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
March 12, 2020
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 Parkway | Leawood | Kansas |
(Address of Principal Executive Offices) | ||
66211 |
(Zip Code) |
(913) 312-6822
Registrant's telephone number, including area code
N/A
(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):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ 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 Stock Market LLC | ||
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 ☒
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. ☐
Item 7.01. Regulation FD Disclosure.
Beginning on March 12, 2020, CrossFirst Bankshares, Inc. (the “Company”) made a series of investor presentations (the “Investor Presentation”) a copy of which is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Company also expects to use the Investor Presentation from time to time thereafter in connection with presentations to potential investors, industry analysts and others.
The Investor Presentation is available under the “Presentations” tab in the “News and Events” section of the Company’s website, located at https://investors.crossfirstbankshares.com.
By filing this Current Report on Form 8-K and furnishing the information contained herein, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.
The information contained in the Investor Presentation is summary information that is intended to be considered in the context of the Company’s Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in this report, although it may do so from time to time as its management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
The information presented in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, unless the Company specifically states that the information is to be considered “filed” under the Exchange Act or specifically incorporates it by reference into a filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01. Financial Statements and Exhibits.
(d) | Exhibits |
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: | March 12, 2020 | CROSSFIRST BANKSHARES, INC. | |||
By: | /s/ David L. O'Toole | ||||
David L. O'Toole Chief Financial Officer | |||||
NASDAQ: CFB | March 12th, 2020
FORWARD-LOOKING STATEMENTS. This presentation and oral statements made during this meeting contain forward-looking statements. These forward- looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "might," "should," "could," "predict," "potential," "believe," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "strive," "projection," "goal," "target," "outlook," "aim," "would," "annualized" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: risks related to general business and economic conditions and any regulatory responses to such conditions; our ability to effectively execute our growth strategy and manage our growth, including identifying and consummating suitable mergers and acquisitions; the geographic concentration of our markets; fluctuation of the fair value of our investment securities due to factors outside our control; our ability to successfully manage our credit risk and the sufficiency of our allowance; regulatory restrictions on our ability to grow due to our concentration in commercial real estate lending; our ability to attract, hire and retain qualified management personnel; interest rate fluctuations; our ability to raise or maintain sufficient capital; competition from banks, credit unions and other financial services providers; the effectiveness of our risk management framework in mitigating risks and losses; our ability to maintain effective internal control over financial reporting; our ability to keep pace with technological changes; system failures and interruptions, cyber-attacks and security breaches; employee error, fraudulent activity by employees or clients and inaccurate or incomplete information about our clients and counterparties; our ability to maintain our reputation; costs and effects of litigation, investigations or similar matters; risk exposure from transactions with financial counterparties; severe weather, acts of god, acts of war or terrorism; compliance with governmental and regulatory requirements; changes in the laws, rules, regulations, interpretations or policies relating to financial institutions, accounting, tax, trade, monetary and fiscal matters; compliance with requirements associated with being a public company; level of coverage of our business by securities analysts; and future equity issuances. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward- looking statement, whether as a result of new information, future developments or otherwise, except as required by law. NON-GAAP FINANCIAL INFORMATION. This presentation contains certain non-GAAP measures. These non-GAAP measures, as calculated by CrossFirst, are not necessarily comparable to similarly titled measures reported by other companies. Additionally, these non-GAAP measures are not measures of financial performance or liquidity under GAAP and should not be considered alternatives to the Company's other financial information determined under GAAP. See the Appendix for reconciliations of certain non-GAAP measures. MARKET AND INDUSTRY DATA. This presentation references certain market, industry and demographic data, forecasts and other statistical information. We have obtained this data, forecasts and information from various independent, third party industry sources and publications. Nothing in the data, forecasts or information used or derived from third party sources should be construed as advice. Some data and other information are also based on our good faith estimates, which are derived from our review of industry publications and surveys and independent sources. We believe that these sources and estimates are reliable but have not independently verified them. Statements as to our market position are based on market data currently available to us. Although we are not aware of any misstatements regarding the economic, employment, industry and other market data presented herein, these estimates involve inherent risks and uncertainties and are based on assumptions that are subject to change. 2
Holding Company CrossFirst Bankshares, Inc. Ticker / Exchange CFB / Nasdaq Global Select Pro Forma Market Capitalization $462 million Total Asset Size Approaching $5 billion Total Shares Outstanding 51,969,203 Price / Earnings LTM: 16.2x 2020 Estimates: 9.1x Price / Tangible Book Value 0.78x Price / Stock Trading Range From IPO $8.89 / $8.63 - $ 15.50 2019 Net Income $28.5 million (45% Increase) 2019 Operating Revenue Growth 30% Full Year 2019 Diluted EPS $0.58 for the Full Year (23% Increase) Annual Dividend / Yield No Quarterly Dividends Note: All pricing data is as of market close 3/11/2020 and financial information is as of 12/31/19 3
George F. Jones Jr. – President, CEO and Director of CrossFirst Other Senior Executives • Joined CrossFirst in 2016 after a short retirement from Texas Capital Bancshares, Inc. (TCBI) • Founding executive of TCBI in 1998 • Led TCBI through 50 consecutive profitable quarters and growth to $12 billion in assets Amy Fauss Chief Operating Officer of CrossFirst Bank 28+ years of banking experience Mike Maddox – President, CEO of CrossFirst Bank and Director of CrossFirst Joined CrossFirst in 2009 • Joined CrossFirst in 2008 after serving as Kansas City regional president for Intrust Bank Tom Robinson • Practicing lawyer for more than six years before joining Intrust Bank Chief Risk Officer of CrossFirst • Graduate School of Banking at the University of Wisconsin - Madison 35+ years of banking experience Joined CrossFirst in 2011 David O’Toole – CFO, Chief Investment Officer and Director of CrossFirst, CFO of CrossFirst Bank Aisha Reynolds General Counsel of CrossFirst and • More than 40 years of experience in banking, accounting, valuation and investment banking CrossFirst Bank • Founding shareholder and director of CrossFirst Bank and became CFO in 2008 13+ years of experience • Co-founder and managing partner of a national bank consulting and accounting firm Joined CrossFirst in 2018 • Served on numerous boards of directors of banks and private companies, including the Continental Airlines, Inc. travel agency advisory board Randy Rapp – Chief Credit Officer of CrossFirst Bank • More than 30 years of experience in banking, primarily as a credit analyst, commercial relationship manager and credit officer • Joined CrossFirst in April 2019 after serving as Executive Vice President and Chief Credit Officer of Texas Capital Bank, National Association from May 2015 until March 2019 • Mr. Rapp joined Texas Capital Bank in 2000 Matt Needham – Director of Strategy and Investor Relations of CrossFirst • More than 15 years experience in banking, strategy, accounting and investment banking, five with CrossFirst • Deep experience in capital markets including valuation, mergers, acquisitions and divestitures • Provided assurance and advisory services with Ernst & Young • Former Deputy Bank Commissioner in Kansas and has served on several bank boards • MBA Wake Forest University, obtained CFA designation and CPA, Graduate School of Banking at the University of Colorado 4
• $4.9 billion(1) asset banking operation founded in 2007 • Branch-lite structure operating 7 branches in key markets (2) along the I-35 corridor (1) (1) • 3rd largest bank headquartered in the Kansas City MSA (1) (1) • High-growth commercial banking franchise with 357 full time equivalent employees (1) • High quality people, strong culture & relationship-oriented business model • Serving businesses, business owners, professionals and their personal networks • Core focus on improving profitability & operating (Number of Locations) efficiency Financial Highlights (Full Year Ended 12/31/19)(2) Balance Sheet Performance (Year-to-Date) Asset Quality Metrics Assets: $4,931 ROAA: 0.63% NPAs / Assets: 0.97% Gross Loans:( 3) $3,852 ROACE: 5.38% NCOs / Avg. Loans: 0.31% Deposits: $3,924 Efficiency Ratio: 58.37% Reserves / Loans: 1.48% Tier 1 Leverage: 12.06% NIM(FTE): 3.31% Reserves / NPLs: 129% Total Risk-Based Capital: 13.43% Net Income: $28.5 Classified Loans / Capital + ALLL13.2% (1) As of December 31, 2019. (2) Dollars are in millions. 5 (3) Net of unearned income
✓ Attract and develop highest level of talent ✓ Active expansion through acquisitions and new market development to utilize capital from IPO and optimize capital structure ✓ Serve businesses, business owners, professionals and their personal networks ✓ Focus on core markets; grow organically using a “Relationship Banking” model ✓ Maintain branch-lite model with strategically placed locations ✓ Improve profitability and operating efficiency ✓ Execute on our high-tech, high-touch banking strategy ✓ Leverage technology to provide a high level of convenience ✓ Employ effective enterprise risk management ✓ Expand niche lending verticals: Enterprise Value Lending (2017), Relational Tribal Nations Lending (2017), Relational High Volume Builder Lending (2017) 6
(1) As of 12/31/19 Kansas City Wichita Oklahoma City Tulsa Dallas Energy (Tulsa) Date Entered Market 2007 2012 2012 2013 2016 2014 Loans ($mm) $1,155 $437 $264 $492 $1,105 $409 Deposits ($mm) $1,796 $550 $359 $515 $550 $154 Total Deposits in MSA (2) ($bn) $57 $16 $31 $26 $271 -- Number of Branches 3 1 1 1 1 -- Deposits per Location ($mm) $599 $550 $359 $669(3) $505 -- Deposit per Location Bank for #1 #1 #1 #1 #8 -- Banks in MSA(2) Market Demographics (4) Population (mm) 2.2 0.6 1.4 1.0 7.7 -- Population Change 2010 - 2020 (%) 8.0 2.6 13.2 6.8 20.3 -- Projected Population Change -- 3.2 1.2 4.7 3.1 7.4 2020 - 2025 (%) Sept 2019 Unemployment Rate (%) 2.5 3.5 2.9 3.1 3.1 -- Median Household Income $69,742 $57,281 $60,214 $55,936 $73,009 -- (1) Our energy lending group is based in Tulsa but lends across multiple geographies. (2) Source: S&P Global Market Intelligence (3) Tulsa’s deposits per location include Energy deposits of $154mm. (4) Source: S&P Global Market Intelligence and Bureau of Labor Statistics. 7
Leawood, KS (HQ) Leawood, KS Wichita, KS Dallas, TX Tulsa, OK Oklahoma City, OK Kansas City, MO 8 8 New Frisco, TX Location not shown– expected opening 1st Quarter 2020; New Plaza Location, Kansas City, MO – expected opening 2nd Half 2020
CrossFirst Bankshares, Inc. Reported Record Fourth Quarter and 2019 Results 2019 Fourth Quarter and Full Year Key Financial Highlights: ✓ Produced record results in operating revenue for 23rd consecutive quarter ✓ Full year 2019 operating revenue grew by nearly 30% and operating expense growth was under 2% compared to 2018, resulting in positive operating leverage for 2019 ✓ Record year-to-date net income of $28.5 million, an increase of 45% from the same period in 2018 ✓ Diluted EPS of $0.58 for year-to-date 2019, an increase of 23% from the same period in 2018 ✓ Achieved efficiency ratios of 58.4% year-to-date compared to 73.6% in 2018 ✓ 20% year-over-year asset growth in 2019 ✓ Grew loans by $793 million or 26% since December 31, 2018 ✓ Grew deposits by $716 million or 22% since December 31, 2018 ✓ Improved the Asset / Employee ratio to $13.8 million ✓ Book value per share of $11.58 at December 31, 2019 compared to $10.21 at December 31, 2018 9
Commentary Yield on Loans and Cost of Total Deposits 6% 5.52% 5.56% ▪ Focus on commercial lending 5.34% 5.21% 4.89% increased the asset sensitivity of 4.62% 4.60% our balance sheet, with 4% approximately 76% floating rate loans or maturing within one year 1.89% 1.70% 1.70% 2% 1.44% 0.91% 0.87% 0.99% ▪ NIM has remained in a narrow range in spite of significant 0% interest rate volatility 2015 2016 2017 2018 2019 QTD QTD Yield on Loans Cost of Total Deposits 12/31/18 12/31/19 ▪ Loan to deposit ratio decreased from 99.2% to 98.2% Net Interest Margin – Fully Tax Equivalent 4% 3.51% 3.40% 3.39% 3.27% 3.24% 3.31% 3.23% 3% 2% 1% 0% 2015 2016 2017 2018 2019 QTD QTD 12/31/18 12/31/19 10
After one time $16mm provision adjustment, actual Commentary Return on Average Assets(1) ROAA fell to (0.06%) from the previously reported 0.94% ▪ Since 2010, CrossFirst historically 1.4% 1.06% invested in talent and acquisitions 0.94% 0.94% 1.1% 0.91% 0.89% 0.89% to grow its market presence and 0.78% 0.86% 0.89% expand product lines or lending 0.8% 0.67% verticals, such as energy lending 0.5% ▪ In 2018, we shifted to a focus on 0.2% earnings and efficiency, while still -0.1% maintaining robust balance sheet (0.06%) (0.06%) growth Q4 Q1 Q2 Q3 Q4 2018 2019 2019 2019 2019 (2) ▪ In Q4 the Company took an ROAA Core ROAA additional $16 million provision for its large non-performing credit that was adversely impacted due to Core Efficiency Ratio (Fully Tax Equivalent) deterioration of the borrowers 100% business and underlying collateral 80% 64.20% 63.10% 60.18% 61.41% 60.09% 58.43% 60% 54.29% 53.43% 55.60% 54.66% 40% 20% 0% Q4 Q1 Q2 Q3 Q4 2018 2019 2019 2019 2019 Efficiency Ratio Core Efficiency Ratio - Fully Tax Equivalent (2) (1) Ratios are annualized. (2) Represents a non-GAAP financial measure. See Non-GAAP Reconciliation slides in Appendix for additional detail. Full Tax-equivalent efficiency 11 ratio is presented.
Tangible Book Value/Share Tangible Book Value per Common Share ▪ Tangible Book Value per common share $14 increased $1.39 in 2019 due to: $12 $11.43 ▪ The IPO in Q3 2019 was accretive to $10.04 TBV/Share $10 $8.12 ▪ Unrealized gains in the marketable $8 $7.02 $6.20 securities portfolio from positive $6 pricing movements ▪ Growth in earnings during 2019 $4 ▪ Nearly doubled TBV per common share $2 since 2015 $- 2015 2016 2017 2018 2019 Diluted Earnings Per Share Diluted Earnings Per Share $0.70 0.58 ▪ Continued improvement in $0.60 Diluted EPS fell to profitability despite declining interest (0.01) from the rates $0.50 0.47 previously reported 0.22 after recording 0.39 ▪ Continued increase in annual an additional $16mm $0.40 provision earnings per share growth despite 0.28 issuing 6.6 million shares during the $0.30 0.20 0.20 0.21 initial public offering $0.20 0.12 $0.10 $- (0.01) $(0.10) 2015 2016 2017 2018 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019 12
Loan Mix by Type ($3.9bn) C&I Loan Breakdown by Type ($1.4bn) Misc. Financial Credit Related Vehicles Merchant Activities Education 3% Owner Occupied Other Wholesalers 3% 2% Real Estate 1% 4% Other 8% Aircraft 16% Residential 4% Mortgage Commercial & Rental & Leasing Health Care 8% Industrial Services 10% 35% 5% Energy Professional & 11% Technical Services Commercial Real 5% Business Loans to Estate Restaurants Individuals 37% 5% 8% Motor Vehicle & Real Estate Parts Dealers Recreation Activity 5% Security Services Engineering & 6% Manufacturing 7% 6% Contracting 7% 6% CRE Loan Portfolio by Segment ($1.0bn)(2) CRE Loans by Geography ($1.0bn)(2) Raw Land Land Retail 4% Development 15% 2% AZ FL KY Remaining States 1-4 Family Res 2% 2% 2% 14% Construction CO 11% Hotel 6% 11% MO Other 6% 5% Industrial OK TX 12% 12% 42% Multi-Family KS 18% Medical 13% 3% Office C-Store 11% 2% Senior Living 5% (1) Data as of December 31, 2019. 13 (2) CRE as defined by regulators (including construction and development). (3) Shown as a percentage of bank capital.
Our Energy Portfolio (Dollars are in millions) 450 $409 400 Energy Portfolio Characteristics $358 350 ~35% 300 ▪ Lending as a senior secured lender $243 250 and as a cash flow lender 200 $168 ▪ Loaning on proven producing 150 $137 ~65% reserves 100 ▪ CrossFirst typically does not lend to 50 shale, oil field services, or mid- 0 stream energy companies 2015 2016 2017 2018 2019 ▪ Most of our clients have access to Oil Exploration & Production Natural Gas Exploration & Production price hedging through their credit facility and over half are utilizing hedging as part of their strategy. Crude Oil Historical NMX Closing Prices Nat Gas $120 113.9 3/10/20 Close $7.0 6.2 Crude Oil: 34.36 Nat Gas: 1.936 $100 $6.0 $5.0 $80 $4.0 $60 $3.0 $40 $2.0 $20 26.2 1.6 $1.0 $0 $0.0 Mar-10 Dec-10 Sep-11 Jun-12 Mar-13 Dec-13 Sep-14 Jun-15 Mar-16 Dec-16 Sep-17 Jun-18 Mar-19 Dec-19 Crude Oil Natural Gas 14 (1) Ratio is annualized.
Allowance for Loan Losses / Total Loans Commentary Classified Loans / (Total Capital + LLR) 1.48% $80 19.2% Recent Credit Quality & ALL Trends $200 18.7% $70 1.24% ▪ The Company is still assessing the 1.23% 1.22% 1.18% 18.0% 16.3% timeline for which CECL will be adopted $60 $56.9 reviewing the impact it will have on the $150 13.2% 13.2% allowance and capital $50 $43.0 $42.9 13.0% $37.8 $40.0 $101.4 $97.5 ▪ Q4 includes an additional $16 million $40 $100 $88.3 $85.2 $86.9 provision for a previously disclosed non-performing asset $30 8.0% $20 $50 $10 3.0% $0 0.00% $0 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q4 Q1 Q2 Q3 Q4 2018 2019 2019 2019 2019 Capital Analysis ▪ IPO during third quarter 2019 resulted Capital Ratios in $87 million of new capital 20% 12.53% 12.93% ▪ Unfunded commitments totaled $1.5 11.23% 11.04% 12.22% 13.90% billion for year-ended 2019, 42% of 15% 13.51% 12.91% 13.43% 11.75% 12.20% 12.04% 12.20% which are commitments to fund C&I 11.23% 11.02% loans and 58% are other loan 10% commitments ▪ Unfunded commitments have an 5% impact on the Risk-Based Capital Ratios 0% Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Common Equity Tier 1 Tier 1 Risk Based Total Risk-Based Capital Amounts are in millions. 15
▪ Focus on robust organic growth strategy in our core markets of Kansas City, Wichita, Oklahoma City, Tulsa & Dallas to elevate franchise in place ▪ Dallas in development phase with exceptional growth but requires additional time to achieve desired profitability ▪ Maintain superior asset quality ▪ Actively pursue expansion opportunities through acquisition or new market development ▪ Opening a branch in the Frisco, TX(1) market in first half 2020 and a new office in Kansas City, MO on the plaza in the second half of 2020 ▪ Opportunistically pursue expansion efforts in adjacent metropolitan areas or in core markets to create value above and beyond a strong organic growth model ▪ Maintain branch-lite structure in our markets ▪ Grow with banking teams with people who are proficient and knowledgeable of our current target client base and fit our culture of quality growth ▪ Maintain earnings growth momentum of the franchise to improve profitability to peer levels and leverage scale potential of current investments (1) In addition to our full-service branch in the Dallas MSA, our organization is consistently evaluating other strategic opportunities 16
Experienced and Invested Leadership Established Presence in Attractive Markets Scalable Infrastructure Designed to Accommodate Significant Growth Customer Base Consists of Sophisticated Businesses and their Owners At Inflection Point of Turning Robust Balance Sheet Growth into Earnings Growth Sophisticated Suite of Banking Services to Facilitate Full-Service Commercial Relationships Specialized Lending Verticals Disciplined Underwriting and Standardized Credit Administration 17
18
Pillars of CrossFirst Asset Quality Nonperforming Assets / Assets ▪ Proven and comprehensive credit policy 2.0% and procedures ▪ Highly competent and experienced 1.5% bankers 1.18% 1.00% 0.97% ▪ Effective credit administration process 1.0% ▪ Commitment to diversification 0.43% ▪ Disciplined and standardized 0.5% 0.36% underwriting 0.20% 0.18% 0.08% ▪ Proactive problem management 0.0% ▪ Decisive response to opportunities 2015 2016 2017 2018 Q1 Q2 Q3 2019 Full Year 2019 2019 2019 Commentary ▪ In 2017, the Bank experienced one Net Charge-Offs / Average Loans(1) significant charge-off of 0.75% approximately $5 million (0.34% of average loans) on one C&I credit 0.58% 0.53% ▪ In Q3 the Bank charged-off $4.7 million from liquidating two legacy 0.50% 0.44% NPAs, one C&I and one in Energy ▪ Increase in Q2 NPAs from one loan 0.31% negatively impacted in part by a law change and deterioration in the 0.25% borrowing business and underlying 0.11% collateral, or 0.69% of the 1.18% 0.07% 0.09% 0.04% ▪ $5.5 million in charge-offs in Q4 0.00% 0.00% includes a partial charge-off relating 2015 2016 2017 2018 2019 Q1 2019 Q2 2019 Q3 2019 Q4 2019 to one of the NPAs described immediately above 19 (1) Ratio is annualized.
Investment Portfolio Breakout as of December 31, 2019(1) Commentary Municipal - Taxable Other 0.5% ▪ At year-end, the duration of the 1.7% portfolio was approximately 4.7 CMO (Fixed) years and fully taxable equivalent 17.4% (FTE) yield for 2019 was 3.35% MBS (Fixed) (1) Municipal - Tax- Exempt 20.6% Total: $741.6M 59.8% ▪ During Q4 2019, $75 million of new securities were purchased with an average FTE yield of 3.11% ▪ During Q4 2019, $37 million of securities ($35 million were MBS/CMO) were sold to reposition the portfolio mix to lower sensitivity. Tax Exempt Municipals Average Yield on Securities – Fully Tax Equivalent were purchased as the 5% replacement 3.85% 4% 3.72% 3.63% 3.62% 3.61% 3.35% 3.22% 3% ▪ Our marketable securities portfolio has a substantial unrealized gain of $21.8 million at 2% December 31, 2019 1% 0% 2015 2016 2017 2018 2019 Q4 2018 Q4 2019 20 (1) Based on approximate fair value.
As of or for the Year Ended December 31, 2015 2016 2017 2018 2019 Income Statement Data Interest income $54,116 $69,069 $97,816 $156,880 $216,218 Interest expense 11,849 15,016 22,998 46,512 74,774 Net interest income 42,267 54,053 74,818 110,368 141,444 Provision for loan losses 5,975 6,500 12,000 13,500 29,900 Non-interest income 2,365 3,407 3,679 6,083 8,715 Non-interest expense 30,562 40,587 62,089 85,755 87,648 Income before taxes 8,095 10,373 4,408 17,196 32,611 Income tax expense (benefit) 626 62 (1,441) (2,394) 4,138 Net income 7,469 10,311 5,849 19,590 28,473 Preferred stock dividends 2,066 2,100 2,100 2,100 175 Net income available to common stockholders 5,403 8,211 3,749 17,490 28,298 Non-GAAP core operating income(1) 7,469 10,311 9,716 19,940 27,427 Balance Sheet Data Cash and cash equivalents $79,418 $155,972 $130,820 $216,541 $187,320 Available-for-sale securities 460,542 593,012 703,581 663,678 741,634 Gross loans (net of unearned income) 992,726 1,296,886 1,996,029 3,060,747 3,852,244 Allowance for loan losses (15,526) (20,786) (26,091) (37,826) (56,896) Goodwill and other intangibles 8,100 7,998 7,897 7,796 7,694 Total assets 1,574,346 2,133,106 2,961,118 4,107,215 4,931,233 Non-interest-bearing deposits 123,430 198,088 290,906 484,284 521,826 Total deposits 1,294,812 1,694,301 2,303,364 3,208,097 3,923,759 Borrowings and repurchase agreements 112,430 216,709 357,837 388,391 373,664 Trust preferred securities, net of fair value adj. 792 819 850 884 921 Preferred Stock, liquidation value 30,000 30,000 30,000 30,000 0 Total Stockholders' Equity 160,004 214,837 287,147 490,336 601,644 Tangible Stockholders' Equity(1) 121,904 176,839 249,250 452,540 593,950 Share and Per Share Data: Basic earnings per share $0.29 $0.39 $0.12 $0.48 $0.59 Diluted earnings per share 0.28 0.39 0.12 0.47 0.58 Book value per share 6.61 7.34 8.38 10.21 11.58 Tangible book value per share(1) 6.20 7.02 8.12 10.04 11.43 Wtd. avg. common shares out. - basic 18,640,678 20,820,784 30,086,530 36,422,612 47,679,184 Wtd. avg. common shares out. - diluted 19,378,290 21,305,874 30,963,424 37,492,567 48,576,135 Shares outstanding at end of period 19,661,718 25,194,872 30,686,256 45,074,322 51,969,203 21 Historic share counts and per share figures reflect 2:1 stock split effected on 12/21/18. (1) Represents a non-GAAP financial measure. See Non-GAAP Reconciliation slides in Appendix for additional detail.
As of or for the Year Ended December 31, 2015 2016 2017 2018 2019 Selected Ratios: Return on average assets 0.53% 0.56% 0.24% 0.56% 0.63% Non-GAAP core operating return on average assets(1) 0.53 0.56 0.40 0.57 0.61% Return on average common equity(1) 4.60 5.51 1.53 5.34 5.38 Non-GAAP core operating return on average common equity(1) 4.60 5.51 3.11 5.45 5.18 Yield on earning assets - tax equivalent(2) 4.14 4.08 4.37 4.77 5.04 Yield on securities - tax equivalent(2) 3.72 3.63 3.85 3.62 3.35 Yield on loans 4.62 4.60 4.89 5.34 5.52 Cost of interest-bearing deposits 1.01 0.96 1.12 1.71 2.21 Cost of funds 0.94 0.91 1.06 1.49 1,90 Cost of total deposits 0.91 0.87 0.99 1.44 1.89 Net interest margin - tax equivalent(2) 3.27 3.24 3.40 3.39 3.31 Non-interest expense to average assets 2.17 2.21 2.53 2.45 1.95 Efficiency ratio(3) 68.48 70.64 79.10 73.64 58.37 Non-GAAP core operating efficiency ratio FTE(1)(3) 64.66 66.04 72.33 67.68 57.25 Non-interest-bearing deposits to total deposits 9.53 11.69 12.63 15.10 13.30 Loans to deposits 76.67 76.54 86.66 95.41 98.18 Credit Quality Ratios: Allowance for loans losses to total loans 1.56% 1.60% 1.30% 1.23% 1.48% Non-performing assets to total assets 0.08 0.20 0.18 0.43 0.97 Non-performing loans to total loans 0.12 0.33 0.27 0.58 1.15 Allowance for loans losses to non-performing loans 1,336.38 493.14 481.68 212.30 128.54 Net charge-offs to average loans 0.04 0.11 0.44 0.07 0.31 Capital Ratios: Total stockholders' equity to total assets 10.16% 10.07% 9.70% 11.94% 12.20% Common equity tier 1 capital ratio 8.50 9.78 8.62 11.75 12.20 Tier 1 risk-based capital ratio 10.70 11.38 9.70 12.53 12.22 Total risk-based capital ratio 11.82 12.51 10.65 13.51 13.43 Tier 1 leverage ratio 9.72 10.48 9.71 12.43 12.06 (1) Represents a non-GAAP financial measure. See Non-GAAP Reconciliation slides in Appendix or press release for additional detail. (2) Tax-exempt income is calculated on a tax equivalent basis. Tax-exempt income includes municipal securities, which is exempt from federal taxation. A tax rate of 21% is used for fiscal year 2018 and interim periods and a tax rate of 35% is used for fiscal years 2017 and prior. (3) Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income. 22
CrossFirst Bankshares, Inc Quarterly Financials As of or for the Three Months Ended (Dollars in thousands, except per share data) 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 Income Statement Data Interest income $47,068 $51,317 $54,192 $55,529 $55,180 Interest expense 14,753 17,712 19,318 19,743 18,001 Net interest income 32,315 33,605 34,874 35,786 37,179 Provision for loan losses 4,500 2,850 2,850 4,850 19,350 Non-interest income 1,195 1,645 1,672 3,212 2,186 Non-interest expense 20,166 22,631 21,960 21,172 21,885 Income (loss) before taxes 8,844 9,769 11,736 12,976 (1,870) Income tax expense (benefit) (1,490) 419 2,297 2,592 (1,170) Net income (loss) 10,334 9,350 9,439 10,384 (700) Preferred stock dividends 525 175 0 0 0 Net income (loss) available to common stockholders 9,809 9,175 9,439 10,384 (700) Non-GAAP core operating income (loss)(1) 6,600 7,989 9,754 10,384 (700) Balance Sheet Data Cash and cash equivalents $216,541 $117,317 $141,373 $128,126 $187,320 Securities 663,678 707,430 704,776 733,093 741,634 Gross loans (net of unearned income) 3,060,747 3,277,598 3,467,204 3,629,792 3,852,244 Allowance for loan losses (37,826) (40,001) (42,852) (42,995) (56,896) Goodwill and intangibles 7,796 7,770 7,745 7,720 7,694 Total assets 4,107,215 4,266,369 4,473,182 4,651,313 4,931,233 Non-interest bearing deposits 484,284 488,375 511,837 513,832 521,826 Total deposits 3,208,097 3,399,899 3,584,136 3,658,108 3,923,759 Borrowings and repurchase agreements 388,391 368,597 364,246 357,614 373,664 Trust preferred securities, net of fair value adj. 884 893 902 912 921 Preferred Stock 30,000 0 0 0 0 Stockholders' Equity 490,336 480,514 499,195 602,435 601,644 Tangible Stockholders' Equity(1) 452,540 472,744 491,450 594,715 593,950 Share and Per Share Data: Basic earnings (loss) per common share $0.22 $0.20 $0.21 $0.22 $ (0.01) Dilutive earnings (loss) per common share 0.22 0.20 0.20 0.21 (0.01) Book value per common share 10.21 10.63 11.00 11.59 11.58 Tangible book value per common share(1) 10.04 10.46 10.83 11.44 11.43 Wtd. avg. common shares out. - basic 43,853,170 45,093,442 45,236,264 48,351,553 51,952,712 Wtd. avg. common shares out. - diluted 44,920,448 45,960,267 46,211,780 49,164,549 52,748,312 Shares outstanding at end of period 45,074,322 45,202,370 45,367,641 51,969,203 51,969,203 23 Historic share counts and per share figures reflect 2:1 stock split effected on 12/21/18 (1) Represents a non-GAAP financial measure. See Non-GAAP Reconciliation slides in Appendix for additional detail.
CrossFirst Bankshares, Inc Quarterly Financials As of or for the Three Months Ended 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 Selected Ratios: - - - Return on average assets(1) 1.06% 0.91% 0.86% 0.89% -0.06% - - - Non-GAAP core operating return on average assets(1)(2) 0.67 0.78 0.89 0.89 (0.06)% Return on average common equity 9.03 7.98 - 7.78 - 7.58 - (0.46) Yield on earning assets 5.01 5.18 - 5.12 - 4.94 - 4.71 - - - Yield on earning assets - tax equivalent(3) 5.08 5.25 5.18 5.00 4.76 Yield on securities 3.24 3.23 - 3.08 - 2.85 - 2.86 - - - Yield on securities - tax equivalent(3) 3.61 3.59 3.42 3.19 3.22 Yield on loans 5.56 5.75 - 5.66 - 5.53 - 5.21 Costs of interest bearing liabilities 2.01 2.25 - 2.29 - 2.24 - 1.96 Cost of interest-bearing deposits 2.04 2.30 - 2.33 - 2.26 - 1.97 Cost of funds 1.72 1.96 - 1.99 - 1.94 - 1.71 Cost of Deposits 1.70 1.96 - 1.99 - 1.94 - 1.70 Cost of other borrowings 1.79 1.86 - 1.93 - 1.95 - 1.86 - - - Net interest margin - tax equivalent(3) 3.51 3.46 3.35 3.24 3.23 Noninterest expense to average assets 2.06 2.20 - 2.00 - 1.82 - 1.81 - - - Efficiency ratio(4) 60.18 64.20 60.09 54.29 55.60 - - - Non-GAAP core operating efficiency ratio (FTE) (2)(4) 61.41 63.10 58.43 53.43 54.66 Noninterest bearing deposits to total deposits 15.10 14.36 - 14.28 - 14.05 - 13.30 Loans to deposits 95.41 96.40 - 96.74 - 99.23 - 98.18 Credit Quality Ratios: Allowance for loans losses to total loans 1.23% 1.22% 1.24% 1.18% 1.48% Nonperforming assets to total assets 0.43 0.36 1.18 1.00 0.97 Nonperforming loans to total loans 0.58 0.40 1.45 1.22 1.15 Allowance for loans losses to nonperforming loans 212.30 307.27 85.20 97.12 128.54 Net charge-offs to average loans(1) 0.03 0.09 0.00 0.53 0.58 Capital Ratios: Total stockholders' equity to total assets 11.94% 11.26% - 11.16% - 12.95% - 12.20% Common equity tier 1 capital ratio 11.75 11.23 - 11.02 - 12.91 - 12.20 Tier 1 risk-based capital ratio 12.53 11.23 - 11.04 - 12.93 - 12.22 Total risk-based capital ratio 13.51 12.20 - 12.04 - 13.90 - 13.43 Tier 1 leverage ratio 12.43 11.15 - 10.87 - 12.57 - 12.06 (1) Interim periods are annualized (2) Represents a non-GAAP financial measure. See Non-GAAP Reconciliation slides in Appendix for additional detail. 24 (3) Tax-exempt income is calculated on a tax equivalent basis. Tax-exempt income includes municipal securities, which is exempt from federal taxation. A tax rate of 21% is used for 2018 & 2019. (4) Efficiency ratio is non-interest expense divided by the sum of net interest income and non-interest income
As of or for the Year Ended December 31, (Dollars in thousands) 2015 2016 2017 2018 2019 Non-GAAP Core Operating Income: Net Income $7,469 $10,311 $5,849 $19,590 $28,473 Add: restructuring charges 0 0 0 4,733 0 Less: Tax effect(1) 0 0 0 1,381 0 Restructuring charges, net of tax 0 0 0 3,352 0 Add: fixed asset impairments 0 0 1,903 171 424 Less: Tax effect(2) 0 0 737 44 109 Fixed asset impairments, net of tax 0 0 1,166 127 315 Add: State tax credit(3) 0 0 0 (3,129) (1,361) Add: 2017 Tax Cut and Jobs Act(3) 0 0 2,701 0 0 Non-GAAP core operating income $7,469 $10,311 $9,716 $19,940 $27,427 Non-GAAP Core Operating Return on Average Assets: Net Income $7,469 $10,311 $5,849 $19,590 $28,473 Non-GAAP core operating income 7,469 10,311 9,716 19,940 27,427 Average Assets 1,410,447 1,839,563 2,452,797 3,494,655 4,499,764 GAAP return on average assets 0.53% 0.56% 0.24% 0.56% 0.63% Non-GAAP core operating return on average assets 0.53% 0.56% 0.40% 0.57% 0.61% Non-GAAP Core Operating Return on Average Equity: Net Income $7,469 $10,311 $5,849 $19,590 $28,473 Non-GAAP core operating income 7,469 10,311 9,716 19,940 27,427 Less: Preferred stock dividends 2,066 2,100 2,100 2,100 175 Net Income available to common stockholders 5,403 8,211 3,749 17,490 28,298 Non-GAAP core operating income 5,403 8,211 7,616 17,840 27,252 available to common stockholders Average common equity 117,343 149,132 245,193 327,446 526,225 Tangible Assets 8,100 7,998 7,897 7,796 7,746 Average Tangible Equity 109,243 141,134 237,296 319,650 518,479 GAAP return on average common equity 4.60% 5.51% 1.53% 5.34% 5.38% Non-GAAP core return on average tangible common equity 4.95% 5.82% 3.21% 5.58% 5.26% Non-GAAP Core Operating Efficiency Ratio: Non-interest expense $30,562 $40,587 $62,089 $85,755 $87,648 Less: restructuring charges 0 0 0 4,733 0 Non-GAAP non-interest expense (numerator) 30,562 40,587 62,089 81,022 87,648 Net interest income 42,267 54,053 74,818 110,368 141,444 Tax-equivalent interest income 2,637 4,001 5,439 3,099 2,522 Non-interest income 2,365 3,407 3,679 6,083 8,715 Add: fixed asset impairments 0 0 1,903 171 424 Non-GAAP Operating revenue (denominator) 47,269 61,461 85,839 119,721 153,105 GAAP efficiency ratio 68.48% 70.64% 79.10% 73.64% 58.37% Non-GAAP core operating efficiency ratio (FTE) 64.66% 66.04% 72.33% 67.68% 57.25% (1) Represents the tax impact of the adjustments above at a tax rate of 25.73%, plus a permanent tax benefit associated with stock-based grants that were exercised prior to our former CEO’s departure. 25 (2) Represents the tax impact of the adjustments above at a tax rate of 25.73% for fiscal years 2018 and after; 38.73% for fiscal years prior to 2018. (3) No tax effect associated with the 2017 Tax Act adjustment or state tax credit.
As of or for the Three Months Ended (Dollars in thousands) December 31, 2018 March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 Non-GAAP Core Operating Income (loss): Net Income (loss) $10,334 $9,350 $9,439 $10,384 ($700) Add: restructuring charges (815) 0 0 0 0 Less: Tax effect(1) (210) 0 0 0 0 Restructuring charges, net of tax (605) 0 0 0 0 Add: fixed asset impairments 0 0 424 0 0 Less: Tax effect(2) 0 0 109 0 0 Fixed asset impairments, net of tax 0 0 315 0 0 Add: State tax credit(3) (3,129) (1,361) 0 0 0 Add: 2017 Tax Cut and Jobs Act 0 0 Non-GAAP core operating income $6,600 $7,989 $9,754 $10,384 ($700) Non-GAAP Core Operating Return on Average Assets: Net Income (loss) $10,334 $9,350 $9,439 $10,384 ($700) Non-GAAP core operating income 6,600 7,989 9,754 10,384 (700) Average Assets 3,884,642 4,168,243 4,402,002 4,610,958 4,809,579 GAAP return on average assets(4) 1.06% 0.91% 0.86% 0.89% (0.06%) Non-GAAP core operating return on average assets(4) 0.67% 0.78% 0.89% 0.89% (0.06%) Non-GAAP Core Operating Efficiency Ratio: Non-interest expense $20,166 $22,631 $21,960 $21,172 $21,885 Less: restructuring charges (815) 0 0 0 0 Non-GAAP non-interest expense (numerator) 20,981 22,631 21,960 21,172 21,885 Net interest income 32,315 33,605 34,874 35,786 37,179 Tax-equivalent interest income 658 616 612 624 670 Non-interest income 1,195 1,645 1,672 3,212 2,186 Add: fixed asset impairments 0 0 424 0 0 Non-GAAP operating revenue (denominator) 34,168 35,866 37,582 39,622 40,035 GAAP efficiency ratio 60.18% 64.20% 60.09% 54.29% 55.60% Non-GAAP core operating efficiency ratio (FTE) 61.41% 63.10% 58.43% 53.43% 54.66% (1) Represents the tax impact of the adjustments above at a tax rate of 25.73%, plus a permanent tax benefit associated with stock-based grants that were exercised prior to our former CEO’s departure. (2) Represents the tax impact of the adjustments above at a tax rate of 25.73%. (3) No tax effect associated with the state tax credit. (4) Interim periods are annualized. 26
As of or for the Year Ended December 31, (Dollars in thousands, except per share data) 2015 2016 2017 2018 2019 Tangible Stockholders' Equity: Stockholders' equity $160,004 $214,837 $287,147 $490,336 $601,644 Less: goodwill and intangible assets 8,100 7,998 7,897 7,796 7,694 Less: preferred stock 30,000 30,000 30,000 30,000 0 Tangible Stockholders' Equity $121,904 $176,839 $249,250 $452,540 $593,950 Shares outstanding at end of period 19,661,718 25,194,872 30,686,256 45,074,322 51,969,203 Book value per common share $6.61 $7.34 $8.38 $10.21 $11.58 Tangible book value per common share $6.20 $7.02 $8.12 $10.04 $11.43 As of or for the Three Months Ended (Dollars in thousands, except per share data) 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 Tangible Stockholders' Equity: Stockholders' equity $490,336 $480,514 $499,195 $602,435 $601,644 Less: goodwill and intangible assets 7,796 7,770 7,745 7,720 7,694 Less: preferred stock 30,000 0 0 0 0 Tangible Stockholders' Equity $452,540 $472,744 $491,450 $594,715 $593,950 Shares outstanding at end of period 45,074,322 45,202,370 45,367,641 51,969,203 51,969,203 Book value per common share $10.21 $10.63 $11.00 $11.59 $11.58 Tangible book value per common share $10.04 $10.46 $10.83 $11.44 $11.43 27