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CB

CROSSFIRST BANKSHARES, INC. (CFB)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered steady profitability: operating revenue grew 2% sequentially to $63.6M, GAAP net income was $18.6M, and diluted EPS rose to $0.37; NIM-FTE held at 3.20% and efficiency ratio improved to 59.32% .
  • Credit quality strengthened: non-performing assets fell to 0.22% of total assets, annualized net charge-offs were 0.07%, and classified loans to capital plus ACL improved to 13.3% .
  • Guidance adjusted: FY 2024 core loan growth reduced to 6–8% (from 8–10%), while NIM-FTE (3.20–3.25%), combined ACL/loans (1.25–1.35%), and tax rate (20–22%) were maintained; adjusted non-interest expense set at ~$37M per quarter .
  • Catalysts: core system contract renegotiation with ~$2M expected annual run-rate savings and an earn-back of four months (incremental cost booked in Q2), plus opportunistic buybacks ($3.0M at $12.78) could support operating leverage and capital returns going forward .

What Went Well and What Went Wrong

  • What Went Well

    • Stable margin profile with NIM-FTE at 3.20%, supported by 7 bps higher loan yield and expanding earning assets; noninterest income grew 2% sequentially led by service charges and interchange .
    • Credit metrics improved broadly: NPA/TA down to 0.22%, charge-offs at 0.07%, and classified ratio improved from 15.8% to 13.3%; ACL/nonperforming loans at 640% .
    • Management executed cost actions: net $0.7M Q2 expense from core contract renegotiation with a four-month earn-back; CFO highlighted ~$2M annual savings and noted expenses would have declined absent the restructuring (“would add another $0.01 to EPS”) .

  • What Went Wrong

    • Loan growth moderated, prompting FY 2024 guidance reduction to 6–8% core loan growth; CRE concentration (~3.20× capital) remains a focus area to bring below 3.00× .
    • Deposit costs rose 5 bps sequentially to 3.92% amid competitive markets, continuing to pressure funding costs even as the pace moderates .
    • Transaction deposits declined sequentially ($774M vs. $867M Q1) while time deposits grew, sustaining mix-related cost pressures; noninterest-bearing deposits were stable at ~14% of total .

Financial Results

MetricQ2 2023Q4 2023Q1 2024Q2 2024
Operating revenue ($USD Millions)$60.3 $61.4 $62.2 $63.6
Net income ($USD Millions)$16.0 $17.7 $18.2 $18.6
Diluted EPS ($USD)$0.33 $0.35 $0.36 $0.37
ROAA (%)0.93 0.97 1.00 1.00
ROCE (%)10.00 10.71 10.36 10.59
NIM - FTE (%)3.27 3.23 3.20 3.20
Efficiency ratio (%)62.02 57.05 60.31 59.32
Loans & DepositsQ2 2023Q4 2023Q1 2024Q2 2024
Period-end loans ($USD Millions)$5,797 $6,128 $6,249 $6,344
Period-end deposits ($USD Millions)$6,100 $6,491 $6,587 $6,734
Non-interest-bearing deposits ($USD Millions)$928 $990 $954 $958
NPA / Total assets (%)0.19 0.34 0.27 0.22
ACL / loans (%)1.17 1.20 1.20 1.20
Net charge-offs / avg loans (%)0.04 0.12 0.10 0.07
Loan Portfolio ($USD Millions)Q2 2023Q1 2024Q2 2024
Commercial & industrial$2,058 $2,179 $2,207
Energy$233 $221 $234
CRE – owner-occupied$543 $578 $592
CRE – non-owner-occupied$2,480 $2,770 $2,812
Residential real estate$440 $469 $474
Consumer$43 $32 $25
Total gross loans$5,797 $6,249 $6,344

Notes:

  • Operating revenue defined as net interest income plus non-interest income .
  • NIM presented on a fully tax-equivalent basis .
  • Non-GAAP adjusted metrics and reconciliations provided in exhibits; adjusted efficiency ratio and adjusted EPS trends are available in the releases .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core loan growthFY 20248–10% 6–8% Lowered
NIM - FTEFY 20243.20–3.25% 3.20–3.25% Maintained
Adjusted non-interest expenseQuarterly 2024$36–37M per quarter ~$37M per quarter Tightened to ~$37M
Combined ACL / loansFY 20241.25–1.35% 1.25–1.35% Maintained
Effective tax rateFY 202420–22% 20–22% Maintained

Context:

  • Management expects margin to benefit with potential rate cuts; absent cuts, margin at lower end of range .
  • CRE concentration targeted to decline below 300% of capital over “next several quarters” .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Margin & rate sensitivityNIM-FTE stabilized in low-3.20s; liability sensitivity increased modestly; hedge reduced asset yield in Q1 by 7 bps NIM-FTE stable at 3.20%; loan yields +7 bps; deposit costs +5 bps; positioned to benefit from rate cuts (assumes two in 2024) Stable NIM; modest tailwind if rates fall
Deposits & mixDDA % declined YoY; competitive market; deposit growth diversified across products Deposits +2% QoQ; DDA ~$958M (14% of deposits); competitive pricing; Nimbus deposit platform targeted for Q4 launch Continued growth initiatives; tech launch upcoming
Loan growth & pricingStrong Q4 growth; Q1 growth +$121M at disciplined pricing; CRE focus Loans +$95M; average new loan yield 8.93%; guidance lowered to 6–8% for FY Moderating growth; maintaining pricing discipline
CRE concentration & office exposureCRE non-owner-occupied largest category; office ~4.7% of loans CRE concentration ~3.20× capital; office ~$286M (4.5% of loans), avg LTV 63%, mostly suburban Class A/B, maturities largely floating Intentional de-risking; focus to reduce below 3.00×
Credit quality & reservesNPA/TA improved Q4; ACL/loans ~1.20%; classified loans elevated vs early 2023 NPA/TA 0.22%; ACL/loans 1.20%; provision $2.4M (largely growth & macro factors) Improving metrics; reserve level maintained
Operating leverage & cost actionsQ4 expense synergies; Q1 adjusted expense framework; efficiency ratio trends improving Core system renegotiation ($0.7M net cost in Q2, four-month earn-back); ~$2M annual savings; adjusted expenses guided ~$37M/quarter Efficiency initiatives progressing

Management Commentary

  • CEO: “CrossFirst had a great quarter delivering solid earnings growth, maintaining strong credit quality, and strategically returning capital to stockholders.”
  • CEO (call): “We increased earnings…resulting in expansion of net interest income and fee income…we continue to drive operating leverage across our expense base.”
  • President: “Total office exposure is now $286 million…average loan-to-value is 63%…majority suburban Class A/B…63% maturities in next 2 years and 83% floating.”
  • CFO: “Restructuring [core system contract] expected to generate…~$2 million per year…adjusting for the restructuring would add another $0.01 to EPS.”

Q&A Highlights

  • Deposits: Growth diversified across footprint; Nimbus platform slated for Q4 launch; management sees potential for deposit growth to outpace loan growth near-term .
  • NIM trajectory: Positioned to benefit from rate cuts; tailwind expected as late-quarter loan growth becomes full-quarter earnings and CDs reprice .
  • Credit/classifieds: Broad-based improvement across C&I and CRE; restructurings and refinancings aided classification reductions; reserve qualitative factors remained steady .
  • CRE concentration: ~3.20× capital; target below 3.00× over next several quarters; acquisitions lifted concentration, now being worked down methodically .
  • Costs & talent: Savings reinvested in production talent amid market disruption; added 5 production hires while keeping headcount flat .
  • Capital deployment: Opportunistic buybacks in Q2; with stock price improvement, focus shifting toward high-quality organic growth while continuing to build capital ratios .

Estimates Context

  • S&P Global consensus estimates for EPS and revenue were unavailable for CFB due to a CIQ mapping limitation in the data connector at the time of this analysis. As a result, we cannot provide a “vs. estimates” assessment for Q2 2024 or Q3 2024.*

Key Takeaways for Investors

  • Margin resilience: NIM-FTE held at 3.20% with asset yields keeping pace with funding costs; balance sheet positioned to benefit modestly from potential rate cuts in 2024 .
  • Improving credit: Declining NPA/TA, modest net charge-offs, and strong coverage (ACL to NPL ~640%) reduce risk premium and support capital generation .
  • Growth discipline: Loan growth moderated and guidance lowered to 6–8%; focus remains on pricing discipline and reducing CRE concentration below 3.00× capital .
  • Operating leverage actions: Core system renegotiation (four-month earn-back) and ~$2M annual savings should underpin expense control and efficiency ratio improvement .
  • Deposit strategy: Continued progress across geographies and industries; upcoming Nimbus launch could bolster deposit growth and lower-cost funding over time .
  • Capital allocation: Opportunistic buybacks when shares trade below book/tangible book; as valuation improves, management tilts toward organic growth while building capital .
  • Near-term trading: Watch for rate-cut signaling and deposit mix shifts; CD repricing, late-Q2 loan growth ramp, and fee income expansion are incremental positives .

Additional detail

  • Q2 highlights: operating revenue +$1.4M QoQ; loans +$95M; deposits +$147M; buybacks $3.0M (~$12.78 avg price); book value per share $14.78; tangible book $14.02 .
  • Non-GAAP items: Adjusted efficiency ratio-FTE 57.41% in Q2 (vs. 58.31% Q1, 51.87% Q4); adjusted EPS $0.37 in Q2 .
  • “Other relevant press releases” in Q2 2024: None found in the catalog (Q2 earnings press release furnished via 8-K as Exhibit 99.1) .
  • Prior two quarters’ earnings read for trend analysis: Q1 2024 and Q4 2023 8-Ks with full exhibits reviewed .

* Estimates note: S&P Global consensus could not be retrieved due to a CIQ mapping issue for CFB at query time.