8-K: CrossFirst Bankshares Reports Solid Second Quarter Earnings, Driven by Loan and Deposit Growth

CrossFirst Bankshares announced a net income of $18.6 million for the second quarter of 2024, driven by growth in loans and deposits.

Summary

• CrossFirst Bankshares reported a net income of $18.6 million, or $0.37 per diluted share, for the second quarter of 2024.
• Operating revenue increased by $1.4 million, or 2%, compared to the previous quarter.
• Net income improved by $0.4 million and diluted earnings per share increased by $0.01 from the prior quarter.
• The company incurred $0.7 million in expenses related to renegotiating its core system contract, with an expected earn-back period of four months.
• Net interest margin remained consistent with the prior quarter at 3.20%.
• Loans grew by $95 million, or 2%, during the quarter and $216 million, or 4%, year-to-date.
• Deposits increased by $147 million, or 2%, for the quarter and $243 million, or 4%, year-to-date.
• Credit quality improved, with non-performing assets decreasing to 0.22% of total assets.
• The company returned $3.0 million to stockholders through share buybacks at a weighted average price of $12.78 per share.
• CrossFirst remained well-capitalized with a total risk-based capital of 11.4% and a common equity Tier 1 capital of 10.2%.
• Book value per common share grew 2% to $14.78, and tangible book value per common share also grew 2% to $14.02.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with solid financial results, growth in key areas, and strong capital ratios. The company's strategic focus and management commentary also contribute to a positive sentiment.

Positives

• The company achieved solid earnings growth in the second quarter of 2024.
• Credit quality improved, with a decrease in non-performing assets and classified loans.
• The company strategically returned capital to stockholders through share buybacks.
• CrossFirst maintained a strong capital position.
• The company experienced growth in both loans and deposits.
• Operating revenue and net income both improved compared to the previous quarter.
• The company's book value per share and tangible book value per share both increased.

Negatives

• The company incurred $0.7 million in expenses related to renegotiating its core system contract.
• The cost of funds increased due to pricing pressure on interest-bearing deposits.
• Non-interest income decreased slightly compared to the same quarter in the prior year.
• The company's provision for credit losses increased compared to the previous quarter.

Risks

• Uncertain or unfavorable business or economic conditions could impact the company's performance.
• Changes in market interest rates could affect the pricing of the company's products and net interest income.
• The company faces risks related to managing credit, particularly in commercial real estate, energy, and commercial-based loan portfolios.
• 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, or other security breaches could disrupt the company's business.
• Compliance with changing laws and regulations could pose challenges.
• Volatility in the company's stock price is a risk.

Future Outlook

The company's guidance for 2024 includes 6-8% core loan growth, a net interest margin of 3.20% to 3.25%, adjusted non-interest expense of $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 great quarter delivering solid earnings growth, maintaining strong credit quality, and strategically returning capital to stockholders, said Mike Maddox, President and CEO of CrossFirst Bankshares, Inc.
• Our earnings growth is a result of our focused strategy to scale our markets and verticals, driving expansion of net interest income and fee income.
• In turn, we increased operating leverage across our expense base.

Industry Context

The results reflect a positive trend in the banking sector, with CrossFirst demonstrating growth in key areas such as loans and deposits. The company's focus on maintaining strong credit quality and returning capital to shareholders aligns with industry best practices. The stable net interest margin is a positive sign in a fluctuating interest rate environment.

Comparison to Industry Standards

• CrossFirst's ROAA of 1.00% is comparable to other regional banks, such as Commerce Bancshares (ROAA of 1.10% in Q1 2024) and UMB Financial Corporation (ROAA of 0.95% in Q1 2024).
• The company's net interest margin of 3.20% is within the range of other regional banks, although some larger institutions may have slightly higher margins due to their scale and funding advantages.
• CrossFirst's loan growth of 2% for the quarter is in line with the industry average, but some banks with more aggressive growth strategies may have higher rates.
• The company's non-performing assets ratio of 0.22% is better than the industry average, indicating strong credit quality.
• The company's capital ratios are also strong, with a total risk-based capital of 11.4% and a common equity Tier 1 capital of 10.2%, which are above regulatory requirements and comparable to other well-capitalized banks.

Stakeholder Impact

• Shareholders will benefit from the company's solid earnings, share buybacks, and increased book value per share.
• Employees will benefit from the company's focus on culture and development.
• Customers will benefit from the company's continued growth and strong financial position.
• Creditors will benefit from the company's strong capital ratios and asset quality.

Next Steps

• The company will host a conference call on July 16, 2024, to review the second quarter results.
• The company will continue to focus on its growth strategy, expense control initiatives, and capital allocation plans.

Key Dates

Keywords

bank, financial results, earnings, net income, loans, deposits, credit quality, capital, share buybacks, net interest margin, operating revenue, book value, non-performing assets