UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
October 21, 2019 (October 21, 2019)
Date of Report (date of earliest event reported)
CrossFirst Bankshares, Inc.
(Exact name of registrant as specified in its charter)
Kansas | 001-39028 | 26-3212879 | |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) | |
11440 Tomahawk Creek Pkwy, Leawood, KS 66211
(Address of principal executive offices) (Zip Code)
(913 312-6822
Registrant's telephone number, including area code:
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, par value $0.01 per share | CFB | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o
Item 2.02. Results of Operations and Financial Condition.
On October 21, 2019, CrossFirst Bankshares, Inc. (the "Company") issued a press release regarding its financial results for its third fiscal quarter ended September 30, 2019. A copy of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the 'Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits |
Item | Description | |
Press Release, dated October 21, 2019 issued by CrossFirst Bankshares, Inc. | ||
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | October 21, 2019 | CROSSFIRST BANKSHARES, INC. | |||
By: | /s/ David O'Toole | ||||
David O'Toole Chief Financial Officer | |||||
Exhibit 99.1
FOR IMMEDIATE RELEASE | CROSSFIRST BANKSHARES, INC. CONTACT: | |
October 21, 2019 | Matt Needham, Director of Investor Relations | |
(913) 312-6822
https://investors.crossfirstbankshares.com
CrossFirst Bankshares, Inc. Reports Record Third Quarter Net Interest Income and Net Income
LEAWOOD, Kan., Oct. 21, 2019 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported its results for the third quarter of 2019, including record net income of $10.4 million, or $0.21 per diluted share and year-to-date 2019 net income of $29.2 million or $0.61 per diluted share. CrossFirst continues to deliver growth to drive net interest income, earnings and operating leverage while managing through a declining interest rate environment.
"We are pleased with our third quarter results and first quarter reported as a public company," said CrossFirst’s CEO and President George F. Jones, Jr. “While our organization experienced interest margin compression from declining rates, we were still able to deliver net interest income growth in the third quarter. Our teams delivered strong balance sheet growth and we had another quarter of record net income. I am very proud of our employees and what they were able to accomplish.”
2019 Third Quarter Highlights*:
• | Record quarterly net income of $10.4 million, an increase of 63% from the third quarter of 2018 |
• | Record year-to-date net income of $29.2 million, an increase of 215% from the same period in 2018 |
• | Diluted EPS of $0.21 for the quarter, an increase of 40% from the same period in 2018 |
• | Diluted EPS of $0.61 for year-to-date 2019, an increase of 177% from the same period in 2018 |
• | Achieved efficiency ratios of 54.3% for the quarter and 59.4% year-to-date |
• | Grew loans by $163 million from the previous quarter-end and $895 million or 33% since September 30, 2018 |
• | Grew deposits by $74 million from the previous quarter-end and $851 million or 30% since September 30, 2018 |
• | Book value per share of $11.59 at September 30, 2019 compared to $9.43 at September 30, 2018 |
*All share and per share information provided in this release has been adjusted to reflect a 2-for-1 stock split effected in the form of a dividend on December 21, 2018.
Quarter-to-Date | Year-to-Date | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2019 | 2018 | 2019 | |||||||||||||
(Dollars in millions except per share data) | ||||||||||||||||
Net income | $ | 6.4 | $ | 10.4 | $ | 9.3 | $ | 29.2 | ||||||||
Diluted EPS | $ | 0.15 | $ | 0.21 | $ | 0.22 | $ | 0.61 | ||||||||
Return on average assets | 0.70 | % | 0.89 | % | 0.37 | % | 0.89 | % | ||||||||
Return on average common equity | 6.68 | % | 7.58 | % | 3.51 | % | 7.76 | % | ||||||||
Non-GAAP return on average tangible common equity(1) | 6.84 | % | 7.68 | % | 3.61 | % | 7.89 | % | ||||||||
Net interest margin | 3.35 | % | 3.19 | % | 3.23 | % | 3.29 | % | ||||||||
Net interest margin, fully tax-equivalent(2) | 3.44 | % | 3.24 | % | 3.34 | % | 3.35 | % | ||||||||
Efficiency ratio | 65.9 | % | 54.3 | % | 79.1 | % | 59.4 | % | ||||||||
Non-GAAP efficiency ratio, fully tax-equivalent(1)(2) | 64.3 | % | 53.4 | % | 76.8 | % | 58.4 | % | ||||||||
(1) Represents a non-GAAP measure. See "Table 7. Non-GAAP Financial Measures" for a reconciliation of this measure. | ||||||||||||||||
(2) 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%. | ||||||||||||||||
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Income from Operations
Net Interest Income
The Company produced record interest income of $55.5 million for the third quarter of 2019, an increase of 36% from the third quarter of 2018 and 2% greater than the second quarter of 2019. Interest income growth was primarily a result of continued strong growth in average outstanding earning assets. The tax-equivalent yield on earning assets declined from 5.18% to 5.00% during the third quarter of 2019 primarily due to the movement of variable rate assets indexed to market rates and changes in the investment portfolio yields resulting from higher prepayment speeds on the Company's mortgage backed portfolio. Year-to-date interest income is up 47% over the same period in 2018.
Interest expense for the third quarter of 2019 was $19.7 million, or 67% higher than the third quarter of 2018 and 2% higher than the second quarter of 2019. Average interest-bearing deposits in the third quarter of 2019 totaled $3.2 billion, an increase of $847 million or 37% from $2.3 billion in the same quarter in 2018. The interest-bearing deposit mix changes during the quarter were focused on lowering margin exposure to declining rates, however this offset some of the impact of the lower deposit rates during the quarter. Non-deposit funding costs increased to 1.95% from 1.93% in the second quarter of 2019 while overall cost of funds for the quarter was 1.94%, compared to 1.99% for the second quarter of 2019.
Tax-equivalent net interest margin declined to 3.24% for the quarter compared to 3.44% for the same quarter in 2018, reflecting the impact of the declining rate environment. For the nine months ended September 30, 2019, the Company reported a net interest margin of 3.35%, slightly higher than the same period for 2018. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $0.6 million for the third quarter of 2019 and $0.8 million for the third quarter of 2018, and $0.6 million for the second quarter of 2019. Net interest income totaled $35.8 million for the third quarter of 2019 or 3% greater than the second quarter of 2019. Year-to-date net interest income was 34% 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 $2.0 million in the third quarter of 2019 or 171% compared to the same quarter of 2018 and $1.5 million or 92% compared to the second quarter of 2019. While the Company continues to increase fee income commensurate with its growth, the back-to-back swap program generated strong fee income with $1.1 million of new fees recorded during the quarter. During the third quarter of 2019, the Company also recorded a one-time $0.8 million gain related to a changed in derivative valuation. Historically, the company used a peer group in order to value the counter-party risk to assess potential credit default. As the program has matured, the Company reviewed the valuation methodology and implemented a more sophisticated view of risk as the swaps are cross collateralized with the loans being hedged.
Non-Interest Expense
Non-interest expense for the third quarter of 2019 increased $1.3 million, or 7%, compared to the third quarter of 2018 and decreased $0.8 million, or 4% from the second quarter of 2019. Compared to the third quarter of 2018, salary and employment-related expenses increased $1.6 million for additional employee headcount required to support growth and data processing costs were higher from the Company's increased volumes of activity, partially offset by a $0.5 million decrease in FDIC insurance expense. As compared to the second quarter of 2019, salary and employment-related expenses decreased $0.2 million as a result of continuing to manage resource allocation and hiring and FDIC insurance expense decreased $0.6 million as a result of a one-time small bank credit. Year-to-date non-interest expense increased by less than 1% compared to the same period in 2018.
CrossFirst’s effective tax rate for the nine months ended September 30, 2019 was 15.4% as compared to (10.8)% for the nine months ended September 30, 2018. The year-over-year change was primarily due to higher earnings, a reduction in tax-exempt income due to average yields on tax exempt securities decreasing, and permanent tax benefits from a stock-based compensation award in 2018 as compared to 2019. The effective tax rate for the third quarter of 2019 was 20.0% compared to 19.6% for the second quarter of 2019. For both of the comparable periods, the Company continues 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 third quarter of 2019, total assets increased by $178 million or 4% compared to June 30, 2019 with both strong loan and deposit growth. Asset growth for CrossFirst was $935 million or 25% over the last twelve months. While both loans and deposits grew for the quarter, loan volumes outpaced deposit growth increasing the loan to deposit ratio from 96.7% to 99.2%. During the third quarter of 2019, total available for sale investment securities increased $28 million to $733 million, while the overall average for the quarter was $728 million. Tax- exempt municipal securities on average increased $18 million and mortgage backed securities decreased $10 million. The
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increase in investment securities was part of management's strategy to manage liquidity and optimize income.
Loan Growth Results
The Company continues to maintain a diversified loan portfolio while experiencing strong loan growth of 5% for the third quarter of 2019 and 33% since September 30, 2018. Loan yields declined 13 basis points in the overall portfolio commensurate with the adjustable rate loan movements with Libor and Prime over the course of the quarter. The Company experienced $204 million in payoffs for the quarter, but was able to fund $367 million in loans to replace and grow the overall portfolio.
(Dollars in millions) | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | % of Total | QoQ Growth ($) | QoQ Growth (%)(1) | YoY Growth ($) | YoY Growth (%)(1) | ||||||||||||||||||||||||||
Period-end loans (gross) | ||||||||||||||||||||||||||||||||||||
Commercial and industrial | $ | 958 | $ | 1,134 | $ | 1,163 | $ | 1,254 | $ | 1,313 | 36.1 | % | $ | 59 | 5 | % | $ | 355 | 37 | % | ||||||||||||||||
Energy | 312 | 358 | 376 | 386 | 396 | 10.9 | 10 | 3 | 84 | 27 | ||||||||||||||||||||||||||
Commercial real estate | 770 | 847 | 948 | 968 | 993 | 27.3 | 25 | 3 | 223 | 29 | ||||||||||||||||||||||||||
Construction and land development | 436 | 440 | 427 | 463 | 528 | 14.5 | 65 | 14 | 92 | 21 | ||||||||||||||||||||||||||
Residential real estate | 226 | 246 | 331 | 359 | 365 | 10.0 | 6 | 2 | 139 | 62 | ||||||||||||||||||||||||||
Equity lines of credit | 22 | 20 | 20 | 21 | 22 | 0.6 | 1 | 3 | — | — | ||||||||||||||||||||||||||
Consumer installment | 20 | 24 | 22 | 25 | 22 | 0.6 | (3 | ) | (14 | ) | 2 | 6 | ||||||||||||||||||||||||
Total | $ | 2,744 | $ | 3,069 | $ | 3,287 | $ | 3,476 | $ | 3,639 | 100.0 | % | $ | 163 | 5 | % | $ | 895 | 33 | % | ||||||||||||||||
Average loans, net of unearned income | $ | 2,523 | $ | 2,911 | $ | 3,176 | $ | 3,398 | $ | 3,541 | $ | 143 | 4 | % | $ | 1,018 | 40 | % | ||||||||||||||||||
Yield on loans for the period ending | 5.35 | % | 5.56 | % | 5.75 | % | 5.66 | % | 5.53 | % | ||||||||||||||||||||||||||
(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 quarter, which have historically adjusted with movements in fed funds rates. To continue lowering the duration of its deposit base, the Company did not renew $67 million of brokered deposits that matured during the quarter.
(Dollars in millions) | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | % of Total | QoQ Growth ($) | QoQ Growth (%)(1) | YoY Growth ($) | YoY Growth (%)(1) | ||||||||||||||||||||||||||
Period-end deposits | ||||||||||||||||||||||||||||||||||||
Non-interest bearing deposits | $ | 505 | $ | 484 | $ | 488 | $ | 512 | $ | 514 | 14.1 | % | $ | 2 | — | % | $ | 9 | 2 | % | ||||||||||||||||
Transaction deposits | 56 | 82 | 119 | 137 | 146 | 4.0 | % | 9 | 7 | 90 | 163 | |||||||||||||||||||||||||
Savings and money market deposits | 1,448 | 1,632 | 1,511 | 1,634 | 1,776 | 48.5 | % | 142 | 9 | 328 | 23 | |||||||||||||||||||||||||
Time deposits < $100,000 | 338 | 440 | 554 | 535 | 469 | 12.8 | % | (66 | ) | (12 | ) | 131 | 39 | |||||||||||||||||||||||
Time deposits > $100,000 | 460 | 570 | 728 | 766 | 753 | 20.6 | % | (13 | ) | (2 | ) | 293 | 64 | |||||||||||||||||||||||
Total | $ | 2,807 | $ | 3,208 | $ | 3,400 | $ | 3,584 | $ | 3,658 | 100.0 | % | $ | 74 | 2 | % | $ | 851 | 30 | % | ||||||||||||||||
Brokered deposits | $ | 262 | $ | 343 | $ | 424 | $ | 397 | $ | 330 | 9.0 | % | $ | (67 | ) | (17 | )% | $ | 68 | 26 | % | |||||||||||||||
Average deposits | ||||||||||||||||||||||||||||||||||||
Non-interest bearing deposits | $ | 492 | $ | 492 | $ | 477 | $ | 513 | $ | 535 | 14.5 | % | $ | 22 | 4 | % | $ | 43 | 9 | % | ||||||||||||||||
Transaction deposits | 56 | 63 | 104 | 144 | 135 | 3.7 | % | (9 | ) | (6 | ) | 79 | 141 | |||||||||||||||||||||||
Savings and money market deposits | 1,450 | 1,498 | 1,544 | 1,560 | 1,744 | 47.2 | % | 184 | 12 | 294 | 20 | |||||||||||||||||||||||||
Time deposits | 801 | 913 | 1,165 | 1,305 | 1,277 | 34.6 | % | (28 | ) | (2 | ) | 476 | 59 | |||||||||||||||||||||||
Total | $ | 2,799 | $ | 2,966 | $ | 3,290 | $ | 3,522 | $ | 3,691 | 100.0 | % | $ | 169 | 5 | % | $ | 892 | 32 | % | ||||||||||||||||
Cost of deposits for the period ending | 1.42 | % | 1.70 | % | 1.96 | % | 1.99 | % | 1.94 | % | ||||||||||||||||||||||||||
Cost of interest-bearing deposits for the period ending | 1.72 | % | 2.04 | % | 2.30 | % | 2.33 | % | 2.26 | % | ||||||||||||||||||||||||||
(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. | ||||||||||||||||||||||||||||||||||||
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Asset Quality Position
The Company continued to add to the allowance for loan loss in order to support loan growth and changes in relative risk for the overall portfolio, including with respect to one previously disclosed non-performing loan, recording a provision expense of $4.9 million for the quarter. Net charge-offs were $4.7 million for the quarter as a result of liquidating two other previously identified non-performing loans, as compared to net recoveries of $0.3 million for the third quarter in 2018. During the quarter, non-performing assets to assets declined from 1.18% in the second quarter to 1.00% in the third quarter and classified assets to capital continued to trend down.
Asset quality (Dollars in millions) | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | QoQ Growth ($) | YoY Growth ($) | ||||||||||||||||||||
Non-accrual loans | $ | 12.6 | $ | 17.8 | $ | 13.0 | $ | 50.0 | $ | 43.6 | $ | (6.4 | ) | $ | 31.0 | ||||||||||||
Other real estate owned | — | — | 2.5 | 2.5 | 2.5 | — | 2.5 | ||||||||||||||||||||
Non-performing assets | 13.1 | 17.8 | 15.5 | 52.8 | 46.7 | (6.1 | ) | 33.6 | |||||||||||||||||||
Loans 90+ days past due and still accruing | 0.4 | — | — | 0.2 | 0.6 | 0.4 | 0.2 | ||||||||||||||||||||
Loans 30 - 89 days past due | 26.3 | 3.7 | 31.1 | 23.6 | 64.7 | 41.1 | 38.4 | ||||||||||||||||||||
Classified loans | 54.3 | 101.4 | 97.5 | 88.3 | 85.2 | (3.1 | ) | 30.9 | |||||||||||||||||||
Net charge-offs (recoveries) | (0.3 | ) | 0.2 | 0.7 | — | 4.7 | 4.7 | 5.0 | |||||||||||||||||||
Provision for loan loss | 3.0 | 4.5 | 2.9 | 2.9 | 4.9 | 2.0 | 1.9 | ||||||||||||||||||||
Allowance for loan loss | 33.5 | 37.8 | 40.0 | 42.9 | 43.0 | 0.1 | 9.5 | ||||||||||||||||||||
Asset quality metrics | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | |||||||||
Non-performing assets to total assets | 0.35 | % | 0.43 | % | 0.36 | % | 1.18 | % | 1.00 | % | ||||
Allowance for loan loss to total loans | 1.22 | 1.23 | 1.22 | 1.24 | 1.18 | |||||||||
Allowance for loan loss to non-performing loans | 257 | 212 | 307 | 85 | 97 | |||||||||
Net charge-offs (recoveries) to average loans(1) | (0.05 | ) | 0.03 | 0.09 | — | 0.53 | ||||||||
Loans 30 - 89 days past due to loans | 0.96 | 0.12 | 0.95 | 0.68 | 1.78 | |||||||||
Provision to average loans(1) | 0.47 | 0.61 | 0.36 | 0.34 | 0.54 | |||||||||
Classified Loans / (Total Capital + ALLL) | 12.3 | 19.2 | 18.7 | 16.3 | 13.2 | |||||||||
(1) Interim periods annualized. | ||||||||||||||
Capital Position After Initial Public Offering
At September 30, 2019, stockholders’ equity totaled $602 million, or $11.59 per share, compared to $499 million, or $11.00 per share, at June 30, 2019. Tangible common stockholders' equity was $595 million and tangible book value per share was $11.44 at September 30, 2019. The increase in stockholders' equity was a result of quarterly earnings, an increase in accumulated other comprehensive income for unrealized bond gains, and proceeds received from the initial public offering.
Period-end (Dollars in millions, except per share data) | 3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | ||||||||||||||
Total Stockholders' Equity | $ | 410 | $ | 490 | $ | 481 | $ | 499 | $ | 602 | |||||||||
Book value per share | $ | 9.43 | $ | 10.21 | $ | 10.63 | $ | 11.00 | $ | 11.59 | |||||||||
Tangible book value per share(1) | $ | 9.24 | $ | 10.04 | $ | 10.46 | $ | 10.83 | $ | 11.44 | |||||||||
Common equity tier 1 capital ratio | 10.55 | % | 11.75 | % | 11.23 | % | 11.02 | % | 12.91 | % | |||||||||
Tier 1 capital ratio | 11.38 | 12.53 | 11.23 | 11.04 | 12.93 | ||||||||||||||
Total capital ratio | 12.32 | 13.51 | 12.20 | 12.04 | 13.90 | ||||||||||||||
Leverage ratio | 11.39 | 12.43 | 11.15 | 10.87 | 12.57 | ||||||||||||||
(1) Represents a non-GAAP measure. See "Table 7. Non-GAAP Financial Measures" for a reconciliation of this measure. | |||||||||||||||||||
On September 17, 2019 the underwriters for the initial public offering, acquired an additional 844,362 shares of CrossFirst's common stock pursuant to the partial exercise of the underwriters’ over- allotment option granted in connection with the initial public offering. The additional shares were sold at the IPO price of $14.50 per share, less underwriting discounts and commissions. Net proceeds from the sale of the additional shares were approximately $11.4 million, after deducting underwriting discounts and commissions. During the third quarter of 2019, the Company issued 6,594,362 new shares, 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 our 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.
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Conference Call and Webcast
CrossFirst will hold a conference call and webcast to discuss third quarter 2019 results on Monday, October 21, 2019 at 4 p.m. CDT / 5 p.m. EDT. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. Investors, news media, and other participants should register for the call or audio webcast at https://investors.CrossFirstbankshares.com. Participants may dial into the call toll-free at (877) 621- 5851 from anywhere in the U.S. or (470) 495-9492 internationally, using conference ID no. 6057529. Participants are encouraged to dial into the call or access the webcast approximately 10 minutes prior to the start time.
A replay of the webcast will be available on the Company website. A replay of the conference call will be available two hours following the close of the call until October 28, 2019, accessible at (855) 859-2056 with conference ID no. 6057529.
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 Form 10-Q is filed. This earnings release contains forward-looking statements. These forward-looking statements reflect the Company's current views with respect to, among other things, future events and its financial performance. Any statements about 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
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CROSSFIRST BANKSHARES, INC.
TABLE 1. SELECTED FINANCIAL HIGHLIGHTS (UNAUDITED)
(Dollars in thousands, except per share data)
CrossFirst Bankshares, Inc. | ||||||||||||||||||||
Quarterly Selected Financials (Unaudited) | ||||||||||||||||||||
3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | ||||||||||||||||
Income Statement Data | ||||||||||||||||||||
Interest income | $ | 40,775 | $ | 47,068 | $ | 51,317 | $ | 54,192 | $ | 55,529 | ||||||||||
Interest expense | 11,807 | 14,753 | 17,712 | 19,318 | 19,743 | |||||||||||||||
Net interest income | 28,968 | 32,315 | 33,605 | 34,874 | 35,786 | |||||||||||||||
Provision for loan losses | 3,000 | 4,500 | 2,850 | 2,850 | 4,850 | |||||||||||||||
Non-interest income | 1,185 | 1,195 | 1,645 | 1,672 | 3,212 | |||||||||||||||
Non-interest expense | 19,875 | 20,166 | 22,631 | 21,960 | 21,172 | |||||||||||||||
Net income before taxes | 7,278 | 8,844 | 9,769 | 11,736 | 12,976 | |||||||||||||||
Income tax expense (benefit) | 924 | (1,490 | ) | 419 | 2,297 | 2,592 | ||||||||||||||
Net income | 6,354 | 10,334 | 9,350 | 9,439 | 10,384 | |||||||||||||||
Preferred stock dividends | 525 | 525 | 175 | — | — | |||||||||||||||
Net income available to common stockholders | 5,829 | 9,809 | 9,175 | 9,439 | 10,384 | |||||||||||||||
Non-GAAP core operating income(1) | $ | 6,481 | $ | 6,600 | $ | 7,989 | $ | 9,754 | $ | 10,384 | ||||||||||
Balance Sheet Data | ||||||||||||||||||||
Cash and cash equivalents | $ | 118,323 | $ | 216,541 | $ | 117,317 | $ | 141,373 | $ | 128,126 | ||||||||||
Securities | 690,580 | 663,678 | 707,430 | 704,776 | 733,093 | |||||||||||||||
Gross loans (net of unearned income) | 2,736,262 | 3,060,747 | 3,277,598 | 3,467,204 | 3,629,792 | |||||||||||||||
Allowance for loan losses | 33,540 | 37,826 | 40,001 | 42,852 | 42,995 | |||||||||||||||
Goodwill and intangibles | 7,821 | 7,796 | 7,770 | 7,745 | 7,720 | |||||||||||||||
Non-interest bearing deposits | 504,794 | 484,284 | 488,375 | 511,837 | 513,832 | |||||||||||||||
Total deposits | 2,806,580 | 3,208,097 | 3,399,899 | 3,584,136 | 3,658,108 | |||||||||||||||
Borrowings and repurchase agreements | 483,145 | 388,391 | 368,597 | 364,246 | 357,614 | |||||||||||||||
Trust preferred securities, net of fair value adjustment | 875 | 884 | 893 | 902 | 912 | |||||||||||||||
Preferred stock | 30,000 | 30,000 | — | — | — | |||||||||||||||
Common stock(2) | 359,725 | 424,975 | 428,864 | 430,800 | 519,336 | |||||||||||||||
Total stockholders' equity | 409,780 | 490,336 | 480,514 | 499,195 | 602,435 | |||||||||||||||
Tangible common stockholders' equity(1) | $ | 371,959 | $ | 452,540 | $ | 472,744 | $ | 491,450 | $ | 594,715 | ||||||||||
Share and Per Share Data | ||||||||||||||||||||
Basic earnings per common share(2) | $ | 0.15 | $ | 0.22 | $ | 0.20 | $ | 0.21 | $ | 0.22 | ||||||||||
Diluted earning per common share(2) | 0.15 | 0.22 | 0.20 | 0.20 | 0.21 | |||||||||||||||
Book value per share(2) | 9.43 | 10.21 | 10.63 | 11.00 | 11.59 | |||||||||||||||
Tangible book value per share(1)(2) | $ | 9.24 | $ | 10.04 | $ | 10.46 | $ | 10.83 | $ | 11.44 | ||||||||||
Basic weighted average common shares outstanding(2) | 37,790,614 | 43,853,170 | 45,093,442 | 45,236,264 | 48,351,553 | |||||||||||||||
Diluted weighted average common shares outstanding(2) | 38,778,624 | 44,920,448 | 45,960,267 | 46,211,780 | 49,164,549 | |||||||||||||||
Shares outstanding at end of period(2) | 40,261,480 | 45,074,322 | 45,202,370 | 45,367,641 | 51,969,203 | |||||||||||||||
Selected Ratios | ||||||||||||||||||||
Return on average assets | 0.70 | % | 1.06 | % | 0.91 | % | 0.86 | % | 0.89 | % | ||||||||||
Return on average common equity | 6.68 | 9.03 | 7.98 | 7.78 | 7.58 | |||||||||||||||
Yield on earning assets | 4.72 | 5.01 | 5.18 | 5.12 | 4.94 | |||||||||||||||
Yield on earning assets - tax equivalent(3) | 4.81 | 5.08 | 5.25 | 5.18 | 5.00 | |||||||||||||||
Yield on securities | 3.18 | 3.24 | 3.23 | 3.08 | 2.85 | |||||||||||||||
Yield on securities - tax equivalent(3) | 3.58 | 3.61 | 3.59 | 3.42 | 3.19 | |||||||||||||||
6
CROSSFIRST BANKSHARES, INC.
CrossFirst Bankshares, Inc. | ||||||||||||||||||||
Quarterly Selected Financials (Unaudited) | ||||||||||||||||||||
3Q18 | 4Q18 | 1Q19 | 2Q19 | 3Q19 | ||||||||||||||||
Yield on loans | 5.35 | 5.56 | 5.75 | 5.66 | 5.53 | |||||||||||||||
Cost of interest-bearing liabilities | 1.73 | 2.01 | 2.25 | 2.29 | 2.24 | |||||||||||||||
Cost of interest-bearing deposits | 1.72 | 2.04 | 2.30 | 2.33 | 2.26 | |||||||||||||||
Cost of funds | 1.46 | 1.72 | 1.96 | 1.99 | 1.94 | |||||||||||||||
Cost of deposits | 1.42 | 1.70 | 1.96 | 1.99 | 1.94 | |||||||||||||||
Cost of other borrowings | 1.77 | 1.79 | 1.86 | 1.93 | 1.95 | |||||||||||||||
Net interest margin - tax equivalent(3) | 3.44 | 3.51 | 3.46 | 3.35 | 3.24 | |||||||||||||||
Non-interest expense to average assets | 2.20 | 2.06 | 2.20 | 2.00 | 1.82 | |||||||||||||||
Efficiency ratio(4) | 65.91 | 60.18 | 64.20 | 60.09 | 54.29 | |||||||||||||||
Non-interest bearing deposits to total deposits | 17.99 | 15.10 | 14.36 | 14.28 | 14.05 | |||||||||||||||
Loans to deposits | 97.49 | % | 95.41 | % | 96.40 | % | 96.74 | % | 99.23 | % | ||||||||||
Credit Quality Ratios | ||||||||||||||||||||
Allowance for loan losses to total loans | 1.22 | % | 1.23 | % | 1.22 | % | 1.24 | % | 1.18 | % | ||||||||||
Nonperforming assets to total assets | 0.35 | 0.43 | 0.36 | 1.18 | 1.00 | |||||||||||||||
Nonperforming loans to total loans | 0.48 | 0.58 | 0.40 | 1.45 | 1.22 | |||||||||||||||
Allowance for loan losses to nonperforming loans | 256.65 | 212.30 | 307.27 | 85.20 | 97.12 | |||||||||||||||
Net charge-offs (recoveries) to average loans(5) | (0.05 | )% | 0.03 | % | 0.09 | % | — | % | 0.53 | % | ||||||||||
Capital Ratios | ||||||||||||||||||||
Total stockholders' equity to total assets | 11.03 | % | 11.94 | % | 11.26 | % | 11.16 | % | 12.95 | % | ||||||||||
Common equity tier 1 capital ratio | 10.55 | 11.75 | 11.23 | 11.02 | 12.91 | |||||||||||||||
Tier 1 risk-based capital ratio | 11.38 | 12.53 | 11.23 | 11.04 | 12.93 | |||||||||||||||
Total risk-based capital ratio | 12.32 | 13.51 | 12.20 | 12.04 | 13.90 | |||||||||||||||
Tier 1 leverage ratio | 11.39 | % | 12.43 | % | 11.15 | % | 10.87 | % | 12.57 | % | ||||||||||
(1) Represents a non-GAAP financial measure. See "Non-GAAP Financial Measures" for a reconciliation of this measure. | ||||||||||||||||||||
(2) Share data has been adjusted to reflect a 2-for-1 stock split effected in the form of a dividend on December 21, 2018. | ||||||||||||||||||||
(3) 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%. | ||||||||||||||||||||
(4) We calculate efficiency ratio as non-interest expense divided by the sum of net interest income and non-interest income. | ||||||||||||||||||||
(5) Interim periods are annualized. | ||||||||||||||||||||
7
CROSSFIRST BANKSHARES, INC.
TABLE 2. YEAR-TO-DATE ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)
Nine Months Ended | |||||||||||||||||||||
September 30, | |||||||||||||||||||||
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 | $ | 273,525 | $ | 6,447 | 3.15 | % | $ | 334,272 | $ | 7,447 | 2.98 | % | |||||||||
Securities - tax-exempt(1) | 484,090 | 14,062 | 3.88 | 378,651 | 10,672 | 3.77 | |||||||||||||||
Federal funds sold | 18,782 | 281 | 2.00 | 18,714 | 345 | 2.46 | |||||||||||||||
Interest-bearing deposits in other banks | 174,740 | 2,200 | 1.68 | 135,030 | 2,107 | 2.09 | |||||||||||||||
Gross loans, net of unearned income(2) | 2,275,039 | 89,262 | 5.25 | 3,373,118 | 142,319 | 5.64 | |||||||||||||||
Total interest-earning assets(1) | 3,226,176 | $ | 112,252 | 4.65 | % | 4,239,785 | $ | 162,890 | 5.14 | % | |||||||||||
Allowance for loan losses | (29,607 | ) | (41,329 | ) | |||||||||||||||||
Other non-interest-earning assets | 166,661 | 196,900 | |||||||||||||||||||
Total assets | $ | 3,363,230 | $ | 4,395,356 | |||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||
Transaction deposits | $ | 53,995 | $ | 101 | 0.25 | % | $ | 127,785 | $ | 1,139 | 1.19 | % | |||||||||
Savings and money market deposits | 1,381,291 | 15,658 | 1.52 | 1,616,558 | 27,326 | 2.26 | |||||||||||||||
Time deposits | 809,550 | 10,880 | 1.80 | 1,249,219 | 22,956 | 2.46 | |||||||||||||||
Total interest-bearing deposits | 2,244,836 | 26,639 | 1.59 | 2,993,562 | 51,421 | 2.30 | |||||||||||||||
FHLB and short-term borrowings | 381,166 | 5,020 | 1.76 | 366,708 | 5,240 | 1.91 | |||||||||||||||
Trust preferred securities, net of fair value adjustments | 860 | 100 | 15.47 | 895 | 112 | 16.74 | |||||||||||||||
Non-interest bearing deposits | 402,850 | — | — | 508,888 | — | — | |||||||||||||||
Cost of funds | 3,029,712 | $ | 31,759 | 1.40 | % | 3,870,053 | $ | 56,773 | 1.96 | % | |||||||||||
Other liabilities | 10,929 | 22,762 | |||||||||||||||||||
Stockholders' equity | 322,589 | 502,541 | |||||||||||||||||||
Total liabilities and stockholders' equity | $ | 3,363,230 | $ | 4,395,356 | |||||||||||||||||
Net interest income(1) | $ | 80,493 | $ | 106,117 | |||||||||||||||||
Net interest spread(1) | 3.25 | % | 3.18 | % | |||||||||||||||||
Net interest margin(1) | 3.34 | % | 3.35 | % | |||||||||||||||||
(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. | |||||||||||||||||||||
8
CROSSFIRST BANKSHARES, INC.
YEAR-TO-DATE VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED) | |||||||||||
Nine Months Ended | |||||||||||
September 30, 2019 over 2018 | |||||||||||
Average Volume | Yield/Rate | Net Change(2) | |||||||||
(Dollars in thousands) | |||||||||||
Interest Income | |||||||||||
Securities - taxable | $ | 1,364 | $ | (364 | ) | $ | 1,000 | ||||
Securities - tax-exempt(1) | (3,000 | ) | (390 | ) | (3,390 | ) | |||||
Federal funds sold | (1 | ) | 65 | 64 | |||||||
Interest-bearing deposits in other banks | (562 | ) | 469 | (93 | ) | ||||||
Gross loans, net of unearned income | 45,980 | 7,077 | 53,057 | ||||||||
Total interest income(1) | 43,781 | 6,857 | 50,638 | ||||||||
Interest Expense | |||||||||||
Transaction deposits | 277 | 761 | 1,038 | ||||||||
Savings and money market deposits | 3,024 | 8,644 | 11,668 | ||||||||
Time deposits | 7,209 | 4,867 | 12,076 | ||||||||
Total interest-bearing deposits | 10,510 | 14,272 | 24,782 | ||||||||
FHLB and short-term borrowings | (195 | ) | 415 | 220 | |||||||
Trust preferred securities, net of fair value adjustments | 4 | 8 | 12 | ||||||||
Total interest expense | 10,319 | 14,695 | 25,014 | ||||||||
Net interest income(1) | $ | 33,462 | $ | (7,838 | ) | $ | 25,624 | ||||
(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. | |||||||||||
9
CROSSFIRST BANKSHARES, INC.
TABLE 3. 2018 - 2019 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)
Three Months Ended | |||||||||||||||||||||
September 30, | |||||||||||||||||||||
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 | $ | 304,937 | $ | 2,454 | 3.19 | % | $ | 335,045 | $ | 2,264 | 2.68 | % | |||||||||
Securities - tax-exempt(1) | 447,333 | 4,338 | 3.85 | 392,644 | 3,592 | 3.63 | |||||||||||||||
Federal funds sold | 20,674 | 110 | 2.10 | 16,315 | 89 | 2.16 | |||||||||||||||
Interest-bearing deposits in other banks | 132,585 | 614 | 1.84 | 171,913 | 881 | 2.03 | |||||||||||||||
Gross loans, net of unearned income(2) (3) | 2,523,107 | 34,012 | 5.35 | 3,540,707 | 49,327 | 5.53 | |||||||||||||||
Total interest-earning assets(1) | 3,428,636 | $ | 41,528 | 4.81 | % | 4,456,624 | $ | 56,153 | 5.00 | % | |||||||||||
Allowance for loan losses | (31,716 | ) | (43,327 | ) | |||||||||||||||||
Other non-interest-earning assets | 191,956 | 197,661 | |||||||||||||||||||
Total assets | $ | 3,588,876 | $ | 4,610,958 | |||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||
Transaction deposits | $ | 56,072 | $ | 33 | 0.24 | % | $ | 134,987 | $ | 386 | 1.13 | % | |||||||||
Savings and money market deposits | 1,450,397 | 6,139 | 1.68 | 1,743,575 | 9,553 | 2.17 | |||||||||||||||
Time deposits | 801,416 | 3,827 | 1.89 | 1,276,571 | 8,064 | 2.51 | |||||||||||||||
Total interest-bearing deposits | 2,307,885 | 9,999 | 1.72 | 3,155,133 | 18,003 | 2.26 | |||||||||||||||
FHLB and short-term borrowings | 397,252 | 1,772 | 1.77 | 345,794 | 1,703 | 1.95 | |||||||||||||||
Trust preferred securities, net of fair value adjustments | 868 | 36 | 16.21 | 904 | 37 | 16.06 | |||||||||||||||
Non-interest bearing deposits | 491,942 | — | — | 535,467 | — | — | |||||||||||||||
Cost of funds | 3,197,947 | $ | 11,807 | 1.46 | % | 4,037,298 | $ | 19,743 | 1.94 | % | |||||||||||
Other liabilities | 14,904 | 29,833 | |||||||||||||||||||
Total stockholders' equity | 376,025 | 543,827 | |||||||||||||||||||
Total liabilities and stockholders' equity | $ | 3,588,876 | $ | 4,610,958 | |||||||||||||||||
Net interest income(1) | $ | 29,721 | $ | 36,410 | |||||||||||||||||
Net interest spread(1) | 3.35 | % | 3.06 | % | |||||||||||||||||
Net interest margin(1) | 3.44 | % | 3.24 | % | |||||||||||||||||
(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. | |||||||||||||||||||||
10
CROSSFIRST BANKSHARES, INC.
QUARTER TO DATE VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED) | |||||||||||
Three Months Ended | |||||||||||
September 30, 2019 over 2018 | |||||||||||
Average Volume | Yield/Rate | Net Change(2) | |||||||||
(Dollars in thousands) | |||||||||||
Interest Income | |||||||||||
Securities - taxable | $ | 227 | $ | (417 | ) | $ | (190 | ) | |||
Securities - tax-exempt(1) | (509 | ) | (237 | ) | (746 | ) | |||||
Federal funds sold | (24 | ) | 3 | (21 | ) | ||||||
Interest-bearing deposits in other banks | 198 | 69 | 267 | ||||||||
Gross loans, net of unearned income | 14,136 | 1,179 | 15,315 | ||||||||
Total interest income(1) | 14,028 | 597 | 14,625 | ||||||||
Interest Expense | |||||||||||
Transaction deposits | 97 | 256 | 353 | ||||||||
Savings and money market deposits | 1,397 | 2,017 | 3,414 | ||||||||
Time deposits | 2,728 | 1,509 | 4,237 | ||||||||
Total interest-bearing deposits | 4,222 | 3,782 | 8,004 | ||||||||
FHLB and short-term borrowings | (241 | ) | 172 | (69 | ) | ||||||
Trust preferred securities, net of fair value adjustments | 1 | — | 1 | ||||||||
Total interest expense | 3,982 | 3,954 | 7,936 | ||||||||
Net interest income(1) | $ | 10,046 | $ | (3,357 | ) | $ | 6,689 | ||||
(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. | |||||||||||
11
CROSSFIRST BANKSHARES, INC.
TABLE 4. LINKED QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)
Three Months Ended | |||||||||||||||||||||
June 30, 2019 | September 30, 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 | $ | 345,005 | $ | 2,611 | 3.04 | % | $ | 335,045 | $ | 2,264 | 2.68 | % | |||||||||
Securities - tax-exempt(1) | 374,750 | 3,529 | 3.78 | 392,644 | 3,592 | 3.63 | |||||||||||||||
Federal funds sold | 15,165 | 96 | 2.55 | 16,315 | 89 | 2.16 | |||||||||||||||
Interest-bearing deposits in other banks | 110,460 | 580 | 2.10 | 171,913 | 881 | 2.03 | |||||||||||||||
Gross loans, net of unearned income(2) (3) | 3,398,297 | 47,989 | 5.66 | 3,540,707 | 49,327 | 5.53 | |||||||||||||||
Total interest-earning assets(1) | 4,243,677 | $ | 54,805 | 5.18 | % | 4,456,624 | $ | 56,153 | 5.00 | % | |||||||||||
Allowance for loan losses | (41,277 | ) | (43,327 | ) | |||||||||||||||||
Other non-interest-earning assets | 199,603 | 197,661 | |||||||||||||||||||
Total assets | $ | 4,402,003 | $ | 4,610,958 | |||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||
Transaction deposits | $ | 144,020 | $ | 477 | 1.33 | % | $ | 134,987 | $ | 386 | 1.13 | % | |||||||||
Savings and money market deposits | 1,559,979 | 8,955 | 2.30 | 1,743,575 | 9,553 | 2.17 | |||||||||||||||
Time deposits | 1,305,244 | 8,065 | 2.48 | 1,276,571 | 8,064 | 2.51 | |||||||||||||||
Total interest-bearing deposits | 3,009,243 | 17,497 | 2.33 | 3,155,133 | 18,003 | 2.26 | |||||||||||||||
FHLB and short-term borrowings | 371,624 | 1,784 | 1.93 | 345,794 | 1,703 | 1.95 | |||||||||||||||
Trust preferred securities, net of fair value adjustments | 895 | 37 | 16.79 | 904 | 37 | 16.06 | |||||||||||||||
Non-interest bearing deposits | 513,320 | — | — | 535,467 | — | — | |||||||||||||||
Cost of funds | 3,895,082 | $ | 19,318 | 1.99 | % | 4,037,298 | $ | 19,743 | 1.94 | % | |||||||||||
Other liabilities | 20,041 | 29,833 | |||||||||||||||||||
Total stockholders' equity | 486,880 | 543,827 | |||||||||||||||||||
Total liabilities and stockholders' equity | $ | 4,402,003 | $ | 4,610,958 | |||||||||||||||||
Net interest income(1) | $ | 35,487 | $ | 36,410 | |||||||||||||||||
Net interest spread(1) | 3.19 | % | 3.06 | % | |||||||||||||||||
Net interest margin(1) | 3.35 | % | 3.24 | % | |||||||||||||||||
(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. | |||||||||||||||||||||
12
CROSSFIRST BANKSHARES, INC.
LINKED QUARTER VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED) | |||||||||||
Three Months Ended | |||||||||||
September 30, 2019 over June 30, 2019 | |||||||||||
Average Volume | Yield/Rate | Net Change(2) | |||||||||
(Dollars in thousands) | |||||||||||
Interest Income | |||||||||||
Securities - taxable | $ | (68 | ) | $ | (279 | ) | $ | (347 | ) | ||
Securities - tax-exempt(1) | 189 | (126 | ) | 63 | |||||||
Federal funds sold | 8 | (15 | ) | (7 | ) | ||||||
Interest-bearing deposits in other banks | 321 | (20 | ) | 301 | |||||||
Gross loans, net of unearned income | 2,303 | (965 | ) | 1,338 | |||||||
Total interest income(1) | 2,753 | (1,405 | ) | 1,348 | |||||||
Interest Expense | |||||||||||
Transaction deposits | (27 | ) | (64 | ) | (91 | ) | |||||
Savings and money market deposits | 1,095 | (497 | ) | 598 | |||||||
Time deposits | (128 | ) | 127 | (1 | ) | ||||||
Total interest-bearing deposits | 940 | (434 | ) | 506 | |||||||
FHLB and short-term borrowings | (103 | ) | 22 | (81 | ) | ||||||
Trust preferred securities, net of FV adjustments | — | — | — | ||||||||
Total interest expense | 837 | (412 | ) | 425 | |||||||
Net interest income(1) | $ | 1,916 | $ | (993 | ) | $ | 923 | ||||
(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. | |||||||||||
13
CROSSFIRST BANKSHARES, INC.
TABLE 5. CONSOLIDATED BALANCE SHEETS
December 31, 2018 | September 30, 2019 | ||||||
(Unaudited) | |||||||
(Dollars in thousands) | |||||||
Assets | |||||||
Cash and cash equivalents | $ | 216,541 | $ | 128,126 | |||
Available for sale securities - taxable | 296,133 | 323,531 | |||||
Available for sale securities - tax-exempt | 367,545 | 409,562 | |||||
Premises and equipment, held for sale | 3,444 | — | |||||
Loans, net of allowance for loan losses of $37,826 and | |||||||
$42,995 at December 31, 2018 and September 30, 2019, respectively | 3,022,921 | 3,586,797 | |||||
Premises and equipment, net | 74,945 | 71,314 | |||||
Restricted equity securities | 14,525 | 16,053 | |||||
Interest receivable | 14,092 | 15,909 | |||||
Foreclosed assets held for sale | — | 2,471 | |||||
Deferred tax asset | 16,316 | 7,429 | |||||
Goodwill and other intangible assets, net | 7,796 | 7,720 | |||||
Bank-owned life insurance | 63,811 | 65,228 | |||||
Other | 9,146 | 17,173 | |||||
Total assets | $ | 4,107,215 | $ | 4,651,313 | |||
Liabilities and stockholders' equity | |||||||
Deposits | |||||||
Non-interest bearing | $ | 484,284 | $ | 513,832 | |||
Savings, NOW and money market | 1,714,136 | 1,922,522 | |||||
Time | 1,009,677 | 1,221,754 | |||||
Total deposits | 3,208,097 | 3,658,108 | |||||
Federal funds purchased and repurchase agreements | 75,406 | 49,810 | |||||
Federal Home Loan Bank advances | 312,985 | 307,804 | |||||
Other borrowings | 884 | 912 | |||||
Interest payable and other liabilities | 19,507 | 32,244 | |||||
Total liabilities | 3,616,879 | 4,048,878 | |||||
Stockholders' equity | |||||||
Redeemable preferred stock, $0.01 par value, $25 liquidation value: | |||||||
authorized - 5,000,000 shares | |||||||
issued - 1,200,000 and 0 shares at December 31, 2018 | |||||||
and September 30, 2019, respectively | 12 | — | |||||
Common stock, $0.01 par value: | |||||||
authorized - 200,000,000 shares | |||||||
issued - 45,074,322 and 51,969,203 shares at December 31, 2018 | |||||||
and September 30, 2019, respectively | 451 | 520 | |||||
Additional paid-in capital | 454,512 | 518,816 | |||||
Retained earnings | 38,567 | 65,282 | |||||
Other | (196 | ) | (84 | ) | |||
Accumulated other comprehensive income (loss) | (3,010 | ) | 17,901 | ||||
Total stockholders' equity | 490,336 | 602,435 | |||||
Total liabilities and stockholders' equity | $ | 4,107,215 | $ | 4,651,313 | |||
14
CROSSFIRST BANKSHARES, INC.
TABLE 6. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended | Nine months ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2018 | 2019 | 2018 | 2019 | ||||||||||||
(Dollars in thousands except per share data) | |||||||||||||||
Interest Income | |||||||||||||||
Loans, including fees | 34,012 | 49,327 | 89,262 | 142,319 | |||||||||||
Available for sale securities | |||||||||||||||
Taxable | 2,200 | 1,991 | 5,729 | 6,646 | |||||||||||
Tax-exempt | 3,586 | 2,969 | 11,622 | 8,820 | |||||||||||
Deposits with financial institutions | 723 | 970 | 2,481 | 2,452 | |||||||||||
Dividends on bank stocks | 254 | 272 | 718 | 801 | |||||||||||
Total interest income | 40,775 | 55,529 | 109,812 | 161,038 | |||||||||||
Interest Expense | |||||||||||||||
Deposits | 9,999 | 18,003 | 26,639 | 51,421 | |||||||||||
Fed funds purchased and repurchase agreements | 287 | 74 | 628 | 501 | |||||||||||
Advances from Federal Home Loan Bank | 1,468 | 1,629 | 4,308 | 4,739 | |||||||||||
Other borrowings | 53 | 37 | 184 | 112 | |||||||||||
Total interest expense | 11,807 | 19,743 | 31,759 | 56,773 | |||||||||||
Net Interest Income | 28,968 | 35,786 | 78,053 | 104,265 | |||||||||||
Provision for Loan Losses | 3,000 | 4,850 | 9,000 | 10,550 | |||||||||||
Net Interest Income after Provision for Loan Losses | 25,968 | 30,936 | 69,053 | 93,715 | |||||||||||
Non-Interest Income | |||||||||||||||
Service charges and fees (rebates) on customer accounts | (100 | ) | 72 | 506 | 441 | ||||||||||
Gain on sale of available for sale securities | 195 | 34 | 608 | 467 | |||||||||||
Impairment of premises and equipment held for sale | (171 | ) | — | (171 | ) | (424 | ) | ||||||||
Gain on sale of loans | 25 | 49 | 618 | 207 | |||||||||||
Income from bank-owned life insurance | 513 | 476 | 1,511 | 1,416 | |||||||||||
Swap fee income, net | 253 | 1,879 | 299 | 2,415 | |||||||||||
Other non-interest income | 470 | 702 | 1,517 | 2,007 | |||||||||||
Total non-interest income | 1,185 | 3,212 | 4,888 | 6,529 | |||||||||||
Non-Interest Expense | |||||||||||||||
Salaries and employee benefits | 12,652 | 14,256 | 43,689 | 43,296 | |||||||||||
Occupancy | 2,132 | 2,080 | 6,199 | 6,301 | |||||||||||
Professional fees | 766 | 427 | 2,421 | 1,923 | |||||||||||
Deposit insurance premiums | 823 | 302 | 2,411 | 2,020 | |||||||||||
Data processing | 528 | 649 | 1,470 | 1,868 | |||||||||||
Advertising | 527 | 580 | 1,982 | 1,770 | |||||||||||
Software and communication | 630 | 900 | 1,958 | 2,407 | |||||||||||
Depreciation and amortization | 516 | 413 | 1,306 | 1,320 | |||||||||||
Other non-interest expense | 1,301 | 1,565 | 4,153 | 4,858 | |||||||||||
Total non-interest expense | 19,875 | 21,172 | 65,589 | 65,763 | |||||||||||
Net Income Before Taxes | 7,278 | 12,976 | 8,352 | 34,481 | |||||||||||
Income tax expense (benefit) | 924 | 2,592 | (904 | ) | 5,308 | ||||||||||
Net Income | $ | 6,354 | $ | 10,384 | $ | 9,256 | $ | 29,173 | |||||||
Basic Earnings Per Share(1) | $ | 0.15 | $ | 0.22 | $ | 0.23 | $ | 0.63 | |||||||
Diluted Earnings Per Share(1) | $ | 0.15 | $ | 0.21 | $ | 0.22 | $ | 0.61 | |||||||
(1) Share data has been adjusted to reflect a 2-for-1 stock split effected in the form of a dividend on December 21, 2018. | |||||||||||||||
15
CROSSFIRST BANKSHARES, INC.
TABLE 7. 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 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’’ as net income adjusted to remove non-recurring or non-core income and expense items related to: |
▪ | Restructuring charges and adjustments associated with the transition of our former CEO - In connection with the departure of our former CEO in the second quarter of 2018, 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 is net income.
• | 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 (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 tax-equivalent efficiency ratio" as non-interest expense divided by net interest income plus tax-effected interest income on our tax-free municipal bond portfolio plus non-interest income. The most directly comparable financial measure is the efficiency ratio. |
Quarter Ended | Nine Months Ended | ||||||||||||||||||||||||||
09/30/2018 | 12/31/2018 | 03/31/2019 | 06/30/2019 | 09/30/2019 | 09/30/2018 | 09/30/2019 | |||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||
Return on average tangible common equity: | |||||||||||||||||||||||||||
Net income available to common stockholders | $ | 5,829 | $ | 9,809 | $ | 9,175 | $ | 9,439 | $ | 10,384 | $ | 7,681 | $ | 28,998 | |||||||||||||
Average common equity | 346,025 | 430,881 | 466,506 | 486,880 | 543,827 | 292,589 | 499,354 | ||||||||||||||||||||
Less: average goodwill and intangibles | 7,835 | 7,810 | 7,784 | 7,759 | 7,733 | 7,860 | 7,759 | ||||||||||||||||||||
Average tangible common equity | 338,190 | 423,071 | 458,722 | 479,121 | 536,094 | 284,729 | 491,595 | ||||||||||||||||||||
Return on average common equity | 6.68 | % | 9.03 | % | 7.98 | % | 7.78 | % | 7.58 | % | 3.51 | % | 7.76 | % | |||||||||||||
Return on average tangible common equity | 6.84 | % | 9.20 | % | 8.11 | % | 7.90 | % | 7.68 | % | 3.61 | % | 7.89 | % | |||||||||||||
16
CROSSFIRST BANKSHARES, INC.
Quarter Ended | |||||||||||||||||||
09/30/18 | 12/31/18 | 03/31/19 | 06/30/19 | 09/30/19 | |||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Non-GAAP core operating income: | |||||||||||||||||||
Net Income | $ | 6,354 | $ | 10,334 | $ | 9,350 | $ | 9,439 | $ | 10,384 | |||||||||
Add: restructuring charges | — | (815 | ) | — | — | — | |||||||||||||
Less: tax effect(1) | — | (210 | ) | — | — | — | |||||||||||||
Restructuring charges, net of tax | — | (605 | ) | — | — | — | |||||||||||||
Add: fixed asset impairments | 171 | — | — | 424 | — | ||||||||||||||
Less: tax effect(1) | 44 | — | — | 109 | — | ||||||||||||||
Fixed asset impairments, net of tax | 127 | — | — | 315 | — | ||||||||||||||
Add: state tax credit(2) | — | (3,129 | ) | (1,361 | ) | — | — | ||||||||||||
Non-GAAP core operating income | $ | 6,481 | $ | 6,600 | $ | 7,989 | $ | 9,754 | $ | 10,384 | |||||||||
(1) Represents the tax impact of the adjustments above at a tax rate of 25.73% | |||||||||||||||||||
(2) No tax effect | |||||||||||||||||||
Quarter Ended | |||||||||||||||||||
09/30/2018 | 12/31/2018 | 03/31/2019 | 06/30/2019 | 09/30/2019 | |||||||||||||||
(Dollars in thousands except per share data) | |||||||||||||||||||
Tangible common stockholders' equity: | |||||||||||||||||||
Total Stockholders' equity | $ | 409,780 | $ | 490,336 | $ | 480,514 | $ | 499,195 | $ | 602,435 | |||||||||
Less: goodwill and other intangible assets | 7,821 | 7,796 | 7,770 | 7,745 | 7,720 | ||||||||||||||
Less: preferred stock | 30,000 | 30,000 | — | — | — | ||||||||||||||
Tangible common stockholders' equity | $ | 371,959 | $ | 452,540 | $ | 472,744 | $ | 491,450 | $ | 594,715 | |||||||||
Tangible book value per share: | |||||||||||||||||||
Tangible common stockholders' equity | $ | 371,959 | $ | 452,540 | $ | 472,744 | $ | 491,450 | $ | 594,715 | |||||||||
Shares outstanding at end of period | 40,261,480 | 45,074,322 | 45,202,370 | 45,367,641 | 51,969,203 | ||||||||||||||
Book value per share | $ | 9.43 | $ | 10.21 | $ | 10.63 | $ | 11.00 | $ | 11.59 | |||||||||
Tangible book value per share | $ | 9.24 | $ | 10.04 | $ | 10.46 | $ | 10.83 | $ | 11.44 | |||||||||
Quarter Ended | Nine Months Ended | |||||||||||||||||||||||||||
09/30/2018 | 12/31/2018 | 03/31/2019 | 06/30/2019 | 09/30/2019 | 09/30/2018 | 09/30/2019 | ||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||
Non-GAAP Tax Equivalent Efficiency Ratio | ||||||||||||||||||||||||||||
Non-interest expense (Numerator) | $ | 19,875 | $ | 20,166 | $ | 22,631 | $ | 21,960 | $ | 21,172 | $ | 65,589 | $ | 65,763 | ||||||||||||||
Net interest income | 28,968 | 32,315 | 33,605 | 34,874 | 35,786 | 78,053 | 104,265 | |||||||||||||||||||||
Tax equivalent interest income | 753 | 658 | 616 | 612 | 624 | 2,440 | 1,852 | |||||||||||||||||||||
Net interest income - tax equivalent | 29,721 | 32,973 | 34,221 | 35,486 | 36,410 | 80,493 | 106,117 | |||||||||||||||||||||
Non-interest income | 1,185 | 1,195 | 1,645 | 1,672 | 3,212 | 4,888 | 6,529 | |||||||||||||||||||||
Total tax-equivalent income (Denominator) | $ | 30,906 | $ | 34,168 | $ | 35,866 | $ | 37,158 | $ | 39,622 | $ | 85,381 | $ | 112,646 | ||||||||||||||
Efficiency Ratio | 65.91 | % | 60.18 | % | 64.20 | % | 60.09 | % | 54.29 | % | 79.08 | % | 59.36 | % | ||||||||||||||
Non-GAAP Tax Equivalent Efficiency Ratio | 64.31 | % | 59.02 | % | 63.10 | % | 59.10 | % | 53.43 | % | 76.82 | % | 58.38 | % | ||||||||||||||
17