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