Release Details

CrossFirst Bankshares, Inc. Reports Fourth Quarter and Full Year 2021 Results

January 24, 2022

 

Fourth Quarter 2021 Key Financial Performance Metrics

 

Net Income   ROAA   Net Interest Margin (FTE)   Diluted EPS   ROE
$20.8 million   1.50 %   3.28 %   $ 0.40   12.57 %

LEAWOOD, Kan., Jan. 24, 2022 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported operating results for the fourth quarter and full year 2021, with fourth quarter net income of $20.8 million, or $0.40 per diluted share, and full year net income of $69.4 million, or $1.33 per diluted share.

CEO Commentary:

"We built significant momentum in 2021 with solid earnings, operating revenue at an all-time high and a return to loan growth in the last half of the year. We also made meaningful progress this past year in deposit mix and growing fee income while making investments in talent and technology to drive growth, serve our clients in extraordinary ways and deliver value to our shareholders,” said CrossFirst’s CEO and President, Mike Maddox. “Our fourth quarter was a great capstone to the year with continued loan growth and significant improvement in credit quality.”

2021 Fourth Quarter and Full Year Highlights:
  • $5.6 billion of assets with net income for the fiscal year ended December 31, 2021 of $69 million, an increase of $57 million or 451% from the prior year ended December 31, 2020
  • Improvement in credit quality during 2021 as evidenced by the decrease in nonperforming assets to total assets ratio from 1.39% at December 31, 2020 to 0.58% at December 31, 2021
  • Return on Average Assets of 1.24% and a Return on Equity of 10.84% for the fiscal year ended December 31, 2021
  • Net Interest Margin (Fully Tax-Equivalent) of 3.15% for the fiscal year ended December 31, 2021, compared to 3.13% for the prior year ended December 31, 2020
  • Annualized loan growth of 7% for the fourth quarter of 2021, excluding PPP loans
  • Non-interest-bearing deposit growth of 62% from December 31, 2020 which represented 25% of total deposits at December 31, 2021
    Quarter-to-Date       Full Year  
    December 31,       December 31,  
(Dollars in millions except per share data)   2021     2020       2021     2020  
Operating revenue(1) $ 48.2   $ 44.5     $ 182.4   $ 172.0  
Net income $ 20.8   $ 8.1     $ 69.4   $ 12.6  
Diluted earnings per share $ 0.40   $ 0.15     $ 1.33   $ 0.24  
Return on average assets   1.50 %   0.58 %     1.24 %   0.24 %
Return on average common equity   12.57 %   5.19 %     10.84 %   2.05 %
Non-GAAP core return on average tangible common equity(2)   12.57 %   5.19 %     11.40 %   3.27 %
Net interest margin   3.22 %   3.07 %     3.09 %   3.08 %
Net interest margin, fully tax-equivalent(3)   3.28 %   3.12 %     3.15 %   3.13 %
Efficiency ratio   55.38 %   53.35 %     54.50 %   58.13 %
Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3)   54.52 %   52.54 %     52.02 %   52.98 %

 

(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 $49.2 million for the fourth quarter of 2021, a decrease of 1% from the fourth quarter of 2020 and an increase of 4% from the previous quarter. Interest income was slightly down from the fourth quarter of 2020 as a result of lower average loans outstanding and a reduction of $4.5 million in PPP fee income. Average earning assets totaled $5.4 billion for the fourth quarter of 2021, a decrease of $23 million or 1% from the same quarter in 2020. The tax-equivalent yield on earning assets increased from 3.62% to 3.70% during the fourth quarter of 2021 compared to the previous quarter, mostly driven by loans moving off nonaccrual status. For full year 2021, interest income was $193.2 million, which declined compared to full year 2020 primarily due to the yield movements on earning assets.

Interest expense for the fourth quarter of 2021 was $5.8 million, or 28% lower than the fourth quarter of 2020 and 4% higher than the previous quarter. Average interest-bearing deposits decreased to $3.5 billion in the fourth quarter of 2021, or a 9% decrease from the same prior year period. Cost of funds for the quarter was 0.48%, compared to 0.46% for the third quarter of 2021. During the fourth quarter of 2021, $40 million of FHLB advances were paid off early, which drove the cost of funds increase. Excluding the prepayment penalty, cost of funds would have decreased 0.05% compared to the third quarter of 2021. For full year 2021, interest expense was $24.5 million, a decrease of 43% compared to full year 2020 due to lower market rates.

Net interest income totaled $43.4 million for the fourth quarter of 2021 or 4% higher than the third quarter of 2021, and 5% higher than the fourth quarter of 2020. Tax-equivalent net interest margin increased to 3.28% in the current quarter, from 3.20% in the previous quarter, and increased from 3.12% in the same quarter in 2020.   During the fourth quarter of 2021, CrossFirst realized $1.3 million in fees from the forgiveness of $44 million of PPP loans. 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 $0.8 million for the fourth quarter of 2021. Full year 2021 net interest income grew to $168.7 million, an increase of 5% compared to full year 2020, while tax-equivalent net interest margin increased to 3.15% from 3.13% for the prior year.

Non-Interest Income

Non-interest income increased $1.8 million in the fourth quarter of 2021 or 63% compared to the same quarter of 2020 and increased $5.9 million compared to the third quarter of 2021. The increase in non-interest income compared to the previous quarter was due to the $6.2 million impairment loss recorded in the previous quarter. The increase in non-interest income compared to the same quarter of 2020, was primarily due to increases of $0.9 million in credit card fees and $0.4 million in service charge income. Full year 2021 non-interest income was up $1.9 million or 16% compared to full year 2020. The main drivers of the increase were increases in service charges and fees on customer accounts of $1.8 million, $1.7 million in income from bank-owned life insurance and a $3.6 million increase in ATM and credit card interchange income.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2021 was $26.7 million, which increased 13% compared to the fourth quarter of 2020 and increased 11% from the third quarter of 2021. Salaries and benefit costs were higher in the current quarter by $1.1 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 market expansion and increased incentive expenses.   Full year 2021 non-interest expense decreased $0.6 million or 1% compared to full year 2020 primarily due to a $7.4 million goodwill impairment recorded in the second quarter of 2020. This decrease was partly offset by a $3.3 million increase in salary and employee benefits, $1.0 million increase in occupancy, and $2.8 million increase in other non-interest expense as compared to the prior year. The other non-interest expense increase was primarily due to increases in commercial card costs as a result of our growing customer base and increased use as a result of the COVID-19 pandemic. In addition, insured cash sweep (“ICS”) deposits increased in 2021 from 2020, which drove related fees higher.

CrossFirst’s effective tax rate for the fourth quarter of 2021 was 22% as compared to 18% for the fourth quarter of 2020. The 2021 tax rate for the quarter increased due to a greater mix of taxable income to tax-exempt income. For both 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 ratio of taxable income to tax-exempt income increases.

Balance Sheet Performance & Analysis

During the fourth quarter of 2021, total assets increased by $220 million or 4% compared to September 30, 2021, and decreased $38 million or 1% compared to December 31, 2020.   Total assets increased on a linked quarter basis primarily due to a $166 million increase in cash and cash equivalents and decreased year-over-year primarily due to a $186 million decline in loans driven by the PPP loan forgiveness program.   The year-over-year decrease was partly offset by increases in cash and cash equivalents and securities of $74 million and $91 million, respectively. Non-interest-bearing deposits increased $202 million compared to September 30, 2021, and increased $445 million from December 31, 2020. During the fourth quarter of 2021, available-for-sale investment securities increased $38 million to $746 million compared to September 30, 2021. The securities yields increased 2 basis points to a tax equivalent yield of 2.89% for the fourth quarter of 2021 compared to the prior quarter.

Loan Results

During the fourth quarter of 2021, the Company experienced a decrease in average loans of $10 million compared to September 30, 2021, and a decrease of $273 million or 6% compared to December 31, 2020. The year-over-year reduction in average loans was primarily a result of PPP loan forgiveness. Net of PPP loans, average loans grew 1% compared to September 30, 2021. Loan yields increased 17 basis points to 4.17% during the fourth quarter of 2021 and increased 17 basis points over the last twelve months.

    4Q21       3Q21       2Q21       1Q21       4Q20     QoQ Growth ($)   QoQ Growth (%)(1)   YoY Growth ($)   YoY Growth (%)(1)
  (Dollars in millions)
Average loans (gross)                                                              
Commercial $ 1,328     $ 1,233     $ 1,221     $ 1,329     $ 1,367     $ 95     8   %   $ (39 )   (3 ) %
Energy   290       311       341       351       381       (21 )   (7 )       (91 )   (24 )  
Commercial real estate   1,272       1,213       1,203       1,183       1,194       59     5         78     7    
Construction and land development   579       611       633       598       585       (32 )   (5 )       (6 )   (1 )  
Residential and multifamily real estate   612       659       659       688       664       (47 )   (7 )       (52 )   (8 )  
Paycheck Protection Program   84       147       296       308       258       (63 )   (43 )       (174 )   (67 )  
Consumer   56       57       56       50       45       (1 )   (2 )       11     24    
Total $ 4,221     $ 4,231     $ 4,409     $ 4,507     $ 4,494     $ (10 )   (0 ) %   $ (273 )   (6 ) %
                                                               
Yield on average loans for the period ending   4.17 %     4.00 %     3.99 %     3.94 %     4.00 %                        
(1) Actual unrounded values are used to calculate the reported percent disclosed. Accordingly, recalculations using the amounts in millions as disclosed in this release may not produce the same amounts.

Deposit & Other Borrowing Results

During the fourth quarter of 2021, the Company experienced an increase in average deposits of 2% compared to September 30, 2021, and a less than 1% decline in average deposits compared to December 31, 2020. The deposit growth for the quarter was driven by a continued increase in non-interest-bearing deposits, which represented 25% of total deposits at December 31, 2021. In addition, the Company continued to improve the overall cost of deposits, which declined 5 basis points during the fourth quarter of 2021. The cost of interest-bearing deposits has declined 26 basis points over the last twelve months primarily as a result of the lower interest rate environment.

    4Q21       3Q21       2Q21       1Q21       4Q20     QoQ
Growth ($)
  QoQ
Growth (%)(1)
  YoY
Growth ($)
  YoY Growth (%)(1)
  (Dollars in millions)
Average deposits                                                              
Non-interest bearing deposits $ 1,058     $ 910     $ 802     $ 731     $ 732     $ 148     16   %   $ 326     45   %
Transaction deposits   543       511       665       717       575       32     6         (32 )   (6 )  
Savings and money market deposits   2,272       2,276       2,385       2,422       2,158       (4 )   (0 )       114     5    
Time deposits   662       752       869       972       1,087       (90 )   (12 )       (425 )   (39 )  
Total $ 4,535     $ 4,449     $ 4,721     $ 4,842     $ 4,552     $ 86     2   %   $ (17 )   (0 ) %
                                                               
Cost of deposits for the period ending   0.33 %     0.38 %     0.41 %     0.48 %     0.58 %                        
Cost of interest-bearing deposits for the period ending   0.43 %     0.47 %     0.50 %     0.57 %     0.69 %                        
(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 December 31, 2021, other borrowings totaled $238 million, as compared to $278 million at September 30, 2021, and $296 million at December 31, 2020.

Asset Quality Position

Credit quality metrics continued to improve during the fourth quarter of 2021 as classified assets decreased $45 million and the ratio of nonperforming assets to total assets decreased to 0.58% from 0.92% 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 $0.8 million for the fourth quarter of 2021 as compared to $1.3 million for the third 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 some stabilization in the Company’s economic outlook and improved credit performance. These factors resulted in a $5 million release of reserves during the fourth quarter of 2021. The following table provides information regarding asset quality.

Asset quality (Dollars in millions)   4Q21       3Q21       2Q21       1Q21       4Q20  
Non-accrual loans $ 31.4       $ 48.1       $ 54.7     $ 63.3     $ 75.1  
Other real estate owned   1.1         1.1         1.7       2.3       2.3  
Nonperforming assets   32.7         49.8         58.1       68.9       78.4  
Loans 90+ days past due and still accruing   0.1         0.5         1.8       3.2       1.0  
Loans 30 - 89 days past due   3.5         37.6         18.8       11.0       18.1  
Net charge-offs (recoveries)   0.8         1.3         2.6       8.2       11.6  
                                       
Asset quality metrics (%)   4Q21       3Q21       2Q21       1Q21       4Q20  
Nonperforming assets to total assets   0.58   %     0.92   %     1.09 %     1.15 %     1.39 %
Allowance for loan loss to total loans   1.37         1.51         1.78       1.65       1.70  
Allowance for loan loss to nonperforming loans   185         132         134       112       99  
Net charge-offs (recoveries) to average loans(1)   0.07         0.13         0.23       0.74       1.03  
Provision to average loans(1)   (0.47 )       (0.94 )       0.32       0.67       0.96  
Classified Loans / (Total Capital + ALLL)   10.8         17.3         24.0       38.2       40.9  
(1) Interim periods annualized.  

Capital Position

At December 31, 2021, stockholders' equity totaled $668 million, or $13.23 per share, compared to $624 million, or $12.08 per share, at December 31, 2020. During the fourth quarter of 2021, CrossFirst continued its $30 million share repurchase program by purchasing 566,164 shares or 1% of common stock outstanding.

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 December 31, 2021. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call to review fourth quarter and full-year 2021 financial results on Tuesday, January 25, 2022, at 10 a.m. CT / 11 a.m. ET. The results are scheduled to be released after the market closes on Monday, January 24, 2022. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. To access the event by telephone, please dial (877) 621-5851 at least fifteen minutes prior to the start of the call and provide conference number 9688475. International callers should dial +1 (470) 495-9492 and enter the same conference number.

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

For those unable to join the presentation, a replay of the call will be available two hours after the conclusion of the live call. To access the replay, dial (855) 859-2056 and provide conference number 9688475, 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 Annual Report on Form 10-K 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 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 (UNAUDITED)

  As of December 31,
  2021     2020  
  (Dollars in thousands)
Assets          
Cash and cash equivalents $ 482,727     $ 408,810  
Available-for-sale securities - taxable   192,146       177,238  
Available-for-sale securities - tax-exempt   553,823       477,350  
Loans, net of allowance for loan losses of $58,375 and $75,295 at December 31, 2021 and 2020, respectively   4,197,838       4,366,602  
Premises and equipment, net   66,069       70,509  
Restricted equity securities   11,927       15,543  
Interest receivable   16,023       17,236  
Foreclosed assets held for sale   1,148       2,347  
Bank-owned life insurance   67,498       67,498  
Other   32,258       56,170  
Total assets $ 5,621,457     $ 5,659,303  
Liabilities and stockholders’ equity          
Deposits          
Noninterest-bearing $ 1,163,224     $ 718,459  
Savings, NOW and money market   2,895,986       2,932,799  
Time   624,387       1,043,482  
Total deposits   4,683,597       4,694,740  
Federal funds purchased and repurchase agreements   -       2,306  
Federal Home Loan Bank advances   236,600       293,100  
Other borrowings   1,009       963  
Interest payable and other liabilities   32,678       43,766  
Total liabilities   4,953,884       5,034,875  
Stockholders’ equity          
Common stock, $0.01 par value:          
authorized - 200,000,000 shares, issued - 52,590,015 and 52,289,129 shares at December 31, 2021 and 2020, respectively   526       523  
Treasury stock, at cost:          
2,139,970 and 609,613 shares held at December 31, 2021 and 2020, respectively   (28,347 )     (6,061 )
Additional paid-in capital   526,806       522,911  
Retained earnings   147,099       77,652  
Accumulated other comprehensive income   21,489       29,403  
Total stockholders’ equity   667,573       624,428  
Total liabilities and stockholders’ equity $ 5,621,457     $ 5,659,303  

        TABLE 2. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
  2021     2020     2021     2020  
  (Dollars in thousands except per share data)
Interest Income                      
Loans, including fees $ 44,392     $ 45,147     $ 174,660     $ 183,738  
Available-for-sale securities - taxable   850       899       3,273       5,073  
Available-for-sale securities - tax-exempt   3,623       3,255       14,033       13,013  
Deposits with financial institutions   143       56       502       639  
Dividends on bank stocks   194       177       682       985  
Total interest income   49,202       49,534       193,150       203,448  
Interest Expense                      
Deposits   3,734       6,610       18,523       36,585  
Fed funds purchased and repurchase agreements   -       2       3       164  
Federal Home Loan Bank Advances   1,999       1,361       5,837       6,341  
Other borrowings   24       24       96       109  
Total interest expense   5,757       7,997       24,459       43,199  
Net Interest Income   43,445       41,537       168,691       160,249  
Provision for Loan Losses   (5,000 )     10,875       (4,000 )     56,700  
Net Interest Income after Provision for Loan Losses   48,445       30,662       172,691       103,549  
Non-Interest Income                      
Service charges and fees on customer accounts   1,250       856       4,580       2,803  
Realized gains on available-for-sale securities   (20 )     (21 )     1,023       1,704  
Gain on sale of loans   -       44       -       44  
Gains (losses), net on equity securities   (82 )     (6 )     (6,325 )     47  
Income from bank-owned life insurance   395       436       3,483       1,809  
Swap fees and credit valuation adjustments, net   119       (284 )     275       (204 )
ATM and credit card interchange income   2,427       1,516       7,996       4,379  
Other non-interest income   707       408       2,628       1,151  
Total non-interest income   4,796       2,949       13,660       11,733  
Non-Interest Expense                      
Salaries and employee benefits   16,468       14,725       61,080       57,747  
Occupancy   2,381       2,427       9,688       8,701  
Professional fees   981       1,120       3,519       4,218  
Deposit insurance premiums   710       1,150       3,705       4,301  
Data processing   742       654       2,878       2,719  
Advertising   756       349       2,090       1,219  
Software and communication   1,136       978       4,234       3,750  
Foreclosed assets, net   17       74       697       1,239  
Goodwill impairment   -       -       -       7,397  
Other non-interest expense   3,524       2,255       11,491       8,677  
Total non-interest expense   26,715       23,732       99,382       99,968  
Net Income Before Taxes   26,526       9,879       86,969       15,314  
Income tax expense   5,725       1,785       17,556       2,713  
Net Income $ 20,801     $ 8,094     $ 69,413     $ 12,601  
Basic Earnings Per Share $ 0.41     $ 0.16     $ 1.35     $ 0.24  
Diluted Earnings Per Share $ 0.40     $ 0.15     $ 1.33     $ 0.24  

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

    Twelve Months Ended  
    December 31,  
    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 $ 204,889     $ 3,955   1.93 %   $ 267,715     $ 6,058   2.26 %
Securities - tax-exempt(1)   518,058       16,981   3.28       447,324       15,745   3.52  
Federal funds sold   -       -   -       1,020       18   1.73  
Interest-bearing deposits in other banks   389,893       502   0.13       179,978       621   0.35  
Gross loans, net of unearned income(2)   4,340,791       174,660   4.02       4,310,345       183,738   4.26  
Total interest-earning assets(1)   5,453,631     $ 196,098   3.60 %     5,206,382     $ 206,180   3.96 %
Allowance for loan losses   (73,544 )                 (68,897 )            
Other non-interest-earning assets   211,384                   220,994              
Total assets $ 5,591,471                 $ 5,358,479              
Interest-bearing liabilities                                  
Transaction deposits $ 608,063     $ 1,152   0.19 %   $ 447,777     $ 1,696   0.38 %
Savings and money market deposits   2,338,315       8,225   0.35       1,993,964       14,033   0.70  
Time deposits   812,774       9,146   1.13       1,155,492       20,856   1.80  
Total interest-bearing deposits   3,759,152       18,523   0.49       3,597,233       36,585   1.02  
FHLB and short-term borrowings   279,379       5,840   2.09       417,956       6,508   1.56  
Trust preferred securities, net of fair value adjustments   982       96   9.76       939       106   11.34  
Non-interest-bearing deposits   876,309       -   -       684,294       -   -  
Cost of funds   4,915,822     $ 24,459   0.50 %     4,700,422     $ 43,199   0.92 %
Other liabilities   35,447                   43,331              
Stockholders’ equity   640,202                   614,726              
Total liabilities and stockholders' equity $ 5,591,471                 $ 5,358,479              
Net interest income(1)       $ 171,639               $ 162,981      
Net interest spread(1)             3.10 %               3.04 %
Net interest margin(1)             3.15 %               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)

  Twelve Months Ended
  December 31, 2021 over 2020
  Average Volume   Yield/Rate   Net Change(2)
  (Dollars in thousands)
Interest Income                
Securities - taxable $ (1,297 )   $ (806 )   $ (2,103 )
Securities - tax-exempt(1)   2,364       (1,128 )     1,236  
Federal funds sold   (18 )     -       (18 )
Interest-bearing deposits in other banks   437       (556 )     (119 )
Gross loans, net of unearned income   1,294       (10,372 )     (9,078 )
Total interest income(1)   2,780       (12,862 )     (10,082 )
Interest Expense                
Transaction deposits   483       (1,027 )     (544 )
Savings and money market deposits   2,092       (7,900 )     (5,808 )
Time deposits   (5,193 )     (6,517 )     (11,710 )
Total interest-bearing deposits   (2,618 )     (15,444 )     (18,062 )
FHLB and short-term borrowings   (2,518 )     1,850       (668 )
Trust preferred securities, net of fair value adjustments   5       (15 )     (10 )
Total interest expense   (5,131 )     (13,609 )     (18,740 )
Net interest income(1) $ 7,911     $ 747     $ 8,658  

 

(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  
    December 31,  
    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 $ 196,576     $ 1,044   2.11 %   $ 215,348     $ 1,075   1.99 %
Securities - tax-exempt(1)   547,948       4,385   3.17       458,651       3,939   3.42  
Federal funds sold   -       -   -       -       -   -  
Interest-bearing deposits in other banks   387,828       143   0.15       208,650       56   0.11  
Gross loans, net of unearned income(2)   4,220,842       44,392   4.17       4,493,806       45,147   4.00  
Total interest-earning assets(1)   5,353,194     $ 49,964   3.70 %     5,376,455     $ 50,217   3.71 %
Allowance for loan losses   (64,102 )                 (80,770 )            
Other non-interest-earning assets   201,390                   227,511              
Total assets $ 5,490,482                 $ 5,523,196              
Interest-bearing liabilities                                  
Transaction deposits $ 543,088     $ 216   0.16 %   $ 574,811     $ 306   0.21 %
Savings and money market deposits   2,272,307       1,824   0.32       2,158,044       2,344   0.43  
Time deposits   661,978       1,694   1.02       1,086,825       3,960   1.45  
Total interest-bearing deposits   3,477,373       3,734   0.43       3,819,680       6,610   0.69  
FHLB and short-term borrowings   261,600       1,999   3.03       304,923       1,363   1.78  
Trust preferred securities, net of fair value adjustments   1,000       24   9.67       954       24   9.97  
Non-interest-bearing deposits   1,058,462       -   -       732,028       -   -  
Cost of funds   4,798,435     $ 5,757   0.48 %     4,857,585     $ 7,997   0.65 %
Other liabilities   35,632                   45,115              
Stockholders’ equity   656,415                   620,496              
Total liabilities and stockholders' equity $ 5,490,482                 $ 5,523,196              
Net interest income(1)       $ 44,207               $ 42,220      
Net interest spread(1)             3.22 %               3.06 %
Net interest margin(1)             3.28 %               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
  December 31, 2021 over 2020
  Average Volume   Yield/Rate   Net Change(2)
  (Dollars in thousands)
Interest Income                
Securities - taxable $ (95 )   $ 64     $ (31 )
Securities - tax-exempt(1)   745       (299 )     446  
Federal funds sold   -       -       -  
Interest-bearing deposits in other banks   61       26       87  
Gross loans, net of unearned income   (2,710 )     1,955       (755 )
Total interest income(1)   (1,999 )     1,746       (253 )
Interest Expense                
Transaction deposits   (17 )     (73 )     (90 )
Savings and money market deposits   116       (636 )     (520 )
Time deposits   (1,289 )     (977 )     (2,266 )
Total interest-bearing deposits   (1,190 )     (1,686 )     (2,876 )
FHLB and short-term borrowings   (216 )     852       636  
Trust preferred securities, net of fair value adjustments   1       (1 )     -  
Total interest expense   (1,405 )     (835 )     (2,240 )
Net interest income(1) $ (594 )   $ 2,581     $ 1,987  

 

(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       Twelve Months Ended  
  12/31/2021     9/30/2021     6/30/2021     3/31/2021     12/31/2020     12/31/2021     12/31/2020  
    (Dollars in thousands)  
Non-GAAP core operating income:                                                      
Net income $ 20,801     $ 21,000     $ 15,577     $ 12,035     $ 8,094     $ 69,413     $ 12,601  
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 $ 20,801     $ 25,898     $ 14,245     $ 12,035     $ 8,094     $ 72,979     $ 19,998  
(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       Twelve Months Ended  
    12/31/2021       9/30/2021       6/30/2021       3/31/2021       12/31/2020       12/31/2021       12/31/2020  
    (Dollars in thousands)  
Non-GAAP core return on average tangible common equity:                                                    
Net income available to common stockholders $ 20,801     $ 21,000     $ 15,577     $ 12,035     $ 8,094     $ 69,413     $ 12,601  
Non-GAAP core operating income   20,801       25,898       14,245       12,035       8,094       72,979       19,998  
Average common equity   656,415       644,715       633,417       625,875       620,496       640,202       614,726  
Less: average goodwill and intangibles   140       160       179       199       218       170       3,898  
Average tangible common equity $ 656,275     $ 644,555     $ 633,238     $ 625,676     $ 620,278     $ 640,032     $ 610,828  
Return on average common equity   12.57 %     12.92 %     9.86 %     7.80 %     5.19 %     10.84 %     2.05 %
Non-GAAP core return on average tangible common equity   12.57 %     15.94 %     9.02 %     7.80 %     5.19 %     11.40 %     3.27 %

 

    Quarter Ended       Twelve Months Ended  
    12/31/2021       9/30/2021       6/30/2021       3/31/2021       12/31/2020       12/31/2021       12/31/2020  
    (Dollars in thousands)  
Non-GAAP core operating return on average assets:                                                      
Net income $ 20,801     $ 21,000     $ 15,577     $ 12,035     $ 8,094     $ 69,413     $ 12,601  
Non-GAAP core operating income   20,801       25,898       14,245       12,035       8,094       72,979       19,998  
Average assets $ 5,490,482     $ 5,408,984     $ 5,673,638     $ 5,798,167     $ 5,523,196     $ 5,591,471     $ 5,358,479  
Return on average assets   1.50 %     1.54 %     1.10 %     0.84 %     0.58 %     1.24 %     0.24 %
Non-GAAP core operating return on average assets   1.50 %     1.90 %     1.01 %     0.84 %     0.58 %     1.31 %     0.37 %

 

    Quarter Ended
  12/31/2021     9/30/2021     6/30/2021     3/31/2021     12/31/2020
    (Dollars in thousands except per share data)
Tangible common stockholders' equity:                                    
Total stockholders' equity $ 667,573     $ 652,407     $ 637,190     $ 628,834     $ 624,428
Less: goodwill and other intangible assets   130       149       169       188       208
Tangible common stockholders' equity $ 667,443     $ 652,258     $ 637,021     $ 628,646     $ 624,220
Tangible book value per share:                                    
Tangible common stockholders' equity $ 667,443     $ 652,257     $ 637,021     $ 628,646     $ 624,220
Shares outstanding at end of period   50,450,045       51,002,698       50,958,680       51,678,669       51,679,516
Book value per share $ 13.23     $ 12.79     $ 12.50     $ 12.17     $ 12.08
Tangible book value per share $ 13.23     $ 12.79     $ 12.50     $ 12.16     $ 12.08

 

    Quarter Ended       Twelve Months Ended  
    12/31/2021       9/30/2021       6/30/2021       3/31/2021       12/31/2020       12/31/2021       12/31/2020  
    (Dollars in thousands)  
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)                                                      
Non-interest expense $ 26,715     $ 24,036       $ 25,813     $ 22,818     $ 23,732     $ 99,382     $ 99,968  
Less: Accelerated employee benefits   -       -         719       -       -       719       -  
Less: goodwill impairment   -       -         -       -       -       -       7,397  
Adjusted Non-interest expense (numerator) $ 26,715     $ 24,036       $ 25,094     $ 22,818     $ 23,732     $ 98,663     $ 92,571  
Net interest income   43,445       41,801         42,328       41,117       41,537       168,691       160,249  
Tax equivalent interest income(1)   762       748         734       704       683       2,948       2,732  
Non-interest income (loss)   4,796       (1,105 )       5,825       4,144       2,949       13,660       11,733  
Add: Unrealized loss on equity security   -       6,200         -       -       -       6,200       -  
Less: BOLI settlement benefits   -       -         1,841       -       -       1,841       -  
Total tax-equivalent income (denominator) $ 49,003     $ 47,644       $ 47,046     $ 45,965     $ 45,169     $ 189,658     $ 174,714  
Efficiency Ratio   55.38 %     59.06   %     53.61 %     50.41 %     53.35 %     54.50 %     58.13 %
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)   54.52 %     50.45   %     53.34 %     49.64 %     52.54 %     52.02 %     52.98 %
(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       Twelve Months Ended  
  12/31/2021     9/30/2021     6/30/2021     3/31/2021     12/31/2020     12/31/2021     12/31/2020  
    (Dollars in thousands)  
Non-GAAP Pre-Tax Pre-Provision Profit                                                      
Net income before taxes $ 26,526       $ 26,660       $ 18,840     $ 14,943     $ 9,879     $ 86,969       $ 15,314  
Add: Provision for loan losses   (5,000 )       (10,000 )       3,500       7,500       10,875       (4,000 )       56,700  
Non-GAAP Pre-Tax Pre-Provision Profit $ 21,526       $ 16,660       $ 22,340     $ 22,443     $ 20,754     $ 82,969       $ 72,014  

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