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CrossFirst Bankshares, Inc. Reports Second Quarter 2022 Results

July 18, 2022

Second Quarter 2022 Key Financial Performance Metrics

Net Income ROAA Net Interest Margin (FTE) Diluted EPS ROE
$15.5 million 1.12% 3.52%(1) $0.31 10.15%
         

LEAWOOD, Kan, July 18, 2022 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported operating results for the second quarter of 2022, with second quarter net income of $15.5 million, or $0.31 per diluted share, and year-to-date net income of $32.4 million, or $0.64 per diluted share.

CEO Commentary:

"In addition to our announcement about our planned acquisition of Central, we produced a very strong quarter of organic loan growth. We also invested in talent to support our continued success by filling key roles with both internal promotions and adding high-caliber talent from the outside,” said CrossFirst’s CEO and President, Mike Maddox. “We remain highly focused on credit quality, and we are committed to managing through a challenging economy while delivering for our clients and stockholders.”

2022 Second Quarter Highlights:
  • Announced on June 13, 2022, an agreement under which CrossFirst Bank will acquire Central Bancorp, Inc.’s bank subsidiary, Farmers & Stockmens Bank (“Central”), in an all-cash transaction
  • $5.7 billion of assets with 6% operating revenue growth compared to the second quarter of 2021
  • $179 million or 4% of total loan growth from the previous quarter and $290 million or 7% loan growth from the same quarter last year; excluding PPP loans(2), loan growth was $195 million from the previous quarter or 5% and was $473 million or 12% from the same quarter last year
  • Continued improvement in credit quality during the second quarter of 2022 as evidenced by the decrease in non-performing assets to total assets ratio from 1.09% at June 30, 2021 to 0.54% at June 30, 2022
  • Return on Average Assets of 1.12% and a Return on Equity of 10.15% for the quarter ended June 30, 2022
  • Net Interest Margin (Fully Tax-Equivalent)(1) of 3.52% for the quarter ended June 30, 2022, compared to 3.14% for the same quarter last year
               
    Quarter-to-Date       Year-to-Date  
    June 30,       June 30,  
(Dollars in millions except per share data)   2022     2021       2022     2021  
Operating revenue(3) $ 50.9   $ 48.2     $ 99.0   $ 93.4  
Net income $ 15.5   $ 15.6     $ 32.4   $ 27.6  
Diluted earnings per share $ 0.31   $ 0.30     $ 0.64   $ 0.53  
Return on average assets   1.12 %   1.10 %     1.18 %   0.97 %
Return on average common equity   10.15 %   9.86 %     10.30 %   8.84 %
Net interest margin(1)   3.46 %   3.08 %     3.35 %   3.02 %
Net interest margin, fully tax-equivalent(1)(4)   3.52 %   3.14 %     3.41 %   3.07 %
Efficiency ratio   57.36 %   53.61 %     57.46 %   52.06 %
Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(4)   55.08 %   53.34 %     55.83 %   51.51 %

(1)  The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest earning asset. All periods presented reflect this change.
(2)  Represents a non-GAAP measure. See "Table 5. Non-GAAP Financial Measures" for a reconciliation of these measures.
(3)  Net interest income plus non-interest income.
(4)  Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental federal income tax rate used is 21.0%.

Income from Operations

Net Interest Income

Interest income was $52.8 million for the second quarter of 2022, an increase of 9% from the second quarter of 2021 and an increase of 11% from the previous quarter due to higher average loans outstanding and higher interest rates. Average earning assets totaled $5.4 billion for the second quarter of 2022, a decrease of $92 million or 2% from the same quarter in 2021. This decline in average earning assets was largely driven by a decrease of $210 million in average interest-bearing deposits in other banks, the impact of which was outweighed by the increase of $29 million in average loans and the associated loan yield increase.

Interest expense for the second quarter of 2022 was $6.1 million, slightly lower than the second quarter of 2021 and 32% higher than the previous quarter. Average interest-bearing deposits decreased to $3.4 billion in the second quarter of 2022, a 13% decrease from the same prior year period. The cost of funds increased from the previous quarter to 0.50%, compared to 0.39% for the first quarter of 2022, driven by the higher interest rate environment.

Net interest income totaled $46.7 million for the second quarter of 2022, which was 8% higher than the first quarter of 2022, and 10% higher than the second quarter of 2021. Tax-equivalent net interest margin increased to 3.52% in the current quarter from 3.29% in the previous quarter and 3.14% in the second quarter of 2021. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on non-taxable securities and loans, was $0.8 million for the second quarter of 2022.

Non-Interest Income

Non-interest income decreased $1.6 million in the second quarter of 2022 or 28% compared to the same quarter of 2021 and decreased $0.7 million compared to the first quarter of 2022. The decrease in non-interest income compared to the previous quarter was due to a $1.1 million decrease in credit card fees and $0.1 million decrease in swap fee income, partly offset by a $0.3 million increase in letter of credit fees and $0.1 million increase in service charge income. The decrease in non-interest income compared to the same quarter of 2021, was primarily due to $1.8 million in income from bank-owned life insurance proceeds received last year.

Non-Interest Expense

Non-interest expense for the second quarter of 2022 was $29.2 million, which increased 13% compared to the second quarter of 2021 and increased 6% from the first quarter of 2022. Salaries and benefit costs were lower in the current quarter by $0.8 million compared to the prior quarter. Furthermore, professional fees increased $0.3 million and data processing expenses increased $0.3 million, partly offset by a slight decrease in software and communication expenses. Compared to the same quarter in the prior year, salaries and benefit costs were $1.4 million higher mainly due to increased hiring for market expansion and increased incentive expenses. Additionally, software and communication expenses increased $0.2 million, and data processing expenses increased $0.4 million, offset by a $0.7 million decrease in foreclosed assets. The other non-interest expense increase for the second quarter of 2022 was primarily due to increases in travel and meeting expenses and employee separation expense of $1.1 million.

CrossFirst’s effective tax rate for the second quarter of 2022 was 21%, as compared to 17% for the second quarter of 2021 and 20% in the first quarter of 2022. The 4% effective tax rate increase compared to the same quarter in the prior year was primarily due to the $1.8 million in income from bank-owned life insurance proceeds received last year, which was not subject to tax. For both comparable periods, the Company continued to benefit from its tax-exempt municipal bond portfolio and bank-owned life insurance. The tax-exempt benefit diminishes as the Company’s ratio of taxable income to tax-exempt income increases.

Balance Sheet Performance & Analysis

During the second quarter of 2022, total assets increased by $190 million or 3% compared to March 31, 2022, and increased $397 million or 7% compared to June 30, 2021. Total assets increased on a linked quarter basis primarily due to a $179 million increase in loans. The year-over-year increase was due to increases in loans of $310 million and cash and cash equivalents of $57 million. Non-interest-bearing deposits increased $53 million compared to March 31, 2022, and increased $345 million from June 30, 2021. During the second quarter of 2022, available-for-sale investment securities decreased $27 million to $696 million compared to March 31, 2022 primarily due to unrealized losses from interest rate increases. The securities yields increased 7 basis points to a tax equivalent yield of 3.07% for the second quarter of 2022 compared to the prior quarter.

Loan Results

During the second quarter of 2022, the Company produced an increase in average loans of $105 million compared to the first quarter of 2022, and an increase of $29 million or 1% compared to the second quarter of 2021. The linked quarter increase in average loans was primarily a result of growth in the commercial and commercial real estate portfolios. Net of PPP loans, average loans grew 3% compared to the quarter ended March 31, 2022. Loan yields increased 28 basis points to 4.28% during the second quarter of 2022 and increased 29 basis points compared to the same prior year quarter.

    2Q22         1Q22         4Q21         3Q21         2Q21     QoQ
Growth
($)
  QoQ
Growth
(%)
(1)
  YoY
Growth
($)
  YoY
Growth
(%)
(1)
  (Dollars in millions)  
Average loans (gross)                                                                        
Commercial and industrial $ 1,532       $ 1,434       $ 1,328       $ 1,233       $ 1,221     $ 98     7 %   $ 311   25 %  
Energy   241         274         290         311         341       (33)     (12)       (100)   (29)    
Commercial real estate   1,399         1,327         1,272         1,213         1,203       72     5       196   16    
Construction and land development   581         593         579         611         633       (12)     (2)       (52)   (8)    
Residential and multifamily real estate   609         604         612         659         659       5     1       (50)   (8)    
Paycheck Protection Program   20         42         84         147         296       (22)     (52)       (276)   (93)    
Consumer   56         59         56         57         56       (3)     (5)       -   0    
Total $ 4,438       $ 4,333       $ 4,221       $ 4,231       $ 4,409     $ 105     2 %   $ 29   1 %  
                                                                         
Yield on average loans for the period ending   4.28 %       4.00 %       4.17 %       4.00 %       3.99 %                          
(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 & Other Borrowing Results

During the second quarter of 2022, the Company experienced a decrease in average deposits of 2% compared to the previous quarter, and a 4% decline in average deposits compared to the second quarter of 2021. The deposit reduction for the quarter was driven by decreases in transaction deposits and time deposits. As a result of the increasing interest rate environment, the Company had an increase of 11 basis points in the overall cost of deposits during the second quarter of 2022, and the cost of interest-bearing deposits has increased 6 basis points over the last twelve months.

    2Q22       1Q22       4Q21       3Q21       2Q21     QoQ
Growth
($)
  QoQ
Growth
(%)
(1)
  YoY
Growth
($)
  YoY
Growth
(%)
(1)
  (Dollars in millions)
Average deposits                                                              
Non-interest-bearing deposits $ 1,150     $ 1,157     $ 1,058     $ 910     $ 802     $ (7)     (1) %   $ 348     43 %
Transaction deposits   507       586       543       511       665       (79)     (13)       (158)     (23)  
Savings and money market deposits   2,334       2,303       2,272       2,276       2,385       31     1       (51)     (2)  
Time deposits   560       587       662       752       869       (27)     (5)       (309)     (36)  
Total $ 4,551     $ 4,633     $ 4,535     $ 4,449     $ 4,721     $ (82)     (2) %   $ (170)     (4) %
                                                               
Cost of deposits for the period ending   0.42 %     0.31 %     0.33 %     0.38 %     0.41 %                        
Cost of interest-bearing deposits for the period ending   0.56 %     0.41 %     0.43 %     0.47 %     0.50 %                        
(1) Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.  
   

At June 30, 2022, other borrowings totaled $298 million, as compared to $228 million at March 31, 2022, and $284 million at June 30, 2021.

Asset Quality Position

Non-performing assets decreased to $30.8 million due to a $5.4 million decrease in non-accrual loans. The decline is attributable to decreases in non-accrual commercial and industrial and energy loans. The non-performing assets to total assets ratio decreased from 1.09% at June 30, 2021 to 0.54% at June 30, 2022. Classified loans increased slightly during the second quarter due to some grade changes in the commercial and industrial portfolio, but remained in an acceptable range at 12.1% of total capital plus the allowance for credit losses.

The allowance for credit losses was $56 million or 1.23% of outstanding loans and 202% of non-accruing loans at June 30, 2022. The combined allowance for credit losses and accrual for off-balance sheet credit risk from unfunded commitments (“RUC”) was $61 million or 1.35% of outstanding loans and 221% of non-accruing loans at June 30, 2022.

The allowance for credit losses to total loans decreased to 1.23% at June 30, 2022 from 1.27% at March 31, 2022. The improvements in credit metrics compared to June 30, 2021 were primarily driven by upgrades in COVID-19 impacted segments and the Energy portfolio. Net charge-offs were $1.1 million for the second quarter of 2022 and were consistent with the prior quarter. The charge-offs for the current quarter were primarily related to commercial and industrial and energy credits. The following table provides information regarding asset quality.

Asset quality (Dollars in millions)   2Q22       1Q22       4Q21       3Q21       2Q21  
Non-accrual loans $ 27.7     $ 33.1     $ 31.4     $ 48.1     $ 54.7  
Other real estate owned   1.0       1.0       1.1       1.1       1.7  
Non-performing assets   30.8       35.6       32.7       49.8       58.1  
Loans 90+ days past due and still accruing   2.2       1.5       0.1       0.5       1.8  
Loans 30 - 89 days past due   16.6       15.9       3.5       37.6       18.8  
Net charge-offs (recoveries)   1.1       1.1       0.8       1.3       2.6  
                                       
Asset quality metrics (%)   2Q22       1Q22       4Q21       3Q21       2Q21  
Non-performing assets to total assets   0.54 %     0.64 %     0.58 %     0.92 %     1.09 %
Allowance for credit loss to total loans   1.23       1.27       1.37       1.51       1.78  
Allowance for credit loss + RUC to total loans(1)   1.35       1.38       -       -       -  
Allowance for credit loss to non-performing loans   187       160       185       132       134  
Net charge-offs (recoveries) to average loans(2)   0.10       0.10       0.07       0.13       0.23  
Provision to average loans(2)   0.19       (0.06)       (0.47)       (0.94)       0.32  
Classified Loans / (Total Capital + ACL)   12.1       10.8       10.8       17.3       24.0  
Classified Loans / (Total Capital + ACL + RUC)(1)   12.0       10.7       -       -       -  
(1) Includes the accrual for off-balance sheet credit risk from unfunded commitments that resulted from CECL adoption on January 1, 2022.  
(2) Interim periods annualized.  
   

Capital Position

At June 30, 2022, stockholders' equity totaled $608 million, or $12.27 per share, compared to $668 million, or $13.23 per share, at December 31, 2021. During the second quarter of 2022, CrossFirst continued its share repurchase program by purchasing 237,993 shares of common stock outstanding. In addition, accumulated other comprehensive income (loss) declined by $71 million between December 31, 2021 and June 30, 2022; driven by a $74 million decrease in the unrealized gain (loss) on available-for-sale securities, net of tax.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 12% and the total capital to risk-weighted assets was approximately 13% at June 30, 2022. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will host a conference call to review second quarter 2022 financial results on Tuesday, July 19, 2022, at 10 a.m. CT / 11 a.m. ET. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. To access the event by telephone, please dial (877) 270-2148 at least fifteen minutes prior to the start of the call and request access to the CrossFirst Bankshares, Inc. call. International callers should dial +1 (412) 902-6510 and request access as directed above.

The call will also be broadcast live over the internet and can be accessed via the following link: https://edge.media-server.com/mmc/p/px7sxoby. Please visit the site at least 15 minutes prior to the call to allow time for registration.

For those unable to join the presentation, a replay of the call will be available two hours after the conclusion of the live call. To access the replay, dial (877) 344-7529 and enter the replay access code 4987463. International callers should dial +1 (412) 317-0088 and enter the same access code. A replay of the webcast will also be available for 90 days on the company’s website https://investors.crossfirstbankshares.com/.

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 Quarterly Report on Form 10-Q is filed. This earnings release contains forward-looking statements regarding, among other things, our business plans, the acquisition of Central, and future 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,” “planned,” “projects,” “continuing,” “ongoing,” “expects,” “intends” and similar words or phrases. The inclusion of forward-looking information in this earnings release should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.

Accordingly, the Company cautions you that any such forward-looking statements are not a guarantee of future performance and 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, credit quality and risk, ongoing impact of the COVID-19 pandemic, industry and technological changes, cyber incidents or other failures, disruptions or security breaches, interest rates, commercial and residential real estate values, economic and market conditions in the United States or internationally, funding availability, accounting estimates and risk management processes, the transition away from the London Interbank Offered Rate (LIBOR), legislative and regulatory changes, business strategy execution, hiring and retention of key personnel, competition, mortgage markets, fraud committed against the Company, environmental liability and severe weather, natural disasters, acts of war or terrorism or other external events. These and other factors that could cause results to differ materially from those described in the forward-looking statements, as well as a discussion of the risks and uncertainties that may affect our business, can be found in our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q and in other filings we make with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this communication, and we disclaim any obligation to update any forward-looking statement or to publicly announce the results of any revisions to any of the forward-looking statements included herein, except as required by law.

About CrossFirst Bankshares, Inc.

CrossFirst Bankshares, Inc. (Nasdaq: CFB) 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 nine full-service banking locations in Kansas, Missouri, Oklahoma, Texas, and Arizona that offer products and services to businesses, professionals, individuals, and families.

 

TABLE 1. CONSOLIDATED BALANCE SHEETS

  June 30, 2022   December 31, 2021(2)
  (Unaudited)    
  (Dollars in thousands)
Assets          
Cash and cash equivalents $ 277,678     $ 482,727  
Available-for-sale securities - taxable   186,154       192,146  
Available-for-sale securities - tax-exempt   509,493       553,823  
Loans, net of unearned fees   4,528,234       4,256,213  
Allowance for credit losses on loans(1)   55,817       58,375  
Net loans   4,472,417       4,197,838  
Premises and equipment, net   64,769       66,069  
Restricted equity securities   14,946       11,927  
Interest receivable   17,909       16,023  
Foreclosed assets held for sale   973       1,148  
Bank-owned life insurance   68,293       67,498  
Other   95,679       32,258  
Total assets $ 5,708,311     $ 5,621,457  
Liabilities and stockholders’ equity          
Deposits          
Non-interest-bearing $ 1,163,462     $ 1,163,224  
Savings, NOW and money market   2,847,887       2,895,986  
Time   733,071       624,387  
Total deposits   4,744,420       4,683,597  
Federal Home Loan Bank advances   296,600       236,600  
Other borrowings   1,041       1,009  
Interest payable and other liabilities   58,234       32,678  
Total liabilities   5,100,295       4,953,884  
Stockholders’ equity          
Common stock, $0.01 par value:          
authorized - 200,000,000 shares, issued - 52,972,244 and 52,590,015 shares at June 30, 2022 and December 31, 2021, respectively   529       526  
Treasury stock, at cost:          
3,436,295 and 2,139,970 shares held at June 30, 2022 and December 31, 2021, respectively   (48,501 )     (28,347 )
Additional paid-in capital   528,548       526,806  
Retained earnings   176,869       147,099  
Accumulated other comprehensive income (loss)   (49,429 )     21,489  
Total stockholders’ equity   608,016       667,573  
Total liabilities and stockholders’ equity $ 5,708,311     $ 5,621,457  

(1)  As of December 31, 2021, this line represents the allowance for loan and lease losses.
(2)  The year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

    

    TABLE 2. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

  Three Months Ended   Six Months Ended
  June 30,   June 30,
  2022     2021     2022     2021  
  (Dollars in thousands except per share data)
Interest Income                      
Loans, including fees $ 47,327     $ 43,846     $ 90,055     $ 87,604  
Available-for-sale securities - taxable   1,086       869       2,130       1,620  
Available-for-sale securities - tax-exempt   3,845       3,497       7,537       6,848  
Deposits with financial institutions   369       110       521       238  
Dividends on bank stocks   213       162       357       327  
Total interest income   52,840       48,484       100,600       96,637  
Interest Expense                      
Deposits   4,732       4,850       8,243       10,578  
Fed funds purchased and repurchase agreements   74       2       74       3  
Federal Home Loan Bank Advances   1,294       1,280       2,403       2,563  
Other borrowings   31       24       56       48  
Total interest expense   6,131       6,156       10,776       13,192  
Net Interest Income   46,709       42,328       89,824       83,445  
Provision for Credit Losses(1)   2,135       3,500       1,510       11,000  
Net Interest Income after Provision for Credit Losses(1)   44,574       38,828       88,314       72,445  
Non-Interest Income                      
Service charges and fees on customer accounts   1,546       1,177       2,954       2,134  
Realized losses on available-for-sale securities   (12 )     (13 )     (38 )     (3 )
Unrealized losses on equity securities, net   (71 )     6       (174 )     (33 )
Income from bank-owned life insurance   407       2,245       795       2,661  
Swap fees and credit valuation adjustments, net   12       (30 )     130       125  
ATM and credit card interchange income   1,521       1,506       4,185       3,834  
Other non-interest income   798       934       1,291       1,251  
Total non-interest income   4,201       5,825       9,143       9,969  
Non-Interest Expense                      
Salaries and employee benefits   17,095       15,660       35,036       29,213  
Occupancy   2,622       2,397       5,115       4,891  
Professional fees   1,068       1,138       1,873       1,920  
Deposit insurance premiums   713       917       1,450       2,068  
Data processing   1,160       720       1,972       1,436  
Advertising   757       435       1,449       738  
Software and communication   1,198       1,034       2,468       2,099  
Foreclosed assets, net   15       665       (38 )     715  
Other non-interest expense   4,575       2,847       7,544       5,551  
Total non-interest expense   29,203       25,813       56,869       48,631  
Net Income Before Taxes   19,572       18,840       40,588       33,783  
Income tax expense   4,027       3,263       8,215       6,171  
Net Income $ 15,545     $ 15,577     $ 32,373     $ 27,612  
Basic Earnings Per Share $ 0.31     $ 0.30     $ 0.65     $ 0.54  
Diluted Earnings Per Share $ 0.31     $ 0.30     $ 0.64     $ 0.53  

(1)  For the three and six-months ended June 30, 2021, this line represents the provision for loan and lease losses.
 

 

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

    Six Months Ended  
    June 30,  
    2022       2021  
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate
(4)
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate
(4)
    (Dollars in thousands)  
Interest-earning assets:                                  
Securities - taxable(1) $ 220,783     $ 2,487   2.26 %   $ 209,730     $ 1,947   1.86 %
Securities - tax-exempt(1)(2)   543,873       9,120   3.35       464,208       8,286   3.57  
Federal funds sold   -       -   -       -       -   -  
Interest-bearing deposits in other banks   253,771       521   0.41       429,930       238   0.11  
Gross loans, net of unearned income(3)   4,385,664       90,055   4.14       4,457,792       87,604   3.96  
Total interest-earning assets(1)(2)   5,404,091     $ 102,183   3.81 %     5,561,660     $ 98,075   3.55 %
Allowance for credit losses   (57,324 )                 (77,552 )            
Other non-interest-earning assets   207,881                   251,450              
Total assets $ 5,554,648                 $ 5,735,558              
Interest-bearing liabilities                                  
Transaction deposits $ 546,982     $ 596   0.22 %   $ 690,514     $ 677   0.20 %
Savings and money market deposits   2,318,415       4,716   0.41       2,403,318       4,495   0.38  
Time deposits   573,503       2,931   1.03       920,307       5,406   1.18  
Total interest-bearing deposits   3,438,900       8,243   0.48       4,014,139       10,578   0.53  
FHLB and short-term borrowings   280,883       2,477   1.78       289,039       2,566   1.79  
Trust preferred securities, net of fair value adjustments   1,018       56   11.11       971       48   9.89  
Non-interest-bearing deposits   1,153,499       -   -       766,725       -   -  
Cost of funds   4,874,300     $ 10,776   0.44 %     5,070,874     $ 13,192   0.52 %
Other liabilities   46,312                   35,017              
Stockholders’ equity   634,036                   629,667              
Total liabilities and stockholders' equity $ 5,554,648                 $ 5,735,558              
Net interest income(2)       $ 91,407               $ 84,883      
Net interest spread(1)(2)             3.37 %               3.03 %
Net interest margin(1)(2)             3.41 %               3.07 %

(1) The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest-earning asset. All periods presented reflect this change.
(2) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.
(3) Average gross loan balances include non-accrual loans.
(4) 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)

  Six Months Ended
  June 30, 2022 over 2021
  Average Volume   Yield/Rate   Net Change(2)
  (Dollars in thousands)
Interest Income                
Securities - taxable $ 107     $ 433     $ 540  
Securities - tax-exempt(1)   987       (153 )     834  
Federal funds sold   -       -       -  
Interest-bearing deposits in other banks   (132 )     415       283  
Gross loans, net of unearned income   (1,434 )     3,885       2,451  
Total interest income(1)   (472 )     4,580       4,108  
Interest Expense                
Transaction deposits   (151 )     70       (81 )
Savings and money market deposits   (163 )     384       221  
Time deposits   (1,840 )     (635 )     (2,475 )
Total interest-bearing deposits   (2,154 )     (181 )     (2,335 )
FHLB and short-term borrowings   (71 )     (18 )     (89 )
Trust preferred securities, net of fair value adjustments   2       6       8  
Total interest expense   (2,223 )     (193 )     (2,416 )
Net interest income(1) $ 1,751     $ 4,773     $ 6,524  

(1) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.  
(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

 

TABLE 4. 2021 - 2022 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

    Three Months Ended  
    June 30,  
    2022       2021  
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate
(4)
  Average
Balance
  Interest
Income /
Expense
  Average
Yield /
Rate
(4)
    (Dollars in thousands)  
Interest-earning assets:                                  
Securities - taxable(1) $ 220,763     $ 1,299   2.35 %   $ 207,835     $ 1,031   1.99 %
Securities - tax-exempt(1)(2)   553,960       4,653   3.36       478,334       4,231   3.54  
Federal funds sold   -       -   -       -       -   -  
Interest-bearing deposits in other banks   198,210       369   0.75       407,801       110   0.11  
Gross loans, net of unearned income(3)   4,437,917       47,327   4.28       4,409,280       43,846   3.99  
Total interest-earning assets(1)(2)   5,410,850     $ 53,648   3.98 %     5,503,250     $ 49,218   3.59 %
Allowance for credit losses   (56,732 )                 (76,741 )            
Other non-interest-earning assets   191,539                   247,129              
Total assets $ 5,545,657                 $ 5,673,638              
Interest-bearing liabilities                                  
Transaction deposits $ 508,403     $ 374   0.29 %   $ 664,552     $ 313   0.19 %
Savings and money market deposits   2,334,103       2,869   0.49       2,385,074       2,107   0.35  
Time deposits   559,708       1,489   1.07       869,176       2,430   1.12  
Total interest-bearing deposits   3,402,214       4,732   0.56       3,918,802       4,850   0.50  
FHLB and short-term borrowings   330,064       1,368   1.66       287,904       1,282   1.79  
Trust preferred securities, net of fair value adjustments   1,024       29   11.94       976       24   9.82  
Non-interest-bearing deposits   1,149,654       -   -       801,591       -   -  
Cost of funds   4,882,956     $ 6,129   0.50 %     5,009,273     $ 6,156   0.49 %
Other liabilities   48,160                   30,948              
Stockholders’ equity   614,541                   633,417              
Total liabilities and stockholders' equity $ 5,545,657                 $ 5,673,638              
Net interest income(2)       $ 47,519               $ 43,062      
Net interest spread(1)(2)             3.48 %               3.10 %
Net interest margin(1)(2)             3.52 %               3.14 %

(1) The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest-earning asset. All periods presented reflect this change.
(2) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.
(3) Average loan balances include non-accrual loans.
(4) 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
  June 30, 2022 over 2021
  Average Volume   Yield/Rate   Net Change(2)
  (Dollars in thousands)
Interest Income                
Securities - taxable $ 67     $ 201     $ 268  
Securities - tax-exempt(1)   643       (221 )     422  
Federal funds sold   -       -       -  
Interest-bearing deposits in other banks   (84 )     343       259  
Gross loans, net of unearned income   287       3,194       3,481  
Total interest income(1)   913       3,517       4,430  
Interest Expense                
Transaction deposits   (86 )     147       61  
Savings and money market deposits   (46 )     808       762  
Time deposits   (827 )     (114 )     (941 )
Total interest-bearing deposits   (959 )     841       (118 )
FHLB and short-term borrowings   179       (93 )     86  
Trust preferred securities, net of fair value adjustments   1       4       5  
Total interest expense   (779 )     752       (27 )
Net interest income(1) $ 1,692     $ 2,765     $ 4,457  

(1) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.
(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.

 

TABLE 5. NON-GAAP FINANCIAL MEASURES

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

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

  • We calculate ‘‘non-GAAP core operating income’’ as net income adjusted to remove non-core income and expense items related to:
     
    • Acquisition costs - We incurred expenses in the second quarter of 2022 related to the announced acquisition of Central Bancorp, Inc.’s bank subsidiary, Farmers & Stockmens Bank.
       
    • Employee separation - During the quarter ended June 30, 2022, the Company recorded $1.1 million expense related to employee separation.
       
    • Charges and adjustments associated with the full vesting of a former executive - We incurred additional charges in the second quarter of 2021 related to the acceleration of $0.7 million of certain cash, stock-based compensation, and employee costs.
       
    • Bank Owned Life Insurance - We obtain bank owned life insurance on key employees throughout the organization and received a $1.8 million benefit in the second quarter of 2021.
       
    • Unrealized loss on equity security - During the quarter ended September 30, 2021, the Company recorded a $6.2 million impairment loss related to an equity investment that was received as part of a restructured loan agreement.

The most directly comparable GAAP financial measure for non-GAAP core operating income is net income. Management believes that non-GAAP core operating income removes events that are not part of core business activities and are useful analytical tools for investors to compare periods excluding these non-core expenses and charges.

  • We calculate "non-GAAP core return on average tangible common equity" as non-GAAP core operating income (as defined above) 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. Management believes that non-GAAP core return on average tangible common equity removes events that are not part of core business activities and are useful analytical tools for investors to compare periods excluding these non-core expenses and charges.
  • We calculate "non-GAAP core operating return on average assets" as non-GAAP core operating income (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 divided by average assets. Management believes that non-GAAP core operating return on average assets removes events that are not part of core business activities and are useful analytical tools for investors to compare periods excluding these non-core expenses and charges.
  • 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. Management believes that tangible stockholders’ equity is important to many investors in the marketplace who are interested in changes from period to period in our stockholders’ equity, exclusive of changes in intangible assets.
  • 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. Management believes that tangible book value per share is important to many investors in the marketplace who are interested in changes from period to period in our stockholders’ equity, exclusive of changes in intangible assets.
  • We calculate ‘‘non-GAAP loan growth, excluding PPP loans’’ as gross loans, net of unearned income subtracted by PPP loans, net of unearned income. Management believes that loan growth, excluding PPP loans is important to investors because it is a better representation of the overall loan portfolio activity when comparing between periods.
  • We calculate "non-GAAP core operating efficiency ratio - fully tax equivalent (FTE)" as non-interest expense adjusted to remove non-core, non-interest expenses as defined above under non-GAAP core operating income divided by net interest income on a fully tax-equivalent basis plus non-interest income adjusted to remove non-core, non-interest income as defined above under non-GAAP core operating income. The most directly comparable financial measure is the efficiency ratio. Management believes that the non-GAAP core operating efficiency ratio is important to many investors because the ratio removes events that are not part of core business activities and is a useful analytical tool.
  • We calculate "non-GAAP pre-tax pre-provision profit" as net income before taxes plus the provision for credit losses. Management believes that non-GAAP pre-tax pre-provision profit is important to many investors because the calculation removes the tax impact on the financials and gives investors insight into the operating income of the company.
     
  Quarter Ended       Six Months Ended  
  6/30/2022     3/31/2022     12/31/2021     9/30/2021     6/30/2021     6/30/2022     6/30/2021  
    (Dollars in thousands)  
Non-GAAP core operating income:                                                      
Net income $ 15,545     $ 16,828     $ 20,801     $ 21,000     $ 15,577     $ 32,373     $ 27,612  
Add: Acquisition costs   239       -       -       -       -       239       -  
Less: Tax effect(1)   50       -       -       -       -       50       -  
Acquisition costs, net of tax   189       -       -       -       -       189       -  
Add: Employee separation   1,063       -       -       -       -       1,063       -  
Less: Tax effect(1)   223       -       -       -       -       223       -  
Employee separation, net of tax   840       -       -       -       -       840       -  
Add: Unrealized loss on equity security   -       -       -       6,200       -       -       -  
Less: Tax effect(1)   -       -       -       1,302       -       -       -  
Unrealized loss on equity security, net of tax   -       -       -       4,898       -       -       -  
Add: Accelerated employee benefits   -       -       -       -       719       -       719  
Less: Tax effect(2)   -       -       -       -       210       -       210  
Accelerated employee benefits, net of tax   -       -       -       -       509       -       509  
Less: BOLI settlement benefits(3)   -       -       -       -       1,841       -       1,841  
Non-GAAP core operating income $ 16,574     $ 16,828     $ 20,801     $ 25,898     $ 14,245     $ 33,402     $ 26,280  
(1) Represents the tax impact of the adjustments at a tax rate of 21.0%.  
(2) Represents the tax impact of the adjustments above at a tax rate of 21.0%, plus a permanent tax benefit associated with stock-based grants.  
(3) No tax effect.  

 

    Quarter Ended       Six Months Ended  
    6/30/2022       3/31/2022       12/31/2021       9/30/2021       6/30/2021       6/30/2022       6/30/2021  
    (Dollars in thousands)  
Non-GAAP core return on average tangible common equity:                                                    
Net income available to common stockholders $ 15,545     $ 16,828     $ 20,801     $ 21,000     $ 15,577     $ 32,373     $ 27,612  
Non-GAAP core operating income   16,574       16,828       20,801       25,898       14,245       33,402       26,280  
Average common equity   614,541       653,747       656,415       644,715       633,417       634,036       629,667  
Less: average goodwill and intangibles   101       121       140       160       179       111       189  
Average tangible common equity $ 614,440     $ 653,626     $ 656,275     $ 644,555     $ 633,238     $ 633,925     $ 629,478  
Return on average common equity   10.15 %     10.44 %     12.57 %     12.92 %     9.86 %     10.30 %     8.84 %
Non-GAAP core return on average tangible common equity   10.82 %     10.44 %     12.57 %     15.94 %     9.02 %     10.63 %     8.42 %

 

    Quarter Ended       Six Months Ended  
    6/30/2022       3/31/2022       12/31/2021       9/30/2021       6/30/2021       6/30/2022       6/30/2021  
    (Dollars in thousands)  
Non-GAAP core operating return on average assets:                                                      
Net income $ 15,545     $ 16,828     $ 20,801     $ 21,000     $ 15,577     $ 32,373     $ 27,612  
Non-GAAP core operating income   16,574       16,828       20,801       25,898       14,245       33,402       26,280  
Average assets $ 5,545,657     $ 5,563,738     $ 5,490,482     $ 5,408,984     $ 5,673,638     $ 5,554,648     $ 5,735,558  
Return on average assets   1.12 %     1.23 %     1.50 %     1.54 %     1.10 %     1.18 %     0.97 %
Non-GAAP core operating return on average assets   1.20 %     1.23 %     1.50 %     1.90 %     1.01 %     1.21 %     0.92 %

 

    Quarter Ended
  6/30/2022     3/31/2022     12/31/2021     9/30/2021     6/30/2021
    (Dollars in thousands except per share data)
Tangible common stockholders' equity:                                    
Total stockholders' equity $ 608,016     $ 623,199     $ 667,573     $ 652,407     $ 637,190
Less: goodwill and other intangible assets   91       110       130       149       169
Tangible common stockholders' equity $ 607,925     $ 623,089     $ 667,443     $ 652,258     $ 637,021
Tangible book value per share:                                    
Tangible common stockholders' equity $ 607,925     $ 623,089     $ 667,443     $ 652,257     $ 637,021
Shares outstanding at end of period   49,535,949       49,728,253       50,450,045       51,002,698       50,958,680
Book value per share $ 12.27     $ 12.53     $ 13.23     $ 12.79     $ 12.50
Tangible book value per share $ 12.27     $ 12.53     $ 13.23     $ 12.79     $ 12.50

 

    Quarter Ended  
    6/30/2022       3/31/2022       12/31/2021       9/30/2021       6/30/2021  
  (Dollars in thousands)  
Non-GAAP loan growth, excluding PPP loans:                                      
Gross loans, net of unearned income $ 4,528,234     $ 4,349,558     $ 4,256,213     $ 4,233,117     $ 4,237,944  
Less: PPP loans, net of unearned income   14,536       31,200       64,805       109,465       197,084  
Non-PPP gross loans, net of unearned income $ 4,513,698     $ 4,318,358     $ 4,191,408     $ 4,123,652     $ 4,040,860  
Year-over-year loan growth   6.85 %                                
Non-GAAP year-over-year loan growth excluding
PPP loans
  12.00                                  
Linked quarter loan growth   4.11                                  
Non-GAAP linked quarter loan growth excluding PPP loans   4.52 %                                

 

    Quarter Ended       Six Months Ended  
    6/30/2022       3/31/2022       12/31/2021       9/30/2021       6/30/2021       6/30/2022       6/30/2021  
    (Dollars in thousands)  
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)                                                      
Non-interest expense $ 29,203     $ 27,666     $ 26,715     $ 24,036       $ 25,813     $ 56,869     $ 48,631  
Less: Accelerated employee benefits   -       -       -       -         719       -       719  
Adjusted Non-interest expense (numerator) $ 29,203     $ 27,666     $ 26,715     $ 24,036       $ 25,094     $ 56,869     $ 47,912  
Net interest income   46,709       43,115       43,445       41,801         42,328       89,824       83,445  
Tax equivalent interest income(1)   810       775       762       748         734       1,583       1,438  
Non-interest income (loss)   4,201       4,942       4,796       (1,105 )       5,825       9,143       9,969  
Add: Acquisition costs   239       -       -       -         -       239       -  
Add: Employee separation   1,063       -       -       -         -       1,063       -  
Add: Unrealized loss on equity security   -       -       -       6,200         -       -       -  
Less: BOLI settlement benefits(2)   -       -       -       -         1,841       -       1,841  
Total tax-equivalent income (denominator) $ 53,022     $ 48,832     $ 49,003     $ 47,644       $ 47,046     $ 101,852     $ 93,011  
Efficiency Ratio   57.36 %     57.57 %     55.38 %     59.06   %     53.61 %     57.46 %     52.06 %
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)   55.08 %     56.66 %     54.52 %     50.45   %     53.34 %     55.83 %     51.51 %
(1) Tax exempt income (tax-free municipal securities) is calculated on a tax equivalent basis. The incremental tax rate used is 21.0%.  
(2) No tax effect.  
   

 

    Quarter Ended       Six Months Ended  
  6/30/2022     3/31/2022     12/31/2021     9/30/2021     6/30/2021     6/30/2022     6/30/2021  
  (Dollars in thousands)                  
Non-GAAP Pre-Tax Pre-Provision Profit                                                      
Net income before taxes $ 19,572     $ 21,016       $ 26,526       $ 26,660       $ 18,840     $ 40,588     $ 33,783  
Add: Provision for credit losses   2,135       (625 )       (5,000 )       (10,000 )       3,500       1,510       11,000  
Non-GAAP Pre-Tax Pre-Provision Profit $ 21,707     $ 20,391       $ 21,526       $ 16,660       $ 22,340     $ 42,098     $ 44,783  

 

INVESTOR CONTACT
Heather Worley
Heather@crossfirst.com | (214) 676-4666
https://investors.crossfirstbankshares.com 



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The Web Content Accessibility Guidelines (WCAG) defines requirements for designers and developers to improve accessibility for people with disabilities. It defines three levels of conformance: Level A, Level AA, and Level AAA. CrossFirst is partially conformant with WCAG 2.1 level AA. Partially conformant means that some parts of the content do not fully conform to the accessibility standard.

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We welcome your feedback on the accessibility of CrossFirst’s website. Please let us know if you encounter accessibility barriers on CrossFirst’s website:

• Phone: (913) 428-3434
• E-mail: legal@crossfirst.com
• Postal address: 11440 Tomahawk Creek Parkway, Leawood, Kansas 66211.

We try to respond to feedback within 5 business days.


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