CrossFirst Bankshares, Inc. Reports Third Quarter 2021 Results

·34 min read

Third Quarter 2021 Key Financial Performance Metrics

Net Income

ROAA

Net Interest Margin
(FTE)

Diluted EPS

ROE

$21.0 million

1.54%

3.20%

$0.41

12.92%

LEAWOOD, Kan., Oct. 18, 2021 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported its results for the third quarter of 2021, with net income of $21.0 million, or $0.41 per diluted share, and year-to-date net income of $48.6 million, or $0.93 per diluted share. Results this quarter included a $6.2 million asset impairment relating to an equity investment and a $10 million release from reserves due to continuing improvement in credit quality. Subsequent to quarter end, the Board of Directors authorized the repurchase of up to $30 million of common stock over time.

CEO Commentary:

"We had another quarter of strong profitability and have continued our strong earnings momentum as the economy accelerates and credit quality improves from last year’s low points," said CrossFirst’s CEO and President, Mike Maddox. "We continue to take a long-term view that will best serve our constituents well into the future by investing in talent to grow our top-line revenue and by investing in technology to better serve our clients. At the same time, we remain committed to delivering value to our shareholders and are pleased to be able to continue the return of capital with the new buyback program."

2021 Third Quarter Highlights:

  • $5.4 billion of assets with 162% net income growth compared to the third quarter of 2020

  • Return on Average Assets of 1.54% and a Return on Equity of 12.92% with a non-GAAP Core Return on Average Assets of 1.90% and non-GAAP Return on Equity of 15.94%

  • Efficiency ratio of 59.06% for the third quarter of 2021 and a non-GAAP core efficiency ratio of 50.45% after adjusting for nonrecurring or non-core items and tax equivalent interest

  • Net Interest Margin (Fully Tax-Equivalent) of 3.20% compared to 3.12% in the previous quarter

  • Non-interest-bearing deposit growth of 27% from September 30, 2020 which accounts for 22% of total deposits

  • Book value per share of $12.79 at September 30, 2021 compared to $11.84 at September 30, 2020

Quarter-to-Date

Year-to-Date

September 30,

September 30,

(Dollars in millions except per share data)

2021

2020

2021

2020

Operating revenue(1)

$

40.7

$

43.4

$

134.1

$

127.5

Net income

$

21.0

$

8.0

$

48.6

$

4.5

Diluted earnings per share

$

0.41

$

0.15

$

0.93

$

0.09

Return on average assets

1.54

%

0.58

%

1.16

%

0.11

%

Return on average common equity

12.92

%

5.19

%

10.24

%

0.98

%

Non-GAAP core return on average tangible common equity(2)

15.94

%

5.19

%

10.99

%

2.62

%

Net interest margin

3.14

%

2.93

%

3.05

%

3.08

%

Net interest margin, fully tax-equivalent(3)

3.20

%

2.98

%

3.10

%

3.13

%

Efficiency ratio

59.06

%

53.03

%

54.18

%

59.44

%

Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3)

50.45

%

52.23

%

51.15

%

53.14

%


(1) Net interest income plus non-interest income.

(2) Represents a non-GAAP measure. See "Table 5. Non-GAAP Financial Measures" for a reconciliation of these measures.

(3) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental federal income tax rate used is 21.0%.

Income from Operations

Net Interest Income

Interest income was $47.3 million for the third quarter of 2021, a decrease of 2% from the third quarter of 2020 and a 1% decrease from the previous quarter. Interest income was down from the third quarter of 2020 as a result of lower average loans outstanding. Average earning assets totaled $5.3 billion for the third quarter of 2021, a decrease of $68 million or 1% from the same quarter in 2020. The tax-equivalent yield on earning assets increased from 3.57% to 3.62% during the third quarter of 2021, and was down from 3.66% in the third quarter of 2020, primarily due to the movement of variable rate assets indexed to market rates. Year-to-date, interest income was $143.9 million, which declined compared to the same period in 2020 primarily due to the yield movements on earning assets.

Interest expense for the third quarter of 2021 was $5.5 million, or 40% lower than the third quarter of 2020 and 10% lower than the previous quarter. Average interest-bearing deposits decreased to $3.5 billion in the third quarter of 2021, or a 3% decrease from the same prior year period. Cost of funds for the quarter was 0.46%, compared to 0.49% for the second quarter of 2021. Year-to-date, interest expense was $18.7 million, a decrease of 47% from the same period in the prior year due to lower market rates.

Net interest income totaled $41.8 million for the third quarter of 2021 or 1% lower than the second quarter of 2021, and 6% higher than the third quarter of 2020. Tax-equivalent net interest margin increased to 3.20% in the current quarter, from 3.12% in the previous quarter, and increased from 2.98% in the same quarter in 2020. During the third quarter of 2021, CrossFirst realized $1.7 million in fees from the forgiveness of $88 million of PPP loans. Including fees recognized, the PPP loans yielded 5.50% for the current quarter and the Company will continue to recognize fees over the life of the loans or as the loans are forgiven. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $0.7 million for the third quarter of 2021. Year-to-date net interest income grew to $125.2 million, an increase of 6% from the same period in the prior year, while tax-equivalent net interest margin declined to 3.10% from 3.13% for the same prior year period.

Non-Interest Income

Non-interest income decreased $5.2 million in the third quarter of 2021 or 127% compared to the same quarter of 2020 and decreased $6.9 million compared to the second quarter of 2021. During the third quarter of 2021, the Company recorded a $6.2 million impairment loss related to an equity investment that was received as part of a restructured loan agreement, which was partially offset by increases of $0.3 million in credit card fees and $0.4 million in service charge income as compared to the same quarter of 2020. Year-to-date non-interest income was up $0.1 million or 1% compared to the same period in the prior year.

Non-Interest Expense

Non-interest expense for the third quarter of 2021 was $24.0 million, which increased 4% compared to the third quarter of 2020 and decreased 7% from the second quarter of 2021. Salaries and benefit costs were lower in the current quarter by $0.3 million compared to the prior quarter and $0.8 million higher than the same quarter in the prior year mainly due to increased hiring for market expansion. Year-to-date non-interest expense decreased $3.6 million or 5% from the same period in the prior year primarily due to a $7.4 million goodwill impairment recorded in the second quarter of 2020. This decrease was partly offset by a $1.6 million increase in salary and employee benefits, $1.0 million increase in occupancy, and $1.5 million increase in other non-interest expense as compared to the same period in the prior year.

CrossFirst’s effective tax rate for the third quarter of 2021 was 21% as compared to 16% for the third quarter of 2020. The 2021 quarter-to-date income tax expense was impacted by a $17.2 million increase in income before income taxes that increased taxes at the statutory rate by $3.6 million. For both of the comparable periods, the Company continued to benefit from the tax-exempt municipal bond portfolio and bank-owned life insurance. The tax-exempt benefit diminishes as the Company’s pre-tax income improves.

Balance Sheet Performance & Analysis

During the third quarter of 2021, total assets increased by $90 million or 2% compared to June 30, 2021 and decreased $105 million or 2% compared to September 30, 2020. The total assets change was negatively impacted by the $88 million in PPP loans that were forgiven in the third quarter. Non-interest-bearing deposits increased $142 million compared to June 30, 2021, which was the main driver of the cost of funds 3 basis points decrease. During the third quarter of 2021, available-for-sale investment securities decreased $4 million to $708 million compared to June 30, 2021, while the overall average for the third quarter was $730 million. The securities yields decreased 6 basis points to a tax equivalent yield of 2.87% for the third quarter of 2021 compared to the prior quarter.

Loan Results

The Company experienced a decrease in average loans of 4% since June 30, 2021 and a decrease of 5% year-over-year from September 30, 2020. The reduction in average loans was primarily a result of PPP loan forgiveness. Loan yields increased slightly to 4.00% during the third quarter and increased 10 basis points over the last twelve months.

3Q21

2Q21

1Q21

4Q20

3Q20

QoQ
Growth
($)

QoQ
Growth
(%)
(1)

YoY
Growth
($)

YoY
Growth
(%)
(1)

(Dollars in millions)

Average loans (gross)

Commercial

$

1,233

$

1,221

$

1,329

$

1,367

$

1,308

$

12

1

%

$

(75

)

(6

)

%

Energy

311

341

351

381

393

(30

)

(9

)

(82

)

(21

)

Commercial real estate

1,213

1,203

1,183

1,194

1,169

10

1

44

4

Construction and land development

611

633

598

585

617

(22

)

(3

)

(6

)

(1

)

Residential and multifamily real estate

659

659

688

664

583

0

0

76

13

Paycheck Protection Program

147

296

308

258

362

(149

)

(50

)

(215

)

(59

)

Consumer

57

56

50

45

45

1

2

12

27

Total

$

4,231

$

4,409

$

4,507

$

4,494

$

4,477

$

(178

)

(4

)

%

$

(246

)

(5

)

%

Yield on average loans for the period ending

4.00

%

3.99

%

3.94

%

4.00

%

3.90

%

(1) Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

Deposit & Other Borrowing Results

The Company experienced a reduction in average deposits of 6% since June 30, 2021, and increased average deposits 2% year-over-year from September 30, 2020. The deposit decrease for the quarter was driven by a continued decrease in time deposits and a reduction in money market accounts. In addition, the Company continued to improve the overall cost of deposits, which declined 3 basis points during the third quarter of 2021, reflective of average non-interest-bearing deposit increases. The cost of interest-bearing deposits has declined 33 basis points over the last twelve months primarily as a result of the lower interest rate environment.

3Q21

2Q21

1Q21

4Q20

3Q20

QoQ
Growth
($)

QoQ
Growth
(%)
(1)

YoY
Growth
($)

YoY
Growth
(%)
(1)

(Dollars in millions)

Average deposits

Non-interest bearing deposits

$

910

$

802

$

731

$

732

$

714

$

108

13

%

$

196

27

%

Transaction deposits

511

665

717

575

460

(154

)

(23

)

51

11

Savings and money market deposits

2,276

2,385

2,422

2,158

1,995

(109

)

(5

)

281

14

Time deposits

752

869

972

1,087

1,175

(117

)

(13

)

(423

)

(36

)

Total

$

4,449

$

4,721

$

4,842

$

4,552

$

4,344

$

(272

)

(6

)

%

$

105

2

%

Cost of deposits for the period ending

0.38

%

0.41

%

0.48

%

0.58

%

0.67

%

Cost of interest-bearing deposits for the period ending

0.47

%

0.50

%

0.57

%

0.69

%

0.80

%

(1) Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

At September 30, 2021, other borrowings totaled $278 million, as compared to $284 million at June 30, 2021, and $351 million at September 30, 2020.

Asset Quality Position

Credit quality metrics generally improved during the third quarter of 2021 as classified assets decreased $47 million and the ratio of nonperforming assets to total assets decreased to 0.92% from 1.09% in the previous quarter. The improvements in credit metrics were primarily driven by upgrades in COVID-19 impacted segments and the Energy portfolio. Net charge-offs were $1.3 million for the third quarter of 2021 as compared to $2.6 million for the second quarter of 2021. The charge-offs for the current quarter were related to energy and commercial and industrial credits.

The overall decrease in the allowance for loan losses for the current quarter reflects a relatively minor change in net period-end loan balances, stabilization in the Company’s economic outlook and improved credit performance. These factors resulted in a $10 million release of reserves during the third quarter. The following table provides information regarding asset quality.

Asset quality (Dollars in millions)

3Q21

2Q21

1Q21

4Q20

3Q20

Non-accrual loans

$

48.1

$

54.7

$

63.3

$

75.1

$

75.6

Other real estate owned

1.1

1.7

2.3

2.3

2.3

Nonperforming assets

49.8

58.1

68.9

78.4

82.2

Loans 90+ days past due and still accruing

0.5

1.8

3.2

1.0

4.3

Loans 30 - 89 days past due

37.6

18.8

11.0

18.1

45.4

Net charge-offs (recoveries)

1.3

2.6

8.2

11.6

6.0

Asset quality metrics (%)

3Q21

2Q21

1Q21

4Q20

3Q20

Nonperforming assets to total assets

0.92

%

1.09

%

1.15

%

1.39

%

1.49

%

Allowance for loan loss to total loans

1.51

1.78

1.65

1.70

1.70

Allowance for loan loss to nonperforming loans

132

134

112

99

95

Net charge-offs (recoveries) to average loans(1)

0.13

0.23

0.74

1.03

0.54

Provision to average loans(1)

(0.94

)

0.32

0.67

0.96

0.97

Classified Loans / (Total Capital + ALLL)

17.3

24.0

38.2

40.9

43.2

(1) Interim periods annualized.

Capital Position

At September 30, 2021, stockholders' equity totaled $652 million, or $12.79 per share, compared to $624 million, or $12.08 per share, at December 31, 2020. Subsequent to quarter end, the Board of Directors authorized a stock repurchase program under which the Company may repurchase up to $30 million of common stock over time. The actual timing, number and value of shares of common stock repurchased under the stock repurchase program will be determined by management at its discretion and will depend on a number of factors, including, but not limited to, the market price of the Company's common stock, general market and economic conditions, and applicable legal requirements. Stock repurchases under the program may be modified, suspended or terminated by the Company at any time without prior notice. Under the stock repurchase program, the Company may repurchase its common stock in the open market, through block trades, in privately negotiated transactions, pursuant to a trading plan separately adopted in the future, or by other means, in accordance with federal securities laws and other applicable laws.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 13% and the total capital to risk-weighted assets was approximately 14% at September 30, 2021. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call and webcast to discuss third quarter 2021 results on Tuesday, October 19, 2021, at 10 a.m. CDT / 11 a.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. To access the call, dial toll-free (877) 621-5851 from anywhere in the U.S. or +1 (470) 495-9492 for international callers and provide conference number 8025119. Participants are encouraged to dial into the call or access the webcast approximately 15 minutes prior to the start time.

A replay of the call will be available two hours after the conclusion of the live call. To access the replay, dial (855) 859-2056 and provide conference number 8025119, passcode 9067. International callers should dial +1 (404) 537-3406 and enter the same confirmation number. A replay of the webcast will also be available for 90 days on the company’s website https://investors.crossfirstbankshares.com.

Cautionary Notice about Forward-Looking Statements

The financial results in this press release reflect preliminary, unaudited results, which are not final until the Company’s Quarterly Report on Form 10-Q is filed. This earnings release contains forward-looking statements. 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 its financial condition, results of operations, business strategy and financial needs. Our actual results could differ materially from those anticipated in such forward-looking statements.

Accordingly, the Company cautions you that any such forward-looking statements are not a guarantee of future performance and that actual results may prove to be materially different from the results expressed or implied by the forward-looking statements due to a number of factors. Such factors include, without limitation, those listed from time to time in reports that the Company files with the Securities and Exchange Commission as well as the uncertain impact of the COVID-19 pandemic. 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 Bank

CrossFirst Bankshares, Inc. (Nasdaq: CFB) is a Kansas corporation and a registered bank holding company for its wholly owned subsidiary CrossFirst Bank, which is headquartered in Leawood, Kansas. CrossFirst has nine full-service banking locations in Kansas, Missouri, Oklahoma, Texas, and Arizona that offer products and services to businesses, professionals, individuals, and families.


Unaudited Financial Tables

  • Table 1. Consolidated Balance Sheets

  • Table 2. Consolidated Statements of Operations

  • Table 3. 2020 - 2021 Year-to-Date Analysis of Changes in Net Interest Income

  • Table 4. 2020 - 2021 Quarterly Analysis of Changes in Net Interest Income

  • Table 5. Non-GAAP Financial Measures


TABLE 1. CONSOLIDATED BALANCE SHEETS

September 30, 2021

December 31, 2020

(Unaudited)

(Dollars in thousands)

Assets

Cash and cash equivalents

$

316,722

$

408,810

Available-for-sale securities - taxable

168,182

177,238

Available-for-sale securities - tax-exempt

539,924

477,350

Loans, net of allowance for loan losses of $64,152 and $75,295 at September 30, 2021 and December 31, 2020, respectively

4,168,965

4,366,602

Premises and equipment, net

66,598

70,509

Restricted equity securities

12,885

15,543

Interest receivable

15,928

17,236

Foreclosed assets held for sale

1,148

2,347

Bank-owned life insurance

67,104

67,498

Other

43,695

56,170

Total assets

$

5,401,151

$

5,659,303

Liabilities and stockholders’ equity

Deposits

Noninterest-bearing

$

960,999

$

718,459

Savings, NOW and money market

2,774,477

2,932,799

Time

701,121

1,043,482

Total deposits

4,436,597

4,694,740

Federal funds purchased and repurchase agreements

-

2,306

Federal Home Loan Bank advances

276,600

293,100

Other borrowings

997

963

Interest payable and other liabilities

34,550

43,766

Total liabilities

4,748,744

5,034,875

Stockholders’ equity

Common stock, $0.01 par value:

authorized - 200,000,000 shares, issued - 52,576,504 and 52,289,129 shares at September 30, 2021 and December 31, 2020, respectively

526

523

Treasury stock, at cost:

1,573,806 and 609,613 shares held at September 30, 2021 and December 31, 2020, respectively

(20,000

)

(6,061

)

Additional paid-in capital

525,676

522,911

Retained earnings

126,299

77,652

Accumulated other comprehensive income

19,906

29,403

Total stockholders’ equity

652,407

624,428

Total liabilities and stockholders’ equity

$

5,401,151

$

5,659,303

TABLE 2. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2021

2020

2021

2020

(Dollars in thousands except per share data)

Interest Income

Loans, including fees

$

42,664

$

43,929

$

130,268

$

138,591

Available-for-sale securities - taxable

803

1,042

2,423

4,174

Available-for-sale securities - tax-exempt

3,562

3,186

10,410

9,758

Deposits with financial institutions

121

47

359

583

Dividends on bank stocks

161

248

488

808

Total interest income

47,311

48,452

143,948

153,914

Interest Expense

Deposits

4,211

7,298

14,789

29,975

Fed funds purchased and repurchase agreements

-

54

3

162

Federal Home Loan Bank Advances

1,275

1,749

3,838

4,980

Other borrowings

24

24

72

85

Total interest expense

5,510

9,125

18,702

35,202

Net Interest Income

41,801

39,327

125,246

118,712

Provision for Loan Losses

(10,000

)

10,875

1,000

45,825

Net Interest Income after Provision for Loan Losses

51,801

28,452

124,246

72,887

Non-Interest Income (Loss)

Service charges and fees on customer accounts

1,196

792

3,330

1,947

Realized gains on available-for-sale securities

1,046

1,012

1,043

1,725

Unrealized gains (losses), net on equity securities

(6,210

)

-

(6,243

)

53

Income from bank-owned life insurance

427

464

3,088

1,373

Swap fees and credit valuation adjustments, net

31

121

156

80

ATM and credit card interchange income

1,735

1,482

5,569

2,863

Other non-interest income

670

192

1,921

751

Total non-interest income (loss)

(1,105

)

4,063

8,864

8,792

Non-Interest Expense

Salaries and employee benefits

15,399

14,628

44,612

43,022

Occupancy

2,416

2,144

7,307

6,274

Professional fees

618

1,132

2,538

3,098

Deposit insurance premiums

927

1,096

2,995

3,151

Data processing

700

652

2,136

2,065

Advertising

596

147

1,334

870

Software and communication

999

959

3,098

2,772

Foreclosed assets, net

(35

)

20

680

1,174

Goodwill impairment

-

-

-

7,397

Other non-interest expense

2,416

2,233

7,967

6,421

Total non-interest expense

24,036

23,011

72,667

76,244

Net Income Before Taxes

26,660

9,504

60,443

5,435

Income tax expense

5,660

1,498

11,831

928

Net Income

$

21,000

$

8,006

$

48,612

$

4,507

Basic Earnings Per Share

$

0.41

$

0.15

$

0.95

$

0.09

Diluted Earnings Per Share

$

0.41

$

0.15

$

0.93

$

0.09


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

Nine Months Ended

September 30,

2021

2020

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

$

207,691

$

2,911

1.87

%

$

285,363

$

4,982

2.33

%

Securities - tax-exempt(1)

507,986

12,596

3.32

443,506

11,807

3.56

Federal funds sold

-

-

-

1,364

18

1.73

Interest-bearing deposits in other banks

390,588

359

0.12

170,316

566

0.44

Gross loans, net of unearned income(2)

4,381,213

130,268

3.98

4,248,520

138,591

4.36

Total interest-earning assets(1)

5,487,478

$

146,134

3.56

%

5,149,069

$

155,964

4.05

%

Allowance for loan losses

(76,726

)

(64,896

)

Other non-interest-earning assets

214,752

218,797

Total assets

$

5,625,504

$

5,302,970

Interest-bearing liabilities

Transaction deposits

$

629,959

$

936

0.20

%

$

404,967

$

1,391

0.46

%

Savings and money market deposits

2,360,559

6,402

0.36

1,938,669

11,689

0.81

Time deposits

863,592

7,451

1.15

1,178,632

16,895

1.91

Total interest-bearing deposits

3,854,110

14,789

0.51

3,522,268

29,975

1.14

FHLB and short-term borrowings

285,371

3,841

1.80

456,048

5,145

1.51

Trust preferred securities, net of fair value adjustments

976

72

9.80

933

82

11.81

Non-interest-bearing deposits

814,924

-

-

668,208

-

-

Cost of funds

4,955,381

$

18,702

0.50

%

4,647,457

$

35,202

1.01

%

Other liabilities

35,385

42,731

Stockholders’ equity

634,738

612,782

Total liabilities and stockholders' equity

$

5,625,504

$

5,302,970

Net interest income(1)

$

127,432

$

120,762

Net interest spread(1)

3.06

%

3.04

%

Net interest margin(1)

3.10

%

3.13

%

(1) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.
(2) Average loan balances include nonaccrual loans.
(3) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.


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

Nine Months Ended

September 30, 2021 over 2020

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

(1,200

)

$

(871

)

$

(2,071

)

Securities - tax-exempt(1)

1,627

(838

)

789

Federal funds sold

(18

)

-

(18

)

Interest-bearing deposits in other banks

390

(597

)

(207

)

Gross loans, net of unearned income

4,176

(12,499

)

(8,323

)

Total interest income(1)

4,975

(14,805

)

(9,830

)

Interest Expense

Transaction deposits

555

(1,010

)

(455

)

Savings and money market deposits

2,185

(7,472

)

(5,287

)

Time deposits

(3,795

)

(5,649

)

(9,444

)

Total interest-bearing deposits

(1,055

)

(14,131

)

(15,186

)

FHLB and short-term borrowings

(2,169

)

865

(1,304

)

Trust preferred securities, net of fair value adjustments

4

(14

)

(10

)

Total interest expense

(3,220

)

(13,280

)

(16,500

)

Net interest income(1)

$

8,195

$

(1,525

)

$

6,670


(1) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income income taxes. The incremental income income tax rate used is 21.0%.

(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.


TABLE 4. 2020 - 2021 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

Three Months Ended

September 30,

2021

2020

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

$

194,929

$

964

1.96

%

$

257,637

$

1,290

1.99

%

Securities - tax-exempt(1)

534,917

4,310

3.20

440,669

3,855

3.48

Federal funds sold

-

-

-

-

-

-

Interest-bearing deposits in other banks

313,188

121

0.15

166,423

47

0.11

Gross loans, net of unearned income(2)

4,230,553

42,664

4.00

4,477,211

43,929

3.90

Total interest-earning assets(1)

5,273,587

$

48,059

3.62

%

5,341,940

$

49,121

3.66

%

Allowance for loan losses

(75,103

)

(75,970

)

Other non-interest-earning assets

210,500

220,282

Total assets

$

5,408,984

$

5,486,252

Interest-bearing liabilities

Transaction deposits

$

510,823

$

259

0.20

%

$

460,420

$

260

0.22

%

Savings and money market deposits

2,276,436

1,907

0.33

1,995,307

2,301

0.46

Time deposits

752,012

2,045

1.08

1,174,555

4,737

1.60

Total interest-bearing deposits

3,539,271

4,211

0.47

3,630,282

7,298

0.80

FHLB and short-term borrowings

278,154

1,275

1.82

479,475

1,803

1.50

Trust preferred securities, net of fair value adjustments

988

24

9.63

944

24

10.19

Non-interest-bearing deposits

909,750

-

-

714,337

-

-

Cost of funds

4,728,163

$

5,510

0.46

%

4,825,038

$

9,125

0.75

%

Other liabilities

36,106

47,304

Stockholders’ equity

644,715

613,910

Total liabilities and stockholders' equity

$

5,408,984

$

5,486,252

Net interest income(1)

$

42,549

$

39,996

Net interest spread(1)

3.16

%

2.91

%

Net interest margin(1)

3.20

%

2.98

%


(1) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.

(2) Average gross loan balances include non-accrual loans.
(3) Actual unrounded values are used to calculate the reported yield or rate disclosed. Accordingly, recalculations using the amounts in thousands as disclosed in this release may not produce the same amounts.


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

Three Months Ended

September 30, 2021 over 2020

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

(307

)

$

(19

)

$

(326

)

Securities - tax-exempt(1)

782

(327

)

455

Federal funds sold

-

-

-

Interest-bearing deposits in other banks

51

23

74

Gross loans, net of unearned income

(2,403

)

1,138

(1,265

)

Total interest income(1)

(1,877

)

815

(1,062

)

Interest Expense

Transaction deposits

26

(27

)

(1

)

Savings and money market deposits

304

(698

)

(394

)

Time deposits

(1,414

)

(1,278

)

(2,692

)

Total interest-bearing deposits

(1,084

)

(2,003

)

(3,087

)

FHLB and short-term borrowings

(863

)

335

(528

)

Trust preferred securities, net of fair value adjustments

1

(1

)

-

Total interest expense

(1,946

)

(1,669

)

(3,615

)

Net interest income(1)

$

69

$

2,484

$

2,553


(1) Tax exempt income is calculated on a tax-equivalent basis. Tax-free municipal securities are exempt from federal income taxes. The incremental income tax rate used is 21.0%.

(2) The change in interest not due solely to volume or rate has been allocated in proportion to the respective absolute dollar amounts of the change in volume or rate.


TABLE 5. NON-GAAP FINANCIAL MEASURES

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

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

  • We calculate ‘‘non-GAAP core operating income’’ as net income adjusted to remove non-recurring or non-core income and expense items related to:

    • Goodwill impairment - We performed an interim review of goodwill as of June 30, 2020. The book value of goodwill exceeded its fair market value and resulted in a full $7.4 million impairment.

    • Charges and adjustments associated with the full vesting of a former executive - We incurred additional charges in the second quarter of 2021 related to the acceleration of $0.7 million of certain cash, stock-based compensation, and employee costs.

    • Bank Owned Life Insurance - We obtain bank owned life insurance on key employees throughout the organization and received a $1.8 million benefit in the second quarter of 2021.

    • Unrealized loss on equity security – During the quarter ended September 30, 2021, the Company recorded a $6.2 million impairment loss related to an equity investment that was received as part of a restructured loan agreement.

The most directly comparable GAAP financial measure for non-GAAP core operating income is net income.

  • We calculate "core return on average tangible common equity" as Non-GAAP core operating income (as defined above) divided by average tangible common equity. Average tangible common equity is calculated as average common equity less average goodwill and intangibles and average preferred equity. The most directly comparable GAAP measure is return on average common equity.

  • We calculate "Non-GAAP core operating return on average assets" as non-GAAP core operating income (as defined above) divided by average assets. The most directly comparable GAAP financial measure is return on average assets, which is calculated as net income divided by average assets.

  • We calculate ‘‘non-GAAP core operating return on average common equity’’ as non-GAAP core operating income (as defined above) less preferred dividends divided by average common equity. The most directly comparable GAAP financial measure is return on average common equity, which is calculated as net income less preferred dividends divided by average common equity.

  • We calculate "tangible common stockholders' equity" as total stockholders' equity less goodwill and intangibles and preferred equity. The most directly comparable GAAP measure is total stockholders' equity.

  • We calculate ‘‘tangible book value per share’’ as tangible common stockholders' equity (as defined above) divided by the total number of shares outstanding. The most directly comparable GAAP measure is book value per share.

  • We calculate "non-GAAP core operating efficiency ratio - fully tax equivalent (FTE)" as non-interest expense adjusted to remove non-recurring, or non-core, non-interest expenses as defined above under non-GAAP core operating income divided by net interest income on a fully tax-equivalent basis plus non-interest income adjusted to remove non-recurring, or non-core, non-interest income as defined above under non-GAAP core operating income. The most directly comparable financial measure is the efficiency ratio.

  • We calculate "non-GAAP pre-tax pre-provision profit" as net income before taxes plus the provision for loan losses.

Quarter Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

(Dollars in thousands)

Non-GAAP core operating income:

Net income

$

21,000

$

15,577

$

12,035

$

8,094

$

8,006

$

48,612

$

4,507

Add: Unrealized loss on equity security

6,200

-

-

-

-

6,200

-

Less: Tax effect(2)

1,302

-

-

-

-

1,302

-

Unrealized loss on equity security, net of tax

4,898

-

-

-

-

4,898

-

Add: Goodwill impairment(1)

-

-

-

-

-

-

7,397

Add: Accelerated employee benefits

-

719

-

-

-

719

-

Less: Tax effect(3)

-

210

-

-

-

210

-

Accelerated employee benefits, net of tax

-

509

-

-

-

509

-

Less: BOLI settlement benefits(1)

-

1,841

-

-

-

1,841

-

Non-GAAP core operating income

$

25,898

$

14,245

$

12,035

$

8,094

$

8,006

$

52,178

$

11,904

(1) No tax effect.

(2) Represents the tax impact of the adjustments at a tax rate of 21.0%.

(3) Represents the tax impact of the adjustments above at a tax rate of 21.0%, plus a permanent tax benefit associated with stock-based grants.


Quarter Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

(Dollars in thousands)

Non-GAAP core return on average tangible common equity:

Net income available to common stockholders

$

21,000

$

15,577

$

12,035

$

8,094

$

8,006

$

48,612

$

4,507

Non-GAAP core operating income

25,898

14,245

12,035

8,094

8,006

52,178

11,904

Average common equity

644,715

633,417

625,875

620,496

613,910

634,738

612,782

Less: average goodwill and intangibles

160

179

199

218

238

179

5,138

Average tangible common equity

$

644,555

$

633,238

$

625,676

$

620,278

$

613,672

$

634,559

$

607,644

Return on average common equity

12.92

%

9.86

%

7.80

%

5.19

%

5.19

%

10.24

%

0.98

%

Non-GAAP core return on average tangible common equity

15.94

%

9.02

%

7.80

%

5.19

%

5.19

%

10.99

%

2.62

%


Quarter Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

(Dollars in thousands)

Non-GAAP core operating return on average assets:

Net income

$

21,000

$

15,577

$

12,035

$

8,094

$

8,006

$

48,612

$

4,507

Non-GAAP core operating income

25,898

14,245

12,035

8,094

8,006

52,178

11,904

Average assets

$

5,408,984

$

5,673,638

$

5,798,167

$

5,523,196

$

5,486,252

$

5,625,504

$

5,302,970

Return on average assets

1.54

%

1.10

%

0.84

%

0.58

%

0.58

%

1.16

%

0.11

%

Non-GAAP core operating return on average assets

1.90

%

1.01

%

0.84

%

0.58

%

0.58

%

1.24

%

0.30

%


Quarter Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

(Dollars in thousands except per share data)

Tangible common stockholders' equity:

Total stockholders' equity

$

652,407

$

637,190

$

628,834

$

624,428

$

617,883

Less: goodwill and other intangible assets

149

169

188

208

227

Tangible common stockholders' equity

$

652,258

$

637,021

$

628,646

$

624,220

$

617,656

Tangible book value per share:

Tangible common stockholders' equity

$

652,258

$

637,021

$

628,646

$

624,220

$

617,656

Shares outstanding at end of period

51,002,698

50,958,680

51,678,669

51,679,516

52,195,778

Book value per share

$

12.79

$

12.50

$

12.17

$

12.08

$

11.84

Tangible book value per share

$

12.79

$

12.50

$

12.16

$

12.08

$

11.83


Quarter Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

(Dollars in thousands)

Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)

Non-interest expense

$

24,036

$

25,813

$

22,818

$

23,732

$

23,011

$

72,667

$

76,244

Less: Accelerated employee benefits

-

719

-

-

-

719

-

Less: goodwill impairment

-

-

-

-

-

-

7,397

Adjusted Non-interest expense (numerator)

$

24,036

$

25,094

$

22,818

$

23,732

$

23,011

$

71,948

$

68,847

Net interest income

41,801

42,328

41,117

41,537

39,327

125,246

118,712

Tax equivalent interest income(1)

748

734

704

683

669

2,186

2,050

Non-interest income (loss)

(1,105

)

5,825

4,144

2,949

4,063

8,864

8,792

Add: Unrealized loss on equity security

6,200

-

-

-

-

6,200

-

Less: BOLI settlement benefits

-

1,841

-

-

-

1,841

-

Total tax-equivalent income (denominator)

$

47,644

$

47,046

$

45,965

$

45,169

$

44,059

$

140,655

$

129,554

Efficiency Ratio

59.06

%

53.61

%

50.41

%

53.35

%

53.03

%

54.18

%

59.44

%

Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)

50.45

%

53.34

%

49.64

%

52.54

%

52.23

%

51.15

%

53.14

%

(1) Tax exempt income (tax-free municipal securities) is calculated on a tax equivalent basis. The incremental tax rate used is 21.0%.


Quarter Ended

Nine Months Ended

9/30/2021

6/30/2021

3/31/2021

12/31/2020

9/30/2020

9/30/2021

9/30/2020

(Dollars in thousands)

Non-GAAP Pre-Tax Pre-Provision Profit

Net income before taxes

$

26,660

$

18,840

$

14,943

$

9,879

$

9,504

$

60,443

$

5,435

Add: Provision for loan losses

(10,000

)

3,500

7,500

10,875

10,875

1,000

45,825

Non-GAAP Pre-Tax Pre-Provision Profit

$

16,660

$

22,340

$

22,443

$

20,754

$

20,379

$

61,443

$

51,260

CROSSFIRST BANKSHARES, INC. CONTACT:
Heather Worley, Investor Relations / Media Contact
Heather@crossfirst.com / (214) 442-5898
https://investors.crossfirstbankshares.com


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