10-Q: CrossFirst Bankshares Reports Q1 2024 Results: Loan Growth and Stable Credit Quality Highlight Quarter

CrossFirst Bankshares reported a net income of $18.2 million for the first quarter of 2024, driven by loan growth and stable credit quality.

Summary

• CrossFirst Bankshares reported a net income of $18.2 million, or $0.36 per diluted share, for the first quarter of 2024, compared to $16.1 million, or $0.33 per diluted share, in the same period last year.
• The company experienced loan growth of $121 million, or 2%, during the quarter, and deposit growth of $96 million, or 1%.
• Credit quality remained stable, with non-performing assets decreasing to 0.27% of total assets and annualized net charge-offs representing 0.10% of average loans.
• The company returned $1.5 million to stockholders through share buybacks at a weighted average price of $13.10 per share.
• Total risk-based capital increased to 11.4%, and common equity Tier 1 capital increased to 10.2%.
• Book value per common share grew 1% to $14.47, and tangible book value per common share also grew 1% to $13.70.
• Net interest income decreased by $1.6 million compared to the first quarter of 2023, while non-interest income increased by $1.2 million.
• The company anticipates a net interest margin of 3.20% to 3.25% for 2024 and non-interest expenses between $36 million and $37 million per quarter for the remainder of 2024.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive. The company shows solid growth and stable credit quality, but there are some concerns about net interest income and the impact of the interest rate environment. The company is managing its risks well and is well-capitalized.

Positives

• The company achieved solid loan and deposit growth during the quarter.
• Credit quality remained stable with a decrease in non-performing assets.
• The company continued to build capital with increases in total risk-based capital and common equity Tier 1 capital.
• The company returned capital to stockholders through share buybacks.
• Book value and tangible book value per share both increased by 1%.

Negatives

• Net interest income decreased by $1.6 million compared to the first quarter of 2023.
• The company experienced a reduction in net interest margin FTE by 45 basis points.
• Cash and cash equivalents decreased by $48 million, or 19%, from the end of 2023.

Risks

• The company is exposed to interest rate risk, which could erode net interest margins.
• There is potential for risk rating migration in certain sectors of the commercial real estate portfolio due to higher interest rates and operating costs.
• The company has approximately $2.6 billion of uninsured deposits, which is an estimated amount based on the same methodologies and assumptions used for the Banks regulatory reporting requirements.
• The company is subject to various regulatory capital requirements, and failure to meet these requirements could have a material adverse effect.

Future Outlook

The company anticipates a net interest margin of 3.20% to 3.25% for 2024 and non-interest expenses between $36 million and $37 million per quarter for the remainder of 2024. The company expects the effective tax rate to remain in the range of 20% to 22% for the remainder of 2024.

Management Comments

• Management believes that, as of March 31, 2024, the Company and the Bank met all capital adequacy requirements to which they are subject.
• Management actively monitors credit risk including oversight of credit and lending strategies, exposures and objectives of the Company.
• Management believes that its current capital ratios and liquidity are sufficient to mitigate the risks of uninsured deposits.
• The Company believes that its current on and off-balance sheet liquidity will be sufficient to meet anticipated cash requirements for the next 12 months and thereafter.

Industry Context

The results reflect a challenging interest rate environment with increased competition for deposits, impacting net interest income. The company's focus on loan growth and maintaining credit quality aligns with industry trends, while the emphasis on capital and liquidity management is crucial in the current economic climate.

Comparison to Industry Standards

• CrossFirst's loan growth of 2% is in line with some regional banks but may be higher than some larger national banks that are experiencing slower growth.
• The company's non-performing asset ratio of 0.27% is better than the industry average for many banks, indicating strong credit quality.
• The efficiency ratio of 60.31% is comparable to other regional banks, but the adjusted efficiency ratio of 58.31% shows the company is managing expenses well.
• The company's capital ratios are above regulatory requirements, which is a positive sign compared to some banks that are struggling to meet these requirements.
• The company's return on average assets of 1.00% is in line with other well-performing regional banks.

Related Party Transactions

• Related party loans totaled $10 million and related party deposits totaled $105 million at March 31, 2024.
• Related parties also owned $6 million of the company's Series A Preferred Stock at March 31, 2024.

Stakeholder Impact

• Shareholders benefit from the company's solid financial performance, share buybacks, and dividend payments.
• Employees benefit from the company's growth and stability.
• Customers benefit from the company's continued provision of financial services.
• Creditors benefit from the company's strong capital position and liquidity.

Next Steps

• The company will continue to monitor the U.S. economic indicators and their impact on the company's markets, clients, and prospects.
• The company will continue to manage its interest rate risk and liquidity.
• The company will continue to evaluate opportunities for share repurchases.
• The company will continue to focus on loan and deposit growth.

Key Dates

Keywords

bank, financial results, loan growth, deposit growth, credit quality, net interest income, non-interest income, capital ratios, share repurchase, risk management, financial performance