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CrossFirst Bankshares, Inc. Reports Third Quarter 2020 Results and Announces Share Repurchase Program

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LEAWOOD, Kan., Oct. 20, 2020 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported its results for the third quarter of 2020, including net income of $8.0 million, or $0.15 per diluted share, and year-to-date 2020 net income of $4.5 million, or $0.09 per diluted share. In addition, the Company announced today that its Board of Directors also approved a $20 million program to repurchase CrossFirst's common stock.

"As we continue to serve our clients and communities in extraordinary ways, we are maintaining our focus on credit quality and being well capitalized, due to the on-going economic volatility caused by the pandemic and upcoming elections. Our overall operating performance remained strong, while we continued to prudently provision an additional $10.9 million, commensurate with the risk in our portfolio and to strengthen the balance sheet," said CrossFirsts CEO and President Mike Maddox. "We are continuing to create operational efficiencies in our organization to offset margin compression and increased provisioning so we can emerge from the downturn a much stronger Company. We believe that the Company is well positioned to benefit from an economic recovery, continue increasing earnings power, and deliver long term value to our shareholders."

Third Quarter 2020 Highlights:

  • $5.5 billion of assets with 11% operating revenue growth compared to the third quarter of 2019

  • Pre-tax, pre-provision profit, a non-GAAP financial measure, for the third quarter of $20.4 million and year-to-date pre-tax, pre-provision profit of $51.3 million

  • Efficiency ratio of 53% for the third quarter of 2020 and a non-GAAP core efficiency ratio of 52% after adjusting for nonrecurring or non-core items

  • $64 million of loan growth from the previous quarter and $854 million or 23% over the last twelve months

  • $188 million of deposit growth from the previous quarter and $834 million or 23% over the last twelve months

  • Book value per share of $11.84 at September 30, 2020 compared to $11.59 at September 30, 2019
     

 

 

Quarter-to-Date

 

Year-to-Date

 

 

September 30,

 

September 30,

 

 

2019

 

2020

 

2019

 

2020

 

 

 

 

 

 

 

 

 

 

 

(Dollars in millions except per share data)

Operating revenue (1)

 

$

39.0

 

 

$

43.4

 

 

$

110.8

 

 

$

127.5

 

Net income

 

$

10.4

 

 

$

8.0

 

 

$

29.2

 

 

$

4.5

 

Diluted earnings per share

 

$

0.21

 

 

$

0.15

 

 

$

0.61

 

 

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets

 

0.89

%

 

0.58

%

 

0.89

%

 

0.11

%

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

 

0.89

%

 

0.58

%

 

0.86

%

 

0.30

%

Return on average common equity

 

7.58

%

 

5.19

%

 

7.76

%

 

0.98

%

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

 

7.68

%

 

5.19

%

 

7.89

%

 

0.99

%

Net interest margin

 

3.19

%

 

2.93

%

 

3.29

%

 

3.08

%

Net interest margin, fully tax-equivalent (3)

 

3.24

%

 

2.98

%

 

3.35

%

 

3.13

%

Efficiency ratio

 

54.29

%

 

53.03

%

 

59.36

%

 

59.44

%

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

 

53.43

%

 

52.23

%

 

58.16

%

 

53.14

%

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

(2) Represents a non-GAAP measure. See "Table 5. 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 income taxes. The incremental federal income tax rate used is 21.0%.


Share Repurchase Program

The Company's Board of Directors has approved up to $20 million in share repurchases. Repurchases under the Company's new program will be made in open market or privately negotiated transactions in compliance with Securities and Exchange Commission Rule 10b-18, subject to market conditions, applicable legal requirements, and other relevant factors. This share repurchase plan does not obligate the Company to acquire any particular amount of common stock, and it may be suspended at any time at the Company's discretion. CrossFirst had 52,195,778 shares of common stock outstanding as of September 30, 2020.

COVID-19 Update
The COVID-19 pandemic and measures taken in response have created economic uncertainty and negatively impacted most of our customers in some capacity. During the third quarter of 2020, we continued to operate in accordance with our comprehensive pandemic plan, which includes social distancing measures for customers and employee interactions. In addition, the Company has continued to support key regulatory relief programs for customers, increased provisions for loan losses, increased monitoring of key loan portfolio segments, modified loans, experienced slower discretionary spending, optimized staffing levels, and elevated its risk management activities. Our branch-lite strategy, technology, and relationship banking model, have allowed us to effectively operate through the pandemic, work remotely, and provide us with the agility to effectively serve our customers when they need it most. The Company continues to assess and monitor the COVID-19 pandemic and federal and local requirements in evaluating the full re-opening of its offices and remains flexible regarding process and timeline.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Programs

CrossFirst is committed to helping our local businesses and the communities that we serve during these extremely challenging times and will continue to help customers access regulatory relief and other programs. As of September 30, 2020, the Company still retains $369 million in loans produced through the Paycheck Protection Program ("PPP") and has been working through the forgiveness process for those loans with the Small Business Administration ("SBA"). In addition to the PPP, we have been granting loan modifications and 90/180 day payment deferrals for many customers who have requested additional relief. As of September 30, 2020, the Company continues to have $318 million in loans on modified payments related to COVID-19 on its balance sheet, which, excluding the PPP loans, represents almost 8% of our total loan balances. We are evaluating each modification on a case-by-case basis and assessing the borrowers' willingness and capacity to support the loan until maturity. The Company will continue to implement additional governmental assistance programs as more details become available around the processes and procedures for such programs and grant loan modifications when appropriate.

Income from Operations

Net Interest Income

The Company produced interest income of $48.5 million for the third quarter of 2020, a decrease of 13% from the third quarter of 2019 and a decrease of 5% from the previous quarter. Interest income was down from the third quarter of 2019 primarily due to declining interest rates. Average earning assets totaled $5.3 billion for the third quarter of 2020, an increase of $1 billion or 20% from the same quarter in 2019. The tax-equivalent yield on earning assets declined from 5.00% to 3.66% during the third quarter of 2020, compared to the third quarter of 2019, primarily due to the movement of variable rate assets indexed to declining market rates and the movement of loans to nonaccrual. Year-to-date, the Company produced interest income of $153.9 million as the Company's asset growth was able to mitigate some of the impact of yield declines on earning assets.

Interest expense for the third quarter of 2020 was $9.1 million, or 54% lower than the third quarter of 2019 and 10% lower than the previous quarter. While average interest-bearing deposits increased to $3.6 billion in the third quarter of 2020, an increase of 15% from the same quarter in 2019, overall interest expense on interest-bearing deposits declined as a result of declining interest rates. Non-deposit funding costs increased to 1.50% from 1.35% in the second quarter of 2020 while overall cost of funds for the quarter was 0.75%, compared to 0.85% for the second quarter of 2020. Year-to-date, the Company had interest expense of $35.2 million, a decrease of 38% from the same period in the prior year.

Tax-equivalent net interest margin decreased to 2.98% in the the current quarter, from 3.19% in the previous quarter and declined from 3.24% in the same quarter in 2019, reflecting the impact of the declining rate environment, changes in macro economic conditions, and lower loan yields from having an increased number of loans on non accrual. Year-to-date, the Company had a tax equivalent margin of 3.13% compared to 3.35% over the same period in the prior year. As of September 30, 2020, CrossFirst has realized $3.2 million of the total $9.9 million in fees anticipated from holding the $369 million of PPP loans, which yielded 2.26% for the quarter, and the Company will continue to recognize these fees as the loans are forgiven. 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 third quarter of 2020. Net interest income totaled $39.3 million for the third quarter of 2020 or 4% lower than the second quarter of 2020, and 10% higher than the third quarter of 2019.

Non-Interest Income

Non-interest income increased $0.9 million in the third quarter of 2020 or 26% compared to the same quarter of 2019 and increased $1.4 million or 54% compared to the second quarter of 2020. While the Company continued to increase overall fee income commensurate with its customer growth, during the third quarter of 2020, it also recorded $1 million of securities gains or $0.7 million more than the previous quarter. The back-to-back swap fee income continued to remain low in the current interest rate environment; however, credit card fees continued to be a major contributor to other non-interest income growth for the quarter. Year-to-date non-interest income increased 35% compared to the same period in the prior year.

Non-Interest Expense

Non-interest expense for the third quarter of 2020 was $23.0 million which increased 9% compared to the third quarter of 2019 and decreased 26% from the second quarter of 2020. The Company recorded a $7.4 million expense related to a non-cash goodwill impairment charge in the previous quarter of 2020 primarily as a result of economic and industry conditions at June 30, 2020. In addition, during the third quarter of 2020, the Company optimized its staffing levels, which is anticipated to generate $4.1 million of annualized savings going forward. The Company expects the full impact of the expense reductions to be realized in the fourth quarter. In addition, the Company continues to realize the benefits from reduced travel, entertainment, and other discretionary spending as a result of the COVID-19 pandemic. Year-to-date non-interest expense increased 16% compared to the same period in the prior year primarily from non reoccurring items reported in previous quarters .

CrossFirsts effective tax rate for the third quarter of 2020 was 16% as compared to 20% for the third quarter of 2019. The 2020 quarter-to-date income tax was impacted by a $3.5 million decrease in income before income taxes that reduced taxes at the statutory rate by $1 million. For both of the comparable periods, the Company continued to benefit from the tax-exempt municipal bond portfolio and bank-owned life insurance.

Balance Sheet Performance & Analysis

During the third quarter of 2020, total assets increased by $43 million or 1% compared to June 30, 2020 and $854 million or 18% since September 30, 2019. During the third quarter of 2020, total available for sale investment securities decreased $48 million to $652 million compared to June 30, 2020, while the overall average for the third quarter was $698 million. During the third quarter of 2020, tax-exempt municipal securities on average increased $2 million and mortgage-backed securities decreased $32 million compared to June 30, 2020. The securities yields declined 14 basis points to a tax equivalent yield of 2.93% for the third quarter of 2020 compared to the prior quarter as a result of lower reinvestment yields and prepayments on mortgage-backed securities increasing premium amortizations.

Loan Growth Results

The Company experienced average loan growth of 3% during the third quarter of 2020, but has increased average loans 26% year over year from September 30, 2019. Loan yields declined 38 basis points during the third quarter commensurate with the effects from adjustable rate loan movements in LIBOR and Prime during 2020, lower loan yields from the PPP, and the impact of increased loans on nonaccrual.

(Dollars in millions)

3Q19

 

4Q19

 

1Q20

 

2Q20

 

3Q20

 

% of
Total

 

QoQ
Growth
($)

 

QoQ
Growth
(%) (1)

 

YoY
Growth
($)

 

YoY
Growth
(%) (1)

Average loans (gross)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

$

1,284

 

 

$

1,315

 

 

$

1,339

 

 

$

1,381

 

 

$

1,308

 

 

29

%

 

$

(73

)

 

(5

)

%

 

$

24

 

2

%

Energy

389

 

 

400

 

 

412

 

 

404

 

 

393

 

 

9

 

 

(11

)

 

(3

)

 

 

4

 

1

 

Commercial real estate

974

 

 

1,007

 

 

1,034

 

 

1,115

 

 

1,169

 

 

26

 

 

54

 

 

5

 

 

 

195

 

20

 

Construction and land development

487

 

 

599

 

 

620

 

 

651

 

 

617

 

 

14

 

 

(34

)

 

(5

)

 

 

130

 

27

 

Residential real estate

362

 

 

384

 

 

455

 

 

517

 

 

583

 

 

13

 

 

66

 

 

13

 

 

 

221

 

61

 

Paycheck Protection Program

 

 

 

 

 

 

245

 

 

362

 

 

8

 

 

117

 

 

48

 

 

 

362

 

NA

 

Consumer

45

 

 

45

 

 

45

 

 

44

 

 

45

 

 

1

 

 

1

 

 

1

 

 

 

 

 

Total

$

3,541

 

 

$

3,750

 

 

$

3,905

 

 

$

4,357

 

 

$

4,477

 

 

100

%

 

$

120

 

 

3

 

%

 

$

936

 

26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yield on loans for the period ending

5.53

%

 

5.21

%

 

4.98

%

 

4.28

%

 

3.90

%

 

 

 

 

 

 

 

 

 

 

(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 & Other Borrowings

The Company continues to maintain a traditional deposit mix, with the goal of keeping pace with growth in the loan portfolio. Deposit growth continued to be funded primarily with money market accounts during the third quarter of 2020, which have historically adjusted with movements in Federal Funds rates. The Company has continued to have its transaction deposits increase as a result of more customers utilizing our insured cash sweep products. The Company's cost of interest bearing deposits declined 15 basis points, during the third quarter of 2020, reflective of changes made to deposit pricing in the prior quarter from declines in market rates.

(Dollars in millions)

3Q19

 

4Q19

 

1Q20

 

2Q20

 

3Q20

 

% of
Total

 

QoQ
Growth
($)

 

QoQ
Growth
(%) (1)

 

YoY Growth
($)

 

YoY
Growth
(%) (1)

Average deposits

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-interest bearing deposits

$

535

 

 

$

522

 

 

$

540

 

 

$

746

 

 

$

714

 

 

16

%

 

$

(32

)

 

(4

)

%

 

$

179

 

 

33

 

%

Transaction deposits

135

 

 

200

 

 

341

 

 

414

 

 

460

 

 

11

%

 

46

 

 

11

 

%

 

325

 

 

241

 

%

Savings and money market deposits

1,744

 

 

1,854

 

 

1,887

 

 

1,933

 

 

1,995

 

 

46

%

 

62

 

 

3

 

%

 

251

 

 

14

 

%

Time deposits

1,277

 

 

1,226

 

 

1,166

 

 

1,195

 

 

1,175

 

 

27

%

 

(20

)

 

(2

)

%

 

(102

)

 

(8

)

%

Total

$

3,691

 

 

$

3,802

 

 

$

3,934

 

 

$

4,288

 

 

$

4,344

 

 

100

%

 

$

56

 

 

1

 

%

 

$

653

 

 

18

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of deposits for the period ending

1.94

%

 

1.70

%

 

1.46

%

 

0.79

%

 

0.67

%

 

 

 

 

 

 

 

 

 

 

Cost of interest-bearing deposits for
the period ending

2.26

%

 

1.97

%

 

1.69

%

 

0.95

%

 

0.80

%

 

 

 

 

 

 

 

 

 

 

(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.


At September 30, 2020, other borrowings totaled $350.6 million, as compared to $501.4 million at June 30, 2020, and $358.5 million as of September 30, 2019.

Asset Quality Position

Overall credit quality metrics were elevated as the Company added $10.9 million to the allowance for loan loss, during the third quarter of 2020, commensurate with adverse movement of risk classifications and to strengthen the balance sheet as there remains continued economic uncertainty resulting from the COVID-19 pandemic and volatility in energy prices. While the Company currently believes the reserve is reflective of the risk in the portfolio, there may be cases where the borrowers or specific impairments related to COVID-19 may have not yet been identified. The majority of loans that migrated to classified status during the quarter were related to the energy portfolio and one commercial and industrial credit.

Net charge-offs were $6.0 million for the third quarter of 2020 as compared to net charge-offs of $1.3 million for the second quarter in 2020. Nonperforming assets to total assets quarter over quarter increased to 1.49% primarily as a result of several energy loans that moved to non-accrual. The elevated charge-offs and increase in nonperforming assets in the third quarter were primarily from a large commercial and industrial credit that moved to nonperforming as it was being restructured, but was completed subsequent to the quarter end. The following table provides information regarding asset quality.

Asset quality (Dollars in millions)

3Q19

 

4Q19

 

1Q20

 

2Q20

 

3Q20

Non-accrual loans

$

43.6

 

 

$

39.7

 

 

$

26.3

 

 

$

37.5

 

 

$

75.6

 

Other real estate owned

2.5

 

 

3.6

 

 

3.6

 

 

2.5

 

 

2.3

 

Non-performing assets

46.7

 

 

47.9

 

 

29.9

 

 

40.3

 

 

82.2

 

Loans 90+ days past due and still accruing

0.6

 

 

4.6

 

 

 

 

0.2

 

 

4.3

 

Loans 30 - 89 days past due

64.7

 

 

6.8

 

 

19.5

 

 

34.9

 

 

45.4

 

Net charge-offs (recoveries)

4.7

 

 

5.5

 

 

19.4

 

 

1.3

 

 

6.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset quality metrics (%)

3Q19

 

 

4Q19

 

 

1Q20

 

 

2Q20

 

 

3Q20

 

Non-performing assets to total assets

1.00

%

 

0.97

%

 

0.59

%

 

0.74

%

 

1.49

%

Allowance for loan loss to total loans

1.18

 

 

1.48

 

 

1.29

 

 

1.61

 

 

1.70

 

Allowance for loan loss to non-performing loans

97

 

 

129

 

 

196

 

 

189

 

 

95

 

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

0.53

 

 

0.58

 

 

2.00

 

 

0.12

 

 

0.54

 

Provision to average loans (1)

0.54

 

 

2.05

 

 

1.44

 

 

1.94

 

 

0.97

 

Classified Loans / (Total Capital + ALLL)

13.2

 

 

13.2

 

 

15.8

 

 

34.9

 

 

43.2

 

(1) Interim periods annualized.


Depending upon the future impact of the COVID-19 pandemic, we may need to make additional increases to our provision in future periods. The future impact of the pandemic is highly uncertain and cannot be fully predicted. The extent of the impact on our customers and, in turn, on our business and operations, will depend on future developments, including actions taken to contain the pandemic. To the extent the pandemic continues to cause a recession or decreased economic activity for an extended time period, we expect our business and operations will be negatively impacted. Customers may continue to seek additional loan modifications or restructuring, or we may experience additional adverse movement in risk classifications, any of which could potentially result in the need to adjust the total allowances for loan losses.

Capital Position
At September 30, 2020, stockholders' equity totaled $618 million, or $11.84 per share, compared to $602 million, or $11.58 per share, at December 31, 2019. Tangible common equity was $618 million and tangible book value per share was $11.83 at September 30, 2020, compared to tangible common equity of $594 million and tangible book value per common share of $11.43 at December 31, 2019.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 12% and the total capital to risk-weighted assets was approximately 13% at September 30, 2020. The Company remains well capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call and webcast to discuss third quarter 2020 results on Tuesday, October 20, 2020, at 4 p.m. CDT / 5 p.m. EDT. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. Investors, news media, and other participants should register for the call or audio webcast at https://investors.CrossFirstBankshares.com. Participants may dial into the call toll-free at (877) 621-5851 from anywhere in the U.S. or (470) 495-9492 internationally, using conference ID no. 4184367. Participants are encouraged to dial into the call or access the webcast approximately 10 minutes prior to the start time.

A replay of the webcast will be available on the Company's website. A replay of the conference call will be available two hours following the close of the call until October 27, 2020, accessible at (855) 859-2056 with conference ID no. 4184367.

Cautionary Notice about Forward-Looking Statements

The financial results in this press release reflect preliminary, unaudited results, which are not final until the Companys Quarterly Report on Form 10-Q 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 managements 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 as well as the uncertain impact of the COVID-19 pandemic. 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 eight full-service banking offices primarily along the I-35 corridor in Kansas, Missouri, Oklahoma and Texas.

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

Unaudited Financial Tables

  • Table 1. Consolidated Balance Sheets

  • Table 2.  Consolidated Statements of Income

  • Table 3. 2019-2020 Year-to-Date Analysis of Changes in Net Interest Income

  • Table 4. 2019 - 2020 Quarterly Analysis of Changes in Net Interest Income

  • Table 5. Non-GAAP Financial Measures


TABLE 1. CONSOLIDATED BALANCE SHEETS

 

December 31, 2019

 

September 30, 2020

 

 

 

(unaudited)

 

(Dollars in thousands)

Assets

 

 

 

Cash and cash equivalents

$

187,320

 

$

223,636

Available-for-sale securities - taxable

298,208

 

214,735

Available-for-sale securities - tax-exempt

443,426

 

437,411

Loans, net of allowance for loan losses of $56,896 and $76,035 at December 31, 2019 and September 30, 2020, respectively

3,795,348

 

4,401,774

Premises and equipment, net

70,210

 

70,599

Restricted equity securities

17,278

 

20,923

Interest receivable

15,716

 

19,003

Foreclosed assets held for sale

3,619

 

2,349

Deferred tax asset

13,782

 

15,864

Goodwill and other intangible assets, net

7,694

 

227

Bank-owned life insurance

65,689

 

67,063

Other

12,943

 

32,112

Total assets

$

4,931,233

 

$

5,505,696

Liabilities and stockholders equity

 

 

 

Deposits

 

 

 

Noninterest bearing

$

521,826

 

$

754,172

Savings, NOW and money market

2,162,187

 

2,597,691

Time

1,239,746

 

1,140,686

Total deposits

3,923,759

 

4,492,549

Federal funds purchased and repurchase agreements

14,921

 

13,531

Federal Home Loan Bank advances

358,743

 

336,100

Other borrowings

921

 

952

Interest payable and other liabilities

31,245

 

44,681

Total liabilities

4,329,589

 

4,887,813

Stockholders equity

 

 

 

Common stock, $0.01 par value:

 

 

 

authorized - 200,000,000 shares, issued - 51,969,203 and 52,195,778 shares at December 31, 2019 and September 30, 2020, respectively

520

 

521

Additional paid-in capital

519,870

 

522,226

Retained earnings

64,803

 

69,355

Accumulated other comprehensive income

16,451

 

25,781

Total stockholders equity

601,644

 

617,883

Total liabilities and stockholders equity

$

4,931,233

 

$

5,505,696


TABLE 2. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2019

 

2020

 

2019

 

2020

 

 

 

 

 

 

 

 

 

(Dollars in thousands except per share data)

Interest Income

 

 

 

 

 

 

 

Loans, including fees

$

49,327

 

$

43,929

 

$

142,319

 

 

$

138,591

Available for sale securities

 

 

 

 

 

 

 

Available for sale securities - Taxable

1,991

 

1,042

 

6,646

 

 

4,174

Available for sale securities - Tax-exempt

2,969

 

3,186

 

8,820

 

 

9,758

Deposits with financial institutions

970

 

47

 

2,452

 

 

583

Dividends on bank stocks

272

 

248

 

801

 

 

808

Total interest income

55,529

 

48,452

 

161,038

 

 

153,914

Interest Expense

 

 

 

 

 

 

 

Deposits

18,003

 

7,298

 

51,421

 

 

29,975

Fed funds purchased and repurchase agreements

74

 

54

 

501

 

 

162

Advances from Federal Home Loan Bank

1,629

 

1,749

 

4,739

 

 

4,980

Other borrowings

37

 

24

 

112

 

 

85

Total interest expense

19,743

 

9,125

 

56,773

 

 

35,202

Net Interest Income

35,786

 

39,327

 

104,265

 

 

118,712

Provision for Loan Losses

4,850

 

10,875

 

10,550

 

 

45,825

Net Interest Income after Provision for Loan Losses

30,936

 

28,452

 

93,715

 

 

72,887

Non-Interest Income

 

 

 

 

 

 

 

Service charges and fees on customer accounts

72

 

792

 

441

 

 

1,947

Gain on sale of available for sale securities

34

 

1,012

 

467

 

 

1,725

Impairment of premises and equipment held for sale

 

 

(424

)

 

Gain on sale of loans

49

 

 

207

 

 

Income from bank-owned life insurance

476

 

464

 

1,416

 

 

1,373

Swap fee income, net

1,879

 

121

 

2,415

 

 

80

ATM and credit card interchange income

476

 

1,482

 

1,312

 

 

2,863

Other non-interest income

226

 

192

 

695

 

 

804

Total non-interest income

3,212

 

4,063

 

6,529

 

 

8,792

Non-Interest Expense

 

 

 

 

 

 

 

Salaries and employee benefits

14,256

 

14,628

 

43,296

 

 

43,022

Occupancy

2,080

 

2,144

 

6,301

 

 

6,274

Professional fees

427

 

1,132

 

1,923

 

 

3,098

Deposit insurance premiums

302

 

1,096

 

2,020

 

 

3,151

Data processing

649

 

652

 

1,868

 

 

2,065

Advertising

580

 

147

 

1,770

 

 

870

Software and communication

900

 

959

 

2,407

 

 

2,772

Foreclosed assets, net

8

 

20

 

33

 

 

1,174

Goodwill impairment

 

 

 

 

7,397

Other non-interest expense

1,970

 

2,233

 

6,145

 

 

6,421

Total non-interest expense

21,172

 

23,011

 

65,763

 

 

76,244

Net Income Before Taxes

12,976

 

9,504

 

34,481

 

 

5,435

Income tax expense

2,592

 

1,498

 

5,308

 

 

928

Net Income

10,384

 

8,006

 

$

29,173

 

 

$

4,507

Basic Earnings Per Share

$

0.22

 

$

0.15

 

$

0.63

 

 

$

0.09

Diluted Earnings Share

$

0.21

 

$

0.15

 

$

0.61

 

 

$

0.09


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

 

Nine Months Ended

 

September 30,

 

2019

 

2020

 

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

$

334,272

 

 

$

7,447

 

2.98

%

 

$

285,363

 

 

$

4,982

 

2.33

%

Securities - tax-exempt (1)

378,651

 

 

10,672

 

3.77

 

 

443,506

 

 

11,807

 

3.56

 

Federal funds sold

18,714

 

 

345

 

2.46

 

 

1,364

 

 

18

 

1.73

 

Interest-bearing deposits in other banks

135,030

 

 

2,107

 

2.09

 

 

170,316

 

 

566

 

0.44

 

Gross loans, net of unearned income (2)

3,373,118

 

 

142,319

 

5.64

 

 

4,248,520

 

 

138,591

 

4.36

 

Total interest-earning assets (1)

4,239,785

 

 

$

162,890

 

5.14

%

 

5,149,069

 

 

$

155,964

 

4.05

%

Allowance for loan losses

(41,329

)

 

 

 

 

 

(64,896

)

 

 

 

 

Other non-interest-earning assets

196,900

 

 

 

 

 

 

218,797

 

 

 

 

 

Total assets

$

4,395,356

 

 

 

 

 

 

$

5,302,970

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

Transaction deposits

$

127,785

 

 

$

1,139

 

1.19

%

 

$

404,967

 

 

$

1,391

 

0.46

%

Savings and money market deposits

1,616,558

 

 

27,326

 

2.26

 

 

1,938,669

 

 

11,689

 

0.81

 

Time deposits

1,249,219

 

 

22,956

 

2.46

 

 

1,178,632

 

 

16,895

 

1.91

 

Total interest-bearing deposits

2,993,562

 

 

51,421

 

2.30

 

 

3,522,268

 

 

29,975

 

1.14

 

FHLB and short-term borrowings

366,708

 

 

5,240

 

1.91

 

 

456,048

 

 

5,145

 

1.51

 

Trust preferred securities, net of fair value adjustments

895

 

 

112

 

16.74

 

 

933

 

 

82

 

11.81

 

Non-interest-bearing deposits

508,888

 

 

 

 

 

668,208

 

 

 

 

Cost of funds

3,870,053

 

 

$

56,773

 

1.96

%

 

4,647,457

 

 

$

35,202

 

1.01

%

Other liabilities

22,762

 

 

 

 

 

 

42,731

 

 

 

 

 

Stockholders equity

502,541

 

 

 

 

 

 

612,782

 

 

 

 

 

Total liabilities and stockholders' equity

$

4,395,356

 

 

 

 

 

 

$

5,302,970

 

 

 

 

 

Net interest income (1)

 

 

$

106,117

 

 

 

 

 

$

120,762

 

 

Net interest spread (1)

 

 

 

 

3.18

%

 

 

 

 

 

3.04

%

Net interest margin (1)

 

 

 

 

3.35

%

 

 

 

 

 

3.13

%

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

 

Nine Months Ended

 

September 30, 2020 over 2019

 

Average Volume

 

Yield/Rate

 

Net Change (2)

 

 

 

 

 

 

 

(Dollars in thousands)

Interest Income

 

 

 

 

 

Securities - taxable

$

(993

)

 

$

(1,472

)

 

$

(2,465

)

Securities - tax-exempt (1)

1,759

 

 

(624

)

 

1,135

 

Federal funds sold

(247

)

 

(80

)

 

(327

)

Interest-bearing deposits in other banks

443

 

 

(1,984

)

 

(1,541

)

Gross loans, net of unearned income

32,557

 

 

(36,285

)

 

(3,728

)

Total interest income (1)

33,519

 

 

(40,445

)

 

(6,926

)

Interest Expense

 

 

 

 

 

Transaction deposits

1,287

 

 

(1,035

)

 

252

 

Savings and money market deposits

4,632

 

 

(20,269

)

 

(15,637

)

Time deposits(1,236) (4,825) (6,061)Total interest-bearing deposits4,683 (26,129) (21,446)FHLB and short-term borrowings1,135 (1,230) (95)Trust preferred securities, net of fair value adjustments4 (34) (30)Total interest expense5,822 (27,393) (21,571)Net interest income(1)$27,697 $(13,052) $14,645 (1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from federal income income taxes. The incremental income income 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. 2019 - 2020 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME
(UNAUDITED)

Three Months Ended

September 30,

2019

2020

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

%

$

257,637

$

1,290

1.99

%

Securities - tax-exempt(1)

392,644

3,592

3.63

440,669

3,855

3.48

Federal funds sold

16,315

89

2.16

Interest-bearing deposits in other banks

171,913

881

2.03

166,423

47

0.11

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

3,540,707

49,327

5.53

4,477,211

43,929

3.90

Total interest-earning assets(1)

4,456,624

$

56,152

5.00

%

5,341,940

$

49,121

3.66

%

Allowance for loan losses

(43,327

)

(75,970

)

Other non-interest-earning assets

197,661

220,282

Total assets

$

4,610,958

$

5,486,252

Interest-bearing liabilities

Transaction deposits

$

134,987

$

386

1.13

%

$

460,420

$

260

0.22

%

Savings and money market deposits

1,743,575

9,553

2.17

1,995,307

2,301

0.46

Time deposits

1,276,571

8,064

2.51

1,174,555

4,737

1.60

Total interest-bearing deposits

3,155,133

18,003

2.26

3,630,282

7,298

0.80

FHLB and short-term borrowings

345,794

1,703

1.95

479,475

1,803

1.50

Trust preferred securities, net of fair value adjustments

904

37

16.06

944

24

10.19

Non-interest-bearing deposits

535,467

714,337

Cost of funds

4,037,298

$

19,743

1.94

%

4,825,038

$

9,125

0.75

%

Other liabilities

29,833

47,304

Total stockholders' equity

543,827

613,910

Total liabilities and stockholders' equity

$

4,610,958

$

5,486,252

Net interest income(1)

$

36,409

$

39,996

Net interest spread(1)

3.06

%

2.91

%

Net interest margin(1)

3.24

%

2.98

%

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

September 30, 2020 over 2019

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

(460

)

$

(513

)

$

(973

)

Securities - tax-exempt(1)

418

(155

)

263

Federal funds sold

(44

)

(45

)

(89

)

Interest-bearing deposits in other banks

(28

)

(806

)

(834

)

Gross loans, net of unearned income

11,169

(16,567

)

(5,398

)

Total interest income(1)

11,055

(18,086

)

(7,031

)

Interest Expense

Transaction deposits

373

(499

)

(126

)

Savings and money market deposits

1,198

(8,450

)

(7,252

)

Time deposits

(601

)

(2,726

)

(3,327

)

Total interest-bearing deposits

970

(11,675

)

(10,705

)

FHLB and short-term borrowings

553

(453

)

100

Trust preferred securities, net of fair value adjustments

1

(14

)

(13

)

Total interest expense

1,524

(12,142

)

(10,618

)

Net interest income(1)

$

9,531

$

(5,944

)

$

3,587

(1) Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income 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. 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:

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.

Goodwill impairment - We performed an interim review of goodwill as of June 30, 2020. The book value of goodwill exceeded its fair market value and resulted in a full $7.4 million impairment.

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 (FTE)" 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.

We calculate "non-GAAP pre-tax pre-provision profit" as net income (loss) before taxes plus the provision for loan losses.


Quarter Ended

Nine Months Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

09/30/2019

09/30/2020

(Dollars in thousands)

Non-GAAP Return on average tangible
common equity:

Net income (loss) available to common
stockholders

$

10,384

$

(700

)

$

3,857

$

(7,356

)

$

8,006

$

28,998

$

4,507

Average common equity

543,827

605,960

612,959

611,466

613,910

499,354

612,782

Less: average goodwill and intangibles

7,733

7,708

7,683

7,576

238

7,759

5,138

Average tangible common equity

536,094

598,252

605,276

603,890

613,672

491,595

607,644

Return on average common equity

7.58

%

(0.46

)

%

2.53

%

(4.84

)

%

5.19

%

7.76

%

0.98

%

Non-GAAP Return on average tangible
common equity

7.68

%

(0.46

)

%

2.56

%

(4.90

)

%

5.19

%

7.89

%

0.99

%


Quarter Ended

Nine Months Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

09/30/2019

09/30/2020

(Dollars in thousands)

Non-GAAP core operating income (loss):

Net income (loss)

$

10,384

$

(700

)

$

3,857

$

(7,356

)

$

8,006

$

29,173

$

4,507

Add: fixed asset impairments

424

Less: tax effect(1)

109

Fixed asset impairments, net of tax

315

Add: Goodwill impairment(2)

7,397

7,397

Add: state tax credit(2)

(1,361

)

Non-GAAP core operating income (loss)

$

10,384

$

(700

)

$

3,857

$

41

$

8,006

$

28,127

$

11,904

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

(2) No tax effect


Quarter Ended

Nine Months Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

09/30/2019

09/30/2020

(Dollars in thousands)

Non-GAAP core operating
return on average assets:

Net income (loss)

$

10,384

$

(700

)

$

3,857

$

(7,356

)

$

8,006

$

29,173

$

4,507

Non-GAAP core operating income (loss)

10,384

(700

)

3,857

41

8,006

28,127

11,904

Average assets

$

4,610,958

$

4,809,579

$

4,975,531

$

5,441,513

$

5,486,252

$

4,395,356

$

5,302,970

Return on average assets

0.89

%

(0.06

)

%

0.31

%

(0.54

)

%

0.58

%

0.89

%

0.11

%

Non-GAAP core operating
return on average assets

0.89

%

(0.06

)

%

0.31

%

%

0.58

%

0.86

%

0.30

%


Quarter Ended

Nine Months Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

09/30/2019

09/30/2020

(Dollars in thousands)

Non-GAAP core operating return
on common equity:

Net income (loss)

$

10,384

$

(700

)

$

3,857

$

(7,356

)

$

8,006

$

29,173

$

4,507

Non-GAAP core operating income (loss)

10,384

(700

)

3,857

41

8,006

28,127

11,904

Less: Preferred stock dividends

175

Net income (loss) available to common
stockholders

10,384

(700

)

3,857

(7,356

)

8,006

28,998

4,507

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

10,384

(700

)

3,857

41

8,006

27,952

11,904

Average common equity

$

543,827

$

605,960

$

612,959

$

611,466

$

613,910

$

499,354

$

612,782

Return on average common equity

7.58

%

(0.46

)

%

2.53

%

(4.84

)

%

5.19

%

7.76

%

0.98

%

Non-GAAP core operating return
on common equity

7.58

%

(0.46

)

%

2.53

%

0.03

%

5.19

%

7.48

%

2.59

%


Quarter Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

(Dollars in thousands except per share data)

Tangible common stockholders' equity:

Total stockholders' equity

$

602,435

$

601,644

$

611,946

$

608,092

$

617,883

Less: goodwill and other intangible assets

7,720

7,694

7,669

247

227

Tangible common stockholders' equity

$

594,715

$

593,950

$

604,277

$

607,845

$

617,656

Tangible book value per share:

Tangible common stockholders' equity

$

594,715

$

593,950

$

604,277

$

607,845

$

617,656

Shares outstanding at end of period

51,969,203

51,969,203

52,098,062

52,167,573

52,195,778

Book value per share

$

11.59

$

11.58

$

11.75

$

11.66

$

11.84

Tangible book value per share

$

11.44

$

11.43

$

11.60

$

11.65

$

11.83


Quarter Ended

Nine Months Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

09/30/2019

09/30/2020

(Dollars in thousands)

Non-GAAP Core Operating Efficiency
Ratio - Fully Tax Equivalent (FTE)

Non-interest expense

$

21,172

$

21,885

$

22,223

$

31,010

$

23,011

$

65,763

$

76,244

Less: goodwill impairment

7,397

7,397

Adjusted Non-interest expense (numerator)

$

21,172

$

21,885

$

22,223

$

23,613

$

23,011

$

65,763

$

68,847

Net interest income

35,786

37,179

38,228

41,157

39,327

104,265

118,712

Tax equivalent interest income(1)

624

670

695

685

669

1,852

2,050

Non-interest income

3,212

2,186

2,095

2,634

4,063

6,529

8,792

Add: fixed asset impairments

424

Total tax-equivalent income (denominator)

$

39,622

$

40,035

$

41,018

$

44,476

$

44,059

$

113,070

$

129,554

Efficiency Ratio

54.29

%

55.60

%

55.11

%

70.81

%

53.03

%

59.36

%

59.44

%

Non-GAAP Core Operating Efficiency
Ratio - Fully Tax Equivalent (FTE)

53.43

%

54.66

%

54.18

%

53.09

%

52.23

%

58.16

%

53.14

%

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


Quarter Ended

Nine Months Ended

09/30/2019

12/31/2019

03/31/2020

06/30/2020

09/30/2020

09/30/2019

09/30/2020

(Dollars in thousands)

Non-GAAP Pre-Tax Pre-Provision Profit

Net income (loss) before taxes

$

12,976

$

(1,870

)

$

4,150

$

(8,219

)

$

9,504

$

34,481

$

5,435

Add: Provision for loan losses

4,850

19,350

13,950

21,000

10,875

10,550

45,825

Non-GAAP Pre-Tax Pre-Provision Profit

$

17,826

$

17,480

$

18,100

$

12,781

$

20,379

$

45,031

$

51,260