$
2,150

$
150
Commercial real estate non-owner occupied

685

734

699

—
Residential real estate

1,809

1,867

1,964

—
Consumer

—

—

—

—
Total

$
4,654

$
4,949

$
4,813

$
150

~~The following table summarizes the Company’s carrying value of non-accrual TDRs as of December 31, 2022:~~


		~~December 31, 2022~~
~~Commercial~~		~~356~~
~~Commercial real estate non-owner occupied~~		81
~~Residential real estate~~		~~2,041~~
~~Consumer~~		—
~~Total non-accruing TDRs~~		~~2,478~~

During the three months ended March 31, 2022, the Company had no TDRs that were modified within the past twelve months and had defaulted on their modified terms. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due on principal or interest. The allowance for credit losses related to TDRs on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as TDRs.

Note 6 Allowance for Credit Losses

The tables below detail the Company’s allowance for credit losses as of the dates shown:


	Three months ended March 31, 2023										Three months ended March 31, 2024
			Non-owner										Non-owner
			occupied										occupied
			commercial		Residential								commercial		Residential
	Commercial		real estate		real estate		Consumer		Total		Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	37,608	$	32,050	$	19,306	$	589	$	89,553	$	45,304	$	32,665	$	19,550	$	428	$	97,947
Charge-offs		—		—		—		(325)		(325)		(24)		—		—		(254)		(278)
Recoveries		41		1		7		16		65		116		—		6		66		188
Provision (release) expense for credit losses		(254)		839		261		204		1,050
Provision expense (release) for credit losses												919		(1,827)		544		114		(250)
Ending balance	$	37,395	$	32,890	$	19,574	$	484	$	90,343	$	46,315	$	30,838	$	20,100	$	354	$	97,607


	Three months ended March 31, 2022										Three months ended March 31, 2023
			Non-owner										Non-owner
			occupied										occupied
			commercial		Residential								commercial		Residential
	Commercial		real estate		real estate		Consumer		Total		Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	31,256	$	10,033	$	8,056	$	349	$	49,694	$	37,608	$	32,050	$	19,306	$	589	$	89,553
Charge-offs		(463)		—		(2)		(169)		(634)		—		—		—		(325)		(325)
Recoveries		47		—		2		26		75		41		1		7		16		65
Provision expense (release) for credit losses		1,005		(1,538)		80		128		(325)
Provision (release) expense for credit losses												(254)		839		261		204		1,050
Ending balance	$	31,845	$	8,495	$	8,136	$	334	$	48,810	$	37,395	$	32,890	$	19,574	$	484	$	90,343

In evaluating the loan portfolio for an appropriate ACL level, excluding loans evaluated individually, loans were grouped into segments based on broad characteristics such as primary use and underlying collateral. Within the segments, the portfolio was further

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disaggregated into classes of loans with similar attributes and risk characteristics for purposes of developing the underlying data used within the discounted cash flow model including, but not limited to, prepayment and recovery rates as well as loss rates tied to macro-economic conditions within management’s reasonable and supportable forecast. The ACL also includes subjective adjustments based upon qualitative risk factors including asset quality, loss trends, lending management, portfolio growth and loan review/internal audit results.

Net charge-offs on loans during the three months ended March 31, 2024 were $0.1 million. The Company recorded a decrease in the allowance for credit losses of $0.3 million during the three months ended March 31, 2024. Net charge-offs on loans during the three months ended March 31, 2023 were $0.3 million. The Company recorded an increase in the allowance for credit losses of $1.1 million during the three months ended March 31, ~~2023, driven by loan growth.~~

Net charge-offs on loans during the three months ended March 31, 2022 were $0.6 million. The Company recorded a decrease in the allowance for credit losses of $0.3 million during the three months ended March 31, 2022, driven by strong asset quality.2023.

The Company has elected to exclude AIR from the allowance for credit losses calculation. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, AIR from loans totaled ~~$36.1~~$45.9 million and ~~$31.8~~$42.4 million, respectively.

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Note 7 Other Real Estate Owned

A summary of the activity in other real estate owned (“OREO”) during the three months ended March 31, ~~2023~~2024 and ~~2022~~2023 is as follows:


	For the three months ended March 31,				For the three months ended March 31,
	2023		2022		2024		2023
Beginning balance	$	3,731	$	7,005	$	4,088	$	3,731
Transfers from loan portfolio, at fair value		—		39
Impairments		(13)		(188)		—		(13)
Sales		(260)		(1,793)		(24)		(260)
Ending balance	$	3,458	$	5,063	$	4,064	$	3,458

During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, the Company sold OREO properties with net book balances of ~~$0.3 million~~$24 thousand and ~~$1.8~~$0.3 million, respectively. Sales of OREO properties resulted in net OREO losses of ~~$11~~$2 thousand and ~~net OREO gains of $275~~$11 thousand, which were included within other non-interest expense in the consolidated statements of operations for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

Note 8 Goodwill and Intangible Assets

Goodwill and other intangible assets

In connection with our acquisitions, the ~~Company recorded~~Company’s goodwill was $306.0 million as of ~~$279.1 million.~~March 31, 2024. Goodwill is measured as the excess of the fair value of consideration paid over the fair value of net assets acquired. No goodwill impairment was recorded during the three months ended March 31, ~~2023~~2024 or the year ended December 31, ~~2022.~~2023.

The gross carrying amount of other intangible assets and the associated accumulated amortization at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, are presented as follows:


	March 31, 2023						December 31, 2022						March 31, 2024						December 31, 2023
	Gross				Net		Gross				Net		Gross				Net		Gross				Net
	carrying		Accumulated		carrying		carrying		Accumulated		carrying		carrying		Accumulated		carrying		carrying		Accumulated		carrying
	amount		amortization		amount		amount		amortization		amount		amount		amortization		amount		amount		amortization		amount
Core deposit intangible	$	91,566	$	(46,105)	$	45,461	$	91,566	$	(44,775)	$	46,791	$	91,566	$	(51,425)	$	40,141	$	91,566	$	(50,095)	$	41,471
Wealth management intangible		1,300		(64)		1,236		1,300		(32)		1,268
Customer relationship intangible														17,000		(2,430)		14,570		17,000		(1,867)		15,133
Internally developed technology														2,300		(345)		1,955		2,300		(230)		2,070
Total	$	92,866	$	(46,169)	$	46,697	$	92,866	$	(44,807)	$	48,059	$	110,866	$	(54,200)	$	56,666	$	110,866	$	(52,192)	$	58,674

The Company is amortizing ~~the core deposit and wealth management~~ intangibles from acquisitions onover a ~~straight line basis over 10~~weighted average period of 9.8 years from the date of the respective ~~acquisitions, which represents~~acquisitions. The core deposit and customer relationship intangibles are being amortized over a weighted average period of 10 years, and the ~~expected useful life~~internally developed technology intangible is being amortized over a weighted average period of ~~the assets.~~five years. The Company recognized ~~core deposit and wealth management~~other intangible assets amortization expense of ~~$1.4~~$2.0 million and ~~$0.3~~$1.4 million during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

The following table shows the estimated future amortization expense during the next five years for other intangible assets as of March 31, 2024:


Years ending December 31,		Amount
For the nine months ending December 31, 2024	$	5,901
For the year ending December 31, 2025		7,786
For the year ending December 31, 2026		7,664
For the year ending December 31, 2027		7,542
For the year ending December 31, 2028		6,142

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~~The following table shows the estimated future amortization expense during the next five years for other intangible assets as of March 31, 2023:~~

Years ending December 31,

Amount
For the nine months ending December 31, 2023
$
4,088
For the year ending December 31, 2024

5,451
For the year ending December 31, 2025

5,451
For the year ending December 31, 2026

5,451
For the year ending December 31, 2027

5,451

Servicing Rights

Mortgage servicing rights

Mortgage servicing rights (“MSRs”) represent rights to service loans originated by the Company and sold to government-sponsored enterprises including FHLMC, FNMA, GNMA and FHLB and are included in other assets in the consolidated statements of financial condition. Mortgage loans serviced for others were ~~$0.8~~$0.9 billion and $0.8 billion at March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

Below are the changes in the MSRs for the periods presented:


	For the three months ended March 31,				For the three months ended March 31,
	2023		2022		2024		2023
Beginning balance	$	9,162	$	5,957	$	4,911	$	9,162
Originations		274		1,679		115		274
Recovery		—		6
Amortization		(119)		(206)		(114)		(119)
Ending balance		9,317		7,436		4,912		9,317
Fair value of mortgage servicing rights	$	13,321	$	10,834	$	7,523	$	13,321

The fair value of MSRs was determined based upon a discounted cash flow analysis. The cash flow analysis included assumptions for discount rates and prepayment speeds. Discount rates ranged from 10.0% to 10.5%, and the constant prepayment speed ranged from ~~7.9%~~6.2% to ~~18.2%~~13.3% for the March 31, ~~2023~~2024 valuation. Discount rates ranged from ~~9.5%~~10.0% to ~~10.0%~~10.5%, and the constant prepayment speed ranged from ~~7.7%~~7.9% to ~~13.0%~~18.2% for the March 31, ~~2022~~2023 valuation. Included in mortgage banking income in the consolidated statements of operations was servicing income of ~~$0.5~~$0.4 million and $0.5 million for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

MSRs are evaluated and impairment is recognized to the extent fair value is less than the carrying amount. The Company evaluates impairment by stratifying MSRs based on the predominant risk characteristics of the underlying loans, including loan type and loan term. The Company is amortizing the MSRs in proportion to and over the period of the estimated net servicing income of the underlying loans.

The following table shows the estimated future amortization expense during the next five years for the MSRs as of March 31, ~~2023:~~2024:


Years ending December 31,		Amount		Amount
For the nine months ending December 31, 2023	$	893
For the year ending December 31, 2024		1,077
For the nine months ending December 31, 2024			$	411
For the year ending December 31, 2025		941		502
For the year ending December 31, 2026		821		446
For the year ending December 31, 2027		717		396
For the year ending December 31, 2028				352

SBA servicing asset

The SBA servicing asset represents the value associated with servicing small business real estate loans that have been sold to outside investors with servicing retained. The SBA servicing asset is evaluated and impairment is recognized to the extent fair value is less than the carrying amount. The Company evaluates impairment by stratifying the SBA servicing asset based on the predominant risk characteristics of the underlying loans, including loan type and loan term. The Company is amortizing the SBA servicing asset in proportion to and over the period of the estimated net servicing income of the underlying loans. The Company serviced ~~$110.9~~$112.2 million and $108.8 million of SBA loans that have been sold into the secondary market, as of March 31, 2024 and December 31, 2023, respectively. For the three months ended March 31, 2024 and 2023, the Company recognized SBA servicing asset fee income of $0.1 million and $0.4 million, respectively.

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~~of SBA loans, as of March 31, 2023. For the three months ended March 31, 2023, the Company recognized SBA servicing asset fee income of $0.4 million.~~

Below are the changes in the SBA servicing asset for the ~~period~~periods presented:


	For the three months ended March 31,		For the three months ended March 31,
	2023		2024		2023
Beginning balance	$	2,666	$	2,440	$	2,666
Originations		129		266		129
Disposals				(102)		(210)
Recovery		54		104		54
Disposals		(210)
Amortization		(35)		(74)		(35)
Ending balance		2,604		2,634		2,604
Fair value of SBA servicing asset	$	2,604	$	2,634	$	2,604

The Company uses assumptions and estimates in determining the fair value of SBA loan servicing rights. These assumptions include prepayment speeds, discount rates, and other assumptions. The assumptions used in the valuation were based on input from buyers, brokers and other qualified personnel, as well as market knowledge. ~~The~~For the three months ended March 31, 2024 and 2023, the key assumptions used to determine the fair value of the Company’s SBA loan servicing rights included a weighted average lifetime constant prepayment ~~rate~~rates equal to 15.75% and 12.40%, respectively, and a weighted average discount ~~rate~~rates equal to 10.16% and 13.34%., respectively.

Note 9 Borrowings

Borrowings consist of securities sold under agreements to repurchase, long-term debt and FHLB advances.

Securities sold under agreements to repurchase

The Company enters into repurchase agreements to facilitate the needs of its clients. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company sold securities under agreements to repurchase totaling ~~$21.5~~$19.6 million ~~and $20.2 million, respectively.~~for both periods. The Company pledged mortgage-backed securities with a fair value of approximately ~~$31.9~~$30.1 million and ~~$32.0~~$30.4 million as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively, for these agreements. The Company monitors collateral levels on a continuous basis and may be required to provide additional collateral based on the fair value of the underlying securities. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company had $10.4 million and ~~$11.8~~$10.8 million, respectively, of excess collateral pledged for repurchase agreements.

Federal Home Loan Bank advances

As a member of the FHLB, the Banks have access to a line of credit and term financing from the FHLB with total available credit of $1.8 billion at March 31, 2024. The Company may utilize the FHLB line of credit as a funding mechanism for originated loans and loans held for sale. At March 31, 2024, the Banks had no outstanding borrowings with the FHLB. At December 31, 2023, the Banks had $340.0 million of outstanding borrowings with the FHLB. The Banks may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged for FHLB advances at March 31, 2024 or December 31, 2023. Loans pledged were $2.5 billion and $2.6 billion at March 31, 2024 and December 31, 2023, respectively. The Company incurred $3.2 million and $7.1 million of interest expense related to FHLB advances and other short-term borrowings for the three months ended March 31, 2024 and 2023, respectively.

Long-term debt

The Company holds a subordinated note purchase agreement to issue and sell a fixed-to-floating rate note totaling $40.0 million. The balance on the note at March 31, 2024 and December 31, 2023, net of long-term debt issuance costs totaling ~~$0.4~~$0.3 million, totaled ~~$39.6~~$39.7 million. Interest expense totaling $0.3 million and $0.3 million was recorded in the consolidated statements of operations during the three months ended March 31, ~~2023.~~2024 and 2023, respectively.

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November 5, 2026 through maturity, the note may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the note being redeemed, together with any accrued and unpaid interest on the note being redeemed up to but excluding the date of redemption. The note is not subject to redemption at the option of the holder.

As part of the acquisition of ~~BOJH~~Bank of Jackson Hole (“BOJH”) on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rate notes totaling $15.0 million. The balance on the notes at March 31, ~~2023,~~2024, net of the fair value adjustment

~~Table of Contents~~

from the acquisition totaling ~~$0.6~~$0.4 million, totaled ~~$14.4~~$14.6 million. At December 31, 2023, the balance on the notes, net of the fair value adjustment from the acquisition totaling $0.5 million, totaled $14.5 million. Interest expense related to the notes totaling $0.1 million and $0.1 million was recorded in the consolidated statements of operations during the three months ended March 31, ~~2023.~~2024 and 2023, respectively.

The three notes, containing similar terms, are subordinated, unsecured and mature on June 15, 2031. Payments consist of interest only. Interest expense on the notes is payable semi-annually in arrears and will bear interest at 3.75% per annum until June 15, 2026 (or any earlier redemption date). From June 15, 2026 until June 15, 2031 (or any earlier redemption date) payments will be made quarterly in arrears, and the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month term SOFR plus 306 basis points. Prior to June 15, 2026, the Company may redeem the notes only under certain limited circumstances. Beginning on June 15, 2026 through maturity, the notes may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the notes being redeemed, together with any accrued and unpaid interest on the notes being redeemed up to but excluding the date of redemption. The notes are not subject to redemption at the option of the holder.

~~Federal Home Loan Bank advances~~

As a member of the FHLB, the Banks have access to a line of credit and term financing from the FHLB with total available credit of $1.6 billion at March 31, 2023. The Company may utilize the FHLB line of credit as a funding mechanism for originated loans and loans held for sale. At March 31, 2023 and December 31, 2022, the Banks had $1.0 billion and $385.0 million, respectively, of outstanding borrowings from the FHLB. The Banks may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged at March 31, 2023 or December 31, 2022. Loans pledged were $2.5 billion and $2.0 billion at March 31, 2023 and December 31, 2022, respectively. The Company incurred $7.1 million of interest expense related to FHLB advances and other short-term borrowings for the three months ended March 31, 2023. There was no interest expense related to FHLB advances and other short-term borrowings for the three months ended March 31, 2022.

Note 10 Regulatory Capital

As a bank holding company that has elected to be treated as a financial holding company, the Company, NBH Bank and Bank of Jackson Hole Trust are subject to regulatory capital adequacy requirements implemented by the Federal Reserve and, for NBH Bank and Bank of Jackson Hole Trust, the FDIC, including maintaining capital positions at the “well-capitalized” level. The federal banking agencies have risk-based capital adequacy regulations intended to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization’s operations. Under these regulations, assets are assigned to one of several risk categories, and nominal dollar amounts of assets and credit equivalent amounts of off-balance-sheet items are multiplied by a risk adjustment percentage for the category. Regulatory authorities can initiate certain mandatory actions if the Company, NBH Bank or Bank of Jackson Hole Trust fail to meet the minimum capital requirements, which could have a material effect on our financial statements.

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Under the Basel III requirements, at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company and the Banks met all capital requirements, including the capital conservation buffer of 2.5%. The Company and the Banks had regulatory capital ratios in excess of the levels established for well-capitalized institutions, as detailed in the tables below.


	March 31, 2023									March 31, 2024
				Required to be			Required to be						Required to be			Required to be
				well capitalized under			considered						well capitalized under			considered
				prompt corrective			adequately						prompt corrective			adequately
	Actual			action provisions			capitalized⁽¹⁾			Actual			action provisions			capitalized⁽¹⁾
	Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount
Tier 1 leverage ratio:
Consolidated	9.5%	$	889,292	N/A		N/A	4.0%	$	376,214	10.0%	$	963,724	N/A		N/A	4.0%	$	385,713
NBH Bank	8.9%		831,101	5.0%	$	468,138	4.0%		374,510	9.0%		863,422	5.0%	$	480,318	4.0%		384,254
Bank of Jackson Hole Trust	38.2%		11,301	5.0%		1,477	4.0%		1,182	30.4%		11,817	5.0%		1,946	4.0%		1,557
Common equity tier 1 risk based capital:
Consolidated	11.3%	$	889,292	N/A		N/A	7.0%	$	550,058	12.4%	$	963,724	N/A		N/A	7.0%	$	546,078
NBH Bank	10.6%		831,101	6.5%	$	508,212	7.0%		547,306	11.1%		863,422	6.5%	$	504,635	7.0%		543,453
Bank of Jackson Hole Trust	70.6%		11,301	6.5%		1,040	7.0%		1,120	71.2%		11,817	6.5%		1,079	7.0%		1,162
Tier 1 risk based capital ratio:
Consolidated	11.3%	$	889,292	N/A		N/A	8.5%	$	667,927	12.4%	$	963,724	N/A		N/A	8.5%	$	663,095
NBH Bank	10.6%		831,101	8.0%	$	625,492	8.5%		664,585	11.1%		863,422	8.0%	$	621,089	8.5%		659,907
Bank of Jackson Hole Trust	70.6%		11,301	8.0%		1,280	8.5%		1,360	71.2%		11,817	8.0%		1,328	8.5%		1,411
Total risk based capital ratio:
Consolidated	13.2%	$	1,034,645	N/A		N/A	10.5%	$	825,087	14.3%	$	1,115,783	N/A		N/A	10.5%	$	819,117
NBH Bank	11.8%		921,454	10.0%	$	781,865	10.5%		820,958	12.4%		960,480	10.0%	$	776,361	10.5%		815,179
Bank of Jackson Hole Trust	70.6%		11,301	10.0%		1,600	10.5%		1,680	71.2%		11,819	10.0%		1,660	10.5%		1,743


	December 31, 2022									December 31, 2023
				Required to be			Required to be							Required to be			Required to be
				well capitalized under			considered							well capitalized under			considered
				prompt corrective			adequately							prompt corrective			adequately
	Actual			action provisions			capitalized⁽¹⁾			Actual				action provisions			capitalized⁽¹⁾
	Ratio	Amount		Ratio	Amount		Ratio	Amount		Ratio	Amount		��	Ratio	Amount		Ratio	Amount
Tier 1 leverage ratio:
Consolidated	9.3%	$	857,403	N/A		N/A	4.0%	$	369,335	9.7%	$	941,369		N/A		N/A	4.0%	$	386,775
NBH Bank	8.6%		788,462	5.0%	$	458,593	4.0%		366,874	8.9%		856,243		5.0%	$	481,685	4.0%		385,348
Bank of Jackson Hole Trust	31.0%		11,238	5.0%		1,373	4.0%		1,099	30.0%		11,609		5.0%		1,936	4.0%		1,549
Common equity tier 1 risk based capital:
Consolidated	10.5%	$	857,403	N/A		N/A	7.0%	$	574,339	11.9%	$	941,369		N/A		N/A	7.0%	$	554,325
NBH Bank	9.7%		788,462	6.5%	$	528,334	7.0%		568,975	10.9%		856,243		6.5%	$	512,408	7.0%		551,824
Bank of Jackson Hole Trust	71.6%		11,238	6.5%		1,020	7.0%		1,098	71.2%		11,609		6.5%		1,059	7.0%		1,141
Tier 1 risk based capital ratio:
Consolidated	10.5%	$	857,403	N/A		N/A	8.5%	$	697,412	11.9%	$	941,369		N/A		N/A	8.5%	$	673,109
NBH Bank	9.7%		788,462	8.0%	$	650,257	8.5%		690,898	10.9%		856,243		8.0%	$	630,656	8.5%		670,072
Bank of Jackson Hole Trust	71.6%		11,238	8.0%		1,255	8.5%		1,333	71.2%		11,609		8.0%		1,304	8.5%		1,385
Total risk based capital ratio:
Consolidated	12.2%	$	1,000,398	N/A		N/A	10.5%	$	861,509	13.8%	$	1,092,800		N/A		N/A	10.5%	$	831,487
NBH Bank	10.8%		876,458	10.0%	$	812,821	10.5%		853,462	12.1%		952,674		10.0%	$	788,319	10.5%		827,735
Bank of Jackson Hole Trust	71.6%		11,238	10.0%		1,569	10.5%		1,647	71.2%		11,609		10.0%		1,629	10.5%		1,711


(1)		Includes the capital conservation buffer of 2.5%.

Note 11 Revenue from Contracts with Clients

Revenue is recognized when obligations under the terms of a contract with clients are satisfied. Below is the detail of the Company’s revenue from contracts with ~~clients.~~clients, including service charges and other deposit account related fees, bank card fees and other non-interest income. Other non-interest income includes trust and wealth management fees and Cambr fee income.

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Service charges and other account-related fees

Service charge fees are primarily comprised of monthly service fees, check orders, and other deposit account related fees. Other fees include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account-related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to clients’ accounts.

Bank card fees

Bank card fees are primarily comprised of debit card income, ATM fees, merchant services income, and other fees. Debit card income is primarily comprised of interchange fees earned whenever the Company’s debit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a Bank cardholder uses a non-Bank ATM or a non-Bank cardholder uses a Bank ATM. Merchant services income mainly represents fees charged to merchants to process their debit card transactions. The Company’s performance obligation for bank card fees are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

Other non-interest income

Trust and wealth management fees

The trust and wealth management business offers separately managed investment account solutions and trustee services to clients. Services may include custody of securities, trust investments and wealth management services, directed trusts or fixed income portfolio management and irrevocable life insurance trusts. The Company charges an asset-based fee earned for personal and corporate accounts. Additional fees may include minimum annual fees, fees for additional tax reporting and preparation for irrevocable trust returns or annual flat fees for certain trusts. The performance obligations related to this revenue include items such as performing investment advisory services, custody and record-keeping services, and fund administrative and accounting services. The performance obligations are satisfied upon completion of service and fees are generally a fixed flat rate or based on a percentage of the account’s market value per the contract with the client. These fees are recorded within other non-interest income in the consolidated statements of operations.

Cambr fee income

Cambr operates a deposit acquisition and processing platform that generates core deposits from accounts offered through embedded finance companies. Cambr’s platform facilitates the movement of embedded finance companies’ client deposits into FDIC-insured accounts at banks within Cambr’s network. Cambr generates fee income by charging a percentage-based fee of the client’s deposit balance placed into the Cambr network. The performance obligation is satisfied upon completion of service, and Cambr fee income is recorded within other non-interest income in the consolidated statements of operations.

~~Gain on OREO sales, net~~Other non-interest expense

~~Gain on~~Included within other non-interest expense are gains and losses from OREO sales, ~~net is~~which are recognized when the Company meets its performance obligation to transfer title to the buyer. The gain or loss is measured as the excess of the proceeds received compared to the OREO carrying value. Sales proceeds are received in cash at the time of transfer.

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The following table presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, and non-interest expense in-scope of Topic 606 for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023.


	For the three months ended March 31,				For the three months ended March 31,
	2023		2022		2024		2023
Non-interest income
In-scope of Topic 606:
Service charges and other fees	$	4,927	$	4,177
Service charges and other account-related fees					$	5,283	$	4,927
Bank card fees		4,637		4,123		4,578		4,637
Trust and wealth management fees		508		—
Other non-interest income						1,147		508
Non-interest income (in-scope of Topic 606)		10,072		8,300		11,008		10,072
Non-interest income (out-of-scope of Topic 606)		4,593		10,754		6,686		4,593
Total non-interest income	$	14,665	$	19,054	$	17,694	$	14,665
Non-interest expense
In-scope of Topic 606:
(Loss) gain on OREO sales, net	$	(11)	$	275
Other non-interest expense					$	(2)	$	(11)
Total revenue in-scope of Topic 606	$	10,061	$	8,575	$	11,006	$	10,061

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Contract acquisition costs

The Company utilizes the practical expedient which allows entities to expense immediately contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. The Company has not capitalized any contract acquisition costs.

Note 12 Stock-based Compensation and Benefits

The Company provides stock-based compensation in accordance with shareholder-approved plans. ~~In 2014,~~On May 9, 2023, shareholders approved the ~~2014~~2023 Omnibus Incentive Plan (the ~~"2014~~"2023 Plan"). The ~~2014~~2023 Plan replaces the ~~NBH Holdings Corp. 2009 Equity~~2014 Omnibus Incentive Plan (the "Prior Plan"), pursuant to which the Company granted equity awards prior to the approval of the ~~2014~~2023 Plan. Pursuant to the ~~2014~~2023 Plan, the Compensation Committee of the Board of Directors has the authority to grant, from time to time, awards of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, other stock-based awards, or any combination thereof to eligible persons.

As of March 31, 2024, the aggregate number of Class A common stock available for issuance under the 2023 Plan is 1,185,202 shares. Any shares that are subject to stock options or stock appreciation rights under the 2023 Plan will be counted against the amount available for issuance as one share for every one share granted, and any shares that are subject to awards under the 2023 Plan other than stock options or stock appreciation rights will be counted against the amount available for issuance as one share for every one share granted. The 2023 Plan provides for recycling of shares from both the Prior Plan and the 2023 Plan, the terms of which are further described in the Company's Proxy Statement for its 2023 Annual Meeting of Shareholders. Upon an option exercise, it is the Company’s policy to issue shares from treasury stock.

To date, the Company has issued stock options, restricted stock and performance stock units under the plans. The Compensation Committee sets the option exercise price at the time of grant, but in no case is the exercise price less than the fair market value of a share of stock at the date of grant.

Stock options

The Company issues stock options, which are primarily time-vesting with 1/3 vesting on each of the first, second and third anniversary of the date of grant or date of hire. The expense associated with the awarded stock options was measured at fair value using a Black-Scholes option-pricing model. The outstanding option awards vest on a graded basis over 1-4-3 years of continuous service and have 10-year contractual terms.

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The Company issued stock options in accordance with the 2023 Plan. The following table summarizes stock option activity for the three months ended March 31, ~~2023:~~2024:


				Weighted						Weighted
				average						average
		Weighted		remaining				Weighted		remaining
		average		contractual	Aggregate			average		contractual	Aggregate
		exercise		term in	intrinsic			exercise		term in	intrinsic
	Options	price		years	value		Options	price		years	value
Outstanding at December 31, 2022	717,088	$	29.79	5.98	$	8,850
Outstanding at December 31, 2023							755,546	$	30.95	5.79	$	5,270
Granted	—		—				—		—
Exercised	(1,900)		18.09				(2,000)		18.92
Forfeited	—		—				(4,423)		38.01
Outstanding at March 31, 2023	715,188		29.82	5.70		3,863
Options exercisable at March 31, 2023	520,292		27.82	4.80		3,214
Outstanding at March 31, 2024							749,123		30.94	5.52		4,557
Options exercisable at March 31, 2024							570,571		29.15	4.60		4,290
Options vested and expected to vest	704,495		29.65	5.66		3,859	737,479		30.86	5.47		4,534

Stock option expense is a component of salaries and benefits in the consolidated statements of operations and totaled $0.1 million and $0.1 million for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. At March 31, ~~2023,~~2024, there was $0.4 million of total unrecognized compensation cost related to non-vested stock options granted under the plans. The cost is expected to be recognized over a weighted average period of ~~2.0~~1.8 years.

Restricted stock awards

The Company issues primarily time-based restricted stock awards that vest over a range of a 1-3 year period. Restricted stock with time-based vesting was valued at the fair value of the shares on the date of grant as they are assumed to be held beyond the vesting period.

Performance stock units

The Company grants performance stock units which represent initial target awards and do not reflect potential increases or decreases resulting from the final performance results, which are to be determined at the end of the three-year performance period (vesting date). The actual number of shares to be awarded at the end of the performance period will range from 0% - 150% of the initial target awards. Sixty percent of the award is based on the Company’s cumulative earnings per share (EPS target) during the performance period, and forty percent of the award is based on the Company’s cumulative total shareholder return (TSR target), or TSR, during the performance period. On the vesting date, the Company’s TSR will be compared to the respective TSRs of the companies comprising

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the KBW Regional Index at the grant date to determine the shares awarded. The fair value of the EPS target portion of the award was determined based on the closing stock price of the Company’s common stock on the grant date. The fair value of the TSR target portion of the award was determined using a Monte Carlo Simulation at the grant date.

In establishing ~~the~~ PSU components during 2021, ~~and 2020,~~ the Compensation Committee determined the EPS target portion of the award would not be an effective metric in light of economic uncertainty surrounding COVID-19. Consequently, the Compensation Committee granted an award based upon a relative return on tangible assets (“ROTA”). Annually, the Company’s ROTA is compared to the respective ROTA of companies comprising the KBW Regional Index. At the end of the measurement period, the Company’s ranking will be averaged to determine the shares awarded. The fair value of the ROTA award was determined based on the closing stock price of the Company’s common stock on the grant date.

The weighted-average grant date fair value per unit for the ~~awards granted during 2022 of the~~ EPS target portion and the TSR target portion granted during 2023 was ~~$40.83~~$33.46 and ~~$35.25,~~$27.06, respectively. The initial weighted-average performance price for the TSR target portion granted during ~~2022~~2023 was ~~$43.51.~~$42.37. During the three months ended March 31, ~~2023,~~2024, the Company ~~awarded an additional 12,084~~canceled 5,707 units due to final performance results related to performance stock units granted on ~~June~~April 1, ~~2020.~~2021.

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The following table summarizes restricted stock and performance stock unit activity during the three months ended March 31, ~~2023:~~2024:


		Weighted				Weighted		Weighted				Weighted
	Restricted	average grant-		Performance		average grant-	Restricted	average grant-		Performance		average grant-
	stock shares	date fair value		stock units		date fair value	stock shares	date fair value		stock units		date fair value
Unvested at December 31, 2022	165,137	$	38.28	155,857	$	33.81
Unvested at December 31, 2023							240,584	$	34.47	171,782	$	34.56
Granted	2,836		40.49	—		—	—		—	—		—
Adjustment due to performance	—		—	12,084		24.58	—		—	(5,707)		33.11
Vested	(633)		36.22	(36,236)		24.58	—		—	(15,433)		33.11
Forfeited	(1,162)		38.69	(1,030)		37.67	(2,922)		36.85	(2,104)		33.45
Unvested at March 31, 2023	166,178	$	38.33	130,675	$	35.49
Unvested at March 31, 2024							237,662	$	34.44	148,538	$	34.79

As of March 31, ~~2023,~~2024, the total unrecognized compensation cost related to the non-vested restricted stock awards and performance stock units totaled ~~$2.5~~$3.4 million and ~~$2.1~~$2.3 million, respectively, and is expected to be recognized over a weighted average period of approximately ~~2.0~~1.9 years and 1.6 years, respectively. Expense related to non-vested restricted stock awards totaled ~~$0.9~~$1.0 million and ~~$0.6~~$0.9 million during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Expense related to non-vested performance stock units totaled ~~$0.4~~$0.5 million and $0.4 million during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Expense related to non-vested restricted stock awards and units is a component of salaries and benefits in the Company’s consolidated statements of operations.

Employee ~~Stock Purchase Plan~~stock purchase plan

The 2014 Employee Stock Purchase Plan (“ESPP”) is intended to be a qualified plan within the meaning of Section 423 of the Internal Revenue Code of 1986 and allows eligible employees to purchase shares of common stock up to a limit of $25,000 per calendar year and 2,000 shares per offering period. The price an employee pays for shares is 90.0% of the fair market value of Company common stock on the last day of the offering period. The offering periods are the six-month periods commencing on March 1 and September 1 of each year and ending on August 31 and February 28 (or February 29 in the case of a leap year) of each year. There are no vesting or other restrictions on the stock purchased by employees under the ESPP. Under the ESPP, the total number of shares of common stock reserved for issuance totaled 400,000 shares, of which ~~252,741~~224,299 was available for issuance at March 31, ~~2023.~~2024.

Under the ESPP, employees purchased ~~9,741~~11,620 shares and ~~8,028~~9,741 shares during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

Note 13 Common Stock

The Company had ~~37,641,381~~37,806,148 and ~~37,608,519~~37,784,851 shares of Class A common stock outstanding at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. Additionally, the Company had ~~166,178~~237,662 and ~~165,137~~240,584 shares outstanding at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively, of restricted Class A common stock issued but not yet vested under the 2014 Omnibus Incentive Plan that are not

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included in shares outstanding until such time that they are vested; however, these shares do have voting and certain dividend rights during the vesting period.

On ~~February 24, 2021,~~May 9, 2023, the Company’s Board of Directors authorized a program to repurchase up to ~~$75.0~~$50.0 million of the Company’s stock from time to time in either the open market or through privately negotiated transactions. The remaining authorization under the current program as of March 31, ~~2023~~2024 was ~~$38.6~~$50.0 million.

Note 14 Earnings Per Share

The Company calculates earnings per share under the two-class method, as certain non-vested share awards contain non-forfeitable rights to dividends. As such, these awards are considered securities that participate in the earnings of the Company. Non-vested shares are discussed further in note 12.

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The Company had ~~37,641,381~~37,806,148 and ~~30,008,781~~37,641,381 shares of Class A common stock outstanding as of March 31, ~~2023~~2024 and ~~2022,~~2023, respectively, exclusive of issued non-vested restricted shares. Certain stock options and non-vested restricted shares are potentially dilutive securities, but are not included in the calculation of diluted earnings per share because to do so would have been anti-dilutive for the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023.

The following table illustrates the computation of basic and diluted earnings per share for the three months ended March 31, ~~2023~~2024 and ~~2022:~~2023:


	For the three months ended				For the three months ended
	March 31, 2023		March 31, 2022		March 31, 2024		March 31, 2023
Net income	$	40,283	$	18,352	$	31,391	$	40,283
Less: income allocated to participating securities		(42)		(33)		(64)		(42)
Income allocated to common shareholders	$	40,241	$	18,319	$	31,327	$	40,241
Weighted average shares outstanding for basic earnings per common share		37,785,488		30,120,195		38,031,358		37,785,488
Dilutive effect of equity awards		289,485		359,066		157,122		289,485
Weighted average shares outstanding for diluted earnings per common share		38,074,973		30,479,261		38,188,480		38,074,973
Basic earnings per share	$	1.06	$	0.61	$	0.82	$	1.06
Diluted earnings per share		1.06		0.60		0.82		1.06

The Company had ~~715,188~~749,123 and ~~691,083~~715,188 outstanding stock options to purchase common stock at weighted average exercise prices of ~~$29.82~~$30.94 and ~~$28.18~~$29.82 per share at March 31, ~~2023~~2024 and ~~2022,~~2023, respectively, which have time-vesting criteria, and as such, any dilution is derived only for the time frame in which the vesting criteria had been met and where the inclusion of those stock options is dilutive. The Company had ~~296,853~~386,200 and ~~250,449~~296,853 unvested restricted shares and performance stock units issued as of March 31, ~~2023~~2024 and ~~2022,~~2023, respectively, which have performance, market and/or time-vesting criteria, and as such, any dilution is derived only for the time frame in which the vesting criteria had been met and where the inclusion of those restricted shares and units is dilutive.

Note 15 Derivatives

Risk management objective of using derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company has established policies stipulating that neither carrying value nor fair value at risk should exceed established guidelines. The Company has designed strategies to confine these risks within the established limits and identify appropriate trade-offs in the financial structure of its balance sheet. These strategies include the use of derivative financial instruments to help achieve the desired balance sheet repricing structure while meeting the desired objectives of its clients. Currently, the Company employs certain interest rate swaps that are designated as fair value hedges, cash flow hedges and economic hedges. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions.

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Fair values of derivative instruments on the balance sheet

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification in the consolidated statements of financial condition as of March 31, ~~2023~~2024 and December 31, ~~2022.~~2023. Information about the valuation methods used to measure fair value is provided in note 17.


		Asset derivatives fair value					Liability derivatives fair value					Asset derivatives fair value					Liability derivatives fair value
	Balance Sheet	March 31,		December 31,		Balance Sheet	March 31,		December 31,		Balance Sheet	March 31,		December 31,		Balance Sheet	March 31,		December 31,
	location	2023		2022		Location	2023		2022		location	2024		2023		Location	2024		2023
Derivatives designated as hedging instruments:
Interest rate products	Other assets	$	27,711	$	34,164	Other liabilities	$	2,142	$	1,929	Other assets	$	32,559	$	28,928	Other liabilities	$	2,984	$	3,400
Total derivatives designated as hedging instruments		$	27,711	$	34,164		$	2,142	$	1,929		$	32,559	$	28,928		$	2,984	$	3,400

Derivatives not designated as hedging instruments:
Interest rate products	Other assets	$	7,892	$	10,657	Other liabilities	$	7,900	$	10,660	Other assets	$	9,477	$	8,480	Other liabilities	$	9,714	$	8,484
Interest rate lock commitments	Other assets		674		197	Other liabilities		48		174	Other assets		525		287	Other liabilities		—		5
Forward contracts	Other assets		33		210	Other liabilities		270		104	Other assets		2		—	Other liabilities		68		110
Total derivatives not designated as hedging instruments		$	8,599	$	11,064		$	8,218	$	10,938		$	10,004	$	8,767		$	9,782	$	8,599

Cash flow hedges

The Company’s objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses floors and collars as part of its interest rate risk management strategy. Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up-front premium. Interest rate collars designated as cash flow hedges involve the payments of variable-rate amounts if interest rates rise above the cap strike rate on the contract and receipt of variable-rate amounts if interest rates fall below the floor strike rate on the contract. ~~Beginning with the third quarter of 2022, such derivatives were used to hedge the variable cash flows associated with existing variable-rate loan assets.~~

For derivatives that qualify and are designated as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest income in the same ~~period(s)~~periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge components excluded from the assessment of effectiveness are recognized over the life of the hedge on a systematic and rational basis. The earnings recognition of excluded components is included in interest income. Amounts reported in accumulated other comprehensive income (loss) related to derivatives will be reclassified to interest income as interest payments are received on the Company’s variable-rate assets. As of March 31, ~~2023,~~2024, the Company had cash flow hedges with a notional amount of $200.0 million. The Company expects to reclassify ~~$1.3~~$1.8 million from accumulated other comprehensive (loss) income (“AOCI”) as a reduction to interest income during the next 12 months.

Fair value hedges

Interest rate swaps designated as fair value hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. As of March 31, ~~2023,~~2024, the Company had interest rate swaps with a notional amount of ~~$341.2~~$352.5 million, which were designated as fair value hedges of interest rate risk. As of December 31, ~~2022,~~2023, the Company had interest rate swaps with a notional amount of ~~$340.1~~$351.0 million that were designated as fair value hedges. These interest rate swaps were associated with ~~$468.2~~$472.1 million and ~~$482.7~~$469.4 million of the Company’s fixed-rate loans as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively, before a ~~loss~~gain of ~~$8.5~~$29.1 million and ~~a gain of $29.7~~$22.6 million from the fair value hedge adjustment in the carrying ~~amount,~~amount. The gain is included in loans receivable on the statements of financial condition as of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. Fair value hedge adjustments included basis adjustments on terminated positions to be amortized through the contractual maturity date of each respective hedged item. Excluding those terminated positions, the fair value hedge adjustments consisted of gains totaling $32.1 million and $25.7 million as of March 31, 2024 and December 31, 2023, respectively.

Table of Contents

For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in earnings. The Company includes the gain or loss on the hedged items in the same line item as the offsetting loss or gain on the related derivatives.

~~Table of Contents~~

Non-designated hedges

Derivatives not designated as hedges are not speculative and consist of interest rate swaps with commercial banking clients that facilitate their respective risk management strategies. Interest rate swaps are simultaneously hedged by offsetting interest rate swaps that the Company executes with a third party, such that the Company minimizes its net risk exposure resulting from such transactions. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the client swaps and the offsetting swaps are recognized directly in earnings. As of March 31, ~~2022,~~2024 and December 31, 2023, the Company had matched interest rate swap transactions with an aggregate notional amount of ~~$383.3~~$530.8 million and $464.9 million, respectively, related to this program. ~~As of December 31, 2022, the Company had matched interest rate swap transactions with an aggregate notional amount of $383.0 million.~~ Derivative fee income from non-designated hedges totaled ~~$0.2~~$0.9 million and ~~$0.0~~$0.2 million for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

As part of its mortgage banking activities, the Company enters into interest rate lock commitments, which are commitments to originate loans where the interest rate on the loan is determined prior to funding and the clients have locked into that interest rate. The Company then locks in the loan and interest rate with an investor and commits to deliver the loan if settlement occurs ("best efforts") or commits to deliver the locked loan in a binding ("mandatory") delivery program with an investor. Fair value changes of certain loans under interest rate lock commitments are hedged with forward sales contracts of MBS. Forward sales contracts of MBS are recorded at fair value with changes in fair value recorded in non-interest income. Interest rate lock commitments and commitments to deliver loans to investors are considered derivatives. The market value of interest rate lock commitments and best efforts contracts are not readily ascertainable with precision because they are not actively traded in stand-alone markets. The Company determines the fair value of interest rate lock commitments and delivery contracts by measuring the fair value of the underlying assets. The fair value of the underlying assets is impacted by current interest rates, remaining origination fees, costs of production to be incurred and the probability that the interest rate lock commitments will close or will be funded.

Certain additional risks arise from these forward delivery contracts in that the counterparties to the contracts may not be able to meet the terms of the contracts. The Company does not expect any counterparty to any MBS contract to fail to meet its obligation. Additional risks inherent in mandatory delivery programs include the risk that, if the Company fails to deliver the loans subject to interest rate risk lock commitments, it will still be obligated to “pair off” MBS to the counterparty. Should this be required, the Company could incur significant costs in acquiring replacement loans and such costs could have an adverse effect on the consolidated financial statements.

The fair value of the mortgage banking derivative is recorded as a freestanding asset or liability with the change in value being recognized in current earnings during the period of change.

The Company had interest rate lock commitments with a notional value of ~~$40.5~~$29.7 million and forward contracts with a notional value of ~~$43.3~~$30.0 million at March 31, ~~2023.~~2024. At December 31, ~~2022,~~2023, the Company had interest rate lock commitments with a notional value of ~~$35.5~~$13.8 million and forward contracts with a notional value of ~~$45.0~~$17.7 million.

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Effect of derivative instruments on the consolidated statements of operations and accumulated other comprehensive income

The tables below present the effect of the Company’s derivative financial instruments in the consolidated statements of operations for the three months ended March 31, ~~2023~~2024 and ~~2022:~~2023:

Location of gain (loss)

Amount of (loss) gain recognized in income on derivatives

Location of gain (loss)

Amount of gain (loss) recognized in income on derivatives

Derivatives in fair value

recognized in income on

For the three months ended March 31,

recognized in income on

For the three months ended March 31,

hedging relationships

derivatives

2023

2022

derivatives

2024

2023

Interest rate products

Interest and fees on loans

(5,491)

18,596

Interest and fees on loans

8,580

(5,491)

Location of gain (loss)

Amount of gain (loss) recognized in income on hedged items

Location of gain (loss)

Amount of (loss) gain recognized in income on hedged items

recognized in income on

For the three months ended March 31,

recognized in income on

For the three months ended March 31,

Hedged items

hedged items

2023

2022

hedged items

2024

2023

Interest rate products

Interest and fees on loans

7,310

(20,220)

Interest and fees on loans

(6,548)

7,310


	Location of gain (loss)	Amount of (loss) gain recognized in income on derivatives				Location of gain (loss)	Amount of (loss) gain recognized in income on derivatives
Derivatives not designated	recognized in income on	For the three months ended March 31,				recognized in income on	For the three months ended March 31,
as hedging instruments	derivatives	2023		2022		derivatives	2024		2023
Interest rate products	Other non-interest expense	$	(6)	$	5	Other non-interest expense	$	(232)	$	(6)
Interest rate lock commitments	Mortgage banking income		640		(1,086)	Mortgage banking income		332		640
Forward contracts	Mortgage banking income		(344)		2,711	Mortgage banking income		44		(344)
Total		$	290	$	1,630		$	144	$	290

The table below presents the effect of ~~fair value~~ cash flow hedge accounting on AOCI as of the dates presented. ~~The Company did not utilize cash flow hedges until the third quarter of 2022.~~


	For the three months ended March 31, 2023													For the three months ended March 31, 2024
		Gain recognized in OCI on derivative		Gain recognized in OCI included component		Gain recognized in OCI excluded component	Location of Loss recognized from AOCI into income		Loss reclassified from AOCI into income		Loss reclassified from AOCI into income included component		Loss reclassified from AOCI into income excluded component		Loss recognized in OCI on derivatives		Loss recognized in OCI included component		Loss recognized in OCI excluded component	Location of loss recognized from AOCI into income		Loss reclassified from AOCI into income		Loss reclassified from AOCI into income included component		Loss reclassified from AOCI into income excluded component
Derivatives in cash flow hedging relationships:
Interest rate products	$	616	$	399	$	217	Interest income	$	(262)	$	(162)	$	(100)	$	(1,427,601)	$	(1,002,237)	$	(425,364)	Interest income	$	(512,826)	$	(395,034)	$	(117,792)


	For the three months ended March 31, 2023
		Gain recognized in OCI on derivatives		Gain recognized in OCI included component		Gain recognized in OCI excluded component	Location of loss recognized from AOCI into income		Loss reclassified from AOCI into income		Loss reclassified from AOCI into income included component		Loss reclassified from AOCI into income excluded component
Derivatives in cash flow hedging relationships:
Interest rate products	$	616	$	399	$	217	Interest income	$	(262)	$	(162)	$	(100)

Credit-risk-related contingent features

The Company has agreements with its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness for reasons other than an error or omission of an administrative or operational nature, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company fails to maintain its status as a well/adequately capitalized institution, then the counterparty has the right to terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

As of March 31, ~~2023,~~2024, the termination value of derivatives in a net liability position related to these agreements was zero. The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and as of March 31, ~~2023,~~2024, the Company had met these thresholds. If the Company had breached any of these provisions at March 31, ~~2023,~~2024, it could have been required to settle its obligations under the agreements at the termination value.

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Note 16 Commitments and Contingencies

In the normal course of business, the Company enters into various off-balance sheet commitments to help meet the financing needs of clients. These financial instruments include commitments to extend credit, commercial and consumer lines of credit and standby letters of credit. The same credit policies are applied to these commitments as the loans in the consolidated statements of financial condition; however, these commitments involve varying degrees of credit risk in excess of the amount recognized in the consolidated statements of financial condition. The total amounts of unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon. However, the contractual amount of these commitments, offset by any additional collateral pledged, represents the Company’s potential credit loss exposure.

Total unfunded commitments at March 31, ~~2023~~2024 and December 31, ~~2022~~2023 were as follows:


	March 31, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Commitments to fund loans	$	1,122,858	$	1,124,942	$	706,637	$	724,928
Credit card lines of credit		6,770		7,167		4,467		6,278
Unfunded commitments under lines of credit		902,871		862,369		840,932		890,530
Commercial and standby letters of credit		11,883		13,859		11,681		13,029
Total unfunded commitments	$	2,044,382	$	2,008,337	$	1,563,717	$	1,634,765

Commitments to fund loans—Commitments to fund loans are legally binding agreements to lend to clients in accordance with predetermined contractual provisions providing there have been no violations of any conditions specified in the contract. These commitments are generally at variable interest rates and are for specific periods or contain termination clauses and may require the payment of a fee. The total amounts of unused commitments are not necessarily representative of future credit exposure or cash requirements, as commitments often expire without being drawn upon.

Credit card lines of credit—The Company extends lines of credit to clients through the use of credit cards issued by NBH Bank. These lines of credit represent the maximum amounts allowed to be funded, many of which will not exhaust the established limits, and as such, these amounts are not necessarily representations of future cash requirements or credit exposure.

Unfunded commitments under lines of credit—In the ordinary course of business, the Company extends revolving credit to its clients. These arrangements may require the payment of a fee.

Commercial and standby letters of credit—As a provider of financial services, the Company routinely issues commercial and standby letters of credit, which may be financial standby letters of credit or performance standby letters of credit. These are various forms of “back-up” commitments to guarantee the performance of a client to a third party. While these arrangements represent a potential cash outlay for the Company, the majority of these letters of credit will expire without being drawn upon. Letters of credit are subject to the same underwriting and credit approval process as traditional loans, and as such, many of them have various forms of collateral securing the commitment, which may include real estate, personal property, receivables or marketable securities.

Contingencies

Mortgage loans sold to investors may be subject to repurchase or indemnification in the event of specific default by the borrower or subsequent discovery that underwriting standards were not met. The Company established a reserve liability for expected losses related to these representations and warranties based upon management’s evaluation of actual and historic loss history, delinquency trends or other documentation or deficiency findings in the portfolio and economic conditions. Charges against the reserve during the three months ended March 31, 2024 and 2023 ~~and 2022~~ totaling ~~$46~~$26 thousand and ~~$45~~$46 thousand, respectively, were primarily driven by early payoffs. The Company recorded a repurchase reserve included in other liabilities in the consolidated statements of financial condition totaling ~~$1.6~~$1.2 million ~~and $1.7 million at~~for both March 31, ~~2023~~2024 and December 31, ~~2022, respectively.~~2023.

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The following table summarizes mortgage repurchase reserve activity for the periods presented:


	For the three months ended March 31,				For the three months ended March 31,
	2023		2022		2024		2023
Beginning balance	$	1,725	$	2,102	$	1,198	$	1,725
Provision released from operating expense, net		(34)		(88)		—		(34)
Charge-offs		(46)		(45)		(26)		(46)
Ending balance	$	1,645	$	1,969	$	1,172	$	1,645

In the ordinary course of business, the Company and NBH Bank may be subject to litigation. Based upon the available information and advice from the Company’s legal counsel, management does not believe that any potential, threatened or pending litigation to which it is a party will have a material adverse effect on the Company’s liquidity, financial condition or results of operations.

Note 17 Fair Value Measurements

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to disclose the fair value of its financial instruments. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. For disclosure purposes, the Company groups its financial and non-financial assets and liabilities into three different levels based on the nature of the instrument and the availability and reliability of the information that is used to determine fair value. The three levels are defined as follows:

●

Level 1—Includes assets or liabilities in which the valuation methodologies are based on unadjusted quoted prices in active markets for identical assets or liabilities.

●

Level 2—Includes assets or liabilities in which the inputs to the valuation methodologies are based on similar assets or liabilities in inactive markets, quoted prices for identical or similar assets or liabilities in inactive markets, and inputs other than quoted prices that are observable, such as interest rates, yield curves, volatilities, prepayment speeds, and other inputs obtained from observable market input.

●

Level 3—Includes assets or liabilities in which the inputs to the valuation methodology are based on at least one significant assumption that is not observable in the marketplace. These valuations may rely on management’s judgment and may include internally-developed model-based valuation techniques.

Level 1 inputs are considered to be the most transparent and reliable and level 3 inputs are considered to be the least transparent and reliable. The Company assumes the use of the principal market to conduct a transaction of each particular asset or liability being measured and then considers the assumptions that market participants would use when pricing the asset or liability. Whenever possible, the Company first looks for quoted prices for identical assets or liabilities in active markets (level 1 inputs) to value each asset or liability. However, when inputs from identical assets or liabilities on active markets are not available, the Company utilizes market observable data for similar assets and liabilities. The Company maximizes the use of observable inputs and limits the use of unobservable inputs to occasions when observable inputs are not available. The need to use unobservable inputs generally results from the lack of market liquidity of the actual financial instrument or of the underlying collateral. While third party price indications may be available in those cases, limited trading activity can challenge the observability of those inputs.

Changes in the valuation inputs used for measuring the fair value of financial instruments may occur due to changes in current market conditions or other factors. Such changes may necessitate a transfer of the financial instruments to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfer occurs. During the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, there were no transfers of financial instruments between the hierarchy levels.

The following is a description of the valuation methodologies used for assets and liabilities measured at fair value, as well as the general classification of each instrument under the valuation hierarchy:

Fair Value of Financial Instruments Measured on a Recurring Basis

Investment securities available-for-sale—Investment securities available-for-sale are carried at fair value on a recurring basis. To the extent possible, observable quoted prices in an active market are used to determine fair value and, as such, these securities are classified as level 1. When quoted market prices in active markets for identical assets or liabilities are not available, quoted prices of securities with similar characteristics, discounted cash flows or other pricing characteristics are used to estimate fair values and the securities are then classified as level 2.

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Loans held for sale—The Company has elected to record loans originated and intended for sale in the secondary market at estimated fair value. The portfolio consists primarily of fixed rate residential mortgage loans that are sold within 45 days. The Company estimates fair value based on quoted market prices for similar loans in the secondary market and are classified as level 2.

Interest rate swap derivatives—The Company's derivative instruments are limited to interest rate swaps that may be accounted for as fair value hedges or non-designated hedges. The fair values of the swaps incorporate credit valuation adjustments in order to appropriately reflect nonperformance risk in the fair value measurements. The credit valuation adjustment is the dollar amount of the fair value adjustment related to credit risk and utilizes a probability weighted calculation to quantify the potential loss over the life of the trade. The credit valuation adjustments are calculated by determining the total expected exposure of the derivatives (which incorporates both the current and potential future exposure) and then applying the respective counterparties’ credit spreads to the exposure offset by marketable collateral posted, if any. Certain derivative transactions are executed with counterparties who are large financial institutions ("dealers"). International Swaps and Derivative Association Master Agreements ("ISDA") and Credit Support Annexes ("CSA") are employed for all contracts with dealers. These contracts contain bilateral collateral arrangements. The fair value inputs of these financial instruments are determined using discounted cash flow analysis through the use of third-party models whose significant inputs are readily observable market parameters, primarily yield curves, with appropriate adjustments for liquidity and credit risk, and are classified as level 2.

Mortgage banking derivatives—The Company relies on a third-party pricing service to value its mortgage banking derivative financial assets and liabilities, which the Company classifies as a level 3 valuation. The external valuation model to estimate the fair value of its interest rate lock commitments to originate residential mortgage loans held for sale includes grouping the interest rate lock commitments by interest rate and terms, applying an average ~~79.3%~~85.0% estimated pull-through rate based on historical experience, and then multiplying by quoted investor prices determined to be reasonably applicable to the loan commitment groups based on interest rate, terms, and rate lock expiration dates of the loan commitment groups. The Company also relies on an external valuation model to estimate the fair value of its forward commitments to sell residential mortgage loans (i.e., an estimate of what the Company would receive or pay to terminate the forward delivery contract based on market prices for similar financial instruments), which includes matching specific terms and maturities of the forward commitments against applicable investor pricing.

The tables below present the financial instruments measured at fair value on a recurring basis as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 in the consolidated statements of financial condition utilizing the hierarchy structure described above:


	March 31, 2023								March 31, 2024
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investment securities available-for-sale:
U.S. Treasuries	$	72,154	$	—	$	—	$	72,154	$	72,651	$	—	$	—	$	72,651
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		—		222,209		—		222,209		—		193,576		—		193,576
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		—		398,282		—		398,282		—		416,680		—		416,680
Municipal securities		—		154		—		154		—		79		—		79
Corporate debt		—		1,892		—		1,892		—		1,870		—		1,870
Loans held for sale		—		24,594		—		24,594		—		14,065		—		14,065
Interest rate swap derivatives		—		35,603		—		35,603		—		42,036		—		42,036
Mortgage banking derivatives		—		—		707		707		—		—		527		527
Total assets at fair value	$	72,154	$	682,734	$	707	$	755,595	$	72,651	$	668,306	$	527	$	741,484
Liabilities:
Interest rate swap derivatives	$	—	$	10,042	$	—	$	10,042	$	—	$	12,698	$	—	$	12,698
Mortgage banking derivatives		—		—		318		318		—		—		68		68
Total liabilities at fair value	$	—	$	10,042	$	318	$	10,360	$	—	$	12,698	$	68	$	12,766

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	December 31, 2022								December 31, 2023
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Investment securities available-for-sale:
U.S. Treasuries	$	71,388	$	—	$	—	$	71,388	$	73,044	$	—	$	—	$	73,044
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		—		226,131		—		226,131		—		201,809		—		201,809
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		—		405,926		—		405,926		—		351,242		—		351,242
Municipal securities		—		153		—		153		—		79		—		79
Corporate debt		—		1,920		—		1,920		—		1,843		—		1,843
Loans held for sale		—		22,767		—		22,767		—		18,854		—		18,854
Interest rate swap derivatives		—		44,821		—		44,821		—		37,408		—		37,408
Mortgage banking derivatives		—		—		407		407		—		—		287		287
Total assets at fair value	$	71,388	$	701,718	$	407	$	773,513	$	73,044	$	611,235	$	287	$	684,566
Liabilities:
Interest rate swap derivatives	$	—	$	12,589	$	—	$	12,589	$	—	$	15,284	$	—	$	15,284
Mortgage banking derivatives		—		—		278		278		—		—		115		115
Total liabilities at fair value	$	—	$	12,589	$	278	$	12,867	$	—	$	15,284	$	115	$	15,399

The table below details the changes in level 3 financial instruments during the three months ended March 31, ~~2023:~~2024:


		Mortgage banking		Mortgage banking
		derivatives, net		derivatives, net
Balance at December 31, 2022	$	129
Loss included in earnings, net		296
Balance at December 31, 2023			$	172
Gain included in earnings, net				376
Fees and costs included in earnings, net		(36)		(89)
Balance at March 31, 2023	$	389
Balance at March 31, 2024			$	459

Fair Value of Financial Instruments Measured on a Non-recurring Basis

Certain assets may be recorded at fair value on a non-recurring basis as conditions warrant. These non-recurring fair value measurements typically result from the application of lower of cost or fair value accounting or a write-down occurring during the period.

Individually evaluated loans—The Company records individually evaluated loans based on the fair value of the collateral when it is probable that the Company will be unable to collect all contractual amounts due in accordance with the terms of the loan agreement. The Company relies on third-party appraisals and internal assessments, utilizing a discount rate in the range of 2%6% - ~~15%~~37% with a weighted average discount rate of ~~9.2%~~12.7%, in determining the estimated fair values of these loans. The inputs used to determine the fair values of loans are considered level 3 inputs in the fair value hierarchy. At March 31, 2024, the Company recorded a specific reserve of $9.8 million related to 13 loans with a carrying balance of $38.2 million. At March 31, 2023, the Company recorded a specific reserve of $4.4 million related to nine loans with a carrying balance of $12.1 ~~million. At March 31, 2022, the Company recorded a specific reserve of $1.5 million related to seven loans with a carrying balance of $5.4~~ million.

OREO—OREO is recorded at the fair value of the collateral less estimated selling costs using a range of 6% to 10% with a weighted average discount rate of ~~6.3%~~6.1%. The estimated fair values of OREO are updated periodically and further write-downs may be taken to reflect a new basis. During the three months ended March 31, 2024, there was no impairment related to OREO. The Company recognized $13 ~~thousand and $188~~ thousand of OREO impairment during the three months ended March 31, ~~2023 and 2022, respectively.~~2023. The fair values of OREO are derived from third party price opinions or appraisals that generally use an income approach or a market value approach. If reasonable comparable appraisals are not available, the Company may use internally developed models to determine fair values. The inputs used to determine the fair value of OREO properties are considered level 3 inputs in the fair value hierarchy.

Mortgage servicing rights—MSRs represent the value associated with servicing residential real estate loans that have been sold to outside investors with servicing retained. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates ranging from 10.0% to 10.5% with a weighted average rate of 10.0% at March 31, ~~2023~~2024 and prepayment speed assumption ranges of ~~7.9%~~6.2% to ~~18.2%~~13.3% with a weighted average rate of ~~8.2%~~6.3% at March 31, ~~2023~~2024 as inputs. The weighted average MSRs

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are subject to impairment testing. The carrying values of these MSRs are reviewed quarterly for impairment based upon the calculation of fair value. For purposes of measuring impairment, the MSRs are stratified into certain risk characteristics including note type and note term. If the valuation model reflects a value less than the carrying value, MSRs are adjusted to fair value through a valuation allowance, and the adjustment is included in mortgage banking income in the consolidated statements of operations. There was no MSR impairment during the three months ended March 31, ~~2023~~2024 or ~~2022.~~2023. The inputs used to determine the fair values of MSRs are considered level 3 inputs in the fair value hierarchy.

SBA servicing asset—The SBA servicing asset represents the value associated with servicing small business real estate loans that have been sold to outside investors with servicing retained. The fair value for the SBA servicing asset is determined through a discounted cash flow analysis and utilizes a weighted average discount rate of ~~13.3%~~10.2% and a weighted average lifetime constant prepayment rate of ~~12.4%~~15.7%. The SBA servicing asset is amortized over the period of the estimated future net servicing life of the underlying assets, and it is evaluated quarterly for impairment based upon the fair value of the rights as compared to their amortized cost. Impairment is recognized on the income statement to the extent the fair value is less than the capitalized amount of the SBA servicing asset. The Company recorded no impairment for the three months ended March 31, 2024 or 2023.

The Company may be required to record fair value adjustments on other available-for-sale and municipal securities valued at par on a non-recurring basis.

The tables below provide information regarding losses from assets recorded at fair value on a non-recurring basis during the three months ended March 31, ~~2023~~2024 and ~~2022:~~2023:


	March 31, 2023				March 31, 2024
	Total		Losses from fair value changes		Total		Losses from fair value changes
Individually evaluated loans	$	19,577	$	325	$	47,470	$	278
Other real estate owned		3,458		13
Total	$	23,035	$	338


	March 31, 2022				March 31, 2023
	Total		Losses from fair value changes		Total		Losses from fair value changes
Individually evaluated loans	$	14,104	$	634	$	19,577	$	325
Other real estate owned		5,063		188		3,458		13
Total	$	19,167	$	822	$	23,035	$	338

The Company did not record any liabilities measured at fair value on a non-recurring basis during the three months ended March 31, ~~2023~~2024 and ~~2022.~~2023.

Note 18 Fair Value of Financial Instruments

The fair value of a financial instrument is the amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is determined based upon quoted market prices to the extent possible; however, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques that may be significantly impacted by the assumptions used, including the discount rate and estimates of future cash flows. Changes in any of these assumptions could significantly affect the fair value estimates. The fair value of the financial instruments listed below does not reflect a premium or discount that could result from offering all of the Company’s holdings of financial instruments at one time, nor does it reflect the underlying value of the Company, as ASC Topic 825 excludes certain financial instruments and all non-financial instruments from its disclosure requirements. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies and are based on the exit price concept within ASC Topic 825 and applied to this disclosure on a prospective basis. Considerable judgment is required to interpret market data in order to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize in a current market exchange.

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The fair value of financial instruments at March 31, ~~2023~~2024 and December 31, ~~2022~~2023 are set forth below:


	Level in fair value	March 31, 2023				December 31, 2022				Level in fair value	March 31, 2024				December 31, 2023
	measurement	Carrying		Estimated		Carrying		Estimated		measurement	Carrying		Estimated		Carrying		Estimated
	hierarchy	amount		fair value		amount		fair value		hierarchy	amount		fair value		amount		fair value
ASSETS
Cash and cash equivalents	Level 1	$	369,705	$	369,705	$	195,505	$	195,505	Level 1	$	292,931	$	292,931	$	190,826	$	190,826
U.S. Treasury securities - AFS	Level 1		72,154		72,154		71,388		71,388	Level 1		72,651		72,651		73,044		73,044
U.S. Treasury securities - HTM	Level 1		49,117		48,141		49,045		47,629	Level 1		49,412		48,189		49,338		48,334
Mortgage-backed securities—residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises available-for-sale	Level 2		222,209		222,209		226,131		226,131	Level 2		193,576		193,576		201,809		201,809
Mortgage-backed securities—other residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises available-for-sale	Level 2		398,282		398,282		405,926		405,926	Level 2		416,680		416,680		351,242		351,242
Municipal securities available-for-sale	Level 2		154		154		153		153	Level 2		79		79		79		79
Corporate debt	Level 2		1,892		1,892		1,920		1,920
Corporate debt available-for-sale										Level 2		1,870		1,870		1,843		1,843
Other available-for-sale securities	Level 3		794		794		771		771	Level 3		810		810		812		812
Mortgage-backed securities—residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises held-to-maturity	Level 2		331,996		295,246		339,815		298,816	Level 2		290,450		253,914		299,337		265,011
Mortgage-backed securities—other residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored enterprises held-to-maturity	Level 2		256,808		211,869		262,667		213,479	Level 2		230,988		183,673		236,377		190,983
FHLB and FRB stock	Level 2		69,319		69,319		38,390		38,390	Level 2		24,841		24,841		40,890		40,890
Loans receivable	Level 3		7,345,298		7,090,982		7,220,469		6,964,107	Level 3		7,569,052		7,355,053		7,698,758		7,411,687
Loans held for sale	Level 2		24,594		24,594		22,767		22,767	Level 2		14,065		14,065		18,854		18,854
Accrued interest receivable	Level 2		39,608		39,608		34,587		34,587	Level 2		49,585		49,585		44,944		44,944
Interest rate swap derivatives	Level 2		34,088		34,088		45,046		45,046	Level 2		42,036		42,036		37,408		37,408
Mortgage banking derivatives	Level 3		707		707		407		407	Level 3		527		527		287		287
LIABILITIES
Deposit transaction accounts	Level 2		6,603,191		6,603,191		6,999,226		6,999,226	Level 2		7,521,786		7,521,786		7,208,421		7,208,421
Time deposits	Level 2		978,489		953,790		873,400		845,688	Level 2		995,976		992,649		981,970		972,793
Securities sold under agreements to repurchase	Level 2		21,492		21,492		20,214		20,214	Level 2		19,577		19,577		19,627		19,627
Long-term debt	Level 2		55,000		49,421		55,000		52,430	Level 2		55,000		45,127		55,000		43,760
Federal Home Loan Bank advances	Level 2		1,000,000		1,000,000		385,000		385,000	Level 2		—		—		340,000		340,000
Accrued interest payable	Level 2		6,498		6,498		3,201		3,201	Level 2		14,769		14,769		12,239		12,239
Interest rate swap derivatives	Level 2		10,042		10,042		12,589		12,589	Level 2		12,698		12,698		11,884		11,884
Mortgage banking derivatives	Level 3		318		318		278		278	Level 3		68		68		115		115

Note 19 Acquisition Activities

~~During 2022, the Company~~Cambr Solutions, LLC

On April 3, 2023, NBH Bank completed the ~~acquisitions~~acquisition of ~~Community Bancorporation,~~Cambr Solutions, LLC. Upon closing, Cambr became a stand-alone subsidiary of NBH Bank. The transaction was valued at $46.5 million in the ~~bank holding company for Rock Canyon~~aggregate. NBH Bank ~~and Bancshares of Jackson Hole, the bank holding company for Bank of Jackson Hole. The Company~~ determined that the ~~acquisitions constitute~~acquisition constituted a business ~~combinations~~combination as defined in ASC Topic 805, Business Combinations. Accordingly, as of the date of the ~~acquisitions,~~acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. The Company determined fair values in accordance with the guidance provided in ASC Topic 820, Fair Value Measurements and Disclosures. In many cases, the determination of these fair values required management to make estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature and subject to change. Actual results could differ materially. The Company has made the determination of fair values using the best information available at the time; however, purchase accounting is not complete and the assumptions used are subject to change and, if changed, could have a material effect on the Company's financial position and results of operations.

~~Rock Canyon Bank~~Cambr is a deposit acquisition and processing platform that generates core deposits from accounts offered through embedded finance companies. At the time of acquisition, Cambr administered approximately $1.7 billion of deposits comprising more than 500,000 FDIC-insured deposit accounts.

On September 1, 2022, the Company completed its acquisition of Community Bancorporation, the bank holding company of Utah-based Rock Canyon Bank. Immediately following the completion of the acquisition, RCB merged into NBH Bank. Pursuant to the merger agreement executed in April 2022, the Company paid $16.1 million of cash consideration and issued 3,096,745 shares of the Company’s Class A common stock in exchange for all of the outstanding common stock of Community Bancorporation. The

~~Table of Contents~~

transaction was valued at $140.4 million in the aggregate, based on the Company’s closing price of $40.13 on August 31, 2022. The acquisition added seven banking centers to the Company’s footprint within the Provo and Greater Salt Lake City regions.

~~RCB~~Cambr acquisition-related costs totaled ~~$12.3~~$1.0 million for the year ended December 31, ~~2022, including a Day 1 CECL provision expense of $5.4 million.~~2023. The results of ~~RCB are included in the results of the Company subsequent to the acquisition date.~~

~~The table below summarizes preliminary net assets acquired (at fair value) and consideration transferred in connection with the RCB acquisition:~~

September 1, 2022
Assets:

Cash and due from banks

$
260,883
Investment securities available-for-sale

402
Non-marketable securities

977
Loans, net

535,197
Loans held for sale

3,069
Premises and equipment

3,413
Core deposit and other intangibles

16,463
Other assets

11,749
Total assets acquired

832,153

Liabilities:

Total deposits

734,480
Other liabilities

10,115
Total liabilities assumed

744,595

Identifiable net assets acquired

$
87,558

Consideration:

NBHC common stock paid, closing price of $40.13 on August 31, 2022

$
124,272
Cash

16,141
Total

140,413

Goodwill

$
52,855

In connection with the RCB acquisition, the Company recorded $52.9 million of goodwill. The amount of goodwill recorded reflects the expanded market presence, synergies and operational efficiencies that are expected to result from the acquisition. The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:

~~Cash and due from banks~~~~—The carrying amount of these assets was deemed a reasonable estimate of fair value based on the short-term nature of these assets.~~

~~Loans, net~~—The fair value of loans were based on a discounted cash flow methodology that considered the loans’ underlying characteristics including account type, remaining terms of loan, annual interest rates or coupon, interest types, past delinquencies, timing of principal and interest payments, current market rates, loan to value ratios, loss exposure and remaining balance. The discount rates applied were based upon a build-up approach considering the alternative cost of funds, capital charges, servicing costs, and a liquidity premium. Loans were aggregated according to similar characteristics when applying the valuation method.

~~Core deposit and other intangibles~~—The Company recorded a core deposit intangible asset of $13.3 million and an SBA servicing asset of $3.1 million. The core deposit intangible was valued utilizing a discounted cash flow methodology based upon assumptions regarding retained balances, such as account retention rate and growth rates, interest expense including maintenance costs, and alternative costs of funding. The discount rate applied is consistent to that applied to loans above. The SBA servicing asset was valued using a discounted cash flow methodology that included assumptions for pre-payment speeds and defaults discounted at a market-based discount rate. The valuation methodology was applied to each loan individually based upon its specific characteristics.

~~Table of Contents~~

~~The core deposit intangible will be amortized straight-line over ten years, and the SBA servicing asset will be amortized over the life of the underlying portfolio.~~

~~Deposits~~—By definition, the fair value of demand and saving deposits equals the amount payable. For time deposits acquired, the Company utilized an income approach, discounting the contractual cash flows on the instruments over their remaining contractual lives at prevailing market rates.

The fair value of the acquired assets and liabilities noted in the table may change during the provisional period, which may last up to twelve months subsequent to the acquisition date. The Company may obtain additional information to refine the valuation of the acquired assets and liabilities and adjust the recorded fair value.

~~Accounting for acquired loans~~

A Day 1 CECL allowance for credit losses on the non-PCD loans was recorded through provision for credit loss expense within the consolidated statements of operations. At the date of acquisition, of the $537.7 million of loans acquired from RCB, $11.1 million, or 2.1% of RCB’s loan portfolio, were accounted for as PCD loans. The gross contractual amounts receivable of PCD loans, inclusive of all principal and interest, was $13.8 million, including $2.1 million of loans previously charged off by RCB. The Company’s best estimate of the contractual principal and interest cash flows for PCD loans not expected to be collected was $4.5 million, including $2.1 million of loans previously charged off by RCB.

~~The following table provides a summary of PCD loans purchased as part of the RCB acquisition as of the acquisition date:~~

Commercial

Commercial real estate non-owner occupied

Residential real estate

Consumer

Total
Unpaid principal balance

$
12,079

$
220

$
843

$
3

$
13,145
PCD allowance for credit loss at acquisition

(2,257)

(2)

(215)

—

(2,474)
(Discount) premium on acquired loans

(787)

19

(5)

—

(773)
Loans previously charged-off by RCB

(2,051)

—

—

(3)

(2,054)
Purchase price of PCD loans

$
6,984

$
237

$
623

$
—

$
7,844

The Company has determined that it is impractical to report the amounts of revenue and earnings of legacy RCB since the acquisition date due to the integration of certain processes occurring shortly after the acquisition date. Such amounts would require significant estimates that cannot be objectively made.

~~Bank of Jackson Hole~~

On October 1, 2022, the Company completed its acquisition of Bancshares of Jackson Hole, the bank holding company of Wyoming-based Bank of Jackson Hole. Pursuant to the merger agreement executed in March 2022, the Company paid $51.0 million of cash consideration and issued 4,391,964 shares of the Company’s Class A common stock in exchange for all of the outstanding common stock of Bancshares of Jackson Hole. The transaction was valued at $213.4 million in the aggregate, based on the Company’s closing price of $36.99 on September 30, 2022. The acquisition added 12 banking centers with operations in Wyoming and Idaho. Immediately following the closing of the acquisition, BOJH sold substantially of all its assets and liabilities to NBH Bank, with the exception of assets and liabilities related to its trust business. Effective October 1, 2022, BOJH was renamed as Bank of Jackson Hole Trust.

~~BOJH acquisition-related costs totaled $24.5 million for the year ended December 31, 2022, including a Day 1 CECL provision expense of $16.3 million. The results of BOJH~~Cambr are included in the results of the Company subsequent to the acquisition date.

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The table below summarizes ~~preliminary~~ net assets acquired (at fair value) and consideration transferred in connection with the ~~BOJH~~Cambr acquisition:


	October 1, 2022		April 3, 2023
Assets:
Cash and due from banks	$	40,509	$	1,224
Investment securities		203,728
Non-marketable securities		3,104
Loans, net		1,185,699
Loans held for sale		504
Premises and equipment		30,318
Core deposit and other intangibles		30,696
Other intangibles				18,000
Other assets		31,970		6,729
Total assets acquired		1,526,528		25,953

Liabilities:
Total deposits		1,375,593
Long-term debt		39,229
Fed funds purchased		25
Other liabilities		9,483	$	6,340
Total liabilities assumed		1,424,330		6,340

Identifiable net assets acquired	$	102,198	$	19,613

Consideration:
NBHC common stock paid, closing price of $36.99 on September 30, 2022	$	162,459
Cash		50,989	$	46,524
Total		213,448		46,524

Goodwill	$	111,250	$	26,911

In connection with the ~~BOJH~~Cambr acquisition, the Company recorded ~~$111.3~~$26.9 million of goodwill. The amount of goodwill recorded reflects the expanded market presence, synergies and operational efficiencies that are expected to result from the acquisition. The ~~Company transferred $75.3 million~~total amount of ~~available-for-sale securities~~goodwill expected to ~~held-to-maturity as of Day 1.~~be deductible for tax purposes is $27.8 million. The following is a description of the methods used to determine the fair values of significant assets and liabilities presented above:

~~Cash and due from banks~~Other intangibles—The ~~carrying amount~~Company recorded other intangible assets of ~~these~~$18.0 million, including intangibles related to customer relationships and internally developed technology. The other intangible assets ~~was deemed a reasonable estimate of fair value based on the short-term nature of these assets.~~

~~Investment securities~~~~— The investment securities portfolio was fair~~were valued ~~on Day 1 utilizing third-party pricing services. A portion of the investment securities portfolio was sold upon acquisition, and the remaining securities were transferred~~by discounting future cash flows to ~~held-to-maturity.~~

~~Loans, net~~—The fair value of loans were based on a discounted cash flow methodology that considered the loans’ underlying characteristics including account type, remaining terms of loan, annual interest rates or coupon, interest types, past delinquencies, timing of principal and interest payments, current market rates, loan to value ratios, loss exposure and remaining balance.present value. The discount rates applied were based upon a build-up approach considering the alternative cost of funds, capital charges, servicing costs, and a liquidity premium. Loans were aggregated according to similar characteristics when applying the valuation method.

~~Core deposit and other intangibles~~—The Company recorded a core deposit intangible asset of $29.4 million and a wealth management intangible of $1.3 million. The core deposit intangible was valued utilizing a discounted cash flow methodology based upon assumptions regarding retained balances, such as account retention rate and growth rates, interest expense including maintenance costs, and alternative costs of funding. The discount rate applied is consistent to that applied to loans above. The fair value for the wealth management client relationships intangible was based on a multi-period excess earnings method (“MPEEM”), which utilized a contributory asset analysis to ascertain a fair return on investment of all the assets used in the production of income associated with the specific intangible asset. The sum of the resulting net, or excess, earnings attributable to the client relationships was then discounted to present value utilizing an appropriate discount rate.

~~Table of Contents~~

~~The core deposit intangible and wealth management intangible will be amortized straight-line over ten years.~~

~~Long-term debt~~—The Company fair valued the subordinated debt using a market interest rate based on similar securities at acquisition date. The Company modeled out the future cash flows over the term of the debt using the forward interest rate curve at acquisition date, and then discounted the cash flows using rates from similar transactions at or near acquisition date.participant assumptions.

The ~~fair value~~other intangible assets are being amortized over a weighted average period of the acquired assets and liabilities noted in the table may change during the provisional period, which may last up to twelve months subsequent to the acquisition date. The Company may obtain additional information to refine the valuation of the acquired assets and liabilities and adjust the recorded fair value.

~~Accounting for acquired loans~~

A Day 1 CECL allowance for credit losses on the non-PCD loans was recorded through provision for credit loss expense within the consolidated statements of operations. At the date of acquisition, of the $1.2 billion of loans acquired from BOJH, $13.9 million, or 1.1% of BOJH’s loan portfolio, were accounted for as PCD loans. The gross contractual amounts receivable of PCD loans, inclusive of all principal and interest, was $14.0 million, including $0.5 million of loans previously charged off by BOJH. The Company’s best estimate of the contractual cash flows for PCD loans not expected to be collected was $3.8 million.

~~The following table provides a summary of PCD loans purchased as part of the BOJH acquisition as of the acquisition date:~~

Commercial

Commercial real estate non-owner occupied

Residential real estate

Consumer

Total
Unpaid principal balance

$
5,061

$
8,353

$
476

$
12

$
13,902
PCD allowance for credit loss at acquisition

(151)

(3,557)

(55)

(1)

(3,764)
(Discount) premium on acquired loans

(336)

(226)

(16)

—

(578)
Purchase price of PCD loans

$
4,574

$
4,570

$
405

$
11

$
9,560

The Company has determined that it is impractical to report the amounts of revenue and earnings of legacy BOJH since the acquisition date due to the integration of certain processes occurring shortly after the acquisition date. Such amounts would require significant estimates that cannot be objectively made.

~~Unaudited Pro forma information~~

The following unaudited pro forma information combines the historical results of RCB, BOJH and the Company. The pro forma financial information does not include the potential impacts of possible business model changes, current market conditions, revenue enhancements, expense efficiencies, or other factors. If the RCB and BOJH acquisitions had been completed on January 1, 2021, pro forma total revenue for the Company would have been approximately $419.1 million for the year ended December 31, 2022. Pro forma net income for the Company would have been approximately $120.5 million for the year ended December 31, 2022. For the year ended December 31, 2022, pro forma basic and diluted earnings per share for the Company would have been $3.19 and $3.17, respectively. For the year ended December 31, 2022, the pro forma information reflects adjustments made to exclude acquisition-related expenses of the Company totaling $36.8 million and estimated acquisition-related expenses incurred by RCB and BOJH prior to the acquisition date totaling $4.9 million. Day 1 provision expense was included in 2022 to reflect the assumption of the acquisition timing noted above. Adjustments also included estimated net accretion of loan and investment marks of $8.8 million for the year ended December 31, 2022, estimated net amortization of fair value marks on long term debt of $0.2 million for the year ended December 31, 2022, estimated accretion of fair value marks on time deposits of $0.2 million for the year ended December 31, 2022, and estimated amortization of acquired identifiable intangibles of $3.3 million for the year ended December 31, 2022.

~~Table of Contents~~

The pro forma information is theoretical in nature and not necessarily indicative of future consolidated results of operations of the Company or the consolidated results of operations which would have resulted had the Company acquired RCB and BOJH during the periods presented.

~~Note 20 Subsequent Events~~

In April 2023, NBH Bank acquired StoneCastle Digital Solutions, LLC, a subsidiary of StoneCastle Partners, LLC. Upon closing, the legal name of the acquired entity was changed to Camber Solutions, LLC (“Cambr”). Cambr is a unique deposit acquisition and processing platform that generates core deposits from accounts offered through embedded finance companies. The acquisition allows the Company to grow core deposits thereby providing a unique source of liquidity and a diversification of our funding capabilities while lowering funding costs. As of April 30, 2023, NBH Bank has added $0.5 billion of Cambr deposits to its balance sheet and utilized the funds to pay down $0.5 billion of FHLB advances.

Additionally, on May 9, 2023, the Company’s Board of Directors authorized a new program to repurchase up to $50.0 million of the Company’s common stock from time to time either in the open market or in privately negotiated transactions in accordance with applicable regulations of the Securities and Exchange Commission. To date, the Company has repurchased $36.4 million of its previously authorized $75.0 million stock repurchase program announced in February 2021. The new program of $50.0 million replaces this previously authorized program in its entirety.9.4 years.

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Item 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management's discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes as of and for the three months ended March 31, ~~2023,~~2024, and with our annual report on Form 10-K (file number 001-35654), which includes our audited consolidated financial statements and related notes as of and for the years ended December 31, 2023, 2022 ~~2021~~ and ~~2020.~~2021. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that may cause actual results to differ materially from management's expectations. Factors that could cause such differences are discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements” located elsewhere in this quarterly report and in Item 1A “Risk Factors” in the annual report on Form 10-K, referenced above, and should be read herewith.

All amounts are in thousands, except share and per share data, or as otherwise noted.

Overview

Our focus is on building relationships by creating a win-win scenario for our clients and our Company. We believe in providing solutions and services to our clients that are based on fairness and simplicity. We have established a solid financial services franchise with a sizable presence for deposit gathering and building client relationships necessary for growth. We ~~are executing~~have executed on strategic acquisition opportunities to expand our presence in attractive markets and to diversify our revenue streams. Additionally, we are innovating and building strategic fintech partnerships with the goal of delivering a comprehensive digital financial ecosystem for our clients. We are focused on providing small and medium-sized businesses with alternative digital access to address borrowing, depository and cash management needs, while also providing information management and access to digital payment tools, under the safety of a regulated bank. We believe that our established presence in our core markets of Colorado, the greater Kansas City region, Utah, Wyoming, Texas, New Mexico and Idaho, as well as our ongoing investment in digital ~~and blockchain~~ solutions and strategic acquisitions, position us well for growth opportunities. As of March 31, ~~2023,~~2024, we had $9.9 billion in assets, ~~$7.3~~$7.6 billion in loans, ~~$7.6~~$8.5 billion in deposits, ~~$1.1~~$1.2 billion in equity and ~~$0.8~~$0.9 billion in assets under management in our trust and wealth management business.

Operating Highlights ~~and Key Challenges~~

~~Recent industry concerns~~



●		We have built a granular and relationship-focused deposit base and our investment securities portfolio has a short average duration and is primarily comprised of government guaranteed mortgage-backed securities.
●		~~Our deposit base has no exposure to venture capital or crypto deposits.~~
●		~~Approximately 70% of our deposits are FDIC insured.~~
●		~~Our growth in the last few years has primarily been the result of strategic acquisitions consistent with our long-term business plan.~~
●		~~We do not originate high-dollar non-amortizing or balloon payment mortgage loans to our clients.~~

Profitability and returns


●		Net income ~~was a record~~totaled $31.4 million, or $0.82 per diluted share, for the three months ended March 31, 2024, compared to net income of $40.3 million, or $1.06 per diluted share, for the ~~first quarter of 2023, increasing $21.9 million compared to the first quarter of 2022.~~
●		Return on average tangible assets increased 73 basis points to a record 1.80% for the first quarter of 2023, compared to the first quarter of 2022. Return on average tangible common equity totaled a record 20.86% for the first quarter of 2023, compared to 10.31% for the first quarter of 2022.three months ended March 31, 2023.
●		The return on average tangible assets was 1.39% for the first quarter of 2024, compared to 1.80% for the first quarter of ~~2023, compared to 1.07% for the first quarter of 2022.~~2023.
●		The return on average tangible common equity was ~~20.9%~~15.14% for the first quarter of ~~2023,~~2024, compared to ~~10.3%~~20.86% for the first quarter of ~~2022.~~2023.

~~Table of Contents~~

Strategic execution


●		Completed the acquisition of Cambr Solutions, LLC in April 2023, a business-to-business-to-consumer modeled subsidiary that provides granular and diversified cash deposits in a cost-efficient manner. Cambr administers approximately $1.7 billion of deposits comprising more than 500,000 FDIC-insured cash accounts.
●		Continued to invest in digital solutions for our clients through our financial eco-system, 2UniFi,^SM, for small and medium-sized businesses that we believe will increase access to financial services while reducing the costs of banking services.
●		The Company’s balance sheet funding mix improved during the first quarter of 2024, and the Company utilized funding provided by deposit growth to pay down $340.0 million of Federal Home Loan Bank advances.

Loan portfolio


●		Total loans ended the quarter at $7.6 billion compared to $7.7 billion at December 31, 2023.
●		Generated loan fundings totaling $200.0 million, during the three months ended March 31, 2024, with a weighted average new loan origination rate of 8.8%.
●		Maintained a conservatively structured loan portfolio represented by diverse industries and concentrations with most industry sector concentrations at 15% or less of total loans and all concentration levels remain well below our self-imposed limits.

~~Loan portfolio~~


●		~~Total~~Non-owner occupied CRE loans ~~ended~~were 166.7% of the ~~quarter~~Company’s risk based capital, or 24.6% of total loans, and no specific property type comprised more than 10.0% of total loans at ~~$7.3 billion increasing $124.8 million, or 7.0% annualized, since December~~March 31, ~~2022.~~2024.

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●		The Company maintains very little exposure to non-owner occupied CRE retail properties and office properties, comprising 2.1% and 1.3% of total loans, respectively, at March 31, 2024.
●		~~Generated first quarter loan fundings totaling $393.9~~Multi-family loans totaled $348.5 million, ~~with a weighted average new loan origination rate~~or 4.6% of ~~7.9%.~~total loans as of March 31, 2024.
●		We do not originate high-dollar non-amortizing or balloon payment mortgage loans to our clients.

Credit quality


●		Allowance for credit losses totaled ~~1.23%~~1.29% of total loans at March 31, ~~2023,~~2024, compared to ~~1.24%~~1.27% at December 31, ~~2022.~~2023.
●		~~During the three months ended March 31, 2023, the~~The Company recorded ano provision expense for credit losses during the first quarter of 2024, compared to provision expense for credit losses of $0.9 million ~~compared to a provision release of $0.3 million~~ during the ~~three months ended March 31, 2022.~~
●		~~Net charge-offs to average total loans for the three months ended March 31, 2023 totaled 0.01% annualized, compared to 0.03% for the full year ended December 31, 2022.~~first quarter of 2023.
●		Credit quality remained strong, as non-performing loans (comprised of non-accrual loans and non-accrual modified loans) totaled 0.47% of total loans at March 31, ~~2023 totaled a record low 0.13% of total loans,~~2024, compared to ~~0.23%~~0.37% at December 31, ~~2022.~~2023. Non-performing assets to total loans and OREO ~~improved to 0.18%~~totaled 0.53% at March 31, ~~2022,~~2024, compared to ~~0.28%~~0.42% at December 31, ~~2022.~~2023.
●		Net charge-offs of $0.1 million and $1.1 million were recorded during the three months ended March 31, 2024 and the year ended December 31, 2023, respectively. Annualized net charge-offs to average total loans totaled 0.00% and 0.02% for the three months ended March 31, 2024 and the year ended December 31, 2023, respectively.

Client deposit funded balance sheet

		.9
●		Average total deposits for the first quarter of 2024 increased 6.8% to $8.2 billion, compared to $7.7 billion for the first quarter of 2023.
●		Average transaction deposits for the first quarter of ~~2023~~2024 increased ~~26.1%~~6.8% to $7.2 billion, compared to $6.8 billion ~~compared to $5.4 billion~~ for ~~the same period in the prior year. Compared to the fourth quarter of 2022, average transaction deposits decreased $318.0 million, or 4.5% during~~ the first quarter of 2023.
●		Average total deposits for the first quarter of 2023 increased 24.2% to $7.7 billion, compared to the first quarter of 2022. Compared to the fourth quarter of 2022, average total deposits decreased $287.6 million, or 3.6% during the first quarter of 2023.
●		The mix of transaction deposits to total deposits ~~decreased 180 basis points to~~was 88.3% and 87.1% at March 31, 2024 and 2023, ~~from last quarter.~~respectively.
●		Cost of deposits totaled ~~0.58%, increasing 41 basis points, compared to March 31, 2022 due to an increase in the Fed Funds rate between periods. Compared to the fourth quarter of 2022, cost of deposits increased 0.25% during~~2.15% for the first quarter of 2024, compared to 0.58% for the first quarter of 2023. Our total deposit beta through this rate cycle remains low at 37.5%.
●		Approximately 79% of our deposits were FDIC insured as of March 31, 2024.

Liquidity

		.9
●		On balance sheet liquidity included $0.3 billion of cash and $1.3 billion of investment securities as of March 31, 2024.
●		Liquidity is monitored and managed to ensure that sufficient funds are available on-demand to meet our business needs. Additionally, we have access to various off-balance sheet third party funding sources including FHLB advances, the Federal Reserve discount window, Cambr deposits, federal funds purchased and the brokered deposit marketplace.
●		Our investment securities portfolio has a short average duration and is largely backed by U.S government or government sponsored entities giving us confidence that we will not realize material losses. Regarding the fair value of investment securities, our accumulated other comprehensive loss does not have a material impact on our capital position. Our tangible common equity capital ratio, which includes the accumulated other comprehensive loss, totaled 9.2% as of March 31, 2024, compared to 9.0% as of December 31, 2023.

Revenues


●		Fully taxable equivalent (“FTE”) net interest income totaled $85.7 million for the first quarter of 2024, compared to $96.3 million for the first quarter of ~~2023 and increased $48.3 million, or 100.7%, compared to the first quarter of 2022.~~2023.
●		The FTE net interest margin ~~widened 149~~narrowed 61 basis points to ~~4.39%~~3.78% for the three months ended March 31, ~~2023,~~2024, compared to the ~~same period~~first quarter of 2023. The yield on earning assets increased 64 basis points, primarily due to multiple increases in the ~~prior year benefitting from a 216 basis point increase in earning asset yields to 5.24% partially offset by an increase in the cost of funds.~~federal funds rate since March 2022. The cost of funds increased 71135 basis points to ~~0.90%~~2.25% for the three months ended March 31, ~~2023,~~2024, compared to the same period in the prior year.
●		Non-interest income totaled ~~$14.7~~$17.7 million during the three months ended March 31, ~~2023,~~2024, compared to ~~$19.1~~$14.7 million for the three months ended March 31, ~~2022,~~2023, driven by ~~lower mortgage~~increases from our diversified sources of fee revenue including SBA loan income, trust income, Cambr income, fair value adjustments on company-owned life insurance, swap fee income and a $0.6 million gain from the sale of a banking center building. Mortgage banking income ~~due~~decreased $0.6 million during the three months ended March 31, 2024, compared to ~~lower refinance activity and competition driving tighter gain on sale margins.~~the same period in the prior year.
●		Service charges and bank card fees increased a combined ~~$0.9~~$0.2 million during the three months ended March 31, ~~2023,~~2024, compared to the first quarter of ~~2022.~~2023.

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Expenses


●		Non-interest expense totaled ~~$58.3~~$62.8 million during the three months ended March 31, ~~2023,~~2024, representing an increase of ~~$14.2~~$4.5 million, or ~~32.2%~~7.8%, compared to the three months ended March 31, ~~2022 largely driven by an increase in core operating expenses~~2023. Salaries and benefits increased $3.5 million primarily due to ~~our 2022 acquisitions. Included in non-interest expense was $1.7 million higher FDIC deposit insurance expense~~payroll tax credits realized in the first quarter of ~~2023 as~~2023. Occupancy and equipment increased $0.9 million, and other intangible assets amortization increased $0.6 million due to intangible assets acquired through our Cambr acquisition in April of 2023. These increases were partially offset by a ~~result~~decrease of ~~our recent acquisitions and an increase~~$0.9 million in ~~the FDIC assessment rate effective January 2023.~~professional fees.
●		The FTE efficiency ratio, excluding ~~core deposit and wealth management~~other intangible assets amortization, during the three months ended March 31, ~~2023~~2024 totaled ~~53.2%~~58.82%, compared to ~~57.1%~~54.31% during the year ended December 31, ~~2022.~~2023.
●		Income tax expense totaled $7.5 million during the three months ended March 31, 2024, compared to $10.1 million during the three months ended March 31, 2023 ~~compared to $3.6 million during the three months ended March 31, 2022~~ driven by ~~higher~~lower pre-tax income. The effective tax rate for the first quarter ~~2023~~2024 was ~~20.0%~~19.3%, compared to ~~17.3%~~19.1% for the full year ~~2022.~~2023.

Strong capital position


●		Capital ratios continue to be strong and in excess of federal bank regulatory agency “well capitalized” thresholds. As of March 31, ~~2023,~~2024, our consolidated tier 1 leverage ratio was ~~9.46%~~9.99%, and our consolidated common equity tier 1 and tier 1 risk based capital ratios were ~~11.32%~~12.35%.
●		At March 31, ~~2023,~~2024, common book value per share was ~~$30.12.~~$32.58. The tangible common book value per share increased ~~$1.13~~$0.55 to $23.32 during the first quarter ~~to $21.76 at March 31, 2023,~~of 2024 as ~~the quarter’s~~ earnings outpaced the quarterly dividend and ~~benefitted from~~ a ~~$0.25 per share decrease~~$0.10 increase in accumulated other comprehensive loss.

Key Challenges

~~There~~Macroeconomic pressures have resulted in volatility and uncertainty in the banking industry. Increases in interest rates, declines in the fair value of securities, lack of available funding, uninsured deposits and risk from concentrations in loan and deposit segments along with declines in commercial real estate property values are ~~a number of significant challenges confronting us and our industry.~~drawing increased scrutiny on financial institutions. Liquidity within the financial services sector has tightened, ~~within recent months,~~ and we expect the intense competition for deposits throughout our ~~markets.~~ markets to continue. While these are widespread challenges for the banking industry, the Company has not experienced a material impact to our financial condition, operations, customer base, liquidity, capital position or risk profile.

Additionally, we face continual challenges implementing our business strategy. These include growing our assets, particularly loans, and deposits amidst intense competition, changing interest rates, adhering to changes in the regulatory environment and identifying and consummating disciplined acquisition and other expansionary opportunities in a very competitive and inflationary environment.

We are focused on growing our loan portfolio while adhering to our established underwriting standards and self-imposed concentration limits. A significant portion of our loan portfolio is secured by real estate and any deterioration in real estate values or credit quality or elevated levels of non-performing assets would ultimately have a negative impact on the quality of our loan portfolio. In addition, we may see increased rates of repurchase or indemnification demands or indemnification as a result of self-reporting of identified errors in our mortgage loan portfolio. For instance, as part of our normal review process, we have discovered irregularities in mortgage loan applications in one of our offices that has prompted an investigation. Our investigation is not yet complete, and we can give no assurances whether or not its outcome will materially and adversely affect our business or financial condition or results.

Future growth in our interest income will ultimately be dependent on our ability to originate high-quality loans and other high-quality earning assets such as investment securities as well as our ability to access liquidity and manage our cost of funds. ~~Liquidity is monitored and managed to ensure that sufficient funds are available to meet our business needs. Management believes that~~During the Company's excess cash, borrowing capacity and access to sufficient sources of capital are adequate to meet our short-term and long-term liquidity needs in the foreseeable future. We anticipate having access to other third party funding sources, including the ability to raise funds through FHLB advances, issuance of debt, federal funds purchased and the issuance of shares of our common stock or other equity or equity-related securities.

~~Cash balances total $369.7 million as of March~~years ended December 31, 2023 and ~~have increased $174.2 million from December 31,~~ 2022, and decreased $416.7 million from March 31, 2022. Investment securities totaled $1.3 billion as of March 31, 2023 and decreased $24.4 million, or 1.8%, compared to December 31, 2022. As of March 31, 2023, our loans outstanding totaled $7.3 billion, increasing $124.8 million, or 1.7%, compared to December 31, 2022. During 2023, our weighted average rate on new loans funded at the time of origination was 7.5%, which was higher compared to the weighted average yield from our originated loans of 5.8% during the same period. During the three months ended March 31, 2023, the Federal Reserve increased prevailing interest rates by a total of 50100 and 425 basis ~~points.~~points, respectively. Our future earnings will be impacted by the Federal Reserve’s future interest rate policy decisions. Management employs risk management policies to monitor and limit exposure to changes in market rates, which is discussed in more detail in the Asset/Liability Management and Interest Rate Risk section of Management’s Discussion and Analysis.

We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. Approximately 70% of our deposits were FDIC insured as of March 31, 2023. Average total deposits were $7.7 billion during the first quarter of 2023,

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compared to $8.0 billion during the fourth quarter of 2022. The mix of transaction deposits to total deposits was 87.1% at March 31, 2023. Cost of deposits totaled 0.58% at March 31, 2023, and our total cost of funds was 0.90%.

Continued regulation, new liquidity and capital constraints, increased FDIC insurance costs, and a continual need to bolster cybersecurity are adding costs and uncertainty to all U.S. banks and could affect profitability. Also, nontraditional participants in the market may offer increased competition as non-bank payment businesses, including fintechs, are expanding into traditional banking products. While certain external factors are out of our control and may provide obstacles to our business strategy, we are prepared to deal with these challenges and expand our offerings in digital technology, including by partnering with and investing in fintechs where appropriate. We seek to remain flexible, yet methodical and proactive, in our strategic decision making so that we can quickly respond to market changes and the inherent challenges and opportunities that accompany such changes.

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Performance Overview

In evaluating our consolidated statements of financial condition and results of operations financial statement line items, we evaluate and manage our performance based on key earnings indicators, balance sheet ratios, asset quality metrics and regulatory capital ratios, among others. The table below presents some of the primary performance indicators that we use to analyze our business on a regular basis for the periods indicated:

Key Metrics⁽¹⁾


	As of and for the three months ended						As of and for the three months ended
	March 31,		December 31,		March 31,		March 31,		December 31,		March 31,
	2023		2022		2022		2024		2023		2023
Return on average assets		1.70%		0.70%		1.04%		1.28%		1.33%		1.70%
Return on average tangible assets⁽²⁾		1.80%		0.77%		1.07%		1.39%		1.44%		1.80%
Return on average tangible assets, adjusted⁽²⁾⁽³⁾		1.80%		1.55%		1.07%
Return on average equity		14.60%		6.13%		8.84%		10.30%		11.10%		14.60%
Return on average tangible common equity⁽²⁾		20.86%		9.17%		10.31%		15.14%		16.56%		20.86%
Return on average tangible common equity, adjusted⁽²⁾⁽³⁾		20.86%		18.37%		10.31%
Loan to deposit ratio (end of period)⁽¹⁰⁾		96.88%		91.72%		73.44%
Loan to deposit ratio (end of period)⁽³⁾								88.86%		94.00%		96.88%
Non-interest bearing deposits to total deposits (end of period)		38.53%		39.82%		40.14%		26.92%		28.83%		38.53%
Net interest margin⁽⁴⁾		4.32%		4.32%		2.82%		3.70%		3.88%		4.32%
Net interest margin FTE^(2)(4)(5)		4.39%		4.39%		2.90%		3.78%		3.95%		4.39%
Interest rate spread FTE^(2)(5)(6)		3.83%		4.09%		2.78%		2.81%		3.00%		3.83%
Yield on earning assets⁽⁷⁾		5.17%		4.72%		3.00%		5.80%		5.84%		5.17%
Yield on earning assets FTE^(2)(5)(7)		5.24%		4.79%		3.08%		5.88%		5.91%		5.24%
Cost of interest bearing liabilities		1.41%		0.70%		0.30%		3.07%		2.91%		1.41%
Cost of deposits		0.58%		0.33%		0.17%		2.15%		1.94%		0.58%
Non-interest income to total revenue FTE⁽⁵⁾		13.22%		12.78%		28.43%		17.11%		14.98%		13.22%
Non-interest expense to average assets		2.46%		2.84%		2.49%		2.56%		2.49%		2.46%
Efficiency ratio		53.21%		61.96%		67.08%		61.77%		58.82%		53.21%
Efficiency ratio excluding other intangible assets amortization FTE^(2)(3)(5)		51.30%		53.76%		65.32%
Efficiency ratio excluding other intangible assets amortization FTE⁽²⁾⁽⁵⁾								58.82%		56.03%		51.30%
Pre-provision net revenue	$	51,262	$	41,542	$	21,633	$	38,890	$	43,470	$	51,262
Pre-provision net revenue FTE⁽²⁾⁽⁵⁾		52,676		42,996		22,946		40,582		45,137		52,676
Pre-provision net revenue FTE adjusted for acquisition-related expense^(2)(3)(5)		52,676		49,807		22,946

Total Loans Asset Quality Data^(8)(9)(10)
Total Loans Asset Quality Data^(3)(8)(9)
Non-performing loans to total loans		0.13%		0.23%		0.24%		0.47%		0.37%		0.13%
Non-performing assets to total loans and OREO		0.18%		0.28%		0.35%		0.53%		0.42%		0.18%
Allowance for credit losses to total loans		1.23%		1.24%		1.04%		1.29%		1.27%		1.23%
Allowance for credit losses to non-performing loans		946.40%		542.35%		440.01%		272.52%		346.99%		946.40%
Net charge-offs to average loans		0.01%		0.04%		0.05%		0.00%		0.02%		0.01%


(1)		Ratios are annualized.
(2)		Ratio represents non-GAAP financial measure. See non-GAAP reconciliations below.
(3)		~~Ratios~~Total loans are ~~adjusted for acquisition-related expenses. See non-GAAP reconciliation below.~~net of unearned discounts and fees.
(4)		Net interest margin represents net interest income, including accretion income on interest earning assets, as a percentage of average interest earning assets.
(5)		Presented on an FTE basis using the statutory rate of 21% for all periods presented. The taxable equivalent adjustments included above are ~~$1,414, $1,454~~$1,692, $1,667 and ~~$1,313~~$1,414 for the three months ended March 31, ~~2023,~~2024, December 31, ~~2022~~2023 and March 31, ~~2022,~~2023, respectively.
(6)		Interest rate spread represents the difference between the weighted average yield on interest earning assets and the weighted average cost of interest bearing liabilities.
(7)		Interest earning assets include assets that earn interest/accretion or dividends. Any market value adjustments on investment securities are excluded from interest-earning assets.
(8)		Non-performing loans consist of non-accruing loans and restructured loans on non-accrual.
(9)		Non-performing assets include non-performing loans and OREO.
~~(10)~~		~~Total loans are net of unearned discounts and fees.~~

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About Non-GAAP Financial Measures

Certain of the financial measures and ratios we present, including “tangible assets,” “average tangible assets,” “return on average tangible assets,” “tangible common equity,” “tangible common equity to tangible assets,” “return on average tangible common equity,” “tangible common book value,” “tangible common book value per share,” “tangible common equity to tangible assets,” “tangible common book value, excluding accumulated other comprehensive loss, net of tax,” “tangible common book value per share,

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excluding accumulated other comprehensive loss, net of tax,” ~~“adjusted non-interest expense,” “non-interest expense to average assets, adjusted,” “adjusted net income,” “adjusted net~~“net income excluding ~~core deposit~~other intangible assets amortization expense, after tax,” ~~“adjusted earnings per share - diluted,” “adjusted return on average tangible assets,” “adjusted return on average tangible common equity,”~~ “non-interest expense ~~adjusted for intangible asset amortization and acquisition-related expenses,” “non-interest expense adjusted for acquisition-related expenses,” “efficiency ratio adjusted for~~excluding other intangible assets amortization, ~~and acquisition-related expenses,~~” “efficiency ratio excluding other intangible assets amortization FTE,” “pre-provision net revenue,~~” “pre-provision net revenue adjusted for acquisition-related expenses,~~” “tangible common book value, excluding accumulated other comprehensive loss (income), net of tax,” “tangible common book value per share, excluding accumulated other comprehensive loss, ~~(income),~~ net of tax,” ~~“adjusted net~~“net income excluding ~~other intangible assets amortization expense, after tax,” “net income adjusted for~~ the impact of other intangible assets amortization expense, ~~and acquisition-related expenses,~~ after tax,” “net income excluding the impact of other intangible assets amortization expense, after tax,” and “fully taxable equivalent” metrics, are supplemental measures that are not required by, or are not presented in accordance with, U.S. generally accepted accounting principles (GAAP). We refer to these financial measures and ratios as “non-GAAP financial measures.” We consider the use of select non-GAAP financial measures and ratios to be useful for financial and operational decision making and useful in evaluating period-to-period comparisons. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenditures or assets that we believe are not indicative of our primary business operating results or by presenting certain metrics on an FTE basis. We believe that management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, analyzing and comparing past, present and future periods.

These non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP and you should not rely on non-GAAP financial measures alone as measures of our performance. The non-GAAP financial measures we present may differ from non-GAAP financial measures used by our peers or other companies. We compensate for these limitations by providing the equivalent GAAP measures whenever we present the non-GAAP financial measures and by including a reconciliation of the impact of the components adjusted for in the non-GAAP financial measure so that both measures and the individual components may be considered when analyzing our performance. A reconciliation of our GAAP financial measures to the comparable non-GAAP financial measures is as follows:

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Tangible Common Book Value Ratios


	March 31,		December 31,		March 31,		March 31,		December 31,		March 31,
	2023		2022		2022		2024		2023		2023
Total shareholders' equity	$	1,133,727	$	1,092,202	$	820,215	$	1,231,830	$	1,212,807	$	1,133,727
Less: goodwill and other intangible assets, net		(325,828)		(327,191)		(121,096)		(362,709)		(364,716)		(325,828)
Add: deferred tax liability related to goodwill		11,212		10,984		10,298		12,539		12,208		11,212
Tangible common equity (non-GAAP)	$	819,111	$	775,995	$	709,417	$	881,660	$	860,299	$	819,111

Total assets	$	9,917,223	$	9,573,243	$	7,341,512	$	9,967,476	$	9,951,064	$	9,917,223
Less: goodwill and other intangible assets, net		(325,828)		(327,191)		(121,096)		(362,709)		(364,716)		(325,828)
Add: deferred tax liability related to goodwill		11,212		10,984		10,298		12,539		12,208		11,212
Tangible assets (non-GAAP)	$	9,602,607	$	9,257,036	$	7,230,714	$	9,617,306	$	9,598,556	$	9,602,607

Tangible common equity to tangible assets calculations:
Total shareholders' equity to total assets		11.43%		11.41%		11.17%		12.36%		12.19%		11.43%
Less: impact of goodwill and other intangible assets, net		(2.90)%		(3.03)%		(1.36)%		(3.19)%		(3.23)%		(2.90)%
Tangible common equity to tangible assets (non-GAAP)		8.53%		8.38%		9.81%		9.17%		8.96%		8.53%

Tangible common book value per share calculations:
Tangible common equity (non-GAAP)	$	819,111	$	775,995	$	709,417	$	881,660	$	860,299	$	819,111
Divided by: ending shares outstanding		37,641,381		37,608,519		30,008,781		37,806,148		37,784,851		37,641,381
Tangible common book value per share (non-GAAP)	$	21.76	$	20.63	$	23.64	$	23.32	$	22.77	$	21.76

Tangible common book value per share, excluding accumulated other comprehensive loss calculations:
Tangible common equity (non-GAAP)	$	819,111	$	775,995	$	709,417	$	881,660	$	860,299	$	819,111
Accumulated other comprehensive loss, net of tax		78,627		88,204		38,633		80,209		76,401		78,627
Tangible common book value, excluding accumulated other comprehensive loss, net of tax (non-GAAP)		897,738		864,199		748,050		961,869		936,700		897,738
Divided by: ending shares outstanding		37,641,381		37,608,519		30,008,781		37,806,148		37,784,851		37,641,381
Tangible common book value per share, excluding accumulated other comprehensive loss, net of tax (non-GAAP)	$	23.85	$	22.98	$	24.93	$	25.44	$	24.79	$	23.85

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Return on Average Tangible Assets and Return on Average Tangible Equity


	As of and for the three months ended						As of and for the three months ended
	March 31,		December 31,		March 31,		March 31,		December 31,		March 31,
	2023		2022		2022		2024		2023		2023
Net income	$	40,283	$	16,721	$	18,352	$	31,391	$	33,121	$	40,283
Add: impact of other intangible assets amortization expense, after tax		1,049		1,049		227		1,534		1,541		1,049
Net income excluding the impact of other intangible assets amortization expense, after tax (non-GAAP)	$	41,332	$	17,770	$	18,579	$	32,925	$	34,662	$	41,332

Net income excluding the impact of other intangible assets amortization expense, after tax	$	41,332	$	17,770	$	18,579
Add: acquisition-related adjustments, after tax (non-GAAP)⁽¹⁾		—		17,825		—
Net income adjusted for the impact of other intangible assets amortization expense and acquisition-related expenses, after tax (non-GAAP)⁽¹⁾	$	41,332	$	35,595	$	18,579

Average assets	$	9,619,456	$	9,443,630	$	7,174,398	$	9,888,261	$	9,889,054	$	9,619,456
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill		(315,493)		(314,017)		(110,973)		(351,383)		(353,712)		(315,493)
Average tangible assets (non-GAAP)	$	9,303,963	$	9,129,613	$	7,063,425	$	9,536,878	$	9,535,342	$	9,303,963

Average shareholders' equity	$	1,119,118	$	1,082,840	$	841,942	$	1,226,283	$	1,184,164	$	1,119,118
Less: average goodwill and other intangible assets, net of deferred tax liability related to goodwill		(315,493)		(314,017)		(110,973)		(351,383)		(353,712)		(315,493)
Average tangible common equity (non-GAAP)	$	803,625	$	768,823	$	730,969	$	874,900	$	830,452	$	803,625

Return on average assets		1.70%		0.70%		1.04%		1.28%		1.33%		1.70%
Return on average tangible assets (non-GAAP)		1.80%		0.77%		1.07%		1.39%		1.44%		1.80%
Adjusted return on average tangible assets (non-GAAP)		1.80%		1.55%		1.07%
Return on average equity		14.60%		6.13%		8.84%		10.30%		11.10%		14.60%
Return on average tangible common equity (non-GAAP)		20.86%		9.17%		10.31%		15.14%		16.56%		20.86%
Adjusted return on average tangible common equity (non-GAAP)		20.86%		18.37%		10.31%

(1) Acquisition-related adjustments:
Provision expense adjustments:
CECL day 1 provision expense (non-GAAP)	$	—	$	16,348	$	—
Non-interest expense adjustments:
Acquisition-related expenses (non-GAAP)		—		6,811		—
Acquisition-related adjustments before tax (non-GAAP)		—		23,159		—
Tax expense impact		—		(5,334)		—
Acquisition-related adjustments, after tax (non-GAAP)	$	—	$	17,825	$	—

Fully Taxable Equivalent Yield on Earning Assets and Net Interest Margin


	As of and for the three months ended						As of and for the three months ended
	March 31,		December 31,		March 31,		March 31,		December 31,		March 31,
	2023		2022		2022		2024		2023		2023
Interest income	$	113,533	$	103,958	$	49,525	$	131,732	$	134,703	$	113,533
Add: impact of taxable equivalent adjustment		1,414		1,454		1,313		1,692		1,667		1,414
Interest income FTE (non-GAAP)	$	114,947	$	105,412	$	50,838	$	133,424	$	136,370	$	114,947

Net interest income	$	94,889	$	95,066	$	46,661	$	84,030	$	89,501	$	94,889
Add: impact of taxable equivalent adjustment		1,414		1,454		1,313		1,692		1,667		1,414
Net interest income FTE (non-GAAP)	$	96,303	$	96,520	$	47,974	$	85,722	$	91,168	$	96,303

Average earning assets	$	8,902,740	$	8,729,482	$	6,702,501	$	9,127,330	$	9,147,977	$	8,902,740
Yield on earning assets		5.17%		4.72%		3.00%		5.80%		5.84%		5.17%
Yield on earning assets FTE (non-GAAP)		5.24%		4.79%		3.08%		5.88%		5.91%		5.24%
Net interest margin		4.32%		4.32%		2.82%		3.70%		3.88%		4.32%
Net interest margin FTE (non-GAAP)		4.39%		4.39%		2.90%		3.78%		3.95%		4.39%

5551

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Efficiency Ratio and Pre-Provision Net Revenue

As of and for the three months ended

March 31,

December 31,

March 31,

2023

2022

2022
Net interest income

$
94,889

$
95,066

$
46,661
Add: impact of taxable equivalent adjustment

1,414

1,454

1,313
Net interest income FTE (non-GAAP)

$
96,303

$
96,520

$
47,974

Non-interest income

$
14,665

$
14,138

$
19,054

Non-interest expense

$
58,292

$
67,662

$
44,082
Less: other intangible assets amortization

(1,363)

(1,363)

(296)
Less: acquisition-related expenses (non-GAAP)

—

(6,811)

—
Non-interest expense adjusted for other intangible assets amortization and acquisition-related expenses (non-GAAP)

$
56,929

$
59,488

$
43,786

Non-interest expense

$
58,292

$
67,662

$
44,082
Less: acquisition-related expenses (non-GAAP)

—

(6,811)

—
Non-interest expense, adjusted for impact of other intangible assets amortization expense and acquisition-related expenses (non-GAAP)

$
58,292

$
60,851

$
44,082

Efficiency ratio

53.21%

61.96%

67.08%
Efficiency ratio excluding other intangible assets amortization FTE (non-GAAP)

51.30%

53.76%

65.32%

Pre-provision net revenue (non-GAAP)

$
51,262

$
41,542

$
21,633
Pre-provision net revenue, FTE (non-GAAP)

52,676

42,996

22,946
Pre-provision net revenue FTE, adjusted for acquisition-related expenses (non-GAAP)

52,676

49,807

22,946

~~Adjusted Net Income and Earnings Per Share~~

As of and for the three months ended

March 31,

December 31,

March 31,

2023

2022

2022
Adjustments to net income:

Net income

$
40,283

$
16,721

$
18,352
Add: Acquisition-related adjustments, after tax (non-GAAP)

—

17,825

—
Adjusted net income (non-GAAP)

$
40,283

$
34,546

$
18,352

Adjustments to earnings per share:

Earnings per share - diluted

$
1.06

$
0.44

$
0.60
Add: Acquisition-related adjustments, after tax (non-GAAP)

—

0.47

—
Adjusted earnings per share - diluted (non-GAAP)

$
1.06

$
0.91

$
0.60


	As of and for the three months ended
	March 31,		December 31,		March 31,
	2024		2023		2023
Net interest income	$	84,030	$	89,501	$	94,889
Add: impact of taxable equivalent adjustment		1,692		1,667		1,414
Net interest income FTE (non-GAAP)	$	85,722	$	91,168	$	96,303

Non-interest income	$	17,694	$	16,064	$	14,665

Non-interest expense	$	62,834	$	62,095	$	58,292
Less: other intangible assets amortization		(2,008)		(2,008)		(1,363)
Non-interest expense excluding other intangible assets amortization (non-GAAP)	$	60,826	$	60,087	$	56,929
	��
Efficiency ratio		61.77%		58.82%		53.21%
Efficiency ratio excluding other intangible assets amortization FTE (non-GAAP)		58.82%		56.03%		51.30%
Pre-provision net revenue (non-GAAP)	$	38,890	$	43,470	$	51,262
Pre-provision net revenue, FTE (non-GAAP)		40,582		45,137		52,676

Application of Critical Accounting Policies and Significant Estimates

We use accounting principles and methods that conform to GAAP and general banking practices. We are required to apply significant judgment and make material estimates in the preparation of our financial statements and with regard to various accounting, reporting and disclosure matters. Assumptions and estimates are required to apply these principles where actual measurement is not possible or practical. The most significant of these estimates relate to the determination of the ACL.

Allowance for credit losses

The determination of the ACL, which represents management’s estimate of lifetime credit losses inherent in our loan portfolio at the balance sheet date, involves a high degree of judgment and complexity. The Company estimates the collective ACL by first disaggregating the loan portfolio into segments based upon broad characteristics such as primary use and underlying collateral. Within these segments, the portfolio is further disaggregated into classes of loans with similar attributes and risk characteristics. The collective ACL is determined at the class level, analyzing loss history based upon specific loss drivers and risk factors affecting each loan class. The Company utilizes a discounted cash flow (“DCF”) model that incorporates forecasts of certain national

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macroeconomic factors (reasonable and supportable forecasts) which drive the losses predicted in establishing the Company’s collective ACL. Management accounts for the inherent uncertainty of the underlying economic forecast by reviewing and weighting alternate forecast scenarios. For periods beyond the reasonable and supportable forecast period, the Company reverts to historical long-term average loss rates on a straight-line basis. Additionally, the collective ACL calculation includes subjective adjustments for qualitative risk factors that are likely to cause estimated credit losses to differ from historical experience. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition.

Future Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The update requires public business entities to disclose specific categories related to rate reconciliation. It also requires more detailed information for reconciling items, provided certain quantitative thresholds are met. The amendments in this update are effective for fiscal years beginning after December 15, 2024 and are to be applied on a prospective basis. Early adoption is permitted. The Company is evaluating the impact from ASU 2023-09, and does not expect the adoption of this pronouncement to have a material impact on its financial statements apart from the inclusion of additional disclosures.

On March 6, 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted a new set of rules that require a wide range of climate-related disclosures, including material climate-related risks, information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition, Scope 1 and Scope 2 Greenhouse Gas emissions on a phased-in basis by certain larger registrants when those emissions are material and the filing of an attestation report covering the same, and disclosure of the financial statement effects of severe weather events and other natural conditions including costs and losses. Compliance dates under the final rule are phased in by registrant category. Multiple lawsuits have been filed challenging the SEC’s

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new climate rules, which have been consolidated and will be heard in the U.S. Court of Appeals for the Eighth Circuit. On April 4, 2024, the SEC issued an order staying the final rules until judicial review is complete.

Financial Condition

Total assets were $9.9 billion at March 31, ~~2023, compared to $9.6 billion at~~2024, increasing $16.4 million, or 0.2%, from December 31, ~~2022, an increase of $344.0 million, or 3.6%.~~2023. Cash and cash equivalents increased ~~$174.2~~$102.1 million, or ~~89.1%~~53.5%, from December 31, ~~2022,~~2023, and investment securities ~~decreased $24.4~~increased $42.6 million, or ~~1.8%~~3.5%. ~~Total loans increased $124.8 million, or 7.0% annualized,~~Loans totaled $7.6 billion at March 31, 2024, compared to $7.7 billion at December 31, 2023, and the allowance for credit losses ~~increased $0.8~~decreased $0.3 million to ~~$90.3~~$97.6 million at March 31, ~~2023.~~2024. During the first quarter of ~~2023,~~2024, lower cost demand, savings, and money market deposits ("transaction deposits") ~~totaled $6.6~~increased $313.4 million, or 17.5% annualized, to $7.5 billion, compared to ~~$7.0 billion at~~ December 31, ~~2022.~~2023. Total deposits ~~were $7.6~~increased $327.4 million, or 16.1% annualized, to $8.5 billion at March 31, ~~2023,~~2024, compared to ~~$7.9 billion at~~ December 31, ~~2022. FHLB advances increased to $1.0 billion at March 31, 2023, compared to $385.0 million at December 31, 2022, to fund loan originations and increase cash.~~2023.

Investment securities

Available-for-sale

~~Total~~Available-for-sale investment securities ~~available-for-sale decreased 1.5% during~~totaled $685.7 million at March 31, 2024, compared to $628.8 million at December 31, 2023, an increase of $56.8 million, or 9.0%. During the three months ended March 31, ~~2023 to $0.7 billion.~~2024, purchases of available-for sale securities totaled $106.6 million. There were no purchases of available-for-sale securities during the three months ended March 31, 2023. ~~Purchases~~Maturities and paydowns of available-for-sale securities ~~during the three months ended March 31, 2022~~ totaled ~~$179.4 million. Paydowns and maturities totaled $22.5~~$45.7 million and ~~$39.1~~$22.5 million during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

~~Our available-for-sale~~Available-for-sale investment securities ~~portfolio is~~are summarized ~~in the following table~~as follows as of the dates indicated. The weighted average yield was calculated based on amortized cost. Yields on tax exempt securities have not been adjusted for tax exempt status.


	March 31, 2023						December 31, 2022						March 31, 2024						December 31, 2023
						Weighted						Weighted						Weighted						Weighted
	Amortized		Fair		Percent of	average	Amortized		Fair		Percent of	average	Amortized		Fair		Percent of	average	Amortized		Fair		Percent of	average
	cost		value		portfolio	yield	cost		value		portfolio	yield	cost		value		portfolio	yield	cost		value		portfolio	yield
Treasury securities	$	74,148	$	72,154	10.4%	2.54%	$	74,031	$	71,388	10.1%	2.54%	$	74,125	$	72,651	10.6%	3.55%	$	74,508	$	73,044	11.6%	2.54%
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		256,267		222,209	32.0%	1.71%		263,939		226,131	32.0%	1.72%		226,494		193,576	28.2%	1.71%		233,264		201,809	32.1%	1.71%
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		463,907		398,282	57.2%	1.69%		478,866		405,926	57.5%	1.69%		485,221		416,680	60.8%	2.10%		417,155		351,242	55.9%	1.69%
Municipal securities		155		154	0.0%	3.17%		155		153	0.0%	3.17%		80		79	0.0%	3.17%		80		79	0.0%	3.17%
Corporate debt		2,000		1,892	0.3%	5.87%		2,000		1,920	0.3%	5.87%		2,000		1,870	0.3%	5.87%		2,000		1,843	0.3%	5.87%
Other securities		794		794	0.1%	0.00%		771		771	0.1%	0.00%		810		810	0.1%	0.00%		812		812	0.1%	0.00%
Total investment securities available-for-sale	$	797,271	$	695,485	100.0%	1.79%	$	819,762	$	706,289	100.0%	1.79%	$	788,730	$	685,666	100.0%	2.14%	$	727,819	$	628,829	100.0%	1.80%

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, nearly all of the available-for-sale investment portfolio was backed by mortgages. The residential mortgage pass-through securities portfolio is comprised of both fixed rate and adjustable rate FHLMC, FNMA and GNMA securities. The other mortgage-backed securities are comprised of securities backed by FHLMC, FNMA and GNMA securities.

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Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average life of the available-for-sale mortgage-backed securities portfolio was ~~5.4~~4.9 years and 5.2 years at ~~both~~ March 31, ~~2023~~2024 and December 31, ~~2022.~~2023, respectively. This estimate is based on assumptions and actual results may differ. At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the duration of the total available-for-sale investment portfolio was ~~4.5~~4.1 years and ~~4.4~~4.3 years, respectively.

At March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, adjustable rate securities comprised ~~11.8%~~11.9% and ~~11.5%~~13.0%, respectively, of the available-for-sale MBS portfolio. The remainder of the portfolio was comprised of fixed rate amortizing securities with 10 to 30 year contractual maturities, with a weighted average coupon of ~~1.74%~~2.16% per annum and ~~1.75%~~1.73% per annum at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

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The available-for-sale investment portfolio included ~~$101.8~~$103.1 million of unrealized losses at March 31, ~~2023.~~2024. At December 31, ~~2022,~~2023, the available-for-sale investment portfolio included ~~$113.5~~$99.0 million of unrealized losses. We believe any unrealized losses are a result of prevailing interest rates, and as such, we do not believe that any of the securities with unrealized losses were impaired. Management believes that default of the available-for-sale securities is highly unlikely. FHLMC, FNMA and GNMA guaranteed mortgage-backed securities and U.S. Treasury securities have a long history of zero credit losses, an explicit guarantee by the U.S. government (although limited for FNMA and FHLMC securities) and yields that generally trade based on market views of prepayment and liquidity risk rather than credit risk.

Our investment security portfolio consists of high-quality securities, which are largely backed by either U.S. government agencies or U.S. government sponsored entities. We regularly model liquidity stress scenarios to assess potential liquidity issues. The results of our stress testing on our debt security portfolio at March 31, 2024, illustrated that we would continue to meet all capital adequacy requirements.

Held-to-maturity

Held-to-maturity investment securities ~~decreased 2.1% during the three months ended~~totaled $570.9 million at March 31, 2024, compared to $585.1 million at December 31, 2023, ~~to $0.6 billion. Purchases during the three months ended March 31, 20231 totaled $2.5 million.~~a decrease of $14.2 million, or 2.4%. There were no purchases of held-to-maturity ~~investment~~ securities during the three months ended March 31, ~~2022. Paydowns~~2024. During the three months ended March 31, 2023, purchases of held-to-maturity securities totaled $2.5 million. Maturities and ~~maturities~~paydowns of held-to-maturity securities totaled ~~$16.2~~$14.4 million and ~~$41.4~~$16.2 million during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

Held-to-maturity investment securities are summarized as follows as of the dates indicated:


	March 31, 2023						December 31, 2022						March 31, 2024						December 31, 2023
						Weighted						Weighted						Weighted						Weighted
	Amortized		Fair		Percent of	average	Amortized		Fair		Percent of	average	Amortized		Fair		Percent of	average	Amortized		Fair		Percent of	average
	cost		value		portfolio	yield	cost		value		portfolio	yield	cost		value		portfolio	yield	cost		value		portfolio	yield
Treasury securities	$	49,117	$	48,141	7.7%	3.14%	$	49,045	$	47,629	7.5%	3.14%	$	49,412	$	48,189	8.7%	3.14%	$	49,338	$	48,334	8.4%	3.14%
Mortgage-backed securities:
Residential mortgage pass-through securities issued or guaranteed by U.S. Government agencies or sponsored enterprises		331,996		295,246	52.0%	2.30%		339,815		298,816	52.2%	2.29%		290,450		253,914	50.9%	2.20%		299,337		265,011	51.2%	2.20%
Other residential MBS issued or guaranteed by U.S. Government agencies or sponsored enterprises		256,808		211,869	40.3%	1.60%		262,667		213,479	40.3%	1.60%		230,988		183,673	40.4%	1.60%		236,377		190,983	40.4%	1.60%
Total investment securities held-to-maturity	$	637,921	$	555,256	100.0%	2.08%	$	651,527	$	559,924	100.0%	2.07%	$	570,850	$	485,776	100.0%	2.04%	$	585,052	$	504,328	100.0%	2.04%

The residential mortgage pass-through and other residential MBS held-to-maturity investment portfolios are comprised of fixed rate FHLMC, FNMA and GNMA securities.

The fair value of the held-to-maturity investment portfolio included ~~$0.6 million of unrealized gains and $83.2~~$85.1 million of unrealized losses and $42 thousand of unrealized gains at March 31, ~~2023.~~2024. At December 31, ~~2022,~~2023, the held-to-maturity investment portfolio included $81.0 million of unrealized losses and $0.2 million of unrealized ~~gains and $91.8 million of unrealized losses.~~gains.

The Company does not measure expected credit losses on a financial asset, or ~~group~~groups of financial assets, in which historical credit loss information adjusted for current conditions and reasonable and supportable forecasts results in an expectation that nonpayment of the amortized cost basis is zero. Management evaluated held-to-maturity securities noting they are backed by loans guaranteed by either U.S. government agencies or U.S. government sponsored entities, and management believes that default is highly unlikely given this governmental backing and long history without credit losses. Additionally, management notes that yields on which the portfolio generally trades are based upon market views of prepayment and liquidity risk and not credit risk. The Company has no intention to sell the securities and believes it will not be required to sell the securities before the recovery of their amortized cost.

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Mortgage-backed securities may have actual maturities that differ from contractual maturities depending on the repayment characteristics and experience of the underlying financial instruments. The estimated weighted average expected life of the held-to-maturity mortgage-backed securities portfolio as of March 31, ~~2023~~2024 and December 31, ~~2022~~2023 was ~~6.0~~5.8 years ~~for both periods.~~and 5.7 years, respectively. This estimate is based on assumptions and actual results may differ. The duration of the total held-to-maturity investment portfolio was ~~4.9~~4.6 years ~~and 4.8 years as of~~for both March 31, ~~2023~~2024 and December 31, ~~2022, respectively.~~2023.

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Non-marketable securities

The carrying balance of non-marketable securities are summarized as follows as of the dates indicated:


	March 31, 2024		December 31, 2023
Federal Reserve Bank stock	$	24,062	$	24,062
Federal Home Loan Bank stock		779		16,828
Convertible preferred stock		24,415		25,000
Equity method investments		24,183		24,587
Total	$	73,439	$	90,477

FRB and FHLB stock

At March 31, 2024 and December 31, 2023, the Company held ~~$45.6 million of FHLB~~FRB stock and ~~$23.7 million of FRB~~FHLB stock for regulatory or debt facility purposes. At December 31, 2022, the Company held $20.3 million of FHLB stock and $18.1 million of FRB stock. Purchases of FHLB and FRB stock totaled $35.9 million and zero during the three months ended March 31, 2023 and 2022, respectively. These are restricted securities which, lacking a market, are carried at cost. ~~The Company is not aware of any~~There have been no identified events or changes in circumstances that may have an adverse effect on the ~~investments~~FRB and FHLB stock carried at cost.

~~At March 31, 2023, other~~Other non-marketable securities ~~totaled $51.4 million and consisted~~

Other non-marketable securities consist of equity method investments ~~totaling $22.4 million~~ and convertible preferred stock without a readily determinable fair value totaling $29.0 million. At December 31, 2022, other non-marketable securities totaled $50.7 million and consisted of equity method investments totaling $21.7 million and convertible preferred stock without a readily determinable fair value totaling $29.0 million.value. During the three months ended March 31, 2024 and 2023, the Company recorded net unrealized losses on equity method investments totaling $49.7 thousand and ~~2022, purchases of other non-marketable securities totaled zero and $4.0~~$0.2 million, respectively. ~~The Company continues to invest with fintech solution providers to support our digital ecosystem buildout, support our core bank products~~These gains and ~~offerings, and to leverage efficiencies and technological solutions~~losses were recorded in ~~our shared services areas.~~other non-interest income in the Company’s consolidated statements of operations. No impairments were recorded during the three months ended March 31, 2024 or 2023.

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Loans overview

At March 31, ~~2023,~~2024, our loan portfolio was comprised of new loans that we have originated and loans that were acquired in connection with our ~~eight acquisitions to date.~~acquisitions.

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The table below shows the loan portfolio composition at the respective dates:


					March 31, 2023 vs.					March 31, 2024 vs.
					December 31, 2022					December 31, 2023
	March 31, 2023		December 31, 2022		% Change	March 31, 2024		December 31, 2023		% Change
Originated:
Commercial:
Commercial and industrial	$	1,818,415	$	1,841,313	(1.2)%	$	1,777,328	$	1,825,425	(2.6)%
Municipal and non-profit		979,801		959,305	2.1%		1,062,287		1,083,457	(2.0)%
Owner-occupied commercial real estate		674,231		656,361	2.7%		875,303		879,686	(0.5)%
Food and agribusiness		270,197		284,714	(5.1)%		241,654		265,902	(9.1)%
Total commercial		3,742,644		3,741,693	0.0%		3,956,572		4,054,470	(2.4)%
Commercial real estate non-owner occupied		979,150		841,657	16.3%		1,092,780		1,071,529	2.0%
Residential real estate		864,544		827,030	4.5%		923,103		919,139	0.4%
Consumer		16,766		16,986	(1.3)%		14,936		16,686	(10.5)%
Total originated		5,603,104		5,427,366	3.2%		5,987,391		6,061,824	(1.2)%

Acquired:
Commercial:
Commercial and industrial		172,368		183,522	(6.1)%		132,532		141,484	(6.3)%
Municipal and non-profit		316		321	(1.6)%		294		299	(1.7)%
Owner-occupied commercial real estate		248,883		256,979	(3.2)%		234,486		244,087	(3.9)%
Food and agribusiness		64,739		69,265	(6.5)%		57,896		58,695	(1.4)%
Total commercial		486,306		510,087	(4.7)%		425,208		444,565	(4.4)%
Commercial real estate non-owner occupied		845,374		854,393	(1.1)%		767,419		785,221	(2.3)%
Residential real estate		407,254		424,251	(4.0)%		387,101		404,648	(4.3)%
Consumer		3,260		4,372	(25.4)%		1,933		2,500	(22.7)%
Total acquired		1,742,194		1,793,103	(2.8)%		1,581,661		1,636,934	(3.4)%
Total loans	$	7,345,298	$	7,220,469	1.7%	$	7,569,052	$	7,698,758	(1.7)%

The Company maintains a granular and well-diversified loan portfolio with self-imposed concentration limits. ~~The loan portfolio increased $124.8 million, or 7.0% annualized, from~~At March 31, 2024, loans totaled $7.6 billion, compared to $7.7 billion at December 31, ~~2022 to March 31,~~ 2023. ~~First quarter loan fundings totaled $393.9 million with a weighted average new loan origination rate of 7.5%.~~

Our commercial and industrial loan portfolio is highly diversified across industry sectors and geography. At March 31, ~~2023,~~2024, there were no industry sectors representing more than ~~10.0%~~15.0% of our total loan portfolio. Key segments included government/non-profit loans of ~~$566.2~~$780.0 million, or ~~7.7%~~10.3% of total loans, and health care/hospital loans of ~~$411.1~~$423.0 million, or 5.6% of total loans.

Non-owner occupied CRE loans were ~~176.3%~~166.7% of the Company’s risk based capital, or ~~24.8%~~24.6% of total loans, and no specific property type comprised more than 10.0% of total loans. The Company maintains little exposure to non-owner occupied CRE retail properties and office properties, comprising ~~2.0%~~3.4% of total loans. Multi-family loans totaled ~~$282.1~~$348.5 million, or ~~3.8% of total loans, and office loans totaled $104.0 million, or 1.4%~~4.6% of total loans, as of March 31, ~~2023.~~2024.

The agriculture industry continues to be impacted by elevated and volatile commodity prices and intermittent disruptions in supply chains. Our food and agribusiness portfolio is ~~only 4.6%~~4.0% of total loans and is well-diversified across food production, crop and livestock types. Crop and livestock loans represent ~~1.2%~~1.0% of total loans. We have maintained relationships with food and agribusiness clients that generally possess low leverage and, correspondingly, low bank debt to assets, minimizing any potential credit losses in the future.

New loan origination is a direct result of our ability to recruit and retain top banking talent, connect with clients in our markets and provide needed services at competitive rates. Loan fundings totaled ~~$2.0~~$1.3 billion over the past 12 months, led by commercial loan fundings of ~~$1.1~~$0.8 billion. Fundings are defined as closed-end funded loans and revolving lines of credit advances, net of any current period paydowns. Management utilizes this more conservative definition of fundings to better approximate the impact of fundings on loans outstanding and ultimately net interest income.

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The following tables represent new loan fundings during ~~2023~~2024 and ~~2022:~~2023:


	First quarter		Fourth quarter		Third quarter		Second quarter		First quarter		First quarter		Fourth quarter		Third quarter		Second quarter		First quarter
	2023		2022		2022		2022		2022		2024		2023		2023		2023		2023
Commercial:
Commercial and industrial	$	107,013	$	177,693	$	201,106	$	152,550	$	169,168	$	53,978	$	135,954	$	89,297	$	111,717	$	107,013
Municipal and non-profit		22,526		20,393		20,845		81,428		49,906		14,564		79,650		18,657		39,331		22,526
Owner occupied commercial real estate		33,912		40,912		65,125		78,905		67,597		35,128		75,631		67,322		62,649		33,912
Food and agribusiness		(6,564)		28,518		76,293		(4,186)		18,620		(7,204)		10,646		16,191		6,017		(6,564)
Total commercial		156,887		267,516		363,369		308,697		305,291		96,466		301,881		191,467		219,714		156,887
Commercial real estate non-owner occupied		185,875		133,271		166,739		88,612		63,416		73,789		107,738		88,434		99,984		185,875
Residential real estate		49,406		95,067		99,951		93,220		49,040		29,468		48,925		42,514		40,814		49,406
Consumer		1,717		1,396		1,505		1,989		1,904		234		1,849		1,689		1,777		1,717
Total	$	393,885	$	497,250	$	631,564	$	492,518	$	419,651	$	199,957	$	460,393	$	324,104	$	362,289	$	393,885

Included in ~~fundings~~the table above are quarterly net (paydowns) fundings under revolving lines of credit totaling $(59,523), $16,954, ($12,877), $13,766 and ($7,096)~~, $96,903, $124,834, $21,762 and $66,430~~ for the dates noted, ~~in the table above,~~ respectively.

The tables below show the contractual maturities of our total loans for the dates indicated:


	March 31, 2023										March 31, 2024
	Due within		Due after 1 but		Due after 5 but		Due after				Due within		Due after 1 but		Due after 5 but		Due after
	1 year		within 5 years		within 15 years		15 Years		Total		1 year		within 5 years		within 15 years		15 Years		Total
Commercial:
Commercial and industrial	$	264,717	$	1,371,068	$	344,653	$	10,345	$	1,990,783	$	312,780	$	1,286,252	$	297,935	$	12,893	$	1,909,860
Municipal and non-profit		21,293		112,415		528,494		317,915		980,117		15,706		158,602		554,593		333,680		1,062,581
Owner occupied commercial real estate		60,714		265,381		480,640		116,378		923,113		85,783		411,434		510,668		101,904		1,109,789
Food and agribusiness		86,668		174,904		55,690		17,675		334,937		115,079		72,135		97,203		15,133		299,550
Total commercial		433,392		1,923,768		1,409,477		462,313		4,228,950		529,348		1,928,423		1,460,399		463,610		4,381,780
Commercial real estate non-owner occupied		272,097		950,521		586,605		15,300		1,824,523		415,015		926,889		505,543		12,752		1,860,199
Residential real estate		73,848		172,113		359,523		666,314		1,271,798		45,744		201,994		330,958		731,508		1,310,204
Consumer		4,751		12,779		2,493		4		20,027		5,090		10,105		1,670		4		16,869
Total loans	$	784,088	$	3,059,181	$	2,358,098	$	1,143,931	$	7,345,298	$	995,197	$	3,067,411	$	2,298,570	$	1,207,874	$	7,569,052


	December 31, 2022										December 31, 2023
	Due within		Due after 1 but		Due after 5 but		Due after				Due within		Due after 1 but		Due after 5 but		Due after
	1 year		within 5 years		within 15 years		15 Years		Total		1 year		within 5 years		within 15 years		15 Years		Total
Commercial:
Commercial and industrial	$	234,028	$	1,421,752	$	353,909	$	15,146	$	2,024,835	$	282,560	$	1,377,991	$	295,659	$	10,699	$	1,966,909
Municipal and non-profit		1,184		134,012		513,872		310,558		959,626		36,505		158,561		561,112		327,578		1,083,756
Owner occupied commercial real estate		61,598		261,305		478,104		112,333		913,340		86,299		413,032		518,950		105,492		1,123,773
Food and agribusiness		83,254		203,910		46,624		20,191		353,979		121,595		93,227		94,591		15,184		324,597
Total commercial		380,064		2,020,979		1,392,509		458,228		4,251,780		526,959		2,042,811		1,470,312		458,953		4,499,035
Commercial real estate non-owner occupied		234,962		863,842		579,843		17,403		1,696,050		395,426		921,056		527,645		12,623		1,856,750
Residential real estate		72,035		169,024		372,638		637,584		1,251,281		58,323		188,452		350,519		726,493		1,323,787
Consumer		6,142		12,494		2,721		1		21,358		6,459		10,871		1,851		5		19,186
Total loans	$	693,203	$	3,066,339	$	2,347,711	$	1,113,216	$	7,220,469	$	987,167	$	3,163,190	$	2,350,327	$	1,198,074	$	7,698,758

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The stated interest rate (which excludes the effects of non-refundable loan origination and commitment fees, net of costs and the accretion of fair value marks) of total loans with maturities over one year is as follows at the dates indicated:


	March 31, 2023									March 31, 2024
	Fixed			Variable			Total			Fixed			Variable			Total
			Weighted			Weighted			Weighted			Weighted			Weighted			Weighted
	Balance		average rate	Balance		average rate	Balance		average rate	Balance		average rate	Balance		average rate	Balance		average rate
Commercial
Commercial and industrial	$	724,656	4.86%	$	1,001,410	7.50%	$	1,726,066	6.40%	$	619,777	5.47%	$	977,302	8.32%	$	1,597,079	7.22%
Municipal and non-profit⁽¹⁾		958,862	3.50%		22,328	5.04%		981,190	3.62%		1,055,149	3.87%		20,868	5.45%		1,076,017	4.01%
Owner occupied commercial real estate		413,127	4.56%		449,273	6.12%		862,400	5.44%		387,178	4.69%		636,828	7.24%		1,024,006	6.39%
Food and agribusiness		49,349	5.49%		198,918	7.47%		248,267	7.07%		31,295	5.75%		153,177	8.05%		184,472	7.66%
Total commercial		2,145,994	4.24%		1,671,929	7.10%		3,817,923	5.52%		2,093,399	4.58%		1,788,175	7.88%		3,881,574	6.15%
Commercial real estate non-owner occupied		571,429	4.37%		980,998	6.31%		1,552,427	5.59%		498,716	4.54%		946,469	6.59%		1,445,185	5.88%
Residential real estate		508,054	3.87%		689,895	4.98%		1,197,949	4.51%		548,096	4.22%		716,363	5.34%		1,264,459	4.85%
Consumer		11,483	5.20%		3,792	7.67%		15,275	5.82%		8,246	5.98%		3,533	8.26%		11,779	6.67%
Total loans with > 1 year maturity	$	3,236,960	4.21%	$	3,346,614	6.43%	$	6,583,574	5.36%	$	3,148,457	4.51%	$	3,454,540	7.00%	$	6,602,997	5.84%


	December 31, 2022									December 31, 2023
	Fixed			Variable			Total			Fixed			Variable			Total
			Weighted			Weighted			Weighted			Weighted			Weighted			Weighted
	Balance		average rate	Balance		average rate	Balance		average rate	Balance		average rate	Balance		average rate	Balance		average rate
Commercial
Commercial and industrial	$	726,568	4.62%	$	1,064,239	7.00%	$	1,790,807	6.04%	$	644,128	5.37%	$	1,040,219	8.30%	$	1,684,347	7.18%
Municipal and non-profit⁽¹⁾		965,635	3.50%		22,483	4.77%		988,118	3.63%		1,048,816	3.81%		21,029	5.46%		1,069,845	3.93%
Owner occupied commercial real estate		417,675	4.51%		434,066	6.00%		851,741	5.33%		401,464	4.67%		636,010	7.12%		1,037,474	6.27%
Food and agribusiness		49,961	5.26%		220,764	7.19%		270,725	6.83%		33,539	5.73%		169,464	8.07%		203,003	7.68%
Total commercial		2,159,839	4.14%		1,741,552	6.75%		3,901,391	5.35%		2,127,947	4.52%		1,866,722	7.84%		3,994,669	6.11%
Commercial real estate non-owner occupied		569,788	4.28%		891,299	5.88%		1,461,087	5.25%		533,105	4.54%		928,219	6.55%		1,461,324	5.82%
Residential real estate		500,170	3.75%		679,075	4.88%		1,179,245	4.40%		550,974	4.16%		714,490	5.29%		1,265,464	4.80%
Consumer		11,480	4.98%		3,736	7.21%		15,216	5.52%		8,931	5.88%		3,796	8.32%		12,727	6.60%
Total loans with > 1 year maturity	$	3,241,277	4.11%	$	3,315,662	6.13%	$	6,556,939	5.15%	$	3,220,957	4.47%	$	3,513,227	6.98%	$	6,734,184	5.80%


(1)		Included in municipal and non-profit fixed rate loans are loans totaling ~~$341,182~~$352,509 and ~~$340,081~~$351,015 that have been swapped to variable rates at current market pricing at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. Included in the municipal and non-profit segment are tax exempt loans totaling ~~$781,138~~$846,930 and ~~$772,908~~$868,842 with an FTE weighted average rate of ~~4.19%~~4.54% and ~~4.08%~~4.31% at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively.

Asset quality

Asset quality is fundamental to our success and remains a strong point, driven by our disciplined adherence to our self-imposed concentration limits across industry sector and real estate property type. Accordingly, for the origination of loans, we have established a credit policy that allows for responsive, yet controlled lending with credit approval requirements that are scaled to loan size. Within the scope of the credit policy, each prospective loan is reviewed in order to determine the appropriateness and the adequacy of the loan characteristics and the security or collateral prior to making a loan. We have established underwriting standards and loan origination procedures that require appropriate documentation, including financial data and credit reports. For loans secured by real property, we require property appraisals, title insurance or a title opinion, hazard insurance and flood insurance, in each case where appropriate.

Additionally, we have implemented procedures to timely identify loans that may become problematic in order to ensure the most beneficial resolution for the Company. Asset quality is monitored by our credit risk management department and evaluated based on quantitative and subjective factors such as the timeliness of contractual payments received. Additional factors that are considered, particularly with commercial loans over $500,000, include the financial condition and liquidity of individual borrowers and guarantors, if any, and the value of our collateral. To facilitate the oversight of asset quality, loans are categorized based on the number of days past due and on an internal risk rating system, and both are discussed in more detail below.

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The Company’s policy is to review each prospective credit to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, ~~we may seek~~the Company seeks recovery in compliance with ~~state~~ lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include modifying a loan ~~from its original terms, for economic or legal reasons,~~ to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Such ~~restructured~~modified loans are considered ~~TDMs.~~troubled debt modifications (“TDM”). TDMs may include principal forgiveness, interest rate reductions, other-than-insignificant-payment delays, term extensions or any combination thereof. Assets that have been foreclosed on or acquired through deed-in-lieu of foreclosure are classified as OREO until sold, and are carried at the fair value of the collateral less estimated costs to sell, with any initial valuation adjustments charged to the ACL and any subsequent declines in carrying value charged to impairments on OREO.

Non-performing assets and past due loans

Non-performing assets consist of non-accrual loans and OREO. Interest income that would have been recorded had non-accrual loans performed in accordance with their original contract terms during the three months ended March 31, 2024 and 2023 ~~and 2022~~ was ~~$0.1~~$0.6 million and $0.1 million, respectively.

Past due status is monitored as an indicator of credit deterioration. Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Loans that are 90 days or more past due are put on non-accrual status unless the loan is well secured and in the process of collection.

The following table sets forth the non-performing assets and past due loans as of the dates presented:


	March 31, 2023		December 31, 2022		March 31, 2024		December 31, 2023
Non-accrual loans:
Non-accrual loans, excluding modified loans	$	9,430	$	14,034	$	15,740	$	14,756
Modified loans on non-accrual⁽¹⁾		116		2,478		20,077		13,472
Non-performing loans		9,546		16,512		35,817		28,228
OREO		3,458		3,731		4,064		4,088
Total non-performing assets	$	13,004	$	20,243	$	39,881	$	32,316

Loans 30-89 days past due and still accruing interest	$	2,308	$	2,986	$	3,495	$	12,232
Loans 90 days or more past due and still accruing interest		185		95		1		591
Non-accrual loans		9,546		16,512		35,817		28,228
Total past due and non-accrual loans	$	12,039	$	19,593	$	39,313	$	41,051
Accruing modified loans⁽¹⁾	$	4,154	$	4,654	$	10,819	$	15,148
Allowance for credit losses		90,343		89,553		97,607		97,947
Non-performing loans to total loans		0.13%		0.23%		0.47%		0.37%
Total 90 days past due and still accruing interest and non-accrual loans to total loans		0.13%		0.23%		0.47%		0.37%
Total non-performing assets to total loans and OREO		0.18%		0.28%		0.53%		0.42%
ACL to non-performing loans		946.40%		542.35%		272.52%		346.99%


~~(1)~~		~~Reflects troubled debt loan modifications as defined under ASU 2022-02,~~ ~~Financial Instruments—Credit Losses~~ ~~(Topic 326):~~ ~~Troubled Debt Restructurings and Vintage Disclosures~~ ~~adopted in the first quarter of 2023. The prior period includes troubled debt restructured loans consistent with historical disclosures.~~

During the first quarter of ~~2023,~~2024, total non-performing loans ~~decreased $7.0~~increased $7.6 million ~~or 42.2%,~~ from December 31, ~~2022.~~2023. Loans 30-89 days past due and still accruing interest were ~~0.03%~~0.05% and ~~0.04%~~0.16% of total loans at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. Loans 90 days or more past due and still accruing interest were ~~0.00%~~zero percent and 0.01% at ~~both~~ March 31, ~~2023~~2024 and December 31, ~~2022.~~2023, respectively.

Allowance for credit losses

The ACL represents the amount that we believe is necessary to absorb estimated lifetime credit losses inherent in the loan portfolio at the balance sheet date and involves a high degree of judgment and complexity. The Company utilizes a DCF model developed within a third-party software tool to establish expected lifetime credit losses for the loan portfolio. The ACL is calculated as the difference between the amortized cost basis and the projections from the DCF analysis. The DCF model allows for individual life of loan cash flow modeling, excluding extensions and renewals, using loan-specific interest rates and repayment schedules including estimated prepayment rates and loss recovery timing delays. The model incorporates forecasts of certain national macro-economic factors, including unemployment rates, home price index (“HPI”), retail sales and gross domestic product (“GDP”), which drive correlated

~~Table of Contents~~

loss rates. The determination and application of the ACL accounting policy involves judgments, estimates and uncertainties that are

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subject to change. For periods beyond the reasonable and supportable forecast period, we revert to historical long-term average loss rates on a straight-line basis.

We measure expected credit losses for loans on a pooled basis when similar risk characteristics exist. We have identified four primary loan segments within the ACL model that are further stratified into 11 loan classes to provide more granularity in analyzing loss history and to allow for more definitive qualitative adjustments based upon specific risk factors affecting each loan class. Generally, the underlying risk of loss for each of these loan segments will follow certain norms/trends in various economic environments. Loans that do not share risk characteristics are evaluated on an individual basis and are not included in the collective evaluation. Following are the loan classes within each of the four primary loan segments:


	Non-owner occupied
Commercial	commercial real estate	Residential real estate	Consumer
Commercial and industrial	Construction	Senior lien	Consumer
Owner occupied commercial real estate	Acquisition and development	Junior lien
Food and agribusiness	Multifamily
Municipal and non-profit	Non-owner occupied

Loans on non-accrual, in bankruptcy and TDMs with a balance greater than $250,000 are excluded from the pooled analysis and are evaluated individually. If management determines that foreclosure is probable, expected credit losses are evaluated based on the criteria listed below, adjusted for selling costs as appropriate. Typically, these loans consist of commercial, commercial real estate and agriculture loans and exclude homogeneous loans such as residential real estate and consumer loans. Specific allowances are determined by collectively analyzing:


●		the borrower’s resources, ability and willingness to repay in accordance with the terms of the loan agreement;
●		the likelihood of receiving financial support from any guarantors;
●		the adequacy and present value of future cash flows, less disposal costs, of any collateral; and
●		the impact current economic conditions may have on the borrower’s financial condition and liquidity or the value of the collateral.

The collective resulting ACL for loans is calculated as the sum of the general reserves, specific reserves on individually evaluated loans, and qualitative factor adjustments. While these amounts are calculated by individual loan or on a pool basis by segment and class, the entire ACL is available for any loan that, in our judgment, should be charged-off. The determination and application of the ACL accounting policy involves judgments, estimates, and uncertainties that are subject to change. Changes in these assumptions, estimates or the conditions surrounding them may have a material impact on our financial condition, liquidity or results of operations.

Net charge-offs on loans during the three months ended March 31, 2024 totaled $0.1 million, and the ratio of annualized net charge-offs to average total loans totaled 0.00%. During the first quarter of 2024, the Company recorded a decrease in the allowance for credit losses of $0.3 million. Specific reserves on loans totaled $9.8 million at March 31, 2024.

Net charge-offs on loans during the three months ended March 31, 2023 totaled $0.3 million, and the ratio of annualized net charge-offs to average total loans totaled 0.01%. During the first quarter of 2023, the Company recorded an increase in the allowance for credit losses of $1.0 million driven by loan growth. Specific reserves on loans totaled $4.4 million at March 31, 2023.

Net charge-offs on loans during the three months ended March 31, 2022 totaled $0.6 million, and the ratio of annualized net charge-offs to average total loans totaled 0.05%. During the first quarter of 2022, the Company recorded a decrease in the allowance for credit losses of $0.3 million driven by strong asset quality. Specific reserves on loans totaled $1.5 million at March 31, 2023.

The Company has elected to exclude AIR from the ACL calculation. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, AIR from loans totaled ~~$36.1~~$45.9 million and ~~$31.8~~$42.4 million, respectively. When a loan is placed on non-accrual, any recorded AIR is reversed against interest income.

Total ACL

After considering the above mentioned factors, we believe that the ACL of ~~$90.3~~$97.6 million is adequate to cover estimated lifetime losses inherent in the loan portfolio at March 31, ~~2023.~~2024. However, it is likely that future adjustments to the ACL will be necessary. Any changes to the underlying assumptions, circumstances or estimates, including but not limited to changes in the underlying macro-economic forecast, used in determining the ACL, could negatively or positively affect the Company's results of operations, liquidity or financial condition.

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The following schedule presents, by class stratification, the changes in the ACL during the periods listed:


	As of and for the three months ended						As of and for the three months ended
	March 31, 2023			March 31, 2022			March 31, 2024			March 31, 2023
	Total loans		% NCOs⁽¹⁾	Total loans		% NCOs⁽¹⁾	Total loans		% NCOs⁽¹⁾	Total loans		% NCOs⁽¹⁾
Beginning balance	$	89,553		$	49,694		$	97,947		$	89,553
Charge-offs:
Commercial		—	0.00%		(463)	0.04%		(24)	0.00%		—	0.00%
Commercial real estate non-owner occupied		—	0.00%		—	0.00%		—	0.00%		—	0.00%
Residential real estate		—	0.00%		(2)	0.00%		—	0.00%		—	0.00%
Consumer		(325)	0.02%		(169)	0.01%		(254)	0.01%		(325)	0.02%
Total charge-offs		(325)			(634)			(278)			(325)
Recoveries		65			75			188			65
Net charge-offs		(260)	0.01%		(559)	0.05%		(90)	0.00%		(260)	0.01%
Provision expense (release) for credit losses		1,050			(325)
Provision (release) expense for credit losses								(250)			1,050
Ending allowance for credit losses	$	90,343		$	48,810		$	97,607		$	90,343
Ratio of ACL to total loans outstanding at period end		1.23%			1.04%			1.29%			1.23%
Ratio of ACL to total non-performing loans at period end		946.40%			440.01%			272.52%			946.40%
Total loans	$	7,345,298		$	4,674,238		$	7,569,052		$	7,345,298
Average total loans outstanding during the period		7,257,639			4,520,205			7,632,635			7,257,639
Non-performing loans		9,546			11,093			35,817			9,546


(1)		Ratio of annualized net charge-offs to average total loans.

The following tables present the allocation of the ACL and the percentage of the total amount of loans in each loan category listed as of the dates presented:


	March 31, 2023						March 31, 2024
						ACL as a %						ACL as a %
	Total loans		% of total loans	Related ACL		of total ACL	Total loans		% of total loans	Related ACL		of total ACL
Commercial	$	4,228,950	57.6%	$	37,395	41.4%	$	4,381,780	57.9%	$	46,315	47.4%
Commercial real estate non-owner occupied		1,824,524	24.8%		32,890	36.4%		1,860,199	24.6%		30,838	31.6%
Residential real estate		1,271,798	17.3%		19,574	21.7%		1,310,204	17.3%		20,100	20.6%
Consumer		20,026	0.3%		484	0.5%		16,869	0.2%		354	0.4%
Total	$	7,345,298	100.0%	$	90,343	100.0%	$	7,569,052	100.0%	$	97,607	100.0%


	December 31, 2022						December 31, 2023
						ACL as a %						ACL as a %
	Total loans		% of total loans	Related ACL		of total ACL	Total loans		% of total loans	Related ACL		of total ACL
Commercial	$	4,251,780	58.9%	$	37,608	42.0%	$	4,499,035	58.4%	$	45,304	46.3%
Commercial real estate non-owner occupied		1,696,050	23.5%		32,050	35.8%		1,856,750	24.1%		32,665	33.3%
Residential real estate		1,251,281	17.3%		19,306	21.5%		1,323,787	17.2%		19,550	20.0%
Consumer		21,358	0.3%		589	0.7%		19,186	0.3%		428	0.4%
Total	$	7,220,469	100.0%	$	89,553	100.0%	$	7,698,758	100.0%	$	97,947	100.0%

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Deposits

Deposits from banking clients serve as a primary funding source for our banking operations, and our ability to gather and manage deposit levels is critical to our success. Deposits not only provide a lower-cost funding source for our loans, but also provide a foundation for the client relationships that are critical to future loan growth. We maintain a granular and well diversified deposit base with no exposure to venture capital or crypto deposits. The following table presents information regarding our deposit composition at March 31, ~~2023~~2024 and December 31, ~~2022:~~2023:


							Increase (decrease)									Increase (decrease)
	March 31, 2023			December 31, 2022			Amount		% Change	March 31, 2024			December 31, 2023			Amount		% Change
Non-interest bearing demand deposits	$	2,920,891	38.5%	$	3,134,716	39.9%	$	(213,825)	6.8%	$	2,292,917	26.9%	$	2,361,367	28.8%	$	(68,450)	(2.9)%
Interest bearing demand deposits		1,098,172	14.5%		913,852	11.6%		184,320	20.2%		1,427,856	16.8%		1,480,042	18.1%		(52,186)	(3.5)%
Savings accounts		795,150	10.5%		885,488	11.2%		(90,338)	10.2%		652,560	7.6%		661,244	8.1%		(8,684)	(1.3)%
Money market accounts		1,788,978	23.6%		2,065,170	26.2%		(276,192)	13.4%		3,148,453	37.0%		2,705,768	33.0%		442,685	16.4%
Total transaction deposits		6,603,191	87.1%		6,999,226	88.9%		(396,035)	5.7%		7,521,786	88.3%		7,208,421	88.0%		313,365	4.3%
Time deposits < $250,000		712,510	9.4%		670,197	8.5%		42,313	(6.3)%		709,695	8.3%		692,696	8.5%		16,999	2.5%
Time deposits > $250,000		265,979	3.5%		203,203	2.6%		62,776	30.9%		286,281	3.4%		289,274	3.5%		(2,993)	(1.0)%
Total time deposits		978,489	12.9%		873,400	11.1%		105,089	12.0%		995,976	11.7%		981,970	12.0%		14,006	1.4%
Total deposits	$	7,581,680	100.0%	$	7,872,626	100.0%	$	(290,946)	3.7%	$	8,517,762	100.0%	$	8,190,391	100.0%	$	327,371	4.0%

The following table shows uninsured time deposits by scheduled maturity as of March 31, ~~2023:~~2024:


	March 31, 2023		March 31, 2024
Three months or less	$	19,683	$	56,465
Over 3 months through 6 months		6,117		34,052
Over 6 months through 12 months		70,730		73,727
Thereafter		72,045		60,643
Total uninsured time deposits	$	168,575	$	224,887

At March 31, ~~2023~~2024 and December 31 ~~2022,~~2023, time deposits that were scheduled to mature within 12 months totaled ~~$575.5~~$746.1 million and ~~$469.8~~$689.0 million, respectively. Of the time deposits scheduled to mature within 12 months at March 31, ~~2023, $161.1~~2024, $222.2 million were in denominations of $250,000 or more, and ~~$414.4~~$523.9 million were in denominations less than $250,000. Approximately ~~70%~~79% of our total deposits were FDIC insured at March 31, ~~2023 and December 31, 2022.~~2024. Additionally, the Company participates in the IntraFi Cash Service program, which allows depositors to receive reciprocal FDIC insurance coverage. The Company had ~~$450.4~~$930.9 million and ~~$192.2~~$944.3 million of deposits in the program as of March 31, ~~2023~~2024 and ~~2022,~~December 31, 2023, respectively.

Long-term debt

The Company holds a subordinated note purchase agreement to issue and sell a fixed-to-floating rate note totaling $40.0 million. The balance on the note at March 31, 2024 and December 31, 2023, net of long-term debt issuance costs totaling ~~$0.4~~$0.3 million, totaled ~~$39.6~~$39.7 million. Interest expense totaling $0.3 million and $0.3 million was recorded in the consolidated statements of operations during the ~~year~~three months ended March 31, ~~2023.~~2024 and 2023, respectively.

The note is subordinated, unsecured and matures on November 15, 2031. Payments consist of interest only. Interest expense on the note is payable semi-annually in arrears and will bear interest at 3.00% per annum until November 15, 2026 (or any earlier redemption date). From November 15, 2026 until November 15, 2031 (or any earlier redemption date) payments will be made quarterly in arrears, and the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month term SOFR plus 203 basis points. The Company deployed the net proceeds from the sale of the note for general corporate purposes. Prior to November 5, 2026, the Company may redeem the note only under certain limited circumstances. Beginning on November 5, 2026 through maturity, the note may be redeemed, at the Company’s option, on any scheduled interest payment date. Any redemption by the Company would be at a redemption price equal to 100% of the principal amount of the note being redeemed, together with any accrued and unpaid interest on the note being redeemed up to but excluding the date of redemption. The note is not subject to redemption at the option of the holder.

As part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rates totaling $15.0 million. The balance on the notes at March 31, ~~2023,~~2024, net of a fair value adjustment

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related to the acquisition totaling ~~$0.6~~$0.4 million, totaled ~~$14.4~~$14.6 million. At December 31, 2023, the balance on the notes, net of the fair value adjustment from the acquisition totaling $0.5 million, totaled $14.5 million. Interest expense related to the notes totaling $0.1 million and $0.1 million was recorded in the consolidated statements of operations during the ~~year~~three months ended March 31, ~~2023.~~2024 and 2023, respectively.

Other borrowings

As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, the Company sold securities under agreements to repurchase totaling ~~$21.5~~$19.6 million ~~and $20.2 million, respectively.~~for both periods. In addition, as a member of the FHLB, the Company has access to a line of credit and term financing from the FHLB with total available credit of ~~$1.6~~$1.8 billion at March 31, ~~2023.~~2024. The Company may utilize the FHLB line of credit as a funding mechanism for originated loans and loans held for sale. AtThe Banks had no outstanding borrowings with the FHLB at March 31, ~~2023 and~~2024. At December 31, ~~2022,~~2023, the Company had ~~$1.0 billion and $385.0~~$340.0 million ~~respectively,~~ of outstanding borrowings with the FHLB. The Company may pledge investment securities and loans as collateral for FHLB advances. There were no investment securities pledged at March 31, ~~2023~~2024 or December 31, ~~2022.~~2023. Loans pledged were $2.5 billion and ~~$2.0~~$2.6 billion at March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, respectively. The Company incurred $3.2 million and $7.1 million of interest expense related to FHLB advances or other short-term borrowings for the three months ended March 31, ~~2023. The Company incurred no interest expense related to FHLB advances or other short-term borrowings for the three months ended March 31, 2022.~~2024 and 2023, respectively.

Regulatory Capital

Our subsidiary banks and the holding company are subject to the regulatory capital adequacy requirements of the Federal Reserve Board and the FDIC, as applicable. Failure to meet the minimum capital requirements can initiate certain mandatory and possibly further discretionary actions by regulators that could have a material adverse effect on us. At March 31, 2024 and December 31, 2023, our subsidiary banks and the consolidated holding company exceeded all capital ratio requirements under prompt corrective action and other regulatory requirements, as further detailed in note 10 of our consolidated financial statements.

Results of Operations

Our net income depends largely on net interest income, which is the difference between interest income from interest earning assets and interest expense on interest bearing liabilities. Our results of operations are also affected by provisions for credit losses and non-interest income, such as service charges, bank card income, swap fee income, and gain on sale of mortgages. Our primary operating expenses, aside from interest expense, consist of salaries and benefits, occupancy costs, telecommunications data processing expense, FDIC deposit insurance and intangible ~~asset~~assets amortization. Any expenses related to the resolution of problem assets are also included in non-interest expense.

Overview of results of operations

Net income totaled $31.4 million, or $0.82 per diluted share, during the three months ended March 31, 2024, compared to $40.3 million, or $1.06 per diluted share, during the three months ended March 31, ~~2023, increasing $21.9 million compared to the three months ended March 31, 2022.~~2023. The ~~increase~~decrease in net income was largely driven by lower net interest income due to an increase in cost of funds outpacing the ~~growth~~increase in ~~our business driven by organic loan growth, the 2022 acquisitions and multiple increases in the Federal Funds Rate over the last twelve months.~~interest income. The return on average tangible assets was ~~1.80%~~1.39% and ~~1.07%~~1.80% during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively, and the return on average tangible common equity was ~~20.86%~~15.14% and ~~10.31%~~20.86%, respectively.

Table of Contents

Net interest income

We regularly review net interest income metrics to provide us with indicators of how the various components of net interest income are performing. We regularly review: (i) our loan mix and the yield on loans; (ii) the investment portfolio and the related yields; (iii) our deposit mix and the cost of deposits; and (iv) net interest income simulations for various forecast periods.

~~Table of Contents~~

~~The table below presents the components of net interest income on a FTE basis for the three months ended March 31, 2023 and 2022.~~ The effects of trade-date accounting of investment securities for which the cash had not settled are not considered interest earning assets and are excluded from this presentation for time frames prior to their cash settlement, as are the market value adjustments on the investment securities available-for-sale and loans.

For the three months ended

For the three months ended

March 31, 2023

March 31, 2022

Average
balance

Interest

Average
rate

Average
balance

Interest

Average
rate
Interest earning assets:

Originated loans FTE^(1)(2)(3)

$
5,514,704

$
79,167

5.82%

$
4,361,919

$
42,085

3.91%
Acquired loans

1,771,224

27,023

6.19%

147,638

2,568

7.05%
Loans held for sale

21,753

346

6.45%

93,639

756

3.27%
Investment securities available-for-sale

810,257

3,989

1.97%

751,646

2,849

1.52%
Investment securities held-to-maturity

646,646

2,871

1.78%

589,830

2,012

1.36%
Other securities

51,366

898

6.99%

14,590

209

5.73%
Interest earning deposits

86,790

653

3.05%

743,239

359

0.20%
Total interest earning assets FTE⁽²⁾

$
8,902,740

$
114,947

5.24%

$
6,702,501

$
50,838

3.08%
Cash and due from banks

$
118,607

$
79,383

Other assets

687,940

442,098

Allowance for credit losses

(89,831)

(49,584)

Total assets

$
9,619,456

$
7,174,398

Interest bearing liabilities:

Interest bearing demand, savings and money market deposits

$
3,766,203

$
7,759

0.84%

$
2,936,158

$
1,437

0.20%
Time deposits

922,521

3,290

1.45%

821,814

1,094

0.54%
Securities sold under agreements to repurchase

20,045

6

0.12%

22,770

7

0.12%
Long-term debt, net

53,918

518

3.90%

39,489

326

3.35%
Federal Home Loan Bank advances

597,833

7,071

4.80%

—

—

0.00%
Total interest bearing liabilities

$
5,360,520

$
18,644

1.41%

$
3,820,231

$
2,864

0.30%
Demand deposits

$
3,004,643

$
2,434,198

Other liabilities

135,175

78,027

Total liabilities

8,500,338

6,332,456

Shareholders' equity

1,119,118

841,942

Total liabilities and shareholders' equity

$
9,619,456

$
7,174,398

Net interest income FTE⁽²⁾

$
96,303

$
47,974

Interest rate spread FTE⁽²⁾

3.83%

2.78%
Net interest earning assets

$
3,542,220

$
2,882,270

Net interest margin FTE⁽²⁾

4.39%

2.90%
Average transaction deposits

$
6,770,846

$
5,370,356

Average total deposits

7,693,367

6,192,170

Ratio of average interest earning assets to average interest bearing liabilities

166.08%

175.45%

The table below presents the components of net interest income on a FTE basis for the three months ended March 31, 2024 and 2023.


	For the three months ended					For the three months ended
	March 31, 2024					March 31, 2023
	Average balance		Interest		Average rate	Average balance		Interest		Average rate
Interest earning assets:
Originated loans FTE^(1)(2)(3)	$	6,046,849	$	100,914	6.71%	$	5,514,704	$	79,167	5.82%
Acquired loans		1,611,521		24,289	6.06%		1,771,224		27,023	6.19%
Loans held for sale		12,017		225	7.53%		21,753		346	6.45%
Investment securities available-for-sale		751,168		4,103	2.18%		810,257		3,989	1.97%
Investment securities held-to-maturity		579,160		2,514	1.74%		646,646		2,871	1.78%
Other securities		35,036		616	7.03%		51,366		898	6.99%
Interest earning deposits		91,579		763	3.35%		86,790		653	3.05%
Total interest earning assets FTE⁽²⁾	$	9,127,330	$	133,424	5.88%	$	8,902,740	$	114,947	5.24%
Cash and due from banks	$	102,583				$	118,607
Other assets		756,230					687,940
Allowance for credit losses		(97,882)					(89,831)
Total assets	$	9,888,261				$	9,619,456
Interest bearing liabilities:
Interest bearing demand, savings and money market deposits	$	4,947,811	$	36,413	2.96%	$	3,766,203	$	7,759	0.84%
Time deposits		990,041		7,584	3.08%		922,521		3,290	1.45%
Securities sold under agreements to repurchase		18,929		6	0.13%		20,045		6	0.12%
Long-term debt, net		54,229		518	3.84%		53,918		518	3.90%
Federal Home Loan Bank advances		228,236		3,181	5.61%		597,833		7,071	4.80%
Total interest bearing liabilities	$	6,239,246	$	47,702	3.07%	$	5,360,520	$	18,644	1.41%
Demand deposits	$	2,280,997				$	3,004,643
Other liabilities		141,735					135,175
Total liabilities		8,661,978					8,500,338
Shareholders' equity		1,226,283					1,119,118
Total liabilities and shareholders' equity	$	9,888,261				$	9,619,456
Net interest income FTE⁽²⁾			$	85,722				$	96,303
Interest rate spread FTE⁽²⁾					2.81%					3.83%
Net interest earning assets	$	2,888,084				$	3,542,220
Net interest margin FTE⁽²⁾					3.78%					4.39%
Average transaction deposits	$	7,228,808				$	6,770,846
Average total deposits		8,218,849					7,693,367
Ratio of average interest earning assets to average interest bearing liabilities		146.29%					166.08%


(1)		Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
(2)		Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are ~~$1,414~~$1,692 and ~~$1,313~~$1,414 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.
(3)		Loan fees included in interest income totaled ~~$2,899~~$2,951 and ~~$2,364~~$2,899 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

Table of Contents

Net interest income totaled ~~$94.9~~$84.0 million and ~~$46.7~~$94.9 million during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Net interest income on an FTE basis totaled $85.7 million and $96.3 million during the three months ended March 31, 2024 and 2023, ~~an increase of $48.3 million, or 100.7%, compared to three months ended March 31, 2022.~~respectively. The yield on earning assets increased ~~216~~63 basis points, driven by an increase in earning assets and increases in the Federal Reserve’s interest rates. During the three months ended March 31, ~~2023,~~2024, the cost of funds totaled ~~0.90%~~2.25%, compared to ~~0.19%~~0.90%, for the same period during ~~2022.~~2023.

~~Table of Contents~~

Average loans comprised ~~$7.3~~$7.7 billion, or ~~81.8%~~83.9%, of total average interest earning assets during the three months ended March 31, ~~2023,~~2024, compared to ~~$4.5~~$7.3 billion, or ~~67.3%~~81.8%, during the three months ended March 31, ~~2022.~~2023. The increase in average loan balances was driven by organic loan ~~originations and loans acquired through the Rock Canyon Bank and Bank of Jackson Hole acquisitions in 2022.~~originations.

Average investment securities comprised ~~16.4%~~14.6% and ~~20.0%~~16.4% of total interest earning assets during the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively. Average interest bearing cash balances totaled ~~$86.8~~$91.6 million during the three months ended March 31, ~~2023,~~2024, compared to ~~$743.2~~$86.8 million for the same period in the prior ~~year as the excess cash liquidity has been deployed into higher-yielding earning assets.~~year.

Average interest bearing liabilities increased ~~$1.5~~$0.9 billion during the three months ended March 31, ~~2023,~~2024, compared to the three months ended March 31, ~~2022.~~2023. The increase was driven by increases in interest bearing demand, savings and money market deposits totaling ~~$830.0 million, which included deposits from our 2022 acquisitions, Federal Home Loan Bank advances totaling $597.8 million,~~$1.2 billion, and time deposits of ~~$100.7 million, and long-term debt totaling $14.4~~$67.5 million. The increase was partially offset by a decrease in FHLB advances of $369.6 million.

The following table summarizes the changes in net interest income on an FTE basis by major category of interest earning assets and interest bearing liabilities, identifying changes related to volume and changes related to rates for the three months ended March 31, ~~2023,~~2024, compared to the three months ended March 31, ~~2022:~~2023:


	Three months ended March 31, 2023						Three months ended March 31, 2024
	compared to						compared to
	Three months ended March 31, 2022						Three months ended March 31, 2023
	Increase (decrease) due to						Increase (decrease) due to
	Volume		Rate		Net		Volume		Rate		Net
Interest income:
Originated loans FTE^(1)(2)(3)	$	16,549	$	20,533	$	37,082	$	8,881	$	12,866	$	21,747
Acquired loans		24,771		(316)		24,455		(2,407)		(327)		(2,734)
Loans held for sale		(1,143)		733		(410)		(182)		61		(121)
Investment securities available-for-sale		289		851		1,140		(323)		437		114
Investment securities held-to-maturity		252		607		859		(293)		(64)		(357)
Other securities		643		46		689		(287)		5		(282)
Interest earning deposits		(4,939)		5,233		294		40		70		110
Total interest income	$	36,422	$	27,687	$	64,109	$	5,429	$	13,048	$	18,477
Interest expense:
Interest bearing demand, savings and money market deposits	$	1,710	$	4,612	$	6,322	$	8,696	$	19,958	$	28,654
Time deposits		359		1,837		2,196		517		3,777		4,294
Securities sold under agreements to repurchase		(1)		—		(1)
Long-term debt, net		139		53		192		3		(3)		—
Federal Home Loan Bank advances		7,071		—		7,071		(5,151)		1,261		(3,890)
Total interest expense		9,278		6,502		15,780		4,065		24,993		29,058
Net change in net interest income	$	27,144	$	21,185	$	48,329	$	1,364	$	(11,945)	$	(10,581)


(1)		Originated loans are net of deferred loan fees, less costs, which are included in interest income over the life of the loan.
(2)		Presented on an FTE basis using the statutory tax rate of 21% for all periods presented. The taxable equivalent adjustments included above are ~~$1,414~~$1,692 and ~~$1,313~~$1,414 for three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.
(3)		Loan fees included in interest income totaled ~~$2,899~~$2,951 and ~~$2,364~~$2,899 for the three months ended March 31, ~~2023~~2024 and ~~2022,~~2023, respectively.

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Below is a breakdown of average deposits and the average rates paid during the periods indicated:


	For the three months ended						For the three months ended
	March 31, 2023			March 31, 2022			March 31, 2024			March 31, 2023
			Average			Average			Average			Average
	Average		rate	Average		rate	Average		rate	Average		rate
	balance		paid	balance		paid	balance		paid	balance		paid
Non-interest bearing demand	$	3,004,643	0.00%	$	2,434,198	0.00%	$	2,280,997	0.00%	$	3,004,643	0.00%
Interest bearing demand		926,529	0.98%		577,586	0.17%		1,417,972	2.99%		926,529	0.98%
Money market accounts		1,993,541	0.97%		1,575,592	0.24%		2,873,648	3.42%		1,993,541	0.97%
Savings accounts		846,133	0.37%		782,980	0.14%		656,191	0.86%		846,133	0.37%
Time deposits		922,521	1.45%		821,814	0.54%		990,041	3.08%		922,521	1.45%
Total average deposits	$	7,693,367	0.58%	$	6,192,170	0.17%	$	8,218,849	2.15%	$	7,693,367	0.58%

Provision for credit losses

The provision for credit losses represents the amount of expense that is necessary to bring the ACL to a level that we deem appropriate to absorb estimated lifetime losses inherent in the loan portfolio as of the balance sheet date. The determination of the ACL, and the resultant provision for credit losses, is subjective and involves significant estimates and assumptions.

The Company recorded ano provision expense for credit loss ~~provision expense of $0.9 million~~ for the three months ended March 31, ~~2023, driven by loan growth.~~2024. During the three months ended March 31, ~~2022,~~2023, the Company recorded a provision ~~release~~expense for credit losses of ~~$0.3~~$0.9 million, driven by ~~strong asset quality.~~loan growth. The allowance for credit losses totaled ~~1.23%~~1.29% of total loans at March 31, ~~2023,~~2024, compared to the allowance for credit losses of ~~1.04%~~1.23% at March 31, ~~2022.~~2023.

Non-interest income

The table below details the components of non-interest income for the periods presented:


	For the three months ended March 31,				2023 vs 2022			For the three months ended March 31,				2024 vs 2023
					Increase (decrease)							Increase (decrease)
	2023		2022		Amount		% Change	2024		2023		Amount		% Change
Service charges	$	4,101	$	3,710	$	391	10.5%	$	4,391	$	4,101	$	290	7.1%
Bank card fees		4,637		4,123		514	12.5%		4,578		4,637		(59)	(1.3)%
Mortgage banking income		3,216		9,666		(6,450)	(66.7)%		2,655		3,216		(561)	(17.4)%
Bank-owned life insurance income		645		532		113	21.2%		733		645		88	13.6%
Other non-interest income		2,066		1,023		1,043	102.0%		5,337		2,066		3,271	158.3%
Total non-interest income	$	14,665	$	19,054	$	(4,389)	(23.0)%	$	17,694	$	14,665	$	3,029	20.7%

~~Non-interest~~During the three months ended March 31, 2024, non-interest income ~~decreased $4.4~~increased $3.0 million, or ~~23.0%~~20.7%, compared to the first quarter of ~~last year.~~2023. The ~~decrease~~increase was ~~primarily~~ driven by ~~$6.5 million lower mortgage banking income due to lower refinance activity and competition driving tighter gain on sale margins.~~our diversified sources of fee revenue. Other non-interest income increased $3.3 million and included ~~$0.5 million of~~increases in SBA loan income, trust income, ~~during~~Cambr income, fair value adjustments on company-owned life insurance, swap fee income and a $0.6 million gain from the ~~first quarter 2023.~~sale of a banking center building. Service charges and bank card fees increased a combined ~~$0.9 million compared to the first quarter of 2022.~~$0.2 million. Mortgage banking income decreased $0.6 million.

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Non-interest expense

The table below details the components of non-interest expense for the periods presented:


	For the three months ended March 31,				2023 vs 2022			For the three months ended March 31,				2024 vs 2023
					Increase (decrease)							Increase (decrease)
	2023		2022		Amount		% Change	2024		2023		Amount		% Change
Salaries and benefits	$	32,989	$	29,336	$	3,653	12.5%	$	36,520	$	32,989	$	3,531	10.7%
Occupancy and equipment		9,073		6,396		2,677	41.9%		9,941		9,073		868	9.6%
Data processing		3,752		2,381		1,371	57.6%		4,066		3,752		314	8.4%
Marketing and business development		870		673		197	29.3%		962		870		92	10.6%
FDIC deposit insurance		2,178		482		1,696	351.9%		1,345		2,178		(833)	(38.2)%
Bank card expenses		1,328		1,268		60	4.7%		1,349		1,328		21	1.6%
Professional fees		2,590		814		1,776	218.2%		1,646		2,590		(944)	(36.4)%
Other non-interest expense		4,149		2,436		1,713	70.3%		4,997		4,149		848	20.4%
Core deposit and wealth management intangible assets amortization		1,363		296		1,067	360.5%
Other intangible assets amortization									2,008		1,363		645	47.3%
Total non-interest expense	$	58,292	$	44,082	$	14,210	32.2%	$	62,834	$	58,292	$	4,542	7.8%

~~Non-interest~~During the three months ended March 31, 2024, non-interest expense increased ~~$14.2~~$4.5 million, or ~~32.2%~~7.8%, compared to the first quarter of ~~last year. The increase was largely driven~~2023. Salaries and benefits increased $3.5 million primarily due to payroll tax credits realized in the first quarter of 2023. Occupancy and equipment increased $0.9 million, and other intangible assets amortization increased $0.6 million due to intangible assets acquired through our Cambr acquisition in April of 2023. These increases were partially offset by ~~an increase~~a decrease of $0.9 million in ~~core operating expenses related to our 2022 acquisitions.~~professional fees and a $0.8 million reduction in FDIC deposit insurance ~~expense increased $1.7 million due to our 2022 acquisitions and an increase in the FDIC assessment rate effective January 2023.~~expense.

Income taxes

Income tax expense was $7.5 million for the three months ended March 31, 2024, compared to an income tax expense of $10.1 million for the three months ended March 31, 2023, compared to an income tax expense of $3.6 million for the three months ended March 31, 2022. Included in income tax expense was $0.1 million and $0.1 million of tax benefit from stock compensation activity during three months ended March 31, 2023 and March 31, 2022, respectively. Adjusting for the stock compensation activity, the2023. The effective tax rate for the three months ended March 31, ~~2023~~2024 was ~~20.3%~~19.3%, compared to ~~16.8%~~20.0% for the three months ended March 31, ~~2022.~~2023.

Additional information regarding income taxes can be found in note 2019 of our audited consolidated financial statements in our ~~2022~~2023 Annual Report on Form 10-K.

Liquidity and Capital Resources

Liquidity

Liquidity risk management is an important element in our asset/liability management. Liquidity is monitored and managed to ensure that sufficient funds are available to operate our business and pay our obligations to depositors and other creditors, while providing ample available funds for opportunistic and strategic investments. The Company’s corporate treasury team measures liquidity needs through daily cash monitoring, weekly cash projections and monthly liquidity measures reviewed in conjunction with Board-approved liquidity policy limits. We also regularly ~~model liquidity~~conduct Board-approved contingency funding plan stress ~~scenarios~~tests to assess potential liquidity outflows or funding problems resulting from economic disruptions, volatility in the financial markets, unexpected credit events or other significant occurrences deemed problematic by management. These scenarios are incorporated into our contingency funding plan, which provides the basis for the identification of our liquidity ~~needs.~~

~~Management believes that~~needs and are monitored monthly by our Asset and Liability Committee. As of March 31, 2024, the ~~Company's excess~~Banks had sufficient liquidity to cover all expected and unexpected uses of cash ~~borrowing capacity and access to sufficient sources of capital are adequate to meet its~~as modeled by various short-term and long-term liquidity ~~needs in the foreseeable future.~~ stress scenarios.

Our primary sources of funds include but are not limited to cash on hand, the investment securities portfolio, federal funds purchased, deposits, funds provided from operations, prepayments and maturities of ~~loans~~loans.

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On-balance sheet liquidity is represented by our cash and ~~investment securities, securities sold under agreements to repurchase, the sale of~~cash equivalents, and unencumbered investment securities, and ~~federal funds purchased. Additionally, we~~is detailed in the table below as of March 31, 2024 and December 31, 2023:


	March 31, 2024		December 31, 2023
Cash and due from banks	$	292,931	$	190,826
Unencumbered investment securities, at fair value		408,009		338,555
Total	$	700,940	$	529,381

Total on-balance sheet liquidity increased $171.6 million at March 31, 2024 compared to December 31, 2023, due to higher cash and due from banks of $102.1 million and higher unencumbered investment securities of $69.5 million.

We have access to various off-balance sheet third party funding sources including the ability to access immediate funding through FHLB advances, the Federal Reserve discount window, and the Federal Reserve’s new Bank Term Funding Program (“BTFP”). The BTFP is a newly established facility in response to recent liquidity concerns within the banking industry to help assure that banks have the ability to meet the needs of all their depositors. Under the program, eligible depository institutions can obtain loans of up to one year in length by pledging U.S. Treasuries, agency debt and mortgage-backed securities, and other qualifying assets as collateral.

~~The Company’s acquisition of~~ Cambr ~~Solutions, LLC in April 2023 adds a new funding source by providing on-demand access to bring~~ deposits ~~onto our balance sheet. The Company may also utilize~~and the brokered deposit marketplace, whereby deposits could be purchased in a wholesale market as an alternate source of funding. We anticipate having access to capital markets including the ability

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to issue debt or issue shares of our common stock or other equity or equity-related securities.

The Company had pledged $2.5 billion of loans as collateral to the FHLB at March 31, 2024 and $2.6 billion at December 31, 2023. FHLB borrowing availability, lines of credit and other short-term borrowing availability totaled $1.8 billion at March 31, 2024. At March 31, 2024, the Company had no outstanding borrowings with the FHLB. At December 31, 2023, the Company had $340.0 million of outstanding borrowings with the FHLB.

The Company’s acquisition of Cambr Solutions, LLC in April 2023 also added a funding source by providing on-demand access to bring deposits onto our balance sheet. We anticipate that ~~these~~the sources of liquidity discussed above will provide adequate funding and liquidity for at least a 12-month period, and we may utilize any combination of these funding sources for long-term liquidity needs if deemed prudent.

~~On-balance sheet liquidity is represented by our cash~~Our primary uses of funds are loan fundings, investment security purchases, withdrawals of deposits, capital expenditures, operating expenses, and ~~cash equivalents, and unencumbered investment securities, and is detailed in the table below as of March 31, 2023 and December 31, 2022:~~

March 31, 2023

December 31, 2022
Cash and due from banks

$
368,956

$
194,756
Interest bearing bank deposits

749

749
Unencumbered investment securities, at fair value

475,058

476,250
Total

$
844,763

$
671,755

~~Total on-balance sheet liquidity increased $173.0 million at March 31, 2023 compared to December 31, 2022, due to higher cash and due from banks of $174.2 million.~~share repurchases.

At present, financing activities primarily consist of changes in deposits and repurchase agreements, and advances from the FHLB, in addition to the payment of dividends and the repurchase of our common stock. Maturing time deposits represent a potential use of funds. As of March 31, ~~2023, $575.5~~2024, $746.1 million of time deposits were scheduled to mature within 12 months. Based on the current interest rate environment and market conditions, our consumer banking strategy is to focus on attracting and maintaining both lower cost transaction accounts and time deposits.

Through our relationship with the FHLB, the Company may pledge qualifying loans and investment securities allowing us to obtain additional liquidity through FHLB advances and lines of credit. There were no investment securities pledged at March 31, 2023 or December 31, 2022. The Company had loans of $2.5 billion and $2.0 billion pledged as collateral for FHLB advances at March 31, 2023 and December 31, 2022, respectively. FHLB advances, lines of credit and other short-term borrowing availability totaled $1.6 billion at March 31, 2023. The Company can obtain additional liquidity through FHLB advances, the Federal Reserve discount window and the BTFP, if required, and also has access to federal funds lines of credit with correspondent banks. At March 31, 2023, the Company had $1.0 billion of outstanding borrowings with the FHLB. The Company intends to pay off these borrowings over the next 12 months.

During 2021, the Company entered into a subordinated note purchase agreement to issue and sell a fixed-to-floating note. The Company deployed the net proceeds from the sale of the note for general corporate purposes. ~~The balance on the note at March 31, 2023, net of long-term debt issuance costs totaling $0.4 million, totaled $39.6 million.~~ The note is not subject to redemption at the option of the holder. Additionally, as part of the acquisition of BOJH on October 1, 2022, the Company assumed three subordinated note purchase agreements to issue and sell fixed-to-floating rate notes. The balance on ~~the~~all subordinated notes totaled $54.3 million at March 31, 2024. At December 31, 2023, ~~net of~~ the ~~fair value adjustment from~~balance on the ~~acquisition totaling $0.6 million,~~notes, totaled ~~$14.4~~$54.2 million.

Our primary uses of funds are loan fundings, investment security purchases, withdrawals of deposits, settlement of repurchase agreements, capital expenditures, operating expenses, and share repurchases. For additional information regarding our operating, investing and financing cash flows, see our consolidated statements of cash flows in the accompanying consolidated financial statements.

Exclusive from the investing activities related to acquisitions, our primary investing activities are loan fundings and pay-offs and paydowns of loans and purchases and sales of investment securities. At March 31, ~~2023,~~2024, pledgeable investment securities represented a significant source of liquidity. Our available-for-sale investment securities are carried at fair value and our held-to-maturity securities are carried at amortized cost. Our collective investment securities portfolio totaled $1.3 billion at March 31, ~~2023,~~2024, inclusive of pre-tax net unrealized losses of ~~$101.8~~$103.1 million on the available-for-sale securities portfolio. Additionally, our held-to-maturity securities portfolio had ~~$82.7~~$85.1 million of pre-tax net unrealized losses at March 31, ~~2023.~~2024. The gross unrealized gains and losses are detailed in note 3 of our consolidated financial statements. As of March 31, ~~2023,~~2024, our investment securities portfolio consisted primarily of MBS, all of which were issued or guaranteed by U.S. Government agencies or sponsored enterprises. The anticipated repayments and marketability of these securities offer substantial resources and flexibility to meet new loan demand, reinvest in the investment securities portfolio, or provide optionality for reductions in our deposit funding base.

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Capital

Under the Basel III requirements, at March 31, ~~2023,~~2024, the Company, NBH Bank and Bank of Jackson Hole Trust met all capital adequacy requirements, and the Banks had regulatory capital ratios in excess of the levels established for well-capitalized institutions. For more information on regulatory capital, see note 10 in our consolidated financial statements.

Our shareholders' equity is impacted by earnings, changes in unrealized gains and losses on securities, net of tax, stock-based compensation activity, share repurchases, shares issued in connection with acquisitions and the payment of dividends.

The Board of Directors has from time to time authorized multiple programs to repurchase shares of the Company’s common stock either in open market or in privately negotiated transactions in accordance with applicable regulations of the SEC. On May 9, 2023, the Company’s Board of Directors authorized a new program to repurchase up to $50.0 million of the Company’s ~~stock which replaces the previously authorized program of $75.0 million announced in February 2021.~~stock. The remaining authorization under the ~~2021~~ program as of March 31, ~~2023~~2024 was ~~$38.6~~$50.0 million.

On May ~~9, 2023,~~1, 2024, our Board of Directors declared a quarterly dividend of ~~$0.26~~$0.28 per common share, payable on June ~~15, 2023~~14, 2024 to shareholders of record at the close of business on May ~~26, 2023.~~31, 2024.

Asset/Liability Management and Interest Rate Risk

The Board of Directors meets as often as necessary, but no less than quarterly, to review financial statements, public filings, significant accounting policy changes and any risk management issues. The Board also oversees the performance of our internal audit function as well as serves as an independent and objective body to monitor and assess our compliance with legal and regulatory requirements as well as internal control systems. Management and the Board of Directors are responsible for managing interest rate risk and employing risk management policies that monitor and limit this exposure. Interest rate risk is measured using net interest income simulations and market value of portfolio equity analyses. These analyses use various assumptions, including the nature and timing of interest rate changes, yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, and reinvestment/replacement of asset and liability cash flows.

~~The principal objective of the Company's asset and liability management function is to evaluate the interest~~Interest rate risk ~~within the balance sheet and pursue a controlled assumption of interest rate risk while maximizing earnings and preserving adequate levels of liquidity and capital.~~ results from following:


●		Repricing risk — timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;
●		Option risk — changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans at any time and depositors’ ability to redeem certificates of deposit before maturity;
●		Yield curve risk — changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and
●		Basis risk — changes in spread relationships between different yield curves.

The ~~asset and liability management function is under the guidance of the~~ Asset Liability Committee, ~~with direction from the Board~~a cross-functional committee comprised of ~~Directors. The Asset Liability Committee~~executive management and senior leaders, meets monthly to review, among other things, the sensitivity of the Company's assets and liabilities to interest rate changes, local and national market conditions and interest rates. The Asset Liability Committee also reviews the liquidity, capital, deposit mix, loan mix and investment positions of the Company. The Company's principal objective regarding asset and liability management is to evaluate interest rate risk within the balance sheet and pursue a controlled assumption of interest rate risk while preserving adequate levels of liquidity and capital.

Instantaneous parallel rate shift scenarios are modeled and utilized to evaluate risk and establish exposure limits for acceptable changes in net interest margin. These scenarios, known as rate shocks, simulate an instantaneous change in interest rates and utilize various assumptions, including, but not limited to, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment and replacement of asset and liability cash flows.

We also analyze the economic value of equity as a secondary measure of interest rate risk. This is a complementary measure to net interest income where the calculated value is the result of the market value of assets less the market value of liabilities. The economic value of equity is a longer term view of interest rate risk because it measures the present value of the future cash flows. The impact of changes in interest rates on this calculation is analyzed for the risk to our future earnings and is used in conjunction with the analyses on net interest income.

Our interest rate risk model indicated that the Company was ~~asset sensitive~~in a relatively neutral position in terms of interest rate sensitivity at March 31, ~~2023.~~2024. At March 31, ~~2023,~~2024, our ~~asset~~liability sensitivity position ~~decreased~~increased slightly from December 31, ~~2022,~~2023, primarily driven by ~~a decrease in transaction~~

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balance sheet mix change, mainly due to shifting of non-interest bearing deposits ~~and growth in fixed rate loans.~~into interest-bearing deposits. The table below illustrates the impact of an immediate and sustained 200 and 100 basis point

~~Table of Contents~~

increase and a 100 and 200 basis point decrease in interest rates on net interest income based on the interest rate risk model at March 31, ~~2023~~2024 at the respective dates:


Hypothetical
shift in interest	% change in projected net interest income		% change in projected net interest income
rates (in bps)	March 31, 2023	December 31, 2022	March 31, 2024	December 31, 2023
200	1.58%	2.60%	(0.19)%	(0.18)%
100	0.81%	1.31%	(0.05)%	(0.06)%
(100)	(1.65)%	(2.93)%	(0.23)%	(0.09)%
(200)	(4.15)%	(8.24)%	(0.61)%	(0.33)%

Many assumptions are used to calculate the impact of interest rate fluctuations. Actual results may be significantly different than our projections due to several factors, including the timing and frequency of rate changes, market conditions and the shape of the yield curve. The computations of interest rate risk shown above do not include actions that management may undertake to manage the risks in response to anticipated changes in interest rates and actual results may also differ due to any actions taken in response to the changing rates.

As part of the asset/liability management strategy to manage primary market risk exposures expected to be in effect in future reporting periods, management has executed interest rate derivatives primarily using floors and collars. For further discussion of the Company’s derivative contracts refer to note 15. The strategy with respect to liabilities has been to continue to emphasize transaction deposit growth, particularly non-interest or low interest bearing non-maturing deposit accounts while building long-term client relationships. Non-maturing deposit accounts totaled ~~87.1%~~88.3% of total deposits at March 31, ~~2023,~~2024, compared to ~~88.9%~~88.0% at December 31, ~~2022. We currently have no brokered time deposits.~~2023.

Impact of Inflation and Changing Prices

The primary impact of inflation on our operations is reflected in increasing operating costs and non-interest expense. Unlike most industrial companies, virtually all of our assets and liabilities are monetary in nature. As a result, changes in interest rates have a more significant impact on our performance than do changes in the general rate of inflation and changes in prices. Interest rate changes do not necessarily move in the same direction, nor have the same magnitude, as changes in the prices of goods and services. Although not as critical to the banking industry as many other industries, inflationary factors may have some impact on our ability to grow, total assets, earnings and capital levels. While we plan to continue our disciplined approach to expense management, an inflationary environment may cause wage pressures and general increases in our cost of doing business, which may increase our non-interest expense.

Off-Balance Sheet Activities

In the normal course of business, we are a party to various contractual obligations, commitments and other off-balance sheet activities that contain credit, market, and operational risk that are not required to be reflected in our consolidated financial statements. The most significant of these are the loan commitments that we enter into to meet the financing needs of clients, including commitments to extend credit, commercial and consumer lines of credit and standby letters of credit. As of March 31, ~~2023~~2024 and December 31, ~~2022,~~2023, we had loan commitments totaling ~~$2.0~~$1.6 billion ~~and $2.0 billion, respectively,~~for both periods, and standby letters of credit that totaled ~~$11.9~~$11.7 million and ~~$13.9~~$13.0 million, respectively. Unused commitments do not necessarily represent future credit exposure or cash requirements, as commitments often expire without being drawn upon.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is provided under the caption Asset/Liability Management and Interest Rate Risk in Part I, Item 2-Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.

Item 4. CONTROLS AND PROCEDURES

Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange

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Act of 1934, as of March 31, ~~2023.~~2024. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, ~~2023.~~2024.

During the most recently completed fiscal quarter, there were no changes made in the Company's internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

From time to time, we are a party to various litigation matters incidental to the conduct of our business. We are not presently party to any legal proceedings the resolution of which we believe would have a material adverse effect on our business, prospects, financial condition, liquidity, results of operation, cash flows or capital levels.

Item 1A. RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2022 with the exception of the following:~~

~~Recent developments in the banking industry may have shaken consumer confidence in the banking system, particularly regarding regional or community banks.~~

The recent bank failures and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional, as well as community banks like the Company. These developments have negatively impacted customer confidence in regional and community banks, which could prompt customers to transfer their deposits to larger financial institutions. While the Department of the Treasury, the Federal Reserve, and the FDIC have made statements ensuring that depositors of recently failed banks would have access to their deposits, including uninsured deposit accounts, there is no guarantee that such actions will be successful in restoring customer confidence in regional banks and the banking system more broadly. We also anticipate increased regulatory scrutiny – in the course of routine examinations and otherwise – and any new regulations directed towards banks of similar size to the Bank, designed to address the recent negative developments in the banking industry, all of which may increase our costs of doing business and reduce our profitability. Among other things, there may be an increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, losses embedded in the held-to-maturity portion of our securities portfolio (if any), contingent liquidity, CRE composition and concentration, capital position and our general oversight and internal control structures regarding the foregoing. As a result, the Bank could face increased scrutiny or be viewed as higher risk by regulators and the investor community.

~~We may experience increases in FDIC insurance assessments.~~

The significant losses incurred by the Deposit Insurance Fund managed by the FDIC, in connection with recent developments are required by law to be recovered through one or more special assessments on depository institutions and, potentially, their holding companies (if the FDIC determines such action to be appropriate and the Secretary of the Treasury concurs). The FDIC must consider a variety of factors in determining the terms and applicability of any such special assessment, including, among others, the types of entities that benefit from the action taken by the agencies, economic conditions, and anticipated industry impacts. The FDIC has announced that it intends to publish a notice of proposed rulemaking for a special assessment in May 2023. It is also possible that our regular deposit insurance assessment rates will increase should the FDIC alter the assessment rate schedule or calculation methodology for all larger financial institutions (including the Bank) as a result of the recent bank failures. Although we cannot predict the specific timing and terms of any special assessment or any other increase in our deposit insurance assessment rates, any increase in our assessment fees could have a material adverse effect on our results of operations and financial condition.

~~Our investments in financial technology companies and initiatives subject us to material financial, reputational and strategic risks.~~

Our investments in various financial technology companies, included within non-marketable securities on our balance sheet, may have a significant impact on our results of operations. Investments where we have the ability to exercise significant influence but not control over the operating and financial policies of the investee are accounted for using the equity method of accounting. For investments accounted for under the equity method, we increase or decrease our investment by our proportionate share of the investee’s net income or loss. Non-marketable securities also include direct investments in convertible preferred stock. As the convertible preferred stock does not have a readily determinable fair value, it is carried at cost. We periodically evaluate our non-marketable securities investments for impairment. The results of testing our investments for potential impairment may be adversely affected by a variety of factors, including market conditions, general economic conditions and unfavorable changes in the businesses underlying the investments, which may lead to a partial or full impairment of our fintech investments. Impairments or write-downs of these assets may result in charges that adversely affect our results of operations.

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The financial technology companies in which we invest often have the need for substantial additional capital to support expansion or to achieve or maintain a competitive position. Less established companies tend to have lower capitalization and fewer resources and, therefore, are often more vulnerable to financial failure. These companies may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team. The failure of this one product, service or distribution channel, or the loss or ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies.

The possibility that the companies in which we invest will not be able to commercialize their technology or product concept presents a risk that our investment may become impaired. These companies tend to lack management depth, to have limited or no history of operations and to not have attained profitability. Additionally, although some of these companies may already have a commercially successful product or product line at the time of investment, technology products and services often have a more limited market or life span than products in other industries. Thus, the ultimate success of these companies may depend on their ability to continually innovate in increasingly competitive markets. Most of the companies in which we invest will require substantial additional equity financing to satisfy their continuing growth and working capital requirements. Each round of venture financing is typically intended to provide a company with enough capital to reach the next stage of development. The circumstances or market conditions under which such companies will seek additional capital is unpredictable. It is possible that one or more of such companies will not be able to raise additional financing or may be able to do so only at a price or on terms which are unfavorable.

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

Maximum

Total number of

approximate dollar

Total number of

approximate dollar

shares purchased

value of shares

shares purchased

value of shares

as part of publicly

that may yet be

as part of publicly

that may yet be

Total number

Average price

announced plans

purchased under the

Total number

Average price

announced plans

purchased under the

Period

of shares purchased

paid per share

or programs

plans or programs ⁽²⁾

of shares purchased

paid per share

or programs

plans or programs ⁽²⁾

March 1 - March 31, 2023⁽¹⁾

15,648

40.10

—

38,618,179

February 1 - February 29, 2024⁽¹⁾

570

33.70

—

50,000,000

March 1 - March 31, 2024⁽¹⁾

7,167

33.75

—

50,000,000

Total

7,737

33.74

—


(1)		Represents shares purchased other than through publicly announced plans purchased pursuant to the Company’s stock incentive plans at the then current market value in satisfaction of stock option exercise prices, settlements of restricted stock and tax withholdings.
(2)		On May 9, 2023, the Company’s Board of Directors authorized a new program to repurchase up to $50.0 million of the Company’s stock from time to time in either the open market or through privately negotiated transactions. The ~~new program of $50.0 million replaced the previously authorized $75.0 million stock repurchase program announced in February 2021. The~~ remaining authorization under the ~~2021~~ program as of March 31, ~~2023~~2024 was ~~$38.6~~$50.0 million.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS


3.1		Second Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to our Form S-1 Registration Statement (Registration No. 333-177971), filed August 22, 2012)

3.2		Second Amended and Restated By-Laws (incorporated herein by reference to Exhibit 3.2 to our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, filed November 7, 2014)

31.1		Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certifications of CEO and CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH		XBRL Taxonomy Extension Schema

101.CAL		XBRL Taxonomy Extension Calculation

101.DEF		XBRL Taxonomy Extension Definition

101.LAB		XBRL Taxonomy Extension Labels

101.PRE		XBRL Taxonomy Extension Presentation

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


National Bank Holdings Corporation

/s/ Aldis Birkans
Aldis Birkans
Chief Financial Officer
(principal financial officer)

Date: May ~~9, 2023~~1, 2024

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	December 31, 2022
	Amortized		Average year-to-date		Unpaid		Unfunded commitments
	cost basis		amortized cost basis		principal balance		to fund TDRs
Commercial	$	2,160	$	2,348	$	2,150	$	150
Commercial real estate non-owner occupied		685		734		699		—
Residential real estate		1,809		1,867		1,964		—
Consumer		—		—		—		—
Total	$	4,654	$	4,949	$	4,813	$	150


	September 1, 2022
Assets:
Cash and due from banks	$	260,883
Investment securities available-for-sale		402
Non-marketable securities		977
Loans, net		535,197
Loans held for sale		3,069
Premises and equipment		3,413
Core deposit and other intangibles		16,463
Other assets		11,749
Total assets acquired		832,153

Liabilities:
Total deposits		734,480
Other liabilities		10,115
Total liabilities assumed		744,595

Identifiable net assets acquired	$	87,558

Consideration:
NBHC common stock paid, closing price of $40.13 on August 31, 2022	$	124,272
Cash		16,141
Total		140,413

Goodwill	$	52,855