CrossFirst Bankshares, Inc. Reports Second Quarter 2021 Results

CrossFirst Bankshares, Inc.
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In this article:

Second Quarter 2021 Key Financial Performance Metrics

Net Income

Diluted EPS

PTPP

Net Interest Margin
(FTE)

Efficiency Ratio

Book Value per
Common Share

$15.6 million

$0.30

$22.3 million

3.12%

53.61%

$12.50

LEAWOOD, Kan., July 22, 2021 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported its results for the second quarter of 2021, with net income of $15.6 million, or $0.30 per diluted share, and year-to-date net income of $27.6 million, or $0.53 per diluted share.

CEO Commentary:

"During the second quarter, we achieved the strongest profitability in the Company's history and I am extremely proud of our team for executing on several key strategic initiatives that provides a foundation for future growth and success," said CrossFirst’s CEO and President, Mike Maddox. "The Company took several steps to improve the efficiency of the balance sheet and reduce excess liquidity, which resulted in stronger performance metrics, improved margin, and stronger core earnings power. We grew our operating revenue 6% from the previous quarter and our asset quality metrics improved with the strengthening of the loan portfolio and economic recovery. We made great progress on our expansion efforts in Arizona and Frisco, which we believe will create long term value for the organization."

2021 Second Quarter Highlights:

  • $5.3 billion of assets with 10% operating revenue growth compared to the second quarter of 2020

  • Return on Average Assets of 1.10% and a Return on Equity of 9.86%

  • Efficiency ratio of 53.61% for the second quarter of 2021 and a non-GAAP core efficiency ratio of 53.34% after adjusting for nonrecurring or non-core items and tax equivalent interest

  • Net Interest Margin (Fully Tax-Equivalent) of 3.12% compared to 3.00% in the previous quarter

  • Demand deposit growth of 3% from the previous quarter and 9% from same quarter last year; increased to 19% of total deposits

  • Completed the $20 million share repurchase program at a weighted average price of $12.68

  • Book value per share of $12.50 at June 30, 2021 compared to $11.66 at June 30, 2020

Quarter-to-Date

Year-to-Date

June 30,

June 30,

(Dollars in millions except per share data)

2020

2021

2020

2021

Operating revenue(1)

$

43.8

$

48.2

$

84.1

$

93.4

Net income (loss)

$

(7.4

)

$

15.6

$

(3.5

)

$

27.6

Diluted earnings (loss) per share

$

(0.14

)

$

0.30

$

(0.07

)

$

0.53

Return on average assets

(0.54

)

%

1.10

%

(0.14

)

%

0.97

%

Return on average common equity

(4.84

)

%

9.86

%

(1.15

)

%

8.84

%

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

0.03

%

9.02

%

1.30

%

8.42

%

Net interest margin

3.14

%

3.07

%

3.16

%

3.01

%

Net interest margin, fully tax-equivalent(3)

3.19

%

3.12

%

3.22

%

3.06

%

Efficiency ratio

70.81

%

53.61

%

63.29

%

52.06

%

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

53.09

%

53.34

%

53.61

%

51.51

%

(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%.

COVID-19 and Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Programs Update

During the second quarter of 2021, the Company operated with open lobbies to the public, and it opened offices for employees, but remains flexible to respond to possible changes to federal, state and local requirements in the event of the COVID-19 pandemic's resurgence. As of June 30, 2021, the Company retained $197 million in loans produced through the Paycheck Protection Program ("PPP"), and the Company will continue to work through the forgiveness process for those loans with the Small Business Administration ("SBA"). In addition to PPP loans, we granted loan modifications and payment deferrals for many customers who requested additional relief. As of June 30, 2021, the Company still had several modified loans related to COVID-19, mostly in industries such as hospitality, entertainment, travel or other recreational activities directly impacted from the lockdowns.

Income from Operations

Net Interest Income

The Company produced interest income of $48.5 million for the second quarter of 2021, a decrease of 5% from the second quarter of 2020 and a slight increase from the previous quarter. Interest income was down from the second quarter of 2020 primarily due to the impact of lower market interest rates and increased competition for loans, which led to lower loan and bond yields. Average earning assets totaled $5.5 billion for the second quarter of 2021, an increase of $264 million or 5% from the same quarter in 2020. The tax-equivalent yield on earning assets increased from 3.50% to 3.57% during the second quarter of 2021, and was down from 3.96% recorded in the second quarter of 2020, primarily due to the movement of variable rate assets indexed to lower market rates. Year-to-date, the Company produced interest income of $96.6 million, which declined compared to the same period in 2020 primarily with the yield movements on earning assets.

Interest expense for the second quarter of 2021 was $6.2 million, or 39% lower than the second quarter of 2020 and 13% lower than the previous quarter. While average interest-bearing deposits increased to $3.9 billion in the second quarter of 2021, or a 11% increase from the same prior year period, overall interest expense on interest-bearing deposits continued to decline as a result of repricing due to lower market interest rates. Non-deposit funding costs for the second quarter of 2021 remained at 1.79%, while overall cost of funds for the quarter was 0.49%, compared to 0.56% for the first quarter of 2021. Year-to-date, the Company incurred interest expense of $13.2 million, a decrease of 49% from the same period in the prior year.

Net interest income totaled $42.3 million for the second quarter of 2021 or 3% higher than the first quarter of 2021, and 3% higher than the second quarter of 2020. Tax-equivalent net interest margin increased to 3.12% in the current quarter, from 3.00% in the previous quarter, and declined from 3.19% in the same quarter in 2020. The lower year-over-year yields reflect the repricing impact from a lower rate environment and lower priced new loans originated in the first quarter of 2021. The reduction of excess cash on the balance sheet improved overall margin during the second quarter of 2021 compared to the first quarter of 2021. During the second quarter of 2021, CrossFirst realized $2.1 million in fees primarily from the forgiveness of $139 million of PPP loans. The PPP loans yielded 3.84% 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 second quarter of 2021. Year-to-date net interest income grew to $83.4 million, an increase of 5% from the same period in the prior year, while tax-equivalent net interest margin declined to 3.06% from 3.22%.

Non-Interest Income

Non-interest income increased $3.2 million in the second quarter of 2021 or 121% compared to the same quarter of 2020 and increased $1.7 million or 41% compared to the first quarter of 2021. During the second quarter of 2021, the Company recorded an increase of $0.6 million in credit card fees, $0.5 million in service charge income, and recognized a one-time $1.8 million benefit in bank-owned life insurance proceeds compared to the same quarter in 2020, which were the primary drivers of quarterly and year-to-date non-interest income growth. Year-to-date non-interest income was up $5.2 million or 111% compared to the same period in the prior year.

Non-Interest Expense

Non-interest expense for the second quarter of 2021 was $25.8 million, which decreased 17% compared to the second quarter of 2020 and increased 13% from the first quarter of 2021. Salaries and benefit costs were higher in the current quarter by $2.1 million compared to the prior quarter and $1.7 million higher than the same quarter in the prior year mainly due to increased hiring for planned expansion efforts and a one-time $0.7 million dollar compensation benefit to a former executive. In addition, the Company recorded a $0.6 million valuation write-down on a foreclosed property held for sale on the balance sheet that increased non-interest expense for the second quarter of 2021. Year-to-date non-interest expense also decreased from the same period in the prior year primarily due to a one-time non-cash expense recorded in the second quarter of 2020. Overall, the Company continues to benefit from reduced travel, entertainment, and other discretionary spending as a result of the COVID-19 pandemic.

CrossFirst’s effective tax rate for the second quarter of 2021 was 17% as compared to 10% for the second quarter of 2020. The 2021 quarter-to-date income tax expense was impacted by a $27.1 million increase in income before income taxes that increased taxes at the statutory rate by $5.7 million. For both of the comparable periods, the Company continued to benefit from the tax-exempt municipal bond portfolio and bank-owned life insurance.

Balance Sheet Performance & Analysis

During the second quarter of 2021, total assets decreased by $687 million or 11% compared to March 31, 2021 and $151 million or 3% compared to June 30, 2020. As part of the Company's efforts to improve the efficiency of its balance sheet, $162 million in PPP loans were forgiven and the Company reduced its first quarter cash position by over $400 million through a reduction of non-core wholesale, brokered, and institutional deposits. During the second quarter of 2021, available-for-sale investment securities increased $27 million to $712 million compared to March 31, 2021, while the overall average for the second quarter was $720 million. The securities yields increased 4 basis points to a tax equivalent yield of 2.93% for the second quarter of 2021 compared to the prior quarter.

Loan Results

The Company experienced a decrease in average loans of 2% since March 31, 2021, but increased average loans 1% year-over-year from June 30, 2020. The reduction in average loans was primarily a result of PPP forgiveness and pay downs of lower yielding commercial and industrial lines drawn on through the pandemic, which enhanced the previous quarter loan yields. Loan yields increased 5 basis points to 3.99% during the second quarter and declined 29 basis points over the last twelve months, commensurate with adjustable rate loan movements during 2020, competitive pricing from persistently low interest rates and related loan repricing.

(Dollars in millions)

2Q20

3Q20

4Q20

1Q21

2Q21

% of
Total

QoQ
Growth
($)

QoQ
Growth
(%)(1)

YoY
Growth
($)

YoY
Growth
(%)(1)

Average loans (gross)

Commercial and industrial

$

1,381

$

1,308

$

1,367

$

1,329

$

1,221

28

%

$

(108

)

(8

)

%

$

(160

)

(12

)

%

Energy

404

393

381

351

341

8

(10

)

(3

)

(63

)

(16

)

Commercial real estate

1,115

1,169

1,194

1,183

1,203

27

20

2

88

8

Construction and land development

651

617

585

598

633

14

35

6

(18

)

(3

)

Residential real estate

517

583

664

688

659

15

(29

)

(4

)

142

27

Paycheck Protection Program

245

362

258

308

296

7

(12

)

(4

)

51

21

Consumer

44

45

45

50

56

1

6

12

12

27

Total

$

4,357

$

4,477

$

4,494

$

4,507

$

4,409

100

%

$

(98

)

(2

)

%

$

52

1

%

Yield on average loans for the period ending

4.28

%

3.90

%

4.00

%

3.94

%

3.99

%

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

Deposit & Other Borrowing Results

The Company experienced an average reduction in deposits of 2% since March 31, 2021, and increased average deposits 10% year-over-year from June 30, 2020. After improving the efficiency of the balance sheet, the Company ended the quarter with a loan to deposit ratio of 97% at the end of the quarter compared to 89% at the end of the previous quarter. The deposit decrease for the quarter was primarily driven by a reduction in wholesale and institutional funded time deposits, transaction deposits, and money market accounts. In addition, the Company continued to improve the overall cost of deposits as the cost of interest bearing deposits declined 7 basis points during the second quarter of 2021, reflective of changes made to deposit pricing. The cost of interest bearing deposits has declined 45 basis points over the last twelve months primarily as a result of the lower interest rate environment.

(Dollars in millions)

2Q20

3Q20

4Q20

1Q21

2Q21

% of
Total

QoQ
Growth
($)

QoQ
Growth
(%)(1)

YoY Growth
($)

YoY
Growth
(%)(1)

Average deposits

Non-interest bearing deposits

$

746

$

714

$

732

$

731

$

802

17

%

$

71

10

%

$

56

8

%

Transaction deposits

414

460

575

717

665

14

%

(52

)

(7

)

%

251

61

%

Savings and money market deposits

1,933

1,995

2,158

2,422

2,385

51

%

(37

)

(2

)

%

452

23

%

Time deposits

1,195

1,175

1,087

972

869

18

%

(103

)

(11

)

%

(326

)

(27

)

%

Total

$

4,288

$

4,344

$

4,552

$

4,842

$

4,721

100

%

$

(121

)

(2

)

%

$

433

10

%

Cost of deposits for the period ending

0.79

%

0.67

%

0.58

%

0.48

%

0.41

%

Cost of interest-bearing deposits for the period ending

0.95

%

0.80

%

0.69

%

0.57

%

0.50

%

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

At June 30, 2021, other borrowings totaled $284 million, as compared to $287 million at March 31, 2021, and $501 million at June 30, 2020.

Asset Quality Position

Credit quality metrics generally improved during the second quarter of 2021 as classified assets decreased nearly $100 million and nonperforming assets to total assets decreased to 1.09% from 1.15% in the previous quarter. The improvement in credit metrics were primarily derived from upgrades in COVID-19 impacted segments and the Energy portfolio. Net charge-offs were $2.6 million for the second quarter of 2021 as compared to $8.2 million for the first quarter of 2021. The charge-offs for the current quarter were primarily related to several commercial and industrial credits partially impacted by COVID-19.

Overall credit risk remained elevated as the Company added $3.5 million to the allowance for loan loss due to changes in risk factors, charge-off activity, and the continued economic uncertainty regarding the recovery speed from the pandemic. The following table provides information regarding asset quality.

Asset quality (Dollars in millions)

2Q20

3Q20

4Q20

1Q21

2Q21

Non-accrual loans

$

37.5

$

75.6

$

75.1

$

63.3

$

54.7

Other real estate owned

2.5

2.3

2.3

2.3

1.7

Nonperforming assets

40.3

82.2

78.4

68.9

58.1

Loans 90+ days past due and still accruing

0.2

4.3

1.0

3.2

1.8

Loans 30 - 89 days past due

34.9

45.4

18.1

11.0

18.8

Net charge-offs (recoveries)

1.3

6.0

11.6

8.2

2.6


Asset quality metrics (%)

2Q20

3Q20

4Q20

1Q21

2Q21

Nonperforming assets to total assets

0.74

%

1.49

%

1.39

%

1.15

%

1.09

%

Allowance for loan loss to total loans

1.61

1.70

1.70

1.65

1.78

Allowance for loan loss to nonperforming loans

189

95

99

112

134

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

0.12

0.54

1.03

0.74

0.23

Provision to average loans(1)

1.94

0.97

0.96

0.67

0.32

Classified Loans / (Total Capital + ALLL)

34.9

43.2

40.9

38.2

24.0

(1) Interim periods annualized.

Capital Position

At June 30, 2021, stockholders' equity totaled $637 million, or $12.50 per share, compared to $624 million, or $12.08 per share, at December 31, 2020. During the second quarter of 2021, CrossFirst completed its $20 million share repurchase program by purchasing 1,573,806 shares of common stock under the program at a weighted average price of $12.68 per share.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 12% and the total capital to risk-weighted assets was approximately 14% at June 30, 2021. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call and webcast to discuss second quarter 2021 results on Thursday, July 22, 2021, 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. 9690426. 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's website. A replay of the conference call will be available two hours following the close of the call until July 29, 2021, accessible at (855) 859-2056 with conference ID no. 9690426.

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

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.

CROSSFIRST BANKSHARES, INC. CONTACT:
Matt Needham, Investor Relations / Media Contact
matt@crossfirst.com / (913) 312-6822
https://investors.crossfirstbankshares.com


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

December 31, 2020

June 30, 2021

(unaudited)

(Dollars in thousands)

Assets

Cash and cash equivalents

$

408,810

$

220,814

Available-for-sale securities - taxable

177,238

187,553

Available-for-sale securities - tax-exempt

477,350

524,664

Loans, net of allowance for loan losses of $75,295 and $75,493 at December 31, 2020 and June 30, 2021, respectively

4,366,602

4,162,451

Premises and equipment, net

70,509

67,918

Restricted equity securities

15,543

13,329

Interest receivable

17,236

15,816

Foreclosed assets held for sale

2,347

1,718

Bank-owned life insurance

67,498

66,676

Other

56,170

50,495

Total assets

$

5,659,303

$

5,311,434

Liabilities and stockholders’ equity

Deposits

Noninterest bearing

$

718,459

$

818,887

Savings, NOW and money market

2,932,799

2,733,693

Time

1,043,482

804,047

Total deposits

4,694,740

4,356,627

Federal funds purchased and repurchase agreements

2,306

—

Federal Home Loan Bank advances

293,100

283,100

Other borrowings

963

986

Interest payable and other liabilities

43,766

33,531

Total liabilities

5,034,875

4,674,244

Stockholders’ equity

Common stock, $0.01 par value:

authorized - 200,000,000 shares, issued - 52,289,129 and 52,532,486 shares at December 31, 2020 and June 30, 2021, respectively

523

525

Treasury stock, at cost:

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

(6,061

)

(20,000

)

Additional paid-in capital

522,911

524,637

Retained earnings

77,652

105,299

Accumulated other comprehensive income

29,403

26,729

Total stockholders’ equity

624,428

637,190

Total liabilities and stockholders’ equity

$

5,659,303

$

5,311,434


TABLE 2. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2021

2020

2021

(Dollars in thousands except per share data)

Interest Income

Loans, including fees

$

46,323

$

43,846

$

94,662

$

87,604

Available for sale securities - Taxable

1,358

869

3,132

1,620

Available for sale securities - Tax-exempt

3,260

3,497

6,572

6,848

Deposits with financial institutions

45

110

536

238

Dividends on bank stocks

268

162

560

327

Total interest income

51,254

48,484

105,462

96,637

Interest Expense

Deposits

8,405

4,850

22,677

10,578

Fed funds purchased and repurchase agreements

46

2

108

3

Advances from Federal Home Loan Bank

1,620

1,280

3,231

2,563

Other borrowings

26

24

61

48

Total interest expense

10,097

6,156

26,077

13,192

Net Interest Income

41,157

42,328

79,385

83,445

Provision for Loan Losses

21,000

3,500

34,950

11,000

Net Interest Income after Provision for Loan Losses

20,157

38,828

44,435

72,445

Non-Interest Income

Service charges and fees on customer accounts

647

1,177

1,155

2,134

Realized gain (loss) on available-for-sale securities

320

(13

)

713

(3

)

Income from bank-owned life insurance

453

2,245

909

2,661

Swap fees and credit valuation adjustments, net

(32

)

(30

)

(41

)

125

ATM and credit card interchange income

896

1,506

1,381

3,834

Other non-interest income

350

940

612

1,218

Total non-interest income

2,634

5,825

4,729

9,969

Non-Interest Expense

Salaries and employee benefits

14,004

15,660

28,394

29,213

Occupancy

2,045

2,397

4,130

4,891

Professional fees

1,295

1,138

1,966

1,920

Deposit insurance premiums

1,039

917

2,055

2,068

Data processing

721

720

1,413

1,436

Advertising

223

435

723

738

Software and communication

937

1,034

1,813

2,099

Foreclosed assets, net

1,135

665

1,154

715

Goodwill impairment

7,397

—

7,397

—

Other non-interest expense

2,214

2,847

4,188

5,551

Total non-interest expense

31,010

25,813

53,233

48,631

Net Income (Loss) Before Taxes

(8,219

)

18,840

(4,069

)

33,783

Income tax expense (benefit)

(863

)

3,263

(570

)

6,171

Net Income (Loss)

(7,356

)

15,577

$

(3,499

)

$

27,612

Basic Earnings (Loss) Per Share

$

(0.14

)

$

0.30

$

(0.07

)

$

0.54

Diluted Earnings (Loss) Share

$

(0.14

)

$

0.30

$

(0.07

)

$

0.53


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

Six Months Ended

June 30,

2020

2021

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

$

299,456

$

3,692

2.48

%

$

214,178

$

1,947

1.83

%

Securities - tax-exempt(1)

444,948

7,952

3.59

494,297

8,286

3.38

Federal funds sold

2,057

18

1.74

—

—

—

Interest-bearing deposits in other banks

172,294

518

0.60

429,930

238

0.11

Gross loans, net of unearned income(2)

4,132,279

94,662

4.61

4,457,792

87,604

3.96

Total interest-earning assets(1)

5,051,034

$

106,842

4.25

%

5,596,197

$

98,075

3.53

%

Allowance for loan losses

(59,267

)

(77,552

)

Other non-interest-earning assets

218,043

216,913

Total assets

$

5,209,810

$

5,735,558

Interest-bearing liabilities

Transaction deposits

$

377,883

$

1,131

0.60

%

$

690,514

$

677

0.20

%

Savings and money market deposits

1,909,881

9,388

0.99

2,403,318

4,495

0.38

Time deposits

1,180,704

12,158

2.07

920,307

5,406

1.18

Total interest-bearing deposits

3,468,468

22,677

1.31

4,014,139

10,578

0.53

FHLB and short-term borrowings

444,141

3,342

1.51

289,039

2,566

1.79

Trust preferred securities, net of fair value adjustments

928

58

12.64

971

48

9.89

Non-interest-bearing deposits

643,659

—

—

766,725

—

—

Cost of funds

4,557,196

$

26,077

1.15

%

5,070,874

$

13,192

0.52

%

Other liabilities

40,406

35,017

Stockholders’ equity

612,208

629,667

Total liabilities and stockholders' equity

$

5,209,810

$

5,735,558

Net interest income(1)

$

80,765

$

84,883

Net interest spread(1)

3.10

%

3.01

%

Net interest margin(1)

3.22

%

3.06

%

(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)

Six Months Ended

June 30, 2021 over 2020

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

(909

)

$

(836

)

$

(1,745

)

Securities - tax-exempt(1)

825

(491

)

334

Federal funds sold

(18

)

—

(18

)

Interest-bearing deposits in other banks

361

(641

)

(280

)

Gross loans, net of unearned income

7,019

(14,077

)

(7,058

)

Total interest income(1)

7,278

(16,045

)

(8,767

)

Interest Expense

Transaction deposits

579

(1,033

)

(454

)

Savings and money market deposits

1,968

(6,861

)

(4,893

)

Time deposits

(2,289

)

(4,463

)

(6,752

)

Total interest-bearing deposits

258

(12,357

)

(12,099

)

FHLB and short-term borrowings

(1,312

)

536

(776

)

Trust preferred securities, net of fair value adjustments

3

(13

)

(10

)

Total interest expense

(1,051

)

(11,834

)

(12,885

)

Net interest income(1)

$

8,329

$

(4,211

)

$

4,118

(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

June 30,

2020

2021

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

$

290,342

$

1,626

2.25

%

$

211,158

$

1,031

1.96

%

Securities - tax-exempt(1)

438,525

3,945

3.62

508,483

4,231

3.34

Federal funds sold

—

—

—

—

—

—

Interest-bearing deposits in other banks

186,388

45

0.10

407,801

110

0.11

Gross loans, net of unearned income(2) (3)

4,357,055

46,323

4.28

4,409,280

43,846

3.99

Total interest-earning assets(1)

5,272,310

$

51,939

3.96

%

5,536,722

$

49,218

3.57

%

Allowance for loan losses

(60,889

)

(76,741

)

Other non-interest-earning assets

230,092

213,657

Total assets

$

5,441,513

$

5,673,638

Interest-bearing liabilities

Transaction deposits

$

413,870

$

266

0.26

%

$

664,552

$

313

0.19

%

Savings and money market deposits

1,932,723

2,653

0.55

2,385,074

2,107

0.35

Time deposits

1,195,445

5,486

1.85

869,176

2,430

1.12

Total interest-bearing deposits

3,542,038

8,405

0.95

3,918,802

4,850

0.50

FHLB and short-term borrowings

496,556

1,668

1.35

287,904

1,282

1.79

Trust preferred securities, net of fair value adjustments

933

24

10.61

976

24

9.82

Non-interest-bearing deposits

745,864

—

—

801,591

—

—

Cost of funds

4,785,391

$

10,097

0.85

%

5,009,273

$

6,156

0.49

%

Other liabilities

44,656

30,948

Total stockholders' equity

611,466

633,417

Total liabilities and stockholders' equity

$

5,441,513

$

5,673,638

Net interest income(1)

$

41,842

$

43,062

Net interest spread(1)

3.11

%

3.08

%

Net interest margin(1)

3.19

%

3.12

%

(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

June 30, 2021 over 2020

Average Volume

Yield/Rate

Net Change(2)

(Dollars in thousands)

Interest Income

Securities - taxable

$

(404

)

$

(191

)

$

(595

)

Securities - tax-exempt(1)

604

(318

)

286

Federal funds sold

—

—

—

Interest-bearing deposits in other banks

59

6

65

Gross loans, net of unearned income

575

(3,052

)

(2,477

)

Total interest income(1)

834

(3,555

)

(2,721

)

Interest Expense

Transaction deposits

133

(86

)

47

Savings and money market deposits

541

(1,087

)

(546

)

Time deposits

(1,249

)

(1,807

)

(3,056

)

Total interest-bearing deposits

(575

)

(2,980

)

(3,555

)

FHLB and short-term borrowings

(831

)

445

(386

)

Trust preferred securities, net of fair value adjustments

1

(1

)

—

Total interest expense

(1,405

)

(2,536

)

(3,941

)

Net interest income(1)

$

2,239

$

(1,019

)

$

1,220

(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 (loss) 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.

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

  • 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 (loss) (as defined above) divided by average assets. The most directly comparable GAAP financial measure is return on average assets, which is calculated as net income (loss) divided by average assets.

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

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

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

  • We calculate "non-GAAP core operating efficiency ratio - fully tax equivalent (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 (loss) before taxes plus the provision for loan losses.

Quarter Ended

Six Months Ended

06/30/2020

09/30/2020

12/31/2020

03/31/2021

06/30/2021

06/30/2020

06/30/2021

(Dollars in thousands)

Non-GAAP core operating income:

Net income (loss)

$

(7,356

)

$

8,006

$

8,094

$

12,035

$

15,577

$

(3,499

)

$

27,612

Add: Goodwill impairment(1)

7,397

—

—

—

—

7,397

—

Add: Accelerated employee benefits

—

—

—

—

719

—

719

Less: Tax effect(2)

—

—

—

—

210

—

210

Accelerated employee benefits, net of tax

—

—

—

—

509

—

509

Less: BOLI settlement benefits(1)

—

—

—

—

1,841

—

1,841

Non-GAAP core operating income

$

41

$

8,006

$

8,094

$

12,035

$

14,245

$

3,898

$

26,280

(1) No tax effect.

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


Quarter Ended

Six Months Ended

06/30/2020

09/30/2020

12/31/2020

03/31/2021

06/30/2021

06/30/2020

06/30/2021

(Dollars in thousands)

Non-GAAP core return on average tangible common equity:

Net income (loss) available to common stockholders

$

(7,356

)

$

8,006

$

8,094

$

12,035

$

15,577

$

(3,499

)

$

27,612

Non-GAAP core operating income

41

8,006

8,094

12,035

14,245

3,898

26,280

Average common equity

611,466

613,910

620,496

625,875

633,417

612,208

629,667

Less: average goodwill and intangibles

7,576

238

218

199

179

7,629

189

Average tangible common equity

603,890

613,672

620,278

625,676

633,238

604,579

629,478

Return on average common equity

(4.84

)

%

5.19

%

5.19

%

7.80

%

9.86

%

(1.15

)

%

8.84

%

Non-GAAP core return on average tangible common equity

0.03

%

5.19

%

5.19

%

7.80

%

9.02

%

1.30

%

8.42

%


Quarter Ended

Six Months Ended

06/30/2020

09/30/2020

12/31/2020

03/31/2021

06/30/2021

06/30/2020

06/30/2021

(Dollars in thousands)

Non-GAAP core operating return on average assets:

Net income (loss)

$

(7,356

)

$

8,006

$

8,094

$

12,035

$

15,577

$

(3,499

)

$

27,612

Non-GAAP core operating income

41

8,006

8,094

12,035

14,245

3,898

26,280

Average assets

$

5,441,513

$

5,486,252

$

5,523,196

$

5,798,167

$

5,673,638

$

5,209,810

$

5,735,558

Return on average assets

(0.54

)

%

0.58

%

0.58

%

0.84

%

1.10

%

(0.14

)

%

0.97

%

Non-GAAP core operating return on average assets

—

%

0.58

%

0.58

%

0.84

%

1.01

%

0.15

%

0.92

%


Quarter Ended

06/30/2020

09/30/2020

12/31/2020

03/31/2021

06/30/2021

(Dollars in thousands except per share data)

Tangible common stockholders' equity:

Total stockholders' equity

$

608,092

$

617,883

$

624,428

$

628,834

$

637,190

Less: goodwill and other intangible assets

247

227

208

188

169

Tangible common stockholders' equity

$

607,845

$

617,656

$

624,220

$

628,646

$

637,021

Tangible book value per share:

Tangible common stockholders' equity

$

607,845

$

617,656

$

624,220

$

628,646

$

637,021

Shares outstanding at end of period

52,167,573

52,195,778

51,679,516

51,678,669

50,958,680

Book value per share

$

11.66

$

11.84

$

12.08

$

12.17

$

12.50

Tangible book value per share

$

11.65

$

11.83

$

12.08

$

12.16

$

12.50


Quarter Ended

Six Months Ended

06/30/2020

09/30/2020

12/31/2020

03/31/2021

06/30/2021

06/30/2020

06/30/2021

(Dollars in thousands)

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

Non-interest expense

$

31,010

$

23,011

$

23,732

$

22,818

$

25,813

$

53,233

$

48,631

Less: Accelerated employee benefits

—

—

—

—

719

—

719

Less: goodwill impairment

7,397

—

—

—

—

7,397

—

Adjusted Non-interest expense (numerator)

$

23,613

$

23,011

$

23,732

$

22,818

$

25,094

$

45,836

$

47,912

Net interest income

41,157

39,327

41,537

41,117

42,328

79,385

83,445

Tax-equivalent interest income(1)

685

669

683

704

734

1,380

1,438

Non-interest income

2,634

4,063

2,949

4,144

5,825

4,729

9,969

Less: BOLI settlement benefits

—

—

—

—

1,841

—

1,841

Total tax-equivalent income (denominator)

$

44,476

$

44,059

$

45,169

$

45,965

$

47,046

$

85,494

$

93,011

Efficiency Ratio

70.81

%

53.03

%

53.35

%

50.41

%

53.61

%

63.29

%

52.06

%

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

53.09

%

52.23

%

52.54

%

49.64

%

53.34

%

53.61

%

51.51

%

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

(2) 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

Six Months Ended

06/30/2020

09/30/2020

12/31/2020

03/31/2021

06/30/2021

06/30/2020

06/30/2021

(Dollars in thousands)

Non-GAAP Pre-Tax Pre-Provision Profit

Net income (loss) before taxes

$

(8,219

)

$

9,504

$

9,879

$

14,943

$

18,840

$

(4,069

)

$

33,783

Add: Provision for loan losses

21,000

10,875

10,875

7,500

3,500

34,950

11,000

Non-GAAP Pre-Tax Pre-Provision Profit

$

12,781

$

20,379

$

20,754

$

22,443

$

22,340

$

30,881

$

44,783



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