CrossFirst Bankshares, Inc. Reports Fourth Quarter & Full Year 2020 Results

January 28, 2021

Fourth Quarter 2020 Key Financial Performance Metrics
 
                     
Net Income   Diluted EPS   PTPP   Net Interest Margin
(FTE)
  Efficiency Ratio   Book Value Per
Common Share
$8.1 million   $0.15   $20.8 million   3.12%   53.35%   $12.08

LEAWOOD, Kan., Jan. 28, 2021 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported its results for the fourth quarter and full year of 2020, including net income of $8.1 million, or $0.15 per diluted share for the fourth quarter, and net income of $12.6 million, or $0.24 per diluted share for the full year. The financial results were impacted by the significant loan loss provisioning required to address uncertainty and risk in the loan portfolio created in part by the pandemic. In the fourth quarter, the Company provisioned an additional $10.9 million, bringing the full year loan provision to $56.7 million.

CEO Commentary:

"Despite the pandemic and depressed commodity prices, we had a great 2020 and accomplished many key strategic initiatives. I am very pleased with the resilience our clients and employees have exhibited during such difficult times," said CrossFirst’s CEO and President Mike Maddox. "Even with the significant loan loss provisioning, we continued to generate moderate net income and record pretax, pre-provision profits for the Company this year. During the fourth quarter, we reduced our energy concentration, experienced a decline in our classified and nonperforming assets, and successfully commenced our share repurchase program."

2020 Fourth Quarter and Full Year Highlights:

  • $5.7 billion of assets with 15% full year operating revenue growth compared to 2019
  • Pre-tax, pre-provision profit (PTPP), a non-GAAP financial measure, for the fourth quarter of $20.8 million and full year PTPP of $72.0 million
  • Efficiency ratio of 53% for the fourth quarter of 2020 and 58% for the full year; a non-GAAP core efficiency ratio of 53% for full year 2020 after adjusting for nonrecurring items
  • $593 million or 15% loan growth and $771 million or 20% deposit growth over the last twelve months
  • Book value per share of $12.08 at December 31, 2020 compared to $11.58 at December 31, 2019
    Quarter-to-Date   Full Year
    December 31,   December 31,
(Dollars in millions except per share data)   2019   2020   2019   2020
Operating revenue(1)   $ 39.4      $ 44.5      $ 150.2      $ 172.0   
Net income (loss)   $ (0.7 )   $ 8.1      $ 28.5      $ 12.6   
Diluted earnings (loss) per share   $ (0.01 )   $ 0.15      $ 0.58      $ 0.24   
                         
Return on average assets   (0.06 )%   0.58 %   0.63 %   0.24 %
Non-GAAP core operating return on average assets(2)   (0.06 )%   0.58 %   0.61 %   0.37 %
Return on average common equity   (0.46 )%   5.19 %   5.38 %   2.05 %
Net interest margin   3.17 %   3.07 %   3.26 %   3.08 %
Net interest margin, fully tax-equivalent(3)   3.23 %   3.12 %   3.31 %   3.13 %
Efficiency ratio   55.60 %   53.35 %   58.37 %   58.13 %
Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3)   54.66 %   52.54 %   57.25 %   52.98 %
(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%.
 

COVID-19 Update

The COVID-19 pandemic and measures taken in response have created economic uncertainty and negatively impacted many of our customers in some capacity. During the fourth quarter of 2020, we continued to operate in accordance with our comprehensive pandemic plan, which includes social distancing measures for customer 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 certain loan portfolio segments, modified loans, slowed 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 along with 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 December 31, 2020, the Company retained $292 million in loans produced through the Paycheck Protection Program ("PPP"), and the Company 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 December 31, 2020, the Company had $90 million in loans on modified payments related to COVID-19 on our balance sheet, which, excluding the PPP loans, represented 2% 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 offer additional governmental assistance programs as more details become available around the processes and procedures for such programs and will grant loan modifications or new PPP loans when appropriate.

Income from Operations

Net Interest Income

The Company produced interest income of $49.5 million for the fourth quarter of 2020, a decrease of 10% from the fourth quarter of 2019, and an increase of 2% from the previous quarter. Interest income decreased from the fourth quarter of 2019 primarily due to lower interest rates. Average earning assets totaled $5.4 billion for the fourth quarter of 2020, an increase of $0.7 billion or 16% from the same quarter in 2019. The fourth quarter 2020 tax-equivalent yield on earning assets declined to 3.71% from 4.76% in the fourth quarter of 2019, primarily due to the movement of variable rate assets indexed to declining market rates. For full year 2020, the Company produced interest income of $203.4 million as the Company's asset growth was able to partially mitigate some of the impact of yield declines.

Interest expense for the fourth quarter of 2020 was $8.0 million, or 56% lower than the fourth quarter of 2019 and 12% lower than the previous quarter. While average interest-bearing deposits increased to $3.8 billion in the fourth quarter of 2020, an increase of 16% from the same quarter in 2019, overall interest expense on interest-bearing deposits declined as a result of declining interest rates. In the fourth quarter of 2020, non-deposit funding costs increased to 1.78% from 1.50% primarily as a result of several short term lower-cost borrowings maturing. Overall the cost of funds for the fourth quarter of 2020 was 0.65%, compared to 0.75% for the third quarter of 2020. For full year 2020, the Company had interest expense of $43.2 million, a decrease of 42% from full year 2019.

Tax-equivalent net interest margin increased to 3.12% for the current quarter, from 2.98% in the previous quarter, and declined from 3.23% in the fourth quarter of 2019, reflecting the impact of the declining rate environment and changes in macroeconomic conditions. For the full year 2020, the Company had a tax equivalent margin of 3.13% compared to 3.31% for full year 2019. As of December 31, 2020, CrossFirst realized $5.8 million of the total $9.9 million in fees anticipated from making $369 million of total PPP loans. The PPP loans yielded 4.91% for the fourth quarter 2020, and the Company will continue to recognize these fees over contractual maturity and expedite recognition as 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 fourth quarter of 2020 and $2.7 million for the full year of 2020. Full year 2020 net interest income was $160 million or 13% higher than full year 2019, while net interest income totaled $41.5 million for the fourth quarter of 2020 or 6% higher than the third quarter of 2020, and 12% higher than the fourth quarter of 2019.

Non-Interest Income

Non-interest income increased $0.8 million in the fourth quarter of 2020, or 35% compared to the same quarter of 2019, and decreased $1.1 million or 27% compared to the third quarter of 2020. For the fourth quarter and the full year of 2020, the Company continued to increase overall fee income commensurate with its customer growth and recorded stronger credit card interchange fees and other service charges than in the same periods in 2019. Because of the current interest rate environment, the Company had significantly less activity in its back-to-back swap program. The Company realized bond gains throughout the year related to continuously monitoring its investment portfolio. Full year non-interest income increased 35% compared to full year 2019, despite having nearly $3.0 million less income from its back-to-back swap program.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2020 was $24 million, which increased 8% compared to the fourth quarter of 2019, and increased 3% from the third quarter of 2020. During the fourth quarter, the Company recorded higher professional fees as well as added occupancy expense from opening two new locations. Full year non-interest expense increased 14% compared to the same period in the prior year, primarily from nonrecurring items reported in previous quarters. The Company recorded several nonrecurring expenses during the year, including a $7.4 million expense related to a non-cash goodwill impairment charge in the second quarter of 2020, in addition to one-time expenses for optimizing staffing levels in the third quarter of 2020. The Company also had increased professional and foreclosure costs for 2020 as a result of restructuring credits driven in part by the macroeconomic conditions created by the COVID-19 pandemic. Overall, the Company continues to realize benefits from reduced travel, entertainment, and other discretionary spending as a result of the COVID-19 pandemic.

CrossFirst’s effective tax rate for the fourth quarter of 2020 was 18% as compared to 63% for the fourth quarter of 2019. The 2020 quarter-to-date income tax was impacted by an $11.7 million increase in income before income taxes that increased taxes at the statutory rate by $2.5 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 fourth quarter of 2020, total assets increased by $154 million, or 3% compared to September 30, 2020, and $728 million or 15% since December 31, 2019. During the fourth quarter of 2020, total available for sale investment securities increased $5 million to $655 million compared to September 30, 2020, while the overall average for the fourth quarter of 2020 was $674 million. During the fourth quarter of 2020, tax-exempt municipal securities on average increased $18 million and mortgage-backed securities decreased $42 million compared to September 30, 2020. The securities' yields maintained a tax equivalent yield of 2.96% for the fourth quarter of 2020. As part of management's investment strategy, during 2020, the Company's security portfolio decreased $85 million as the Company chose not to replace all of the cash flows associated with mortgaged-backed securities prepayments and also realized gains by selling bonds with potential credit concerns related to COVID-19. The overall average securities balance for full year 2020 was $715 million with a tax equivalent yield of 3.05%.

Loan Growth Results

The Company experienced average loan growth of 0.4% during the fourth quarter of 2020, but increased average loans 20% year-over-year from December 31, 2019. During the fourth quarter, loan growth was impacted by $77 million of PPP loans forgiven, but core loan growth in real estate offset this impact. The Company reduced its energy exposure during the quarter and experienced 10% growth in residential and multifamily real estate loans. Loan yields increased 10 basis points during the fourth quarter as the loan fees recognized from PPP loan forgiveness were able to offset the impact of yield declines from loan repricing. During 2020, full year loan yields declined to 4.26% compared to 5.52% in the prior year, primarily as a result of lower interest rates from adjustable rate loan movements during 2020.

 
 
(Dollars in millions) 4Q19   1Q20   2Q20   3Q20   4Q20   % of
Total
  QoQ
Growth
($)
  QoQ
Growth
(%)(1)
  YoY
Growth
($)
  YoY
Growth
(%)(1)
Average loans (gross)                                                          
Commercial $ 1,315     $ 1,339     $ 1,381     $ 1,308     $ 1,367     30 %   $ 59     5 %   $ 52     4 %
Energy   400       412       404       393       381     8       (12 )   (3 )     (19 )   (5 )
Commercial real estate   1,007       1,034       1,115       1,169       1,194     27       25     2       187     19  
Construction and land development   599       620       651       617       585     13       (32 )   (5 )     (14 )   (2 )
Residential and multifamily real estate   384       455       517       583       664     15       81     14       280     73  
Paycheck Protection Program               245       362       258     6       (104 )   (29 )     258     NA  
Consumer   45       45       44       45       45     1           1           2  
Total $ 3,750     $ 3,905     $ 4,357     $ 4,477     $ 4,494     100 %   $ 17     0.4 %   $ 744     20 %
 
Yield on loans for the period ending   5.21 %     4.98 %     4.28 %     3.90 %     4.00 %                                
(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 experienced average deposit growth of 5% during the fourth quarter of 2020, but increased average deposits 20% year-over-year from December 31, 2019. At the end of 2020, the Company held a loan to deposit ratio of 95%, compared to 100% at the end of the third quarter, and 98% at the end of 2019. The additional deposit growth and liquidity for the quarter was primarily driven by transaction deposits as a result of more customers utilizing our insured cash sweep products. In addition, our money market account pricing remains competitive so the Company can continue growing, while still being able to improve the overall cost of deposits. The Company's cost of interest bearing deposits declined 11 basis points during the fourth quarter of 2020, reflective of changes made to deposit pricing. During 2020, full year costs of funds were 0.92% compared to 1.90% in the prior year, primarily as a result of the lower interest rate environment and declining Fed Funds pricing.

                              
 
(Dollars in millions) 4Q19   1Q20   2Q20   3Q20   4Q20   % of
Total
  QoQ
Growth
($)
  QoQ
Growth
(%)(1)
  YoY Growth
($)
  YoY
Growth
(%)(1)
Average deposits                                                                        
Non-interest bearing deposits $ 522     $ 540     $ 746     $ 714     $ 732     16 %   $ 18     3 %   $ 210     40 %
Transaction deposits   200       341       414       460       575     13 %     115     25 %     375     188 %
Savings and money market deposits   1,854       1,887       1,933       1,995       2,158     47 %     163     8 %     304     16 %
Time deposits   1,226       1,166       1,195       1,175       1,087     24 %     (88 )   (7 )%     (139 )   (11 )%
Total $ 3,802     $ 3,934     $ 4,288     $ 4,344     $ 4,552     100 %   $ 208     5 %   $ 750     20 %
 
                                                                                                      
Cost of deposits for the period ending   1.70 %     1.46 %     0.79 %     0.67 %     0.58 %                                  
Cost of interest-bearing deposits for
the period ending
  1.97 %     1.69 %     0.95 %     0.80 %     0.69 %                                  
(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 December 31, 2020, other borrowings totaled $296.4 million, as compared to $350.6 million at September 30, 2020, and $374.6 million at December 31, 2019.

Asset Quality Position

The Company added $10.9 million to the allowance for loan loss during the fourth quarter of 2020, bringing the total allowance to loans to 1.70%, commensurate with adverse movement of risk classifications and charge-off activity. 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 fourth quarter of 2020 were related to commercial real estate, particularly within the hotel portfolio, which partially offset several pay downs in the energy portfolio and partial charge-offs of other classified assets.

Net charge-offs were $11.6 million for the fourth quarter of 2020, as compared to net charge-offs of $6.0 million for the third quarter in 2020. The elevated charge-offs in the fourth quarter reflected the Company's approach to charging down multiple credits, mostly with exposures in energy and commercial and industrial. Full-year net charge-offs for 2020 were $38.3 million as compared to $11 million for the full year 2019. Nonperforming assets to total assets quarter over quarter decreased to 1.39%, primarily as a result of the associated charge-offs. The following table provides information regarding asset quality.

                   
Asset quality (Dollars in millions) 4Q19   1Q20   2Q20   3Q20   4Q20
Non-accrual loans $ 39.7     $ 26.3     $ 37.5     $ 75.6     $ 75.1  
Other real estate owned 3.6     3.6     2.5     2.3     2.3  
Nonperforming assets 47.9     29.9     40.3     82.2     78.4  
Loans 90+ days past due and still accruing 4.6         0.2     4.3     1.0  
Loans 30 - 89 days past due 6.8     19.5     34.9     45.4     18.1  
Net charge-offs (recoveries) 5.5     19.4     1.3     6.0     11.6  

 

Asset quality metrics (%) 4Q19   1Q20   2Q20   3Q20   4Q20
Nonperforming assets to total assets 0.97 %   0.59 %   0.74 %   1.49 %   1.39 %
Allowance for loan loss to total loans 1.48     1.29     1.61     1.70     1.70  
Allowance for loan loss to nonperforming loans 129.0     196.0     188.6     95.2     99.0  
Net charge-offs (recoveries) to average loans(1) 0.58     2.00     0.12     0.54     1.03  
Provision to average loans(1) 2.05     1.44     1.94     0.97     0.96  
Classified Loans / (Total Capital + ALLL) 13.2     15.8     34.9     43.2     40.9  
(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 decrease economic activity for an extended time period, we expect our business and operations will be further negatively impacted. Customers may continue to seek additional loan modifications or restructurings, 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 December 31, 2020, stockholders' equity totaled $624 million, or $12.08 per share, compared to $602 million, or $11.58 per share, at December 31, 2019. Tangible common equity was $624 million and tangible book value per share was $12.08 at December 31, 2020, compared to tangible common equity of $594 million and tangible book value per share of $11.43 at December 31, 2019. The Company's Board of Directors approved a share repurchase program of up to $20 million in the third quarter of 2020. During the fourth quarter of 2020, CrossFirst repurchased $6.1 million or 609,613 shares of common stock under the program at a weighted average price of $9.91 per share.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 11.93% and the total capital to risk-weighted assets was approximately 13.20% at December 31, 2020. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call and webcast to discuss fourth quarter 2020 and full year results on Thursday, January 28, 2021, at 4:00 p.m. CT / 5:00 p.m. ET. 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. 8838529. 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 February 4, 2021, accessible at (855) 859-2056 with conference ID no. 8838529.

Cautionary Notice about Forward-Looking Statements

The financial results in this earnings 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 its 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 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.

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   December 31, 2020
      (unaudited)
  (Dollars in thousands)
Assets      
Cash and cash equivalents $ 187,320     $ 408,810  
Available-for-sale securities - taxable 296,047     177,238  
Available-for-sale securities - tax-exempt 443,426     477,350  
Loans, net of allowance for loan losses of $56,896 and $75,295 at December 31, 2019 and December 31, 2020, respectively 3,795,348     4,366,602  
Premises and equipment, net 70,210     70,509  
Restricted equity securities 17,278     15,543  
Interest receivable 15,716     17,236  
Foreclosed assets held for sale 3,619     2,347  
Goodwill and other intangible assets, net 7,694     208  
Bank-owned life insurance 65,689     67,498  
Other 28,886     55,962  
Total assets $ 4,931,233     $ 5,659,303  
Liabilities and stockholders’ equity      
Deposits      
Non-interest bearing $ 521,826     $ 718,459  
Savings, NOW and money market 2,162,187     2,932,799  
Time 1,239,746     1,043,482  
Total deposits 3,923,759     4,694,740  
Federal funds purchased and repurchase agreements 14,921     2,306  
Federal Home Loan Bank advances 358,743     293,100  
Other borrowings 921     963  
Interest payable and other liabilities 31,245     43,766  
Total liabilities 4,329,589     5,034,875  
Stockholders’ equity      
Common stock, $0.01 par value:      
authorized - 200,000,000 shares, issued - 51,969,203 and 52,289,129 shares at December 31, 2019 and December 31, 2020, respectively 520     523  
Treasury stock, at cost:      
0 and 609,613 shares held at December 31, 2019 and 2020, respectively     (6,061 )
Additional paid-in capital 519,870     522,911  
Retained earnings 64,803     77,652  
Accumulated other comprehensive income 16,451     29,403  
Total stockholders’ equity 601,644     624,428  
Total liabilities and stockholders’ equity $ 4,931,233     $ 5,659,303  
               

        TABLE 2. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
  2019   2020   2019   2020
   
  (Dollars in thousands except per share data)
Interest Income              
Loans, including fees $ 49,208     $ 45,147     $ 191,527     $ 183,738  
Available for sale securities              
Available for sale securities - Taxable 1,894     899     8,540     5,073  
Available for sale securities - Tax-exempt 3,191     3,255     12,011     13,013  
Deposits with financial institutions 601     56     3,053     639  
Dividends on bank stocks 286     177     1,087     985  
Total interest income 55,180     49,534     216,218     203,448  
Interest Expense              
Deposits 16,247     6,610     67,668     36,585  
Fed funds purchased and repurchase agreements 91     2     592     164  
Advances from Federal Home Loan Bank 1,628     1,361     6,367     6,341  
Other borrowings 35     24     147     109  
Total interest expense 18,001     7,997     74,774     43,199  
Net Interest Income 37,179     41,537     141,444     160,249  
Provision for Loan Losses 19,350     10,875     29,900     56,700  
Net Interest Income after Provision for Loan Losses 17,829     30,662     111,544     103,549  
Non-Interest Income              
Service charges and fees on customer accounts 163     856     604     2,803  
Gain (loss) on sale of available for sale securities 520     (21 )   987     1,704  
Impairment of premises and equipment held for sale         (424 )    
Gain on sale of loans     44     207     44  
Income from bank-owned life insurance 462     436     1,878     1,809  
Swap fee income (loss), net 338     (284 )   2,753     (204 )
ATM and credit card interchange income 473     1,516     1,785     4,379  
Other non-interest income 226     402     917     1,198  
Total non-interest income 2,182     2,949     8,707     11,733  
Non-Interest Expense              
Salaries and employee benefits 13,818     14,725     57,114     57,747  
Occupancy 2,048     2,427     8,349     8,701  
Professional fees 1,041     1,120     2,964     4,218  
Deposit insurance premiums 767     1,150     2,787     4,301  
Data processing 676     654     2,544     2,719  
Advertising 685     349     2,455     1,219  
Software and communication 910     978     3,317     3,750  
Foreclosed assets, net 54     74     84     1,239  
Goodwill impairment             7,397  
Other non-interest expense 1,882     2,255     8,026     8,677  
Total non-interest expense 21,881     23,732     87,640     99,968  
Net Income (Loss) Before Taxes (1,870 )   9,879     32,611     15,314  
Income tax expense (benefit) (1,170 )   1,785     4,138     2,713  
Net Income (Loss) (700 )   8,094     $ 28,473     $ 12,601  
Basic Earnings (Loss) Per Share $ (0.01 )   $ 0.16     $ 0.59     $ 0.24  
Diluted Earnings (Loss) Per Share $ (0.01 )   $ 0.15     $ 0.58     $ 0.24  
                               

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

  Twelve Months Ended
  December 31,
  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 $ 330,051     $ 9,627     2.92 %   $ 267,715     $ 6,058     2.26 %
Securities - tax-exempt(1) 390,908     14,533     3.72     447,324     15,745     3.52  
Federal funds sold 15,195     364     2.40     1,020     18     1.73  
Interest-bearing deposits in other banks 139,538     2,689     1.93     179,978     621     0.35  
Gross loans, net of unearned income(2) 3,468,079     191,527     5.52     4,310,345     183,738     4.26  
Total interest-earning assets(1) 4,343,771     $ 218,740     5.04 %   5,206,382     $ 206,180     3.96 %
Allowance for loan losses (42,015 )           (68,897 )        
Other non-interest-earning assets 198,008             220,994          
Total assets $ 4,499,764             $ 5,358,479          
Interest-bearing liabilities                      
Transaction deposits $ 146,109     $ 1,742     1.19 %   $ 447,777     $ 1,696     0.38 %
Savings and money market deposits 1,676,417     35,385     2.11     1,993,964     14,033     0.70  
Time deposits 1,243,304     30,541     2.46     1,155,492     20,856     1.80  
Total interest-bearing deposits 3,065,830     67,668     2.21     3,597,233     36,585     1.02  
FHLB and short-term borrowings 366,577     6,959     1.90     417,956     6,508     1.56  
Trust preferred securities, net of fair value
adjustments
899     147     16.34     939     106     11.34  
Non-interest-bearing deposits 512,142             684,294          
Cost of funds 3,945,448     $ 74,774     1.90 %   4,700,422     $ 43,199     0.92 %
Other liabilities 25,708             43,331          
Stockholders’ equity 528,608             614,726          
Total liabilities and stockholders' equity $ 4,499,764             $ 5,358,479          
Net interest income(1)     $ 143,966             $ 162,981      
Net interest spread(1)         3.14 %           3.04 %
Net interest margin(1)         3.31 %           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)
  Twelve Months Ended
  December 31, 2020 over 2019
  Average Volume   Yield/Rate   Net Change(2)
   
  (Dollars in thousands)
Interest Income          
Securities - taxable $ (1,624 )   $ (1,945 )   $ (3,569 )
Securities - tax-exempt(1) 2,022     (810 )   1,212  
Federal funds sold (266 )   (80 )   (346 )
Interest-bearing deposits in other banks 612     (2,680 )   (2,068 )
Gross loans, net of unearned income 41,037     (48,826 )   (7,789 )
Total interest income(1) 41,781     (54,341 )   (12,560 )
Interest Expense          
Transaction deposits 1,748     (1,794 )   (46 )
Savings and money market deposits 5,725     (27,077 )   (21,352 )
Time deposits (2,018 )   (7,667 )   (9,685 )
Total interest-bearing deposits 5,455     (36,538 )   (31,083 )
FHLB and short-term borrowings 897     (1,348 )   (451 )
Trust preferred securities, net of fair value adjustments 6     (47 )   (41 )
Total interest expense 6,358     (37,933 )   (31,575 )
Net interest income(1) $ 35,423     $ (16,408 )   $ 19,015  
           
(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
  December 31,
  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 $ 317,524     $ 2,180     2.72 %   $ 215,348     $ 1,075     1.99 %
Securities - tax-exempt(1) 427,280     3,861     3.59     458,651     3,939     3.42  
Federal funds sold 4,750     19     1.61              
Interest-bearing deposits in other banks 152,917     582     1.51     208,650     56     0.11  
Gross loans, net of unearned income(2) (3) 3,749,865     49,208     5.21     4,493,806     45,147     4.00  
Total interest-earning assets(1) 4,652,336     $ 55,850     4.76 %   5,376,455     $ 50,217     3.71 %
Allowance for loan losses (44,051 )           (80,770 )        
Other non-interest-earning assets 201,294             227,511          
Total assets $ 4,809,579             $ 5,523,196          
Interest-bearing liabilities                      
Transaction deposits $ 200,480     $ 603     1.19 %   $ 574,811     $ 306     0.21 %
Savings and money market deposits 1,854,042     8,059     1.72     2,158,044     2,344     0.43  
Time deposits 1,225,752     7,585     2.46     1,086,825     3,960     1.45  
Total interest-bearing deposits 3,280,274     16,247     1.97     3,819,680     6,610     0.69  
FHLB and short-term borrowings 366,190     1,719     1.86     304,923     1,363     1.78  
Trust preferred securities, net of fair value
adjustments
913     35     15.18     954     24     9.97  
Non-interest-bearing deposits 521,799             732,028          
Cost of funds 4,169,176     $ 18,001     1.71 %   4,857,585     $ 7,997     0.65 %
Other liabilities 34,443             45,115          
Total stockholders' equity 605,960             620,496          
Total liabilities and stockholders' equity $ 4,809,579             $ 5,523,196          
Net interest income(1)     $ 37,849             $ 42,220      
Net interest spread(1)         3.05 %           3.06 %
Net interest margin(1)         3.23 %           3.12 %
                       
(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
  December 31, 2020 over 2019
  Average Volume   Yield/Rate   Net Change(2)
   
  (Dollars in thousands)
Interest Income          
Securities - taxable $ (577 )   $ (528 )   $ (1,105 )
Securities - tax-exempt(1) 269     (191 )   78  
Federal funds sold (9 )   (10 )   (19 )
Interest-bearing deposits in other banks 155     (681 )   (526 )
Gross loans, net of unearned income 8,638     (12,699 )   (4,061 )
Total interest income(1) 8,476     (14,109 )   (5,633 )
Interest Expense          
Transaction deposits 480     (777 )   (297 )
Savings and money market deposits 1,132     (6,847 )   (5,715 )
Time deposits (784 )   (2,841 )   (3,625 )
Total interest-bearing deposits 828     (10,465 )   (9,637 )
FHLB and short-term borrowings (283 )   (73 )   (356 )
Trust preferred securities, net of fair value adjustments 2     (13 )   (11 )
Total interest expense 547     (10,551 )   (10,004 )
Net interest income(1) $ 7,929     $ (3,558 )   $ 4,371  
           
(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   Twelve Months Ended
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020   12/31/2019   12/31/2020
                                         
  (Dollars in thousands)
Non-GAAP return on average tangible common equity:                                                      
Net income (loss) available to common stockholders $ (700 )   $ 3,857     $ (7,356 )   $ 8,006     $ 8,094     $ 28,298     $ 12,601  
Average common equity   605,960       612,959       611,466       613,910       620,496       526,225       614,726  
Less: average goodwill and intangibles   7,708       7,683       7,576       238       218       7,746       3,898  
Average tangible common equity   598,252       605,276       603,890       613,672       620,278       518,479       610,828  
Return on average common equity   (0.46 )%     2.53 %     (4.84 )%     5.19 %     5.19 %     5.38 %     2.05 %
Non-GAAP return on average tangible common equity   (0.46 )%     2.56 %     (4.90 )%     5.19 %     5.19 %     5.46 %     2.06 %
                            

 

  Quarter Ended   Twelve Months Ended
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020   12/31/2019   12/31/2020
   
  (Dollars in thousands)
Non-GAAP core operating income (loss):                                                      
Net income (loss) $ (700 )   $ 3,857     $ (7,356 )   $ 8,006     $ 8,094     $ 28,473     $ 12,601  
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) $ (700 )   $ 3,857     $ 41     $ 8,006     $ 8,094     $ 27,427     $ 19,998  
                            
(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
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020   12/31/2019   12/31/2020
                                         
  (Dollars in thousands)
Non-GAAP core operating return on average assets:                                                      
Net income (loss) $ (700 )   $ 3,857     $ (7,356 )   $ 8,006     $ 8,094     $ 28,473     $ 12,601  
Non-GAAP core operating income (loss)   (700 )     3,857       41       8,006       8,094       27,427       19,998  
Average assets $ 4,809,579     $ 4,975,531     $ 5,441,513     $ 5,486,252     $ 5,523,196     $ 4,499,764     $ 5,358,479  
Return on average assets   (0.06 )%     0.31 %     (0.54 )%     0.58 %     0.58 %     0.63 %     0.24 %
Non-GAAP core operating return on average assets   (0.06 )%     0.31 %     %     0.58 %     0.58 %     0.61 %     0.37 %
                                                                           

 

  Quarter Ended   Twelve Months Ended
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020   12/31/2019   12/31/2020
                                         
  (Dollars in thousands)
Non-GAAP core operating return on common equity:                                                      
Net income (loss) $ (700 )   $ 3,857     $ (7,356 )   $ 8,006     $ 8,094     $ 28,473     $ 12,601  
Non-GAAP core operating income (loss)   (700 )     3,857       41       8,006       8,094       27,427       19,998  
Less: Preferred stock dividends                                 175        
Net income (loss) available to common stockholders   (700 )     3,857       (7,356 )     8,006       8,094       28,298       12,601  
Non-GAAP core operating income (loss) available to common stockholders   (700 )     3,857       41       8,006       8,094       27,252       19,998  
Average common equity $ 605,960     $ 612,959     $ 611,466     $ 613,910     $ 620,496     $ 526,225     $ 614,726  
Return on average common equity   (0.46 )%     2.53 %     (4.84 )%     5.19 %     5.19 %     5.38 %     2.05 %
Non-GAAP core operating return on common equity   (0.46 )%     2.53 %     0.03 %     5.19 %     5.19 %     5.18 %     3.25 %
                                                       

 

  Quarter Ended
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020
   
  (Dollars in thousands except per share data)
Tangible common stockholders' equity:                                      
Total stockholders' equity $ 601,644     $ 611,946     $ 608,092     $ 617,883     $ 624,428  
Less: goodwill and other intangible assets   7,694       7,669       247       227       208  
Tangible common stockholders' equity $ 593,950     $ 604,277     $ 607,845     $ 617,656     $ 624,220  
Tangible book value per share:                                      
Tangible common stockholders' equity $ 593,950     $ 604,277     $ 607,845     $ 617,656     $ 624,220  
Shares outstanding at end of period   51,969,203       52,098,062       52,167,573       52,195,778       51,679,516  
Book value per share $ 11.58     $ 11.75     $ 11.66     $ 11.84     $ 12.08  
Tangible book value per share $ 11.43     $ 11.60     $ 11.65     $ 11.83     $ 12.08  
                                       

 

  Quarter Ended   Twelve Months Ended
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020   12/31/2019   12/31/2020
   
  (Dollars in thousands)
Non-GAAP core operating efficiency ratio - Fully Tax Equivalent (FTE)                                                      
Non-interest expense $ 21,881     $ 22,215     $ 31,010     $ 23,011     $ 23,732     $ 87,640     $ 99,968  
Less: goodwill impairment               7,397                         7,397  
Adjusted Non-interest expense (numerator) $ 21,881     $ 22,215     $ 23,613     $ 23,011     $ 23,732     $ 87,640     $ 92,571  
Net interest income   37,179       38,228       41,157       39,327       41,537       141,444       160,249  
Tax equivalent interest income(1)   670       695       685       669       683       2,522       2,732  
Non-interest income   2,182       2,087       2,634       4,063       2,949       8,707       11,733  
Add: fixed asset impairments                                 424        
Total tax-equivalent income (denominator) $ 40,031     $ 41,010     $ 44,476     $ 44,059     $ 45,169     $ 153,097     $ 174,714  
Efficiency ratio   55.60 %     55.10 %     70.81 %     53.03 %     53.35 %     58.37 %     58.13 %
Non-GAAP core operating efficiency ratio - Fully Tax Equivalent (FTE)   54.66 %     54.17 %     53.09 %     52.23 %     52.54 %     57.25 %     52.98 %
 
 
(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   Twelve Months Ended
  12/31/2019   03/31/2020   06/30/2020   09/30/2020   12/31/2020   12/31/2019   12/31/2020
  (Dollars in thousands)
Non-GAAP pre-tax pre-provision profit                          
Net income (loss) before taxes $ (1,870 )   $ 4,150     $ (8,219 )   $ 9,504     $ 9,879     $ 32,611     $ 15,314  
Add: Provision for loan losses   19,350       13,950       21,000       10,875       10,875       29,900       56,700  
Non-GAAP pre-tax pre-provision profit $ 17,480     $ 18,100     $ 12,781     $ 20,379     $ 20,754     $ 62,511     $ 72,014  
                           

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


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