8-K: CrossFirst Bankshares Reports Solid First Quarter 2024 Results with Strong Loan and Deposit Growth

CrossFirst Bankshares announced a first quarter net income of $18.2 million, or $0.36 per diluted common share, driven by strong organic loan and deposit growth.

Summary

• CrossFirst Bankshares reported a net income of $18.2 million, or $0.36 per diluted common share, for the first quarter of 2024.
• Operating revenue increased by $0.8 million compared to the previous quarter.
• Loans grew by $121 million, or 2%, during the quarter, representing an 8% annualized growth.
• Deposits increased by $96 million, or 1%, for the quarter, which is a 6% annualized growth.
• The company's credit quality remained stable, with non-performing assets decreasing to 0.27% of total assets.
• Annualized net charge-offs represented 0.10% of average loans.
• CrossFirst returned $1.5 million to shareholders through share buybacks at a weighted average price of $13.10 per share.
• The company continued to build capital, with total risk-based capital increasing to 11.4% and common equity Tier 1 capital increasing 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.

Sentiment

Score: 7

Explanation: The sentiment is positive due to solid growth metrics and stable credit quality, but there are some concerns about margin compression and rising expenses. The overall tone is optimistic but cautious.

Positives

• The company experienced strong organic loan and deposit growth.
• Credit quality remained stable with a decrease in non-performing assets.
• Non-interest income expanded during the quarter.
• Earnings increased compared to the previous quarter.
• The company returned capital to shareholders through share buybacks.
• Capital ratios improved with increases in total risk-based capital and common equity Tier 1 capital.
• Book value per common share and tangible book value per common share both increased by 1%.

Negatives

• Net interest income decreased compared to both the previous quarter and the same quarter of the prior year.
• Net interest margin contracted by three basis points to 3.20% compared to the previous quarter.
• The cost of funds increased due to pricing pressure on interest-bearing deposits and a reduction in average non-interest-bearing deposits.
• Non-interest expense increased by $2.5 million compared to the fourth quarter of 2023, excluding acquisition-related expenses.

Risks

• The company faces risks related to uncertain economic conditions, including potential recessionary pressures and inflation.
• Changes in market interest rates could affect the pricing of products and net interest income.
• The company's ability to manage credit risk, particularly in commercial real estate, energy, and commercial-based loan portfolios, is a concern.
• There are risks associated with borrower and depositor concentration.
• The company is dependent on its management team and faces competition from other financial institutions.
• System failures, cyber incidents, and other security breaches pose a risk to operations.
• Compliance with changing laws and regulations could impact the company's performance.

Future Outlook

The company provided 2024 guidance, maintaining its previous outlook for loan growth of 8-10%, a net interest margin of 3.20% to 3.25%, adjusted non-interest expense of $36-37 million quarterly, a combined ACL/Loans ratio of 1.25% to 1.35%, and an effective tax rate of 20-22%.

Management Comments

• CrossFirst had a solid first quarter with strong organic loan and deposit growth, stable credit quality, expansion of non-interest income, and an increase in earnings, said Mike Maddox, President and CEO of CrossFirst Bankshares, Inc.
• We benefit from operating in dynamic markets and continued to gain leverage in our operating model this quarter as we executed our strategy to serve our clients and drive enhanced shareholder return.

Industry Context

The results reflect a generally positive trend in the banking sector, with a focus on organic growth and maintaining credit quality. The company's performance is in line with other regional banks that are navigating a complex economic environment with interest rate pressures and deposit competition.

Comparison to Industry Standards

• CrossFirst's loan growth of 8% annualized is solid compared to the industry average, which has seen slower growth in recent quarters due to economic uncertainty.
• The company's net interest margin of 3.20% is within the range of regional banks, but the contraction indicates pressure from rising deposit costs, a common challenge in the current environment.
• The non-performing asset ratio of 0.27% is better than many peers, suggesting strong credit risk management.
• The capital ratios of 11.4% total risk-based capital and 10.2% common equity Tier 1 capital are healthy and above regulatory minimums, similar to other well-capitalized banks.
• Compared to companies like First Republic Bank, which faced significant deposit outflows and credit quality issues, CrossFirst's results show a more stable and resilient performance.

Stakeholder Impact

• Shareholders will benefit from the share buybacks and the increase in book value per share.
• Employees will benefit from the company's focus on growth and development.
• Customers will benefit from the company's continued focus on providing financial services.
• Creditors will be reassured by the company's strong capital position and stable credit quality.

Next Steps

• The company will hold a conference call on April 16, 2024, to review the first quarter results.
• The company will continue to execute its strategy to serve clients and drive enhanced shareholder return.
• The company will focus on growing capital and driving enhanced total shareholder return.

Key Dates

Keywords

bank, financial results, net income, loan growth, deposit growth, credit quality, capital ratios, share buybacks, net interest margin, non-performing assets