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CrossFirst Bankshares, Inc. Reports Revised Fourth Quarter & Full-Year 2019 Results

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LEAWOOD, Kan., Feb. 24, 2020 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (CFB), the bank holding company for CrossFirst Bank, announced that it has revised its preliminary financial results for fourth quarter and full year 2019, which were previously reported on January 23, 2020. In connection with the preparation and review of its 2019 financial statements, the Company has concluded it is necessary to record an additional loan loss provision of $16 million for fourth quarter 2019. The need for additional provision was determined through the Company's internal monitoring processes for reviewing problem credits and resulted from new information obtained in the first quarter of 2020. The additional provision is based on information obtained subsequent to preliminary results on January 23rd and related to the previously disclosed large nonperforming asset. The Company recorded the additional provision as a result of recent deterioration in the borrower's business and the value of the underlying collateral.

The Company's previously reported preliminary results included net income of $11.4 million, or $0.22 per diluted share, for fourth quarter 2019, and full-year 2019 net income of $40.6 million, or $0.83 per diluted share. After the impact of the additional provision (net of tax), the Company now reports a net loss of $700 thousand, or $(0.01) per diluted share for fourth quarter 2019, and full-year 2019 net income of $28.5 million, or $0.58 per diluted share. Full-year net income of $28.5 million still resulted in a year-over-year increase of 45% and $0.11 per diluted change for full-year 2019, a 23% year-over-year increase.

"The provision had a negative impact on our fourth quarter and 2019 results, but it does not change our strong outlook for 2020 earnings," said CrossFirst's President and CEO George F. Jones, Jr. "I continue to remain very proud of our teams and what we have accomplished for the year. Even after the additional provision, we were able to deliver a 45% increase in net income for full-year 2019."

Material Updates to the Provision

The Company recorded a total provision of $19.4 million for the fourth quarter and $29.9 million for full year 2019 instead of the $3.4 million and $13.9 million initially reported. After the increased provision, the allowance to total loans increased to 1.48% at December 31, 2019 from 1.18% at the end of the third quarter of 2019. In addition, the total allowance was $56.9 million at year end 2019 compared to $37.8 million at year-end 2018. No additional charge-offs were recorded from what was originally reported on January 23, 2020.

Impact to Income Taxes

CrossFirst’s revised effective tax rate for the twelve months ended December 31, 2019 was 12.7%, compared to the previously reported effective tax rate of 16.6%.

Updated Previously Furnished Earnings Materials

In addition to issuing this revised earnings release, the Company has revised its earnings presentation and posted the materials on the Company's website. The Company believes these revisions only relate to its fourth quarter and annual results for 2019 and do not impact any statements in its previously filed documents with the Securities and Exchange Commission for any other period, and therefore, those previous reports may continue to be relied upon as filed.

For completeness, the Company has included all previously announced financial results disclosures and related tables with this press release as revised. These results supersede the results previously disclosed in the January 23, 2020 press release.

2019 Fourth Quarter and Full-Year Highlights:

  • Approaching $5 billion of assets with 30% operating revenue growth compared to full-year 2018

  • Quarterly net loss of $700 thousand, compared to net income of $10.3 million for the fourth quarter of 2018

  • Full-year net income of $28.5 million, a year-over-year increase of 45%

  • Diluted EPS of $0.58 for full-year 2019, a year-over-year increase of 23%

  • Achieved efficiency ratios of 55.6% for the quarter and 58.4% for the year

  • Grew loans by $223 million from the previous quarter and $793 million or 26% since year-end December 31, 2018

  • Grew deposits by $266 million from the previous quarter and $716 million or 22% since year-end December 31, 2018

  • Book value per share of $11.58 at December 31, 2019 compared to $10.21 at December 31, 2018

Quarter-to-Date
December 31,

Year-to-Date,
December 31,


2018

2019

2018

2019

(Dollars in millions except per share data)

Operating revenue(1)

$

33.5

$

39.4

$

116.5

$

150.2

Net income (loss)

$

10.3

$

(0.7

)

$

19.6

$

28.5

Diluted earnings (loss) per share

$

0.22

$

(0.01

)

$

0.47

$

0.58

Return on average assets

1.06

%

(0.06

)%

0.56

%

0.63

%

Non-GAAP core operating return on average assets(2)

0.67

%

(0.06

)%

0.57

%

0.61

%

Return on average common equity

9.03

%

(0.46

)%

5.34

%

5.38

%

Non-GAAP return on average tangible common equity(2)

9.20

%

(0.46

)%

5.47

%

5.46

%

Net interest margin

3.44

%

3.17

%

3.29

%

3.26

%

Net interest margin, fully tax-equivalent(3)

3.51

%

3.23

%

3.39

%

3.31

%

Efficiency ratio

60.2

%

55.6

%

73.6

%

58.4

%

Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3)

61.4

%

54.7

%

67.7

%

57.2

%

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

(2) Represents a non-GAAP measure. See "Table 6. Non-GAAP Financial Measures" for a reconciliation of this measure.

(3) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental federal tax rate used is 21.0%.

Income from Operations

Net Interest Income

The Company produced interest income of $55.2 million for the fourth quarter of 2019, an increase of 17% from the fourth quarter of 2018 and remained flat from the previous quarter due to the declining interest rate environment. Full-year interest income is up 38% year-over-year primarily as a result of continued strong growth in average earning assets. The tax-equivalent yield on earning assets declined from 5.00% to 4.76% during the fourth quarter of 2019 primarily due to the movement of variable rate assets indexed to market rates.

Interest expense for the fourth quarter of 2019 was $18.0 million, or 22% higher than the fourth quarter of 2018 and 9% lower than the third quarter of 2019. Average interest-bearing deposits in the fourth quarter of 2019 totaled $3.3 billion, an increase of $806 million or 33% from the same quarter in 2018. Compared to the third quarter of 2019, interest-bearing deposit mix changes during the quarter were a result of responding to declining rates to lower margin exposure, therefore most of the new deposit growth came from variable rate accounts. Non-deposit funding costs decreased to 1.86% from 1.95% in the third quarter of 2019 while overall cost of funds for the quarter was 1.71%, compared to 1.94% for the third quarter of 2019.

Tax-equivalent net interest margin declined to 3.23% for the quarter compared to 3.51% for the same quarter in 2018, reflecting the impact of the declining rate environment. For full-year 2019, the Company reported a tax equivalent net interest margin of 3.31%, slightly lower than full-year 2018 results. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $0.7 million for the fourth quarter of both 2019 and 2018, and $0.6 million for the third quarter of 2019. Net interest income totaled $37.2 million for the fourth quarter of 2019 or 4% greater than the third quarter of 2019. Full-year 2019 net interest income totaled $141.4 million or 28% higher than the same period of 2018, reflecting the Company's strong balance sheet growth and maintenance of net interest margin.

Non-Interest Income

Non-interest income increased $1.0 million in the fourth quarter of 2019, or 83%, compared to the same quarter of 2018 and decreased $1.0 million, or 32%, lower compared to the third quarter of 2019. While the Company continues to increase fee income commensurate with its growth, during the quarter the Company recorded $0.5 million of bond gains as well as more income from the back to back swap program than in the fourth quarter in 2018. The reduction in non-interest income from the prior quarter was due to increased activity for swap fees and a one-time $0.8 million gain related to a change in derivative valuation in the third quarter of 2019. For full-year 2019, non-interest income increased $2.6 million compared to full-year 2018 primarily due to the increased swap activity, the revaluation of the swap program, and the additional activity derived from additional balance sheet and customer growth.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2019 increased $1.7 million, or 9%, compared to the fourth quarter of 2018 and increased $0.7 million, or 3%, from the third quarter of 2019. Compared to the fourth quarter of 2018, salary and employment-related expenses increased $1.4 million for additional employee headcount required to support growth and data processing costs were higher from the Company's increased volumes of activity from balance sheet growth and a larger customer base. As compared to the third quarter of 2019, salary and employment-related expenses decreased $0.4 million as a result of continuing to manage resource allocation and hiring, FDIC insurance expense increased as a result of a one-time small bank credit in the third quarter and professional fees increased $0.6 million. For full-year 2019, non-interest expense increased 2% or $1.9 million compared to full-year 2018 primarily due to salary and employment expenses to support growth and higher data processing costs.

CrossFirst’s effective tax rate for the twelve months ended December 31, 2019 was 12.7% as compared to (13.9)% for the twelve months ended December 31, 2018. The year-over-year change was due to higher earnings, state tax credits related to our new headquarters, a reduction in tax-exempt income due to average yields on tax exempt securities decreasing, and permanent tax benefits from stock-based compensation awards vested and exercised in 2018 as compared to 2019. The effective tax rate for the fourth quarter of 2019 was not available due to a quarterly net loss, and was (16.8)% for the fourth quarter of 2018. For both of the comparable periods, the Company continued to benefit from the tax-exempt municipal bond portfolio creating an effective tax rate lower than the statutory tax rates.

Balance Sheet Performance & Analysis

During the fourth quarter of 2019, total assets increased by $280 million, or 6%, compared to September 30, 2019 with both strong loan and deposit growth. Asset growth for CrossFirst was $824 million, or 20%, year-over-year. During the fourth quarter of 2019, total available for sale investment securities increased $9 million to $742 million, while the overall average for the quarter was $745 million. Tax-exempt municipal securities on average increased $35 million and mortgage-backed securities decreased $19 million. Overall, the Company increased the size of the bond portfolio during 2019 by $78 million, or 12% compared to year-end 2018. The increase in investment securities was part of management's strategy to manage liquidity and optimize income.

Loan Growth Results

The Company continued to maintain a diversified loan portfolio while experiencing strong loan growth of 6% for the fourth quarter of 2019 and 26% since December 31, 2018. Loan yields declined 32 basis points in the overall portfolio commensurate with the adjustable rate loan movements in LIBOR and Prime during the quarter. The Company experienced $174 million in payoffs for the quarter, but funded $255 million in loans to new borrowers to replace and grow the overall portfolio.

(Dollars in millions)

4Q18

1Q19

2Q19

3Q19

4Q19

% of
Total

QoQ
Growth
($)

QoQ
Growth
(%)(1)

YoY
Growth
($)

YoY
Growth
(%)(1)

Average loans (gross)

Commercial and industrial

$

1,021

$

1,145

$

1,224

$

1,284

$

1,315

35

%

$

31

2

%

$

294

29

%

Energy

349

367

383

389

400

11

11

3

51

15

Commercial real estate

810

866

946

974

1,007

27

33

3

197

24

Construction and land development

449

444

457

487

599

16

112

23

150

33

Residential real estate

240

310

342

362

384

10

22

6

144

60

Consumer & Equity Lines

42

44

46

45

45

1

(1

)

3

5

Total

$

2,911

$

3,176

$

3,398

$

3,541

$

3,750

100

%

$

209

6

%

$

839

29

%

Yield on loans for the period ending

5.56

%

5.75

%

5.66

%

5.53

%

5.21

%

(1) Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

Deposit Growth Results

The Company continues to maintain a traditional deposit mix, with the goal of keeping pace with growth in the loan portfolio. Deposit growth was primarily funded with money market accounts during the fourth quarter, which have historically adjusted with movements in Federal Funds rates. During the fourth quarter, the Company added short term wholesale funding and $62 million of brokered deposits to replace the brokered funding that previously rolled off in the third quarter of 2019.

(Dollars in millions)


4Q18


1Q19


2Q19


3Q19


4Q19

% of
Total

QoQ
Growth
($)

QoQ
Growth
(%)(1)

YoY
Growth
($)

YoY
Growth
(%)
(1)

Average deposits

Non-interest bearing deposits

$

492

$

477

$

513

$

535

$

522

14

%

$

(13

)

(3

)%

$

30

6

%

Transaction deposits

63

104

144

135

200

5

%

65

49

137

217

Savings and money market deposits

1,498

1,544

1,560

1,744

1,854

49

%

110

6

356

24

Time deposits

913

1,165

1,305

1,277

1,226

32

%

(51

)

(4

)

313

34

Total

$

2,966

$

3,290

$

3,522

$

3,691

$

3,802

100

%

111

3

%

$

836

28

%

Cost of deposits for the period ending

1.70

%

1.96

%

1.99

%

1.94

%

1.70

%

Cost of interest-bearing deposits for the period ending

2.04

%

2.30

%

2.33

%

2.26

%

1.97

%

(1) Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

Asset Quality Position

The Company added to the allowance for loan loss as a result of the adverse changes in the large nonperforming loan described above and in order to support loan growth and other changes in relative risk for the overall portfolio, recording a provision expense of $19.4 million for the fourth quarter. Net charge-offs were $5.5 million for the quarter, including a partial charge-off of the large non-performing loan described above, as compared to charge-offs of $0.2 million for the fourth quarter in 2018. The following table provides information regarding asset quality as well as other asset quality metrics.

Asset quality (Dollars in millions)

4Q18

1Q19

2Q19

3Q19

4Q19

Non-accrual loans

$

17.8

$

13.0

$

50.0

$

43.6

$

39.7

Other real estate owned

2.5

2.5

2.5

3.6

Non-performing assets

17.8

15.5

52.8

46.7

47.9

Loans 90+ days past due and still accruing

0.2

0.6

4.6

Loans 30 - 89 days past due

3.7

31.1

23.6

64.7

6.8

Net charge-offs (recoveries)

0.2

0.7

4.7

5.5

Asset quality metrics (%)

4Q18

1Q19

2Q19

3Q19

4Q19

Non-performing assets to total assets

0.43

%

0.36

%

1.18

%

1.00

%

0.97

%

Allowance for loan loss to total loans

1.23

1.22

1.24

1.18

1.48

Allowance for loan loss to non-performing loans

212

307

85

97

129

Net charge-offs (recoveries) to average loans(1)

0.03

0.09

0.53

0.58

Provision to average loans(1)

0.61

0.36

0.34

0.54

2.05

(1) Interim periods annualized.

Capital Position

At December 31, 2019, stockholders’ equity totaled $602 million, or $11.58 per share, compared to $602 million, or $11.59 per share, at September 30, 2019. Tangible common stockholders' equity was $594 million and tangible book value per share was $11.43 at December 31, 2019.

Period-end (Dollars in millions, except per share data)

4Q18

1Q19

2Q19

3Q19

4Q19

Total Stockholders' Equity

$

490

$

481

$

499

$

602

$

602

Book value per share

$

10.21

$

10.63

$

11.00

$

11.59

$

11.58

Tangible book value per share(1)

$

10.04

$

10.46

$

10.83

$

11.44

$

11.43

Common equity tier 1 capital ratio

11.75

%

11.23

%

11.02

%

12.91

%

12.20

%

Tier 1 capital ratio

12.53

11.23

11.04

12.93

12.22

Total capital ratio

13.51

12.20

12.04

13.90

13.43

Leverage ratio

12.43

11.15

10.87

12.57

12.06

(1) Represents a non-GAAP measure. See "Table 6. Non-GAAP Financial Measures" for a reconciliation of this measure.

During the third quarter of 2019, the Company issued 6,594,362 new shares in its initial public offering, including the over-allotment, bringing its total net proceeds from the offering to approximately $87.0 million. The Company intends to use the net proceeds from the offering to support growth, organically or through mergers and acquisitions, and for general corporate purposes. As previously disclosed, the Company is currently considering using a portion of the net proceeds for the opening of a second smaller full-service branch in the Dallas MSA, in addition to consistently evaluating other strategic opportunities.

Cautionary Notice about Forward-Looking Statements

The financial results in this press release reflect preliminary, unaudited results, which are not final until the Company’s Annual Report on Form 10-K is filed. This earnings release contains forward-looking statements. These forward-looking statements reflect the Company's current views with respect to, among other things, future events and its financial performance. Any statements about management’s 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,” “believes,” “can,” “could,” “may,” “predicts,” “potential,” “should,” “will,” “estimate,” “plans,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. Any or all of the forward-looking statements in this earnings release may turn out to be inaccurate. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect our financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.

Accordingly, the Company cautions you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes 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 law.

About CrossFirst

CrossFirst Bankshares, Inc., is a Kansas corporation and a registered bank holding company for its wholly-owned subsidiary CrossFirst Bank, which is headquartered in Leawood, Kansas. CrossFirst Bank has seven full-service banking offices primarily along the I-35 corridor in Kansas, Missouri, Oklahoma and Texas.

Unaudited Financial Tables

  • Table 1. Consolidated Balance Sheets

  • Table 2. Consolidated Statements of Income

  • Table 3. Year-to-Date Analysis of Changes in Net Interest Income (2018 & 2019)

  • Table 4. 2018 - 2019 Quarterly Analysis of Changes in Net Interest Income

  • Table 5. Linked Quarterly Analysis of Changes in Net Interest Income

  • Table 6. Non-GAAP Financial Measures

TABLE 1. CONSOLIDATED BALANCE SHEETS

As of December 31,

2018

2019
(unaudited)

(Dollars in thousands)

Assets

Cash and cash equivalents

$

216,541

$

187,320

Available-for-sale securities - taxable

296,133

298,208

Available-for-sale securities - tax-exempt

367,545

443,426

Premises and equipment, held for sale

3,444

Loans, net of allowance for loan losses of $56,896 and $37,826 at December 31, 2019 and 2018, respectively

3,022,921

3,795,348

Premises and equipment, net

74,945

70,210

Restricted equity securities

14,525

17,278

Interest receivable

14,092

15,716

Foreclosed assets held for sale

3,619

Deferred tax asset

16,316

13,782

Goodwill and other intangible assets, net

7,796

7,694

Bank-owned life insurance

63,811

65,689

Other

9,146

12,943

Total assets

$

4,107,215

$

4,931,233

Liabilities and stockholders’ equity

Deposits

Noninterest bearing

$

484,284

$

521,826

Savings, NOW and money market

1,714,136

2,162,187

Time

1,009,677

1,239,746

Total deposits

3,208,097

3,923,759

Federal funds purchased and repurchase agreements

75,406

14,921

Federal Home Loan Bank advances

312,985

358,743

Other borrowings

884

921

Interest payable and other liabilities

19,507

31,245

Total liabilities

3,616,879

4,329,589

Stockholders’ equity

Redeemable preferred stock, $0.01 par value, $25 liquidation value:

authorized - 5,000,000 shares, issued - 0 and 1,200,000 shares at December 31, 2019 and 2018, respectively

12

Common stock, $0.01 par value:

authorized - 200,000,000 shares, issued - 51,969,203 and 45,074,322 shares at December 31, 2019 and 2018, respectively

451

520

Additional paid-in capital

454,512

519,870

Retained earnings

38,567

64,888

Other

(196

)

(85

)

Accumulated other comprehensive income (loss)

(3,010

)

16,451

Total stockholders’ equity

490,336

601,644

Total liabilities and stockholders’ equity

$

4,107,215

$

4,931,233


TABLE 2. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended
December 31,

Twelve Months
Ended December 31,

2018

2019

2018

2019

(Dollars in thousands except per share data)

Interest Income

Loans, including fees
Available for sale securities

$

40,813

$

49,208

$

130,075

$

191,527

Available for sale securities - Taxable

2,243

1,894

7,972

8,540

Available for sale securities - Tax-exempt

3,135

3,191

14,757

12,011

Deposits with financial institutions

615

601

3,096

3,053

Dividends on bank stocks

262

286

980

1,087

Total interest income

47,068

55,180

156,880

216,218

Interest Expense

Deposits

12,733

16,247

39,372

67,668

Fed funds purchased and repurchase agreements

440

91

1,068

592

Advances from Federal Home Loan Bank

1,533

1,628

5,841

6,367

Other borrowings

47

35

231

147

Total interest expense

14,753

18,001

46,512

74,774

Net Interest Income

32,315

37,179

110,368

141,444

Provision for Loan Losses

4,500

19,350

13,500

29,900

Net Interest Income after Provision for Loan Losses

27,815

17,829

96,868

111,544

Non-Interest Income

Service charges and fees (rebates) on customer accounts

(62

)

163

444

604

Gain (loss) on sale of available for sale securities

(70

)

520

538

987

Impairment of premises and equipment held for sale

(171

)

(424

)

Gain on sale of loans

209

827

207

Income from bank-owned life insurance

458

462

1,969

1,878

Swap fee income, net

(14

)

338

285

2,753

Other non-interest income

674

703

2,191

2,710

Total non-interest income

1,195

2,186

6,083

8,715

Non-Interest Expense

Salaries and employee benefits

12,429

13,818

56,118

57,114

Occupancy

2,015

2,048

8,214

8,349

Professional fees

899

1,041

3,320

2,964

Deposit insurance premiums

775

767

3,186

2,787

Data processing

525

676

1,995

2,544

Advertising

709

685

2,691

2,455

Software and communication

672

910

2,630

3,317

Depreciation and amortization

482

414

1,788

1,734

Other non-interest expense

1,660

1,526

5,813

6,384

Total non-interest expense

20,166

21,885

85,755

87,648

Net Income (Loss) Before Taxes

8,844

(1,870

)

17,196

32,611

Income tax expense (benefit)

(1,490

)

(1,170

)

(2,394

)

4,138

Net Income (Loss)

$

10,334

$

(700

)

$

19,590

$

28,473

Basic Earnings (Loss) Per Share

$

0.22

$

(0.01

)

$

0.48

$

0.59

Diluted Earnings (Loss) Share

$

0.22

$

(0.01

)

$

0.47

$

0.58

TABLE 3. YEAR-TO-DATE ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

Twelve Months Ended
December 31,

2018

2019

Average
Balance

Interest
Income /
Expense

Average
Yield /
Rate(3)

Average
Balance

Interest
Income /
Expense

Average
Yield /
Rate(3)

(Dollars in thousands)

Interest-earning assets:

Securities - taxable

$

281,709

$

8,952

3.18

%

$

330,051

$

9,627

2.92

%

Securities - tax-exempt(1)

459,231

17,856

3.89

390,908

14,533

3.72

Federal funds sold

16,377

339

2.07

15,195

364

2.40

Interest-bearing deposits in other banks

159,279

2,757

1.73

139,538

2,689

1.93

Gross loans, net of unearned income(2)

2,435,424

130,075

5.34

3,468,079

191,527

5.52

Total interest-earning assets(1)

3,352,020

$

159,979

4.77

%

4,343,771

$

218,740

5.04

%

Allowance for loan losses

(30,921

)

(42,015

)

Other non-interest-earning assets

173,556

198,008

Total assets

$

3,494,655

$

4,499,764

Interest-bearing liabilities

Transaction deposits

$

56,321

$

175

0.31

%

$

146,109

$

1,742

1.19

%

Savings and money market deposits

1,410,727

23,405

1.66

1,676,417

35,385

2.11

Time deposits

835,595

15,792

1.89

1,243,304

30,541

2.46

Total interest-bearing deposits

2,302,643

39,372

1.71

3,065,830

67,668

2.21

FHLB and short-term borrowings

395,825

7,004

1.77

366,577

6,959

1.90

Trust preferred securities, net of fair value adjustments

864

136

15.69

899

147

16.34

Non-interest-bearing deposits

425,243

512,142

Cost of funds

3,124,575

$

46,512

1.49

%

3,945,448

$

74,774

1.90

%

Other liabilities

12,634

25,708

Stockholders’ equity

357,446

528,608

Total liabilities and stockholders' equity

$

3,494,655

$

4,499,764

Net interest income(1)

$

113,467

$

143,966

Net interest spread(1)

3.28

%

3.14

%

Net interest margin(1)

3.39

%

3.31

%

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.

(2) Average loan balances include nonaccrual loans.

(3) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.


YEAR-TO-DATE VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED)

Twelve Months Ended
December 31, 2019 over 2018

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

1,449

$

(774

)

$

675

Securities - tax-exempt(1)

(2,568

)

(755

)

(3,323

)

Federal funds sold

(26

)

51

25

Interest-bearing deposits in other banks

(365

)

297

(68

)

Gross loans, net of unearned income

56,927

4,525

61,452

Total interest income(1)

55,417

3,344

58,761

Interest Expense

Transaction deposits

564

1,003

1,567

Savings and money market deposits

4,911

7,069

11,980

Time deposits

9,115

5,634

14,749

Total interest-bearing deposits

14,590

13,706

28,296

FHLB and short-term borrowings

(538

)

493

(45

)

Trust preferred securities, net of fair value adjustments

5

6

11

Total interest expense

14,057

14,205

28,262

Net interest income(1)

$

41,360

$

(10,861

)

$

30,499

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.

(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.


TABLE 4. 2018 - 2019 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

Three Months Ended
December 31,

2018

2019

Average
Balance

Interest
Income /
Expense

Average
Yield /
Rate(3)

Average
Balance

Interest
Income /
Expense

Average
Yield /
Rate(3)

(Dollars in thousands)

Interest-earning assets:

Securities - taxable

$

305,995

$

2,505

3.25

%

$

317,524

$

2,180

2.72

%

Securities - tax-exempt(1)

385,463

3,793

3.90

427,280

3,861

3.59

Federal funds sold

9,239

58

2.49

4,750

19

1.61

Interest-bearing deposits in other banks

113,403

558

1.95

152,917

582

1.51

Gross loans, net of unearned income(2) (3)

2,911,350

40,812

5.56

3,749,865

49,208

5.21

Total interest-earning assets(1)

3,725,450

$

47,726

5.08

%

4,652,336

$

55,850

4.76

%

Allowance for loan losses

(34,818

)

(44,051

)

Other non-interest-earning assets

194,010

201,294

Total assets

$

3,884,642

$

4,809,579

Interest-bearing liabilities

Transaction deposits

$

63,223

$

74

0.46

%

$

200,480

$

603

1.19

%

Savings and money market deposits

1,498,075

7,747

2.05

1,854,042

8,059

1.72

Time deposits

912,882

4,912

2.13

1,225,752

7,585

2.46

Total interest-bearing deposits

2,474,180

12,733

2.04

3,280,274

16,247

1.97

FHLB and short-term borrowings

439,322

1,984

1.79

366,190

1,719

1.86

Trust preferred securities, net of fair value adjustments

876

36

16.34

913

35

15.18

Non-interest-bearing deposits

491,689

521,799

Cost of funds

3,406,067

$

14,753

1.72

%

4,169,176

$

18,001

1.71

%

Other liabilities

17,694

34,443

Total stockholders' equity

460,881

605,960

Total liabilities and stockholders' equity

$

3,884,642

$

4,809,579

Net interest income(1)

$

32,973

$

37,849

Net interest spread(1)

3.36

%

3.05

%

Net interest margin(1)

3.51

%

3.23

%

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.

(2) Average loan balances include non-accrual loans.

(3) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.


QUARTER TO DATE VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED)

Three Months Ended
December 31, 2019 over 2018

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

93

$

(418

)

$

(325

)

Securities - tax-exempt(1)

387

(319

)

68

Federal funds sold

(23

)

(16

)

(39

)

Interest-bearing deposits in other banks

167

(143

)

24

Gross loans, net of unearned income

11,105

(2,709

)

8,396

Total interest income(1)

11,729

(3,605

)

8,124

Interest Expense

Transaction deposits

305

224

529

Savings and money market deposits

1,672

(1,360

)

312

Time deposits

1,841

832

2,673

Total interest-bearing deposits

3,818

(304

)

3,514

FHLB and short-term borrowings

(340

)

75

(265

)

Trust preferred securities, net of fair value adjustments

1

(2

)

(1

)

Total interest expense

3,479

(231

)

3,248

Net interest income(1)

$

8,250

$

(3,374

)

$

4,876

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%

(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

TABLE 5. LINKED QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

Three Months Ended

September 30, 2019

December 31, 2019

Average
Balance

Interest
Income /
Expense

Average
Yield /
Rate(3)

Average
Balance

Interest
Income /
Expense

Average
Yield /
Rate(3)

(Dollars in thousands)

Interest-earning assets:

Securities - taxable

$

335,045

$

2,263

2.68

%

$

317,524

$

2,180

2.72

%

Securities - tax-exempt(1)

392,644

3,592

3.63

427,280

3,861

3.59

Federal funds sold

16,315

89

2.16

4,750

19

1.61

Interest-bearing deposits in other banks

171,913

881

2.03

152,917

582

1.51

Gross loans, net of unearned income(2) (3)

3,540,707

49,327

5.53

3,749,865

49,208

5.21

Total interest-earning assets(1)

4,456,624

$

56,152

5.00

%

4,652,336

$

55,850

4.76

%

Allowance for loan losses

(43,327

)

(44,051

)

Other non-interest-earning assets

197,661

201,294

Total assets

$

4,610,958

$

4,809,579

Interest-bearing liabilities

Transaction deposits

$

134,987

$

386

1.13

%

$

200,480

$

603

1.19

%

Savings and money market deposits

1,743,575

9,553

2.17

1,854,042

8,059

1.72

Time deposits

1,276,571

8,064

2.51

1,225,752

7,585

2.46

Total interest-bearing deposits

3,155,133

18,003

2.26

3,280,274

16,247

1.97

FHLB and short-term borrowings

345,794

1,703

1.95

366,190

1,719

1.86

Trust preferred securities, net of fair value

adjustments

904

37

16.06

913

35

15.18

Non-interest-bearing deposits

535,467

521,799

Cost of funds

4,037,298

$

19,743

1.94

%

4,169,176

$

18,001

1.71

%

Other liabilities

29,833

34,443

Total stockholders' equity

543,827

605,960

Total liabilities and stockholders' equity

$

4,610,958

$

4,809,579

Net interest income(1)

$

36,409

$

37,849

Net interest spread(1)

3.06

%

3.05

%

Net interest margin(1)

3.24

%

3.23

%

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.

(2) Average loan balances include nonaccrual loans.

(3) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.


LINKED QUARTER VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED)

Three Months Ended
December 31, 2019 over September 30, 2019

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

(118

)

$

35

$

(83

)

Securities - tax-exempt(1)

310

(41

)

269

Federal funds sold

(51

)

(19

)

(70

)

Interest-bearing deposits in other banks

(90

)

(209

)

(299

)

Gross loans, net of unearned income

2,825

(2,944

)

(119

)

Total interest income(1)

2,876

(3,178

)

(302

)

Interest Expense

Transaction deposits

195

22

217

Savings and money market deposits

576

(2,070

)

(1,494

)

Time deposits

(319

)

(160

)

(479

)

Total interest-bearing deposits

452

(2,208

)

(1,756

)

FHLB and short-term borrowings

97

(81

)

16

Trust preferred securities, net of FV adjustments

(2

)

(2

)

Total interest expense

549

(2,291

)

(1,742

)

Net interest income(1)

$

2,327

$

(887

)

$

1,440

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.

(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

TABLE 6. NON-GAAP FINANCIAL MEASURES

Non-GAAP Financial Measures

In addition to disclosing financial measures determined in accordance with GAAP, the Company discloses non-GAAP financial measures in this release. The Company believes that the non-GAAP financial measures presented in this release reflect industry conventions, or standard measures within the industry, and provide useful information to the Company's management, investors and other parties interested in the Company's operating performance. These measurements should be considered in addition to, but not as a substitute for, financial information prepared in accordance with GAAP. We have defined below each of the non-GAAP measures we use in this release, but these measures may not be synonymous to similar measurement terms used by other companies.

CrossFirst provides reconciliations of these non-GAAP measures below. The measures used in this release include the following:

  • We calculate "return on average tangible common equity" as net income (loss) available to common stockholders divided by average tangible common equity. Average tangible common equity is calculated as average common equity less average goodwill and intangibles and average preferred equity. The most directly comparable GAAP measure is return on average common equity.

  • We calculate ‘‘non-GAAP core operating income (loss)’’ as net income (loss) adjusted to remove non-recurring or non-core income and expense items related to:

    • Restructuring charges and adjustments associated with the transition of a former executive - we incurred restructuring charges in the second quarter of 2018 related to the acceleration of certain stock-based compensation and employee costs, some of which were adjusted in the fourth quarter of 2018.

    • Impairment charges associated with two buildings that were held-for-sale - We acquired a new, larger corporate headquarters to accommodate our business needs, which eliminated the need for two smaller support buildings. The two smaller support buildings had been acquired recently and were extensively remodeled, which resulted in a difference between book and market value for those assets. We sold one of the buildings in 2018. The remaining building was sold during the second quarter of 2019.

    • State tax credits as a result of the purchase and improvement of our new corporate headquarters. We acquired a new, larger corporate headquarters to accommodate our business needs. Our purchase and improvement of the new headquarters resulted in state tax credits.

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

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

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

  • We calculate "tangible common stockholders' equity" as total stockholders' equity less goodwill and intangibles and preferred equity. The most directly comparable GAAP measure is total stockholders' equity.

  • We calculate ‘‘tangible book value per share’’ as tangible common stockholders' equity (as defined above) divided by the total number of shares outstanding. The most directly comparable GAAP measure is book value per share.

  • We calculate "non-GAAP core operating efficiency ratio - fully tax equivalent" as non-interest expense adjusted to remove non-recurring non-interest expenses as defined above under non-GAAP core operating income (loss) divided by net interest income on a fully tax-equivalent basis plus non-interest income adjusted to remove non-recurring non-interest income as defined above under non-GAAP core operating income. The most directly comparable financial measure is the efficiency ratio.

Quarter Ended

Twelve Months Ended

12/31/2018

03/31/2019

06/30/2019

09/30/2019

12/31/2019

12/31/2018

12/31/2019

(Dollars in thousands)

Non-GAAP return on average tangible common equity:

Net income (loss) available to common stockholders

$

9,809

$

9,175

$

9,439

$

10,384

$

(700

)

$

17,490

$

28,298

Average common equity

430,881

466,506

486,880

543,827

605,960

327,446

526,225

Less: average goodwill and intangibles

7,810

7,784

7,759

7,733

7,708

7,847

7,746

Average tangible common equity

423,071

458,722

479,121

536,094

598,252

319,599

518,479

Return on average common equity

9.03

%

7.98

%

7.78

%

7.58

%

(0.46

)%

5.34

%

5.38

%

Non-GAAP Return on average tangible common equity

9.20

%

8.11

%

7.90

%

7.68

%

(0.46

)%

5.47

%

5.46

%

Quarter Ended

Twelve Months Ended

12/31/2018

03/31/2019

06/30/2019

09/30/2019

12/31/2019

12/31/2018

12/31/2019

(Dollars in thousands)

Non-GAAP core operating income (loss):

Net Income (Loss)

$

10,334

$

9,350

$

9,439

$

10,384

$

(700

)

$

19,590

$

28,473

Add: restructuring charges

(815

)

4,733

Less: tax effect(1)

(210

)

1,381

Restructuring charges, net of tax

(605

)

3,352

Add: fixed asset impairments

424

171

424

Less: tax effect(1)

109

44

109

Fixed asset impairments, net of tax

315

127

315

Add: state tax credit(2)

(3,129

)

(1,361

)

(3,129

)

(1,361

)

Non-GAAP core operating income (loss)

$

6,600

$

7,989

$

9,754

$

10,384

$

(700

)

$

19,940

$

27,427

(1) Represents the tax impact of the adjustments above at a tax rate of 25.73%

(2) No tax effect

Quarter Ended

Twelve Months Ended

12/31/2018

03/31/2019

06/30/2019

09/30/2019

12/31/2019

12/31/2018

12/31/2019

(Dollars in thousands)

Non-GAAP core operating return on average assets:

Net income (loss)

10,334

9,350

9,439

10,384

(700

)

19,590

28,473

Non-GAAP core operating income (loss)

6,600

7,989

9,754

10,384

(700

)

19,940

27,427

Average assets

3,884,642

4,168,243

4,402,002

4,610,958

4,809,579

3,494,655

4,499,764

Return on average assets

1.06

%

0.91

%

0.86

%

0.89

%

(0.06

)%

0.56

%

0.63

%

Non-GAAP core operating return on average assets

0.67

%

0.78

%

0.89

%

0.89

%

(0.06

)%

0.57

%

0.61

%

Quarter Ended

Twelve Months Ended

12/31/2018

03/31/2019

06/30/2019

09/30/2019

12/31/2019

12/31/2018

12/31/2019

(Dollars in thousands)

Non-GAAP core operating return on common equity:

Net income (loss)

$

10,334

$

9,350

$

9,439

$

10,384

$

(700

)

$

19,590

$

28,473

Non-GAAP core operating income (loss)

6,600

7,989

9,754

10,384

(700

)

19,940

27,427

Less: Preferred stock dividends

525

175

2,100

175

Net income (loss) available to common stockholders

9,809

9,175

9,439

10,384

(700

)

17,490

28,298

Non-GAAP core operating income (loss) available to common stockholders

6,075

7,814

9,754

10,384

(700

)

17,840

27,252

Average common equity

$

430,881

$

466,506

$

486,880

$

543,827

$

605,960

$

327,446

$

526,225

GAAP return on average common equity

9.03

%

7.98

%

7.78

%

7.58

%

(0.46

)%

5.34

%

5.38

%

Non-GAAP core operating return on common equity

5.59

%

6.79

%

8.04

%

7.58

%

(0.46

)%

5.45

%

5.18

%


Quarter Ended

12/31/2018

03/31/2019

06/30/2019

09/30/2019

12/31/2019

(Dollars in thousands except per share data)

Tangible common stockholders' equity:

Total stockholders' equity

$

490,336

$

480,514

$

499,195

$

602,435

$

601,644

Less: goodwill and other intangible

assets

7,796

7,770

7,745

7,720

7,694

Less: preferred stock

30,000

Tangible common stockholders' equity

$

452,540

$

472,744

$

491,450

$

594,715

$

593,950

Tangible book value per share:

Tangible common stockholders' equity

$

452,540

$

472,744

$

491,450

$

594,715

$

593,950

Shares outstanding at end of period

45,074,322

45,202,370

45,367,641

51,969,203

51,969,203

Book value per share

$

10.21

$

10.63

$

11.00

$

11.59

$

11.58

Tangible book value per share

$

10.04

$

10.46

$

10.83

$

11.44

$

11.43


Quarter Ended

Twelve Months Ended

12/31/2018

03/31/2019

06/30/2019

09/30/2019

12/31/2019

12/31/2018

12/31/2019

(Dollars in thousands)

Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent

Non-interest expense

$

20,166

$

22,631

$

21,960

$

21,172

$

21,885

$

85,755

$

87,648

Less: restructuring charge

$

(815

)

$

$

$

$

$

4,733

$

Non-GAAP non-interest expense

(numerator)

20,981

22,631

21,960

21,172

$

21,885

$

81,022

$

87,648

Net interest income

32,315

33,605

34,874

35,786

37,179

110,368

141,444

Tax equivalent interest income

658

616

612

624

670

3,099

2,522

Non-interest income

1,195

1,645

1,672

3,212

2,186

6,083

8,715

Add: fixed asset impairments

$

$

$

424

$

$

$

171

$

424



Total tax-equivalent income (denominator)



$



34,168



$



35,866



$



37,582



$



39,622



$



40,035



$



119,721



$



153,105

Efficiency Ratio

60.18

%

64.20

%

60.09

%

54.29

%

55.60

%

73.64

%

58.37

%

Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent

61.41

%

63.10

%

58.43

%

53.43

%

54.66

%

67.68

%

57.25

%

CROSSFIRST BANKSHARES, INC. CONTACT:
Matt Needham, Director of Investor Relations
(913) 312-6822
https://investors.crossfirstbankshares.com