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

February 24, 2020

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

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

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

Material Updates to the Provision

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

Impact to Income Taxes

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

Updated Previously Furnished Earnings Materials

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

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

2019 Fourth Quarter and Full-Year Highlights:

  • Approaching $5 billion of assets with 30% operating revenue growth compared to full-year 2018
     
  • Quarterly net loss of $700 thousand, compared to net income of $10.3 million for the fourth quarter of 2018
     
  • Full-year net income of $28.5 million, a year-over-year increase of 45%
     
  • Diluted EPS of $0.58 for full-year 2019, a year-over-year increase of 23%
     
  • Achieved efficiency ratios of 55.6% for the quarter and 58.4% for the year
     
  • Grew loans by $223 million from the previous quarter and $793 million or 26% since year-end December 31, 2018
     
  • Grew deposits by $266 million from the previous quarter and $716 million or 22% since year-end December 31, 2018
     
  • Book value per share of $11.58 at December 31, 2019 compared to $10.21 at December 31, 2018                           
  Quarter-to-Date
December 31,
Year-to-Date,
December 31,
 
2018
2019 2018 2019
  (Dollars in millions except per share data)
Operating revenue(1) $   33.5   $   39.4   $   116.5   $   150.2  
Net income (loss) $   10.3   $   (0.7 ) $   19.6   $   28.5  
Diluted earnings (loss) per share $   0.22   $   (0.01 ) $   0.47   $   0.58  
                         
Return on average assets   1.06 %   (0.06 )%   0.56 %   0.63 %
Non-GAAP core operating return on average assets(2)   0.67 %   (0.06 )%   0.57 %   0.61 %
Return on average common equity   9.03 %   (0.46 )%   5.34 %   5.38 %
Non-GAAP return on average tangible common equity(2)   9.20 %   (0.46 )%   5.47 %   5.46 %
Net interest margin   3.44 %   3.17 %   3.29 %   3.26 %
Net interest margin, fully tax-equivalent(3)   3.51 %   3.23 %   3.39 %   3.31 %
Efficiency ratio   60.2 %   55.6 %   73.6 %   58.4 %
Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3)   61.4 %   54.7 %   67.7 %   57.2 %
(1)Net interest income plus non-interest income. 
(2)Represents a non-GAAP measure. See "Table 6. Non-GAAP Financial Measures" for a reconciliation of this measure.
(3)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental federal tax rate used is 21.0%.

Income from Operations

Net Interest Income

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

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

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

Non-Interest Income

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

Non-Interest Expense

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

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

Balance Sheet Performance & Analysis

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

Loan Growth Results

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

(Dollars in millions) 4Q18    1Q19   2Q19   3Q19    4Q19   % of
Total
  QoQ
Growth
($)
  QoQ
Growth
(%)(1)
  YoY
Growth
($)
  YoY
Growth
(%)(1)
Average loans (gross)                                                          
Commercial and industrial $ 1,021   $ 1,145   $ 1,224   $ 1,284   $ 1,315   35 %   $   31   2 %   $   294   29 %
Energy   349     367     383     389     400   11       11   3       51   15  
Commercial real estate   810     866     946     974     1,007   27       33   3       197   24  
Construction and land development   449     444     457     487     599   16       112   23       150   33  
Residential real estate   240     310     342     362     384   10       22   6       144   60  
Consumer & Equity Lines   42     44     46     45     45   1         (1 )     3   5  
Total $ 2,911   $ 3,176   $ 3,398   $ 3,541   $ 3,750   100 %   $ 209   6 %   $ 839   29 %
                                                           
Yield on loans for the period ending   5.56 %   5.75 %   5.66 %   5.53 %   5.21 %                            
(1)Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

Deposit Growth Results

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

(Dollars in millions) 
4Q18
 
1Q19
 
2Q19
 
3Q19
 
4Q19
  % of
Total
    QoQ
Growth
($)
  QoQ
Growth
(%)(1)
  YoY
Growth
($)
  YoY
Growth
(%)
(1)
Average deposits                                                            
Non-interest bearing deposits $ 492   $ 477   $ 513   $ 535   $ 522   14 %   $   (13 )   (3 )%   $   30   6 %
Transaction deposits   63     104     144     135     200   5 %     65     49       137   217  
Savings and money market deposits   1,498     1,544     1,560     1,744     1,854   49 %     110     6       356   24  
Time deposits   913     1,165     1,305     1,277     1,226   32 %     (51 )   (4 )     313   34  
Total $ 2,966   $ 3,290   $ 3,522   $  3,691   $ 3,802   100 %     111     3 %   $ 836   28 %
                                                             
Cost of deposits for the period ending   1.70 %   1.96 %   1.99 %   1.94 %   1.70 %                              
Cost of interest-bearing deposits for the period ending   2.04 %   2.30 %   2.33 %   2.26 %   1.97 %                              
(1)Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

Asset Quality Position

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

Asset quality (Dollars in millions) 4Q18   1Q19   2Q19   3Q19   4Q19
Non-accrual loans $ 17.8     $ 13.0     $ 50.0     $ 43.6     $ 39.7  
Other real estate owned         2.5       2.5       2.5       3.6  
Non-performing assets   17.8       15.5       52.8       46.7       47.9  
Loans 90+ days past due and still accruing               0.2       0.6       4.6  
Loans 30 - 89 days past due   3.7       31.1       23.6       64.7       6.8  
Net charge-offs (recoveries)   0.2       0.7             4.7       5.5  
                                       
Asset quality metrics (%) 4Q18   1Q19   2Q19   3Q19   4Q19
Non-performing assets to total assets   0.43 %     0.36 %     1.18 %     1.00 %     0.97 %
Allowance for loan loss to total loans   1.23       1.22       1.24       1.18       1.48  
Allowance for loan loss to non-performing loans   212       307       85       97       129  
Net charge-offs (recoveries) to average loans(1)   0.03       0.09             0.53       0.58  
Provision to average loans(1)   0.61       0.36       0.34       0.54       2.05  
(1)Interim periods annualized.

Capital Position

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

Period-end (Dollars in millions, except per share data) 4Q18 1Q19 2Q19 3Q19 4Q19
Total Stockholders' Equity $ 490   $ 481   $ 499   $ 602   $ 602  
                               
Book value per share $ 10.21   $ 10.63   $ 11.00   $ 11.59   $ 11.58  
Tangible book value per share(1) $ 10.04   $ 10.46   $ 10.83   $ 11.44   $ 11.43  
                               
Common equity tier 1 capital ratio   11.75 %   11.23 %   11.02 %   12.91 %   12.20 %
Tier 1 capital ratio   12.53     11.23     11.04     12.93     12.22  
Total capital ratio   13.51     12.20     12.04     13.90     13.43  
Leverage ratio   12.43     11.15     10.87     12.57     12.06  
(1)Represents a non-GAAP measure. See "Table 6. Non-GAAP Financial Measures" for a reconciliation of this measure.

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

Cautionary Notice about Forward-Looking Statements

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

Accordingly, the Company cautions you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and the Company does not intend, and assumes no obligation, to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events or circumstances, except as required by law.

About CrossFirst

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

Unaudited Financial Tables

  • Table 1. Consolidated Balance Sheets
  • Table 2. Consolidated Statements of Income
  • Table 3. Year-to-Date Analysis of Changes in Net Interest Income (2018 & 2019)
  • Table 4. 2018 - 2019 Quarterly Analysis of Changes in Net Interest Income
  • Table 5. Linked Quarterly Analysis of Changes in Net Interest Income
  • Table 6. Non-GAAP Financial Measures

 

TABLE 1. CONSOLIDATED BALANCE SHEETS

  As of December 31,
       
  2018   2019
(unaudited)
  (Dollars in thousands)
Assets            
Cash and cash equivalents $ 216,541   $ 187,320  
Available-for-sale securities - taxable   296,133     298,208  
Available-for-sale securities - tax-exempt   367,545     443,426  
Premises and equipment, held for sale   3,444      
Loans, net of allowance for loan losses of $56,896 and $37,826 at December 31, 2019 and 2018, respectively   3,022,921     3,795,348  
Premises and equipment, net   74,945     70,210  
Restricted equity securities   14,525     17,278  
Interest receivable   14,092     15,716  
Foreclosed assets held for sale       3,619  
Deferred tax asset   16,316     13,782  
Goodwill and other intangible assets, net   7,796     7,694  
Bank-owned life insurance   63,811     65,689  
Other   9,146     12,943  
Total assets $ 4,107,215   $ 4,931,233  
Liabilities and stockholders’ equity        
Deposits            
Noninterest bearing $ 484,284   $ 521,826  
Savings, NOW and money market   1,714,136     2,162,187  
Time   1,009,677     1,239,746  
Total deposits   3,208,097     3,923,759  
Federal funds purchased and repurchase agreements   75,406     14,921  
Federal Home Loan Bank advances   312,985     358,743  
Other borrowings   884     921  
Interest payable and other liabilities   19,507     31,245  
Total liabilities   3,616,879     4,329,589  
Stockholders’ equity    
Redeemable preferred stock, $0.01 par value, $25 liquidation value:    
authorized - 5,000,000 shares, issued - 0 and 1,200,000 shares at December 31, 2019 and 2018, respectively   12      
Common stock, $0.01 par value:    
authorized - 200,000,000 shares, issued - 51,969,203 and 45,074,322 shares at December 31, 2019 and 2018, respectively   451     520  
Additional paid-in capital   454,512     519,870  
Retained earnings   38,567     64,888  
Other   (196 )   (85 )
Accumulated other comprehensive income (loss)   (3,010 )   16,451  
Total stockholders’ equity   490,336     601,644  
Total liabilities and stockholders’ equity $ 4,107,215   $ 4,931,233  

 

TABLE 2. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

  Three Months Ended
December 31,     
  Twelve Months
Ended December 31, 
  2018   2019   2018   2019
   
  (Dollars in thousands except per share data)
Interest Income                            
Loans, including fees
Available for sale securities
$ 40,813     $ 49,208   $ 130,075     $ 191,527  
Available for sale securities - Taxable   2,243       1,894     7,972       8,540  
Available for sale securities - Tax-exempt   3,135       3,191     14,757       12,011  
Deposits with financial institutions   615       601     3,096       3,053  
Dividends on bank stocks   262       286     980       1,087  
Total interest income   47,068       55,180     156,880       216,218  
Interest Expense        
Deposits   12,733       16,247     39,372       67,668  
Fed funds purchased and repurchase agreements   440       91     1,068       592  
Advances from Federal Home Loan Bank   1,533       1,628     5,841       6,367  
Other borrowings   47       35     231       147  
Total interest expense   14,753       18,001     46,512       74,774  
Net Interest Income   32,315       37,179     110,368       141,444  
Provision for Loan Losses   4,500       19,350     13,500       29,900  
Net Interest Income after Provision for Loan Losses   27,815       17,829     96,868       111,544  
Non-Interest Income        
Service charges and fees (rebates) on customer accounts   (62 )     163     444       604  
Gain (loss) on sale of available for sale securities   (70 )     520     538       987  
Impairment of premises and equipment held for sale             (171 )     (424 )
Gain on sale of loans   209           827       207  
Income from bank-owned life insurance   458       462     1,969       1,878  
Swap fee income, net   (14 )     338     285       2,753  
Other non-interest income   674       703     2,191       2,710  
Total non-interest income   1,195       2,186     6,083       8,715  
Non-Interest Expense        
Salaries and employee benefits   12,429       13,818     56,118       57,114  
Occupancy   2,015       2,048     8,214       8,349  
Professional fees   899       1,041     3,320       2,964  
Deposit insurance premiums   775       767     3,186       2,787  
Data processing   525       676     1,995       2,544  
Advertising   709       685     2,691       2,455  
Software and communication   672       910     2,630       3,317  
Depreciation and amortization   482       414     1,788       1,734  
Other non-interest expense   1,660       1,526     5,813       6,384  
Total non-interest expense   20,166       21,885     85,755       87,648  
Net Income (Loss) Before Taxes   8,844       (1,870 )   17,196       32,611  
Income tax expense (benefit)   (1,490 )     (1,170 )   (2,394 )     4,138  
Net Income (Loss) $ 10,334     $ (700 ) $ 19,590     $ 28,473  
Basic Earnings (Loss) Per Share $ 0.22     $ (0.01 ) $ 0.48     $ 0.59  
Diluted Earnings (Loss) Share $ 0.22     $ (0.01 ) $ 0.47     $ 0.58  

 

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

  Twelve Months Ended
December 31,
   2018     2019
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate(3)
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate(3)
   
  (Dollars in thousands)
Interest-earning assets:                                      
Securities - taxable $ 281,709     $ 8,952   3.18 %   $ 330,051     $ 9,627   2.92 %
Securities - tax-exempt(1)   459,231       17,856   3.89       390,908       14,533   3.72  
Federal funds sold   16,377       339   2.07       15,195       364   2.40  
Interest-bearing deposits in other banks   159,279       2,757   1.73       139,538       2,689   1.93  
Gross loans, net of unearned income(2)   2,435,424       130,075   5.34       3,468,079       191,527   5.52  
Total interest-earning assets(1)   3,352,020     $ 159,979   4.77 %     4,343,771     $ 218,740   5.04 %
Allowance for loan losses   (30,921 )             (42,015 )        
Other non-interest-earning assets   173,556               198,008          
Total assets $ 3,494,655             $ 4,499,764          
Interest-bearing liabilities                      
Transaction deposits $ 56,321     $ 175   0.31 %   $ 146,109     $ 1,742   1.19 %
Savings and money market deposits   1,410,727       23,405   1.66       1,676,417       35,385   2.11  
Time deposits   835,595       15,792   1.89       1,243,304       30,541   2.46  
Total interest-bearing deposits   2,302,643       39,372   1.71       3,065,830       67,668   2.21  
FHLB and short-term borrowings   395,825       7,004   1.77       366,577       6,959   1.90  
Trust preferred securities, net of fair value adjustments   864       136   15.69        899       147   16.34  
Non-interest-bearing deposits   425,243               512,142          
Cost of funds   3,124,575     $ 46,512   1.49 %     3,945,448     $ 74,774   1.90 %
Other liabilities   12,634               25,708          
Stockholders’ equity   357,446               528,608          
Total liabilities and stockholders' equity $ 3,494,655             $ 4,499,764          
Net interest income(1)     $ 113,467           $ 143,966    
Net interest spread(1)         3.28 %           3.14 %
Net interest margin(1)         3.39 %           3.31 %
(1)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
(2)Average loan balances include nonaccrual loans.
(3)Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.

 

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

  Twelve Months Ended
December 31, 2019 over 2018
  Average Volume   Yield/Rate   Net Change(2)
   
  (Dollars in thousands)
Interest Income                      
Securities - taxable $ 1,449     $ (774 )   $ 675  
Securities - tax-exempt(1)   (2,568 )     (755 )     (3,323 )
Federal funds sold   (26 )     51       25  
Interest-bearing deposits in other banks   (365 )     297       (68 )
Gross loans, net of unearned income   56,927       4,525       61,452  
Total interest income(1)   55,417       3,344       58,761  
Interest Expense
Transaction deposits   564       1,003       1,567  
Savings and money market deposits   4,911       7,069       11,980  
Time deposits   9,115       5,634       14,749  
Total interest-bearing deposits   14,590       13,706       28,296  
FHLB and short-term borrowings   (538 )     493       (45 )
Trust preferred securities, net of fair value adjustments   5       6       11  
Total interest expense   14,057       14,205       28,262  
Net interest income(1) $ 41,360     $ (10,861 )   $ 30,499  
(1)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
(2)The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

 

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

  Three Months Ended
December 31,
  2018   2019
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate(3)
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate(3)
   
  (Dollars in thousands)
Interest-earning assets:                                      
Securities - taxable $   305,995     $   2,505   3.25 %   $   317,524     $   2,180   2.72 %
Securities - tax-exempt(1)   385,463       3,793   3.90       427,280       3,861   3.59  
Federal funds sold   9,239       58   2.49       4,750       19   1.61  
Interest-bearing deposits in other banks   113,403       558   1.95       152,917       582   1.51  
Gross loans, net of unearned income(2)(3)   2,911,350       40,812   5.56       3,749,865       49,208   5.21  
Total interest-earning assets(1)   3,725,450     $   47,726   5.08 %     4,652,336     $   55,850   4.76 %
Allowance for loan losses   (34,818 )             (44,051 )        
Other non-interest-earning assets   194,010               201,294          
Total assets $ 3,884,642             $ 4,809,579          
Interest-bearing liabilities                      
Transaction deposits $   63,223     $   74   0.46 %   $   200,480     $   603   1.19 %
Savings and money market deposits   1,498,075       7,747   2.05       1,854,042       8,059   1.72  
Time deposits   912,882       4,912   2.13       1,225,752       7,585   2.46  
Total interest-bearing deposits   2,474,180       12,733   2.04       3,280,274       16,247   1.97  
FHLB and short-term borrowings   439,322       1,984   1.79       366,190       1,719   1.86  
Trust preferred securities, net of fair value adjustments   876       36   16.34       913       35   15.18  
Non-interest-bearing deposits   491,689               521,799          
Cost of funds   3,406,067     $   14,753   1.72 %     4,169,176     $   18,001   1.71 %
Other liabilities   17,694               34,443          
Total stockholders' equity   460,881               605,960          
Total liabilities and stockholders' equity $ 3,884,642             $ 4,809,579          
Net interest income(1)     $   32,973           $   37,849    
Net interest spread(1)         3.36 %           3.05 %
Net interest margin(1)         3.51 %           3.23 %
(1)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
(2) Average loan balances include non-accrual loans.
(3)Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.

 

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

   Three Months Ended
December 31, 2019 over 2018
  Average Volume      Yield/Rate   Net Change(2) 
   
  (Dollars in thousands)
Interest Income                      
Securities - taxable $ 93     $ (418 )   $ (325 )
Securities - tax-exempt(1)   387       (319 )     68  
Federal funds sold   (23 )     (16 )     (39 )
Interest-bearing deposits in other banks   167       (143 )     24  
Gross loans, net of unearned income   11,105       (2,709 )     8,396  
Total interest income(1)   11,729       (3,605 )     8,124  
Interest Expense
Transaction deposits      305        224       529  
Savings and money market deposits   1,672       (1,360 )     312  
Time deposits   1,841       832       2,673  
Total interest-bearing deposits   3,818       (304 )     3,514  
FHLB and short-term borrowings   (340 )     75       (265 )
Trust preferred securities, net of fair value adjustments   1       (2 )     (1 )
Total interest expense   3,479       (231 )     3,248  
Net interest income(1) $ 8,250     $ (3,374 )   $ 4,876  
(1)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%
(2)The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

 

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

  Three Months Ended
   September 30, 2019    December 31, 2019
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate(3)
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate(3)
   
  (Dollars in thousands)
Interest-earning assets:                                
Securities - taxable $ 335,045     $ 2,263   2.68 %   $ 317,524     $ 2,180     2.72 %
Securities - tax-exempt(1)   392,644       3,592   3.63       427,280       3,861     3.59  
Federal funds sold   16,315       89   2.16       4,750       19     1.61  
Interest-bearing deposits in other banks   171,913       881   2.03       152,917       582     1.51  
Gross loans, net of unearned income(2)(3)   3,540,707       49,327   5.53       3,749,865       49,208     5.21  
Total interest-earning assets(1)   4,456,624     $ 56,152   5.00 %     4,652,336     $ 55,850     4.76 %
Allowance for loan losses   (43,327 )         (44,051 )      
Other non-interest-earning assets   197,661           201,294        
Total assets $ 4,610,958         $ 4,809,579        
Interest-bearing liabilities                        
Transaction deposits $ 134,987     $ 386   1.13 %   $ 200,480     $ 603     1.19 %
Savings and money market deposits   1,743,575       9,553   2.17       1,854,042       8,059     1.72  
Time deposits   1,276,571       8,064   2.51       1,225,752       7,585     2.46  
Total interest-bearing deposits   3,155,133       18,003   2.26       3,280,274       16,247     1.97  
FHLB and short-term borrowings   345,794       1,703   1.95       366,190       1,719     1.86  
Trust preferred securities, net of fair value            
adjustments   904       37     16.06     913       35       15.18  
Non-interest-bearing deposits   535,467               521,799              
Cost of funds   4,037,298     $ 19,743     1.94 %   4,169,176     $ 18,001       1.71 %
Other liabilities   29,833                 34,443          
Total stockholders' equity   543,827                 605,960          
Total liabilities and stockholders' equity $ 4,610,958                 $ 4,809,579                
Net interest income(1)         $ 36,409                 $ 37,849        
Net interest spread(1)           3.06 %             3.05 %
Net interest margin(1)         3.24 %       3.23 %
(1)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
(2)Average loan balances include nonaccrual loans.
(3) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.

 

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

  Three Months Ended
December 31, 2019 over September 30, 2019
  Average Volume   Yield/Rate   Net Change(2)
   
  (Dollars in thousands)
Interest Income                      
Securities - taxable $ (118 )   $ 35     $ (83 )
Securities - tax-exempt(1)   310       (41 )     269  
Federal funds sold   (51 )     (19 )     (70 )
Interest-bearing deposits in other banks   (90 )     (209 )     (299 )
Gross loans, net of unearned income   2,825       (2,944 )     (119 )
Total interest income(1)   2,876       (3,178 )     (302 )
Interest Expense
Transaction deposits   195       22       217  
Savings and money market deposits   576       (2,070 )     (1,494 )
Time deposits   (319 )     (160 )     (479 )
Total interest-bearing deposits   452       (2,208 )     (1,756 )
FHLB and short-term borrowings   97       (81 )     16  
Trust preferred securities, net of FV adjustments         (2 )     (2 )
Total interest expense   549       (2,291 )     (1,742 )
Net interest income(1) $ 2,327     $ (887 )   $ 1,440  
(1)Tax exempt income is calculated on a tax equivalent basis. Tax-free municipal securities are exempt from Federal taxes. The incremental tax rate used is 21.0%.
(2)The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

TABLE 6. NON-GAAP FINANCIAL MEASURES

Non-GAAP Financial Measures

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

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

  • We calculate "return on average tangible common equity" as net income (loss) available to common stockholders divided by average tangible common equity. Average tangible common equity is calculated as average common equity less average goodwill and intangibles and average preferred equity. The most directly comparable GAAP measure is return on average common equity.
     
  • We calculate ‘‘non-GAAP core operating income (loss)’’ as net income (loss) adjusted to remove non-recurring or non-core income and expense items related to:

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

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

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

    The most directly comparable GAAP financial measure for non-GAAP core operating income (loss) is net income (loss).
  • We calculate "Non-GAAP core operating return on average assets" as non-GAAP core operating income (loss) (as defined above) divided by average assets. The most directly comparable GAAP financial measure is return on average assets, which is calculated as net income (loss) divided by average assets.
     
  • We calculate ‘‘non-GAAP core operating return on average common equity’’ as non-GAAP core operating income (as defined above) less preferred dividends divided by average common equity. The most directly comparable GAAP financial measure is return on average common equity, which is calculated as net income less preferred dividends divided by average common equity.
     
  • We calculate "tangible common stockholders' equity" as total stockholders' equity less goodwill and intangibles and preferred equity. The most directly comparable GAAP measure is total stockholders' equity.
     
  • We calculate ‘‘tangible book value per share’’ as tangible common stockholders' equity (as defined above) divided by the total number of shares outstanding. The most directly comparable GAAP measure is book value per share.
     
  • We calculate "non-GAAP core operating efficiency ratio - fully tax equivalent" as non-interest expense adjusted to remove non-recurring non-interest expenses as defined above under non-GAAP core operating income (loss) divided by net interest income on a fully tax-equivalent basis plus non-interest income adjusted to remove non-recurring non-interest income as defined above under non-GAAP core operating income. The most directly comparable financial measure is the efficiency ratio.
  Quarter Ended   Twelve Months Ended
  12/31/2018   03/31/2019   06/30/2019   09/30/2019   12/31/2019   12/31/2018   12/31/2019
   
  (Dollars in thousands)
Non-GAAP return on average tangible common equity:                                                      
Net income (loss) available to common stockholders $ 9,809     $ 9,175     $ 9,439     $ 10,384     $ (700 )   $ 17,490     $ 28,298  
Average common equity   430,881       466,506       486,880       543,827       605,960       327,446       526,225  
Less: average goodwill and intangibles   7,810       7,784       7,759       7,733       7,708       7,847       7,746  
Average tangible common equity   423,071       458,722       479,121       536,094       598,252       319,599       518,479  
Return on average common equity   9.03 %     7.98 %     7.78 %     7.58 %     (0.46 )%     5.34 %     5.38 %
Non-GAAP Return on average tangible common equity   9.20 %     8.11 %     7.90 %     7.68 %     (0.46 )%     5.47 %     5.46 %
                                                       
  Quarter Ended   Twelve Months Ended
  12/31/2018   03/31/2019   06/30/2019   09/30/2019   12/31/2019   12/31/2018   12/31/2019
   
  (Dollars in thousands)
Non-GAAP core operating income (loss):                                                      
Net Income (Loss) $ 10,334     $ 9,350     $ 9,439     $ 10,384     $ (700 )   $ 19,590     $ 28,473  
Add: restructuring charges   (815 )                             4,733        
Less: tax effect(1)   (210 )                             1,381        
Restructuring charges, net of tax   (605 )                             3,352        
Add: fixed asset impairments               424                   171       424  
Less: tax effect(1)               109                   44       109  
Fixed asset impairments, net of tax               315                   127       315  
Add: state tax credit(2)   (3,129 )     (1,361 )                       (3,129 )     (1,361 )
Non-GAAP core operating income (loss) $   6,600     $   7,989     $ 9,754     $   10,384     $ (700 )   $ 19,940     $ 27,427  
(1)Represents the tax impact of the adjustments above at a tax rate of 25.73%
(2)No tax effect

                                              

  Quarter Ended   Twelve Months Ended
  12/31/2018   03/31/2019   06/30/2019   09/30/2019   12/31/2019   12/31/2018   12/31/2019
  (Dollars in thousands)
Non-GAAP core operating return on average assets:              
Net income (loss) 10,334     9,350     9,439     10,384     (700 )   19,590     28,473  
Non-GAAP core operating income (loss) 6,600     7,989     9,754     10,384     (700 )   19,940     27,427  
Average assets 3,884,642     4,168,243     4,402,002     4,610,958     4,809,579     3,494,655     4,499,764  
Return on average assets 1.06 %   0.91 %   0.86 %   0.89 %   (0.06 )%   0.56 %   0.63 %
Non-GAAP core operating return on average assets 0.67 %   0.78 %   0.89 %   0.89 %   (0.06 )%   0.57 %   0.61 %

 

  Quarter Ended   Twelve Months Ended
  12/31/2018   03/31/2019   06/30/2019   09/30/2019   12/31/2019   12/31/2018   12/31/2019
  (Dollars in thousands)
Non-GAAP core operating return on common equity:                                
Net income (loss) $ 10,334     $ 9,350     $ 9,439     $ 10,384     $ (700 )   $ 19,590     $ 28,473  
Non-GAAP core operating income (loss)   6,600       7,989       9,754       10,384       (700 )     19,940       27,427  
Less: Preferred stock dividends   525       175                         2,100       175  
Net income (loss) available to common stockholders   9,809       9,175       9,439       10,384       (700 )     17,490       28,298  
Non-GAAP core operating income (loss) available to common stockholders   6,075       7,814       9,754       10,384       (700 )     17,840       27,252  
Average common equity $ 430,881     $ 466,506     $ 486,880     $ 543,827     $ 605,960     $ 327,446     $ 526,225  
GAAP return on average common equity   9.03 %     7.98 %     7.78 %     7.58 %     (0.46 )%     5.34 %     5.38 %
Non-GAAP core operating return on common equity   5.59 %     6.79 %     8.04 %     7.58 %     (0.46 )%     5.45 %     5.18 %

 

  Quarter Ended
  12/31/2018   03/31/2019   06/30/2019   09/30/2019   12/31/2019
   
  (Dollars in thousands except per share data)
Tangible common stockholders' equity:                              
Total stockholders' equity $ 490,336   $ 480,514   $ 499,195   $ 602,435   $ 601,644  
Less: goodwill and other intangible                              
assets   7,796     7,770     7,745     7,720     7,694  
Less: preferred stock   30,000                  
Tangible common stockholders' equity $   452,540   $   472,744   $   491,450   $   594,715   $   593,950  
Tangible book value per share:                              
Tangible common stockholders' equity $ 452,540   $ 472,744   $ 491,450   $ 594,715   $ 593,950  
Shares outstanding at end of period   45,074,322     45,202,370     45,367,641     51,969,203     51,969,203  
Book value per share $   10.21   $   10.63   $   11.00   $   11.59   $   11.58  
Tangible book value per share $   10.04   $   10.46   $   10.83   $   11.44   $   11.43  

 

  Quarter Ended   Twelve Months Ended
  12/31/2018 03/31/2019 06/30/2019   09/30/2019 12/31/2019   12/31/2018 12/31/2019
  (Dollars in thousands)
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent              
Non-interest expense $ 20,166   $ 22,631   $ 21,960     $ 21,172   $ 21,885     $ 85,755   $ 87,648  
Less: restructuring charge $ (815 ) $   $     $   $     $ 4,733   $  
Non-GAAP non-interest expense              
(numerator)   20,981     22,631     21,960       21,172   $ 21,885     $ 81,022   $ 87,648  
Net interest income   32,315     33,605     34,874       35,786     37,179       110,368     141,444  
Tax equivalent interest income   658     616     612       624     670       3,099     2,522  
Non-interest income   1,195     1,645     1,672       3,212     2,186       6,083     8,715  
Add: fixed asset impairments $   $   $ 424     $   $     $ 171   $ 424  
 

Total tax-equivalent income (denominator)


$
 

  34,168
 

$
 

  35,866
 

$
 

  37,582
   

$
 

  39,622
 

$
 

  40,035
   

$
 

119,721
 

$
 

153,105
 
Efficiency Ratio   60.18 %   64.20 %   60.09 %     54.29 %   55.60 %     73.64 %   58.37 %
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent   61.41 %   63.10 %   58.43 %     53.43 %   54.66 %     67.68 %   57.25 %

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


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