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CrossFirst Bankshares, Inc. Reports Fourth Quarter & Full Year 2020 Results

January 28, 2021 4:02 PM
Fourth Quarter 2020 Key Financial Performance Metrics

Net Income Diluted EPS PTPP Net Interest Margin
(FTE)		 Efficiency Ratio Book Value Per
Common Share
$8.1 million
 $0.15
 $20.8 million
 3.12%
 53.35%
 $12.08

LEAWOOD, Kan., Jan. 28, 2021 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported its results for the fourth quarter and full year of 2020, including net income of $8.1 million, or $0.15 per diluted share for the fourth quarter, and net income of $12.6 million, or $0.24 per diluted share for the full year. The financial results were impacted by the significant loan loss provisioning required to address uncertainty and risk in the loan portfolio created in part by the pandemic. In the fourth quarter, the Company provisioned an additional $10.9 million, bringing the full year loan provision to $56.7 million.

CEO Commentary:

"Despite the pandemic and depressed commodity prices, we had a great 2020 and accomplished many key strategic initiatives. I am very pleased with the resilience our clients and employees have exhibited during such difficult times," said CrossFirst’s CEO and President Mike Maddox. "Even with the significant loan loss provisioning, we continued to generate moderate net income and record pretax, pre-provision profits for the Company this year. During the fourth quarter, we reduced our energy concentration, experienced a decline in our classified and nonperforming assets, and successfully commenced our share repurchase program."

2020 Fourth Quarter and Full Year Highlights:

Quarter-to-Date
 Full Year
December 31,
 December 31,
(Dollars in millions except per share data) 2019 2020 2019 2020
Operating revenue(1) $39.4 $44.5 $150.2 $172.0
Net income (loss) $(0.7) $8.1 $28.5 $12.6
Diluted earnings (loss) per share $(0.01) $0.15 $0.58 $0.24
Return on average assets (0.06)% 0.58% 0.63% 0.24%
Non-GAAP core operating return on average assets(2) (0.06)% 0.58% 0.61% 0.37%
Return on average common equity (0.46)% 5.19% 5.38% 2.05%
Net interest margin 3.17% 3.07% 3.26% 3.08%
Net interest margin, fully tax-equivalent(3) 3.23% 3.12% 3.31% 3.13%
Efficiency ratio 55.60% 53.35% 58.37% 58.13%
Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3) 54.66% 52.54% 57.25% 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 this measure.
(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%.

COVID-19 Update

The COVID-19 pandemic and measures taken in response have created economic uncertainty and negatively impacted many of our customers in some capacity. During the fourth quarter of 2020, we continued to operate in accordance with our comprehensive pandemic plan, which includes social distancing measures for customer and employee interactions. In addition, the Company has continued to support key regulatory relief programs for customers, increased provisions for loan losses, increased monitoring of certain loan portfolio segments, modified loans, slowed discretionary spending, optimized staffing levels, and elevated its risk management activities. Our branch-lite strategy, technology, and relationship banking model have allowed us to effectively operate through the pandemic, work remotely, and provide us with the agility to effectively serve our customers when they need it most. The Company continues to assess and monitor the COVID-19 pandemic along with federal and local requirements in evaluating the full re-opening of its offices and remains flexible regarding process and timeline.

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Programs

CrossFirst is committed to helping our local businesses and the communities that we serve during these extremely challenging times and will continue to help customers access regulatory relief and other programs. As of December 31, 2020, the Company retained $292 million in loans produced through the Paycheck Protection Program ("PPP"), and the Company has been working through the forgiveness process for those loans with the Small Business Administration ("SBA"). In addition to the PPP, we have been granting loan modifications and 90/180 day payment deferrals for many customers who have requested additional relief. As of December 31, 2020, the Company had $90 million in loans on modified payments related to COVID-19 on our balance sheet, which, excluding the PPP loans, represented 2% of our total loan balances. We are evaluating each modification on a case-by-case basis and assessing the borrowers' willingness and capacity to support the loan until maturity. The Company will continue to offer additional governmental assistance programs as more details become available around the processes and procedures for such programs and will grant loan modifications or new PPP loans when appropriate.

Income from Operations

Net Interest Income

The Company produced interest income of $49.5 million for the fourth quarter of 2020, a decrease of 10% from the fourth quarter of 2019, and an increase of 2% from the previous quarter. Interest income decreased from the fourth quarter of 2019 primarily due to lower interest rates. Average earning assets totaled $5.4 billion for the fourth quarter of 2020, an increase of $0.7 billion or 16% from the same quarter in 2019. The fourth quarter 2020 tax-equivalent yield on earning assets declined to 3.71% from 4.76% in the fourth quarter of 2019, primarily due to the movement of variable rate assets indexed to declining market rates. For full year 2020, the Company produced interest income of $203.4 million as the Company's asset growth was able to partially mitigate some of the impact of yield declines.

Interest expense for the fourth quarter of 2020 was $8.0 million, or 56% lower than the fourth quarter of 2019 and 12% lower than the previous quarter. While average interest-bearing deposits increased to $3.8 billion in the fourth quarter of 2020, an increase of 16% from the same quarter in 2019, overall interest expense on interest-bearing deposits declined as a result of declining interest rates. In the fourth quarter of 2020, non-deposit funding costs increased to 1.78% from 1.50% primarily as a result of several short term lower-cost borrowings maturing. Overall the cost of funds for the fourth quarter of 2020 was 0.65%, compared to 0.75% for the third quarter of 2020. For full year 2020, the Company had interest expense of $43.2 million, a decrease of 42% from full year 2019.

Tax-equivalent net interest margin increased to 3.12% for the current quarter, from 2.98% in the previous quarter, and declined from 3.23% in the fourth quarter of 2019, reflecting the impact of the declining rate environment and changes in macroeconomic conditions. For the full year 2020, the Company had a tax equivalent margin of 3.13% compared to 3.31% for full year 2019. As of December 31, 2020, CrossFirst realized $5.8 million of the total $9.9 million in fees anticipated from making $369 million of total PPP loans. The PPP loans yielded 4.91% for the fourth quarter 2020, and the Company will continue to recognize these fees over contractual maturity and expedite recognition as loans are forgiven. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $0.7 million for the fourth quarter of 2020 and $2.7 million for the full year of 2020. Full year 2020 net interest income was $160 million or 13% higher than full year 2019, while net interest income totaled $41.5 million for the fourth quarter of 2020 or 6% higher than the third quarter of 2020, and 12% higher than the fourth quarter of 2019.

Non-Interest Income

Non-interest income increased $0.8 million in the fourth quarter of 2020, or 35% compared to the same quarter of 2019, and decreased $1.1 million or 27% compared to the third quarter of 2020. For the fourth quarter and the full year of 2020, the Company continued to increase overall fee income commensurate with its customer growth and recorded stronger credit card interchange fees and other service charges than in the same periods in 2019. Because of the current interest rate environment, the Company had significantly less activity in its back-to-back swap program. The Company realized bond gains throughout the year related to continuously monitoring its investment portfolio. Full year non-interest income increased 35% compared to full year 2019, despite having nearly $3.0 million less income from its back-to-back swap program.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2020 was $24 million, which increased 8% compared to the fourth quarter of 2019, and increased 3% from the third quarter of 2020. During the fourth quarter, the Company recorded higher professional fees as well as added occupancy expense from opening two new locations. Full year non-interest expense increased 14% compared to the same period in the prior year, primarily from nonrecurring items reported in previous quarters. The Company recorded several nonrecurring expenses during the year, including a $7.4 million expense related to a non-cash goodwill impairment charge in the second quarter of 2020, in addition to one-time expenses for optimizing staffing levels in the third quarter of 2020. The Company also had increased professional and foreclosure costs for 2020 as a result of restructuring credits driven in part by the macroeconomic conditions created by the COVID-19 pandemic. Overall, the Company continues to realize benefits from reduced travel, entertainment, and other discretionary spending as a result of the COVID-19 pandemic.

CrossFirst’s effective tax rate for the fourth quarter of 2020 was 18% as compared to 63% for the fourth quarter of 2019. The 2020 quarter-to-date income tax was impacted by an $11.7 million increase in income before income taxes that increased taxes at the statutory rate by $2.5 million. For both of the comparable periods, the Company continued to benefit from the tax-exempt municipal bond portfolio and bank-owned life insurance.

Balance Sheet Performance & Analysis

During the fourth quarter of 2020, total assets increased by $154 million, or 3% compared to September 30, 2020, and $728 million or 15% since December 31, 2019. During the fourth quarter of 2020, total available for sale investment securities increased $5 million to $655 million compared to September 30, 2020, while the overall average for the fourth quarter of 2020 was $674 million. During the fourth quarter of 2020, tax-exempt municipal securities on average increased $18 million and mortgage-backed securities decreased $42 million compared to September 30, 2020. The securities' yields maintained a tax equivalent yield of 2.96% for the fourth quarter of 2020. As part of management's investment strategy, during 2020, the Company's security portfolio decreased $85 million as the Company chose not to replace all of the cash flows associated with mortgaged-backed securities prepayments and also realized gains by selling bonds with potential credit concerns related to COVID-19. The overall average securities balance for full year 2020 was $715 million with a tax equivalent yield of 3.05%.

Loan Growth Results

The Company experienced average loan growth of 0.4% during the fourth quarter of 2020, but increased average loans 20% year-over-year from December 31, 2019. During the fourth quarter, loan growth was impacted by $77 million of PPP loans forgiven, but core loan growth in real estate offset this impact. The Company reduced its energy exposure during the quarter and experienced 10% growth in residential and multifamily real estate loans. Loan yields increased 10 basis points during the fourth quarter as the loan fees recognized from PPP loan forgiveness were able to offset the impact of yield declines from loan repricing. During 2020, full year loan yields declined to 4.26% compared to 5.52% in the prior year, primarily as a result of lower interest rates from adjustable rate loan movements during 2020.

(Dollars in millions)4Q19 1Q20 2Q20 3Q20 4Q20 % of
Total		 QoQ
Growth
($)		 QoQ
Growth
(%)(1)		 YoY
Growth
($)		 YoY
Growth
(%)(1)
Average loans (gross)
Commercial$1,315 $1,339 $1,381 $1,308 $1,367 30% $59 5% $52 4%
Energy 400 412 404 393 381 8 (12) (3) (19) (5)
Commercial real estate 1,007 1,034 1,115 1,169 1,194 27 25 2 187 19
Construction and land development 599 620 651 617 585 13 (32) (5) (14) (2)
Residential and multifamily real estate 384 455 517 583 664 15 81 14 280 73
Paycheck Protection Program — — 245 362 258 6 (104) (29) 258 NA
Consumer 45 45 44 45 45 1 — 1 — 2
Total$3,750 $3,905 $4,357 $4,477 $4,494 100% $17 0.4% $744 20%
Yield on loans for the period ending 5.21% 4.98% 4.28% 3.90% 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 Growth & Other Borrowings

The Company experienced average deposit growth of 5% during the fourth quarter of 2020, but increased average deposits 20% year-over-year from December 31, 2019. At the end of 2020, the Company held a loan to deposit ratio of 95%, compared to 100% at the end of the third quarter, and 98% at the end of 2019. The additional deposit growth and liquidity for the quarter was primarily driven by transaction deposits as a result of more customers utilizing our insured cash sweep products. In addition, our money market account pricing remains competitive so the Company can continue growing, while still being able to improve the overall cost of deposits. The Company's cost of interest bearing deposits declined 11 basis points during the fourth quarter of 2020, reflective of changes made to deposit pricing. During 2020, full year costs of funds were 0.92% compared to 1.90% in the prior year, primarily as a result of the lower interest rate environment and declining Fed Funds pricing.

(Dollars in millions)4Q19 1Q20 2Q20 3Q20 4Q20 % of
Total		 QoQ
Growth
($)		 QoQ
Growth
(%)(1)		 YoY Growth
($)		 YoY
Growth
(%)(1)
Average deposits
Non-interest bearing deposits$522 $540 $746 $714 $732 16% $18 3% $210 40%
Transaction deposits 200 341 414 460 575 13% 115 25% 375 188%
Savings and money market deposits 1,854 1,887 1,933 1,995 2,158 47% 163 8% 304 16%
Time deposits 1,226 1,166 1,195 1,175 1,087 24% (88) (7)% (139) (11)%
Total$3,802 $3,934 $4,288 $4,344 $4,552 100% $208 5% $750 20%
Cost of deposits for the period ending 1.70% 1.46% 0.79% 0.67% 0.58%
Cost of interest-bearing deposits for
the period ending		 1.97% 1.69% 0.95% 0.80% 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, 2020, other borrowings totaled $296.4 million, as compared to $350.6 million at September 30, 2020, and $374.6 million at December 31, 2019.

Asset Quality Position

The Company added $10.9 million to the allowance for loan loss during the fourth quarter of 2020, bringing the total allowance to loans to 1.70%, commensurate with adverse movement of risk classifications and charge-off activity. While the Company currently believes the reserve is reflective of the risk in the portfolio, there may be cases where the borrowers or specific impairments related to COVID-19 may have not yet been identified. The majority of loans that migrated to classified status during the fourth quarter of 2020 were related to commercial real estate, particularly within the hotel portfolio, which partially offset several pay downs in the energy portfolio and partial charge-offs of other classified assets.

Net charge-offs were $11.6 million for the fourth quarter of 2020, as compared to net charge-offs of $6.0 million for the third quarter in 2020. The elevated charge-offs in the fourth quarter reflected the Company's approach to charging down multiple credits, mostly with exposures in energy and commercial and industrial. Full-year net charge-offs for 2020 were $38.3 million as compared to $11 million for the full year 2019. Nonperforming assets to total assets quarter over quarter decreased to 1.39%, primarily as a result of the associated charge-offs. The following table provides information regarding asset quality.

Asset quality (Dollars in millions)4Q19 1Q20 2Q20 3Q20 4Q20
Non-accrual loans$39.7 $26.3 $37.5 $75.6 $75.1
Other real estate owned3.6 3.6 2.5 2.3 2.3
Nonperforming assets47.9 29.9 40.3 82.2 78.4
Loans 90+ days past due and still accruing4.6 — 0.2 4.3 1.0
Loans 30 - 89 days past due6.8 19.5 34.9 45.4 18.1
Net charge-offs (recoveries)5.5 19.4 1.3 6.0 11.6


Asset quality metrics (%)4Q19 1Q20 2Q20 3Q20 4Q20
Nonperforming assets to total assets0.97% 0.59% 0.74% 1.49% 1.39%
Allowance for loan loss to total loans1.48 1.29 1.61 1.70 1.70
Allowance for loan loss to nonperforming loans129.0 196.0 188.6 95.2 99.0
Net charge-offs (recoveries) to average loans(1)0.58 2.00 0.12 0.54 1.03
Provision to average loans(1)2.05 1.44 1.94 0.97 0.96
Classified Loans / (Total Capital + ALLL)13.2 15.8 34.9 43.2 40.9
(1) Interim periods annualized.

Depending upon the future impact of the COVID-19 pandemic, we may need to make additional increases to our provision in future periods. The future impact of the pandemic is highly uncertain and cannot be fully predicted. The extent of the impact on our customers and, in turn, on our business and operations, will depend on future developments, including actions taken to contain the pandemic. To the extent the pandemic continues to decrease economic activity for an extended time period, we expect our business and operations will be further negatively impacted. Customers may continue to seek additional loan modifications or restructurings, or we may experience additional adverse movement in risk classifications, any of which could potentially result in the need to adjust the total allowances for loan losses.

Capital Position

At December 31, 2020, stockholders' equity totaled $624 million, or $12.08 per share, compared to $602 million, or $11.58 per share, at December 31, 2019. Tangible common equity was $624 million and tangible book value per share was $12.08 at December 31, 2020, compared to tangible common equity of $594 million and tangible book value per share of $11.43 at December 31, 2019. The Company's Board of Directors approved a share repurchase program of up to $20 million in the third quarter of 2020. During the fourth quarter of 2020, CrossFirst repurchased $6.1 million or 609,613 shares of common stock under the program at a weighted average price of $9.91 per share.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 11.93% and the total capital to risk-weighted assets was approximately 13.20% at December 31, 2020. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call and webcast to discuss fourth quarter 2020 and full year results on Thursday, January 28, 2021, at 4:00 p.m. CT / 5:00 p.m. ET. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. Investors, news media, and other participants should register for the call or audio webcast at https://investors.CrossFirstBankshares.com. Participants may dial into the call toll-free at (877) 621-5851 from anywhere in the U.S. or (470) 495-9492 internationally, using conference ID no. 8838529. Participants are encouraged to dial into the call or access the webcast approximately 10 minutes prior to the start time.

A replay of the webcast will be available on the Company's website. A replay of the conference call will be available two hours following the close of the call until February 4, 2021, accessible at (855) 859-2056 with conference ID no. 8838529.

Cautionary Notice about Forward-Looking Statements

The financial results in this earnings 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 or all of the 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 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

CrossFirst Bankshares, Inc., is a Kansas corporation and a registered bank holding company for its wholly owned subsidiary CrossFirst Bank, which is headquartered in Leawood, Kansas. CrossFirst Bank has eight full-service banking offices primarily along the I-35 corridor in Kansas, Missouri, Oklahoma and Texas.

Unaudited Financial Tables

TABLE 1. CONSOLIDATED BALANCE SHEETS

December 31, 2019 December 31, 2020
(unaudited)
(Dollars in thousands)
Assets
Cash and cash equivalents$187,320 $408,810
Available-for-sale securities - taxable296,047 177,238
Available-for-sale securities - tax-exempt443,426 477,350
Loans, net of allowance for loan losses of $56,896 and $75,295 at December 31, 2019 and December 31, 2020, respectively3,795,348 4,366,602
Premises and equipment, net70,210 70,509
Restricted equity securities17,278 15,543
Interest receivable15,716 17,236
Foreclosed assets held for sale3,619 2,347
Goodwill and other intangible assets, net7,694 208
Bank-owned life insurance65,689 67,498
Other28,886 55,962
Total assets$4,931,233 $5,659,303
Liabilities and stockholders’ equity
Deposits
Non-interest bearing$521,826 $718,459
Savings, NOW and money market2,162,187 2,932,799
Time1,239,746 1,043,482
Total deposits3,923,759 4,694,740
Federal funds purchased and repurchase agreements14,921 2,306
Federal Home Loan Bank advances358,743 293,100
Other borrowings921 963
Interest payable and other liabilities31,245 43,766
Total liabilities4,329,589 5,034,875
Stockholders’ equity
Common stock, $0.01 par value:
authorized - 200,000,000 shares, issued - 51,969,203 and 52,289,129 shares at December 31, 2019 and December 31, 2020, respectively520 523
Treasury stock, at cost:
0 and 609,613 shares held at December 31, 2019 and 2020, respectively— (6,061)
Additional paid-in capital519,870 522,911
Retained earnings64,803 77,652
Accumulated other comprehensive income16,451 29,403
Total stockholders’ equity601,644 624,428
Total liabilities and stockholders’ equity$4,931,233 $5,659,303

TABLE 2. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended Twelve Months Ended
December 31, December 31,
2019 2020 2019 2020
(Dollars in thousands except per share data)
Interest Income
Loans, including fees$49,208 $45,147 $191,527 $183,738
Available for sale securities
Available for sale securities - Taxable1,894 899 8,540 5,073
Available for sale securities - Tax-exempt3,191 3,255 12,011 13,013
Deposits with financial institutions601 56 3,053 639
Dividends on bank stocks286 177 1,087 985
Total interest income55,180 49,534 216,218 203,448
Interest Expense
Deposits16,247 6,610 67,668 36,585
Fed funds purchased and repurchase agreements91 2 592 164
Advances from Federal Home Loan Bank1,628 1,361 6,367 6,341
Other borrowings35 24 147 109
Total interest expense18,001 7,997 74,774 43,199
Net Interest Income37,179 41,537 141,444 160,249
Provision for Loan Losses19,350 10,875 29,900 56,700
Net Interest Income after Provision for Loan Losses17,829 30,662 111,544 103,549
Non-Interest Income
Service charges and fees on customer accounts163 856 604 2,803
Gain (loss) on sale of available for sale securities520 (21) 987 1,704
Impairment of premises and equipment held for sale— — (424) —
Gain on sale of loans— 44 207 44
Income from bank-owned life insurance462 436 1,878 1,809
Swap fee income (loss), net338 (284) 2,753 (204)
ATM and credit card interchange income473 1,516 1,785 4,379
Other non-interest income226 402 917 1,198
Total non-interest income2,182 2,949 8,707 11,733
Non-Interest Expense
Salaries and employee benefits13,818 14,725 57,114 57,747
Occupancy2,048 2,427 8,349 8,701
Professional fees1,041 1,120 2,964 4,218
Deposit insurance premiums767 1,150 2,787 4,301
Data processing676 654 2,544 2,719
Advertising685 349 2,455 1,219
Software and communication910 978 3,317 3,750
Foreclosed assets, net54 74 84 1,239
Goodwill impairment— — — 7,397
Other non-interest expense1,882 2,255 8,026 8,677
Total non-interest expense21,881 23,732 87,640 99,968
Net Income (Loss) Before Taxes(1,870) 9,879 32,611 15,314
Income tax expense (benefit)(1,170) 1,785 4,138 2,713
Net Income (Loss)(700) 8,094 $28,473 $12,601
Basic Earnings (Loss) Per Share$(0.01) $0.16 $0.59 $0.24
Diluted Earnings (Loss) Per Share$(0.01) $0.15 $0.58 $0.24

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

Twelve Months Ended
December 31,
2019 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$330,051 $9,627 2.92% $267,715 $6,058 2.26%
Securities - tax-exempt(1)390,908 14,533 3.72 447,324 15,745 3.52
Federal funds sold15,195 364 2.40 1,020 18 1.73
Interest-bearing deposits in other banks139,538 2,689 1.93 179,978 621 0.35
Gross loans, net of unearned income(2)3,468,079 191,527 5.52 4,310,345 183,738 4.26
Total interest-earning assets(1)4,343,771 $218,740 5.04% 5,206,382 $206,180 3.96%
Allowance for loan losses(42,015) (68,897)
Other non-interest-earning assets198,008 220,994
Total assets$4,499,764 $5,358,479
Interest-bearing liabilities
Transaction deposits$146,109 $1,742 1.19% $447,777 $1,696 0.38%
Savings and money market deposits1,676,417 35,385 2.11 1,993,964 14,033 0.70
Time deposits1,243,304 30,541 2.46 1,155,492 20,856 1.80
Total interest-bearing deposits3,065,830 67,668 2.21 3,597,233 36,585 1.02
FHLB and short-term borrowings366,577 6,959 1.90 417,956 6,508 1.56
Trust preferred securities, net of fair value
adjustments		899 147 16.34 939 106 11.34
Non-interest-bearing deposits512,142 — — 684,294 — —
Cost of funds3,945,448 $74,774 1.90% 4,700,422 $43,199 0.92%
Other liabilities25,708 43,331
Stockholders’ equity528,608 614,726
Total liabilities and stockholders' equity$4,499,764 $5,358,479
Net interest income(1) $143,966 $162,981
Net interest spread(1) 3.14% 3.04%
Net interest margin(1) 3.31% 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, 2020 over 2019
Average Volume Yield/Rate Net Change(2)
(Dollars in thousands)
Interest Income
Securities - taxable$(1,624) $(1,945) $(3,569)
Securities - tax-exempt(1)2,022 (810) 1,212
Federal funds sold(266) (80) (346)
Interest-bearing deposits in other banks612 (2,680) (2,068)
Gross loans, net of unearned income41,037 (48,826) (7,789)
Total interest income(1)41,781 (54,341) (12,560)
Interest Expense
Transaction deposits1,748 (1,794) (46)
Savings and money market deposits5,725 (27,077) (21,352)
Time deposits(2,018) (7,667) (9,685)
Total interest-bearing deposits5,455 (36,538) (31,083)
FHLB and short-term borrowings897 (1,348) (451)
Trust preferred securities, net of fair value adjustments6 (47) (41)
Total interest expense6,358 (37,933) (31,575)
Net interest income(1)$35,423 $(16,408) $19,015
(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. 2019 - 2020 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

Three Months Ended
December 31,
2019 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$317,524 $2,180 2.72% $215,348 $1,075 1.99%
Securities - tax-exempt(1)427,280 3,861 3.59 458,651 3,939 3.42
Federal funds sold4,750 19 1.61 — — —
Interest-bearing deposits in other banks152,917 582 1.51 208,650 56 0.11
Gross loans, net of unearned income(2) (3)3,749,865 49,208 5.21 4,493,806 45,147 4.00
Total interest-earning assets(1)4,652,336 $55,850 4.76% 5,376,455 $50,217 3.71%
Allowance for loan losses(44,051) (80,770)
Other non-interest-earning assets201,294 227,511
Total assets$4,809,579 $5,523,196
Interest-bearing liabilities
Transaction deposits$200,480 $603 1.19% $574,811 $306 0.21%
Savings and money market deposits1,854,042 8,059 1.72 2,158,044 2,344 0.43
Time deposits1,225,752 7,585 2.46 1,086,825 3,960 1.45
Total interest-bearing deposits3,280,274 16,247 1.97 3,819,680 6,610 0.69
FHLB and short-term borrowings366,190 1,719 1.86 304,923 1,363 1.78
Trust preferred securities, net of fair value
adjustments		913 35 15.18 954 24 9.97
Non-interest-bearing deposits521,799 — — 732,028 — —
Cost of funds4,169,176 $18,001 1.71% 4,857,585 $7,997 0.65%
Other liabilities34,443 45,115
Total stockholders' equity605,960 620,496
Total liabilities and stockholders' equity$4,809,579 $5,523,196
Net interest income(1) $37,849 $42,220
Net interest spread(1) 3.05% 3.06%
Net interest margin(1) 3.23% 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 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, 2020 over 2019
Average Volume Yield/Rate Net Change(2)
(Dollars in thousands)
Interest Income
Securities - taxable$(577) $(528) $(1,105)
Securities - tax-exempt(1)269 (191) 78
Federal funds sold(9) (10) (19)
Interest-bearing deposits in other banks155 (681) (526)
Gross loans, net of unearned income8,638 (12,699) (4,061)
Total interest income(1)8,476 (14,109) (5,633)
Interest Expense
Transaction deposits480 (777) (297)
Savings and money market deposits1,132 (6,847) (5,715)
Time deposits(784) (2,841) (3,625)
Total interest-bearing deposits828 (10,465) (9,637)
FHLB and short-term borrowings(283) (73) (356)
Trust preferred securities, net of fair value adjustments2 (13) (11)
Total interest expense547 (10,551) (10,004)
Net interest income(1)$7,929 $(3,558) $4,371
(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:

The most directly comparable GAAP financial measure for non-GAAP core operating income (loss) is net income (loss).

Quarter Ended
 Twelve Months Ended
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020 12/31/2019 12/31/2020
(Dollars in thousands)
Non-GAAP return on average tangible common equity:
Net income (loss) available to common stockholders$(700) $3,857 $(7,356) $8,006 $8,094 $28,298 $12,601
Average common equity 605,960 612,959 611,466 613,910 620,496 526,225 614,726
Less: average goodwill and intangibles 7,708 7,683 7,576 238 218 7,746 3,898
Average tangible common equity 598,252 605,276 603,890 613,672 620,278 518,479 610,828
Return on average common equity (0.46)% 2.53% (4.84)% 5.19% 5.19% 5.38% 2.05%
Non-GAAP return on average tangible common equity (0.46)% 2.56% (4.90)% 5.19% 5.19% 5.46% 2.06%


Quarter Ended Twelve Months Ended
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020 12/31/2019 12/31/2020
(Dollars in thousands)
Non-GAAP core operating income (loss):
Net income (loss)$(700) $3,857 $(7,356) $8,006 $8,094 $28,473 $12,601
Add: fixed asset impairments — — — — — 424 —
Less: tax effect(1) — — — — — 109 —
Fixed asset impairments, net of tax — — — — — 315 —
Add: Goodwill impairment(2) — — 7,397 — — — 7,397
Add: state tax credit(2) — — — — — (1,361) —
Non-GAAP core operating income (loss)$(700) $3,857 $41 $8,006 $8,094 $27,427 $19,998
(1) Represents the tax impact of the adjustments above at a tax rate of 25.73%.
(2) No tax effect.


Quarter Ended
 Twelve Months Ended
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020 12/31/2019 12/31/2020
(Dollars in thousands)
Non-GAAP core operating return on average assets:
Net income (loss)$(700) $3,857 $(7,356) $8,006 $8,094 $28,473 $12,601
Non-GAAP core operating income (loss) (700) 3,857 41 8,006 8,094 27,427 19,998
Average assets$4,809,579 $4,975,531 $5,441,513 $5,486,252 $5,523,196 $4,499,764 $5,358,479
Return on average assets (0.06)% 0.31% (0.54)% 0.58% 0.58% 0.63% 0.24%
Non-GAAP core operating return on average assets (0.06)% 0.31% —% 0.58% 0.58% 0.61% 0.37%


Quarter Ended
 Twelve Months Ended
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020 12/31/2019 12/31/2020
(Dollars in thousands)
Non-GAAP core operating return on common equity:
Net income (loss)$(700) $3,857 $(7,356) $8,006 $8,094 $28,473 $12,601
Non-GAAP core operating income (loss) (700) 3,857 41 8,006 8,094 27,427 19,998
Less: Preferred stock dividends — — — — — 175 —
Net income (loss) available to common stockholders (700) 3,857 (7,356) 8,006 8,094 28,298 12,601
Non-GAAP core operating income (loss) available to common stockholders (700) 3,857 41 8,006 8,094 27,252 19,998
Average common equity$605,960 $612,959 $611,466 $613,910 $620,496 $526,225 $614,726
Return on average common equity (0.46)% 2.53% (4.84)% 5.19% 5.19% 5.38% 2.05%
Non-GAAP core operating return on common equity (0.46)% 2.53% 0.03% 5.19% 5.19% 5.18% 3.25%


Quarter Ended
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020
(Dollars in thousands except per share data)
Tangible common stockholders' equity:
Total stockholders' equity$601,644 $611,946 $608,092 $617,883 $624,428
Less: goodwill and other intangible assets 7,694 7,669 247 227 208
Tangible common stockholders' equity$593,950 $604,277 $607,845 $617,656 $624,220
Tangible book value per share:
Tangible common stockholders' equity$593,950 $604,277 $607,845 $617,656 $624,220
Shares outstanding at end of period 51,969,203 52,098,062 52,167,573 52,195,778 51,679,516
Book value per share$11.58 $11.75 $11.66 $11.84 $12.08
Tangible book value per share$11.43 $11.60 $11.65 $11.83 $12.08


Quarter Ended Twelve Months Ended
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020 12/31/2019 12/31/2020
(Dollars in thousands)
Non-GAAP core operating efficiency ratio - Fully Tax Equivalent (FTE)
Non-interest expense$21,881 $22,215 $31,010 $23,011 $23,732 $87,640 $99,968
Less: goodwill impairment — — 7,397 — — — 7,397
Adjusted Non-interest expense (numerator)$21,881 $22,215 $23,613 $23,011 $23,732 $87,640 $92,571
Net interest income 37,179 38,228 41,157 39,327 41,537 141,444 160,249
Tax equivalent interest income(1) 670 695 685 669 683 2,522 2,732
Non-interest income 2,182 2,087 2,634 4,063 2,949 8,707 11,733
Add: fixed asset impairments — — — — — 424 —
Total tax-equivalent income (denominator)$40,031 $41,010 $44,476 $44,059 $45,169 $153,097 $174,714
Efficiency ratio 55.60% 55.10% 70.81% 53.03% 53.35% 58.37% 58.13%
Non-GAAP core operating efficiency ratio - Fully Tax Equivalent (FTE) 54.66% 54.17% 53.09% 52.23% 52.54% 57.25% 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
12/31/2019 03/31/2020 06/30/2020 09/30/2020 12/31/2020 12/31/2019 12/31/2020
(Dollars in thousands)
Non-GAAP pre-tax pre-provision profit
Net income (loss) before taxes$(1,870) $4,150 $(8,219) $9,504 $9,879 $32,611 $15,314
Add: Provision for loan losses 19,350 13,950 21,000 10,875 10,875 29,900 56,700
Non-GAAP pre-tax pre-provision profit$17,480 $18,100 $12,781 $20,379 $20,754 $62,511 $72,014

CROSSFIRST BANKSHARES, INC. CONTACT:
Matt Needham, Investor Relations/Media Contact
(913) 312-6822
https://investors.crossfirstbankshares.com


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