CFB - Earnings call transcript Q1 2021 | CrossFirst Bankshares, Inc.

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Operator

Good day and thank you for standing by, and welcome to the CrossFirst Q1 2021 Earnings Conference call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Matt Needham, Director of Investor Relations. ahead. go Please

Matthew Needham

you thank us on today Welcome, for call. the and joining

& Maddox, we and CEO; Risk call, the President Randy Credit have Chief Officer; On Financial Mike and Officer. Chief Dave Rapp, Chief O'Toole,

reminder, earnings and Investor our Relations a along on be release a this presentation, of As call, replay with website. available will our telephonic

out of want We I and to which release our nearest risk in in I are a encourage Reconciliations on risks actually Relations we Maddox. from afternoon, this underway, available turn let we this number forward-looking to release, a Slide a share on be comprehensive and financial website. today included point and you information, comparable the basis. metrics also to update measures investor that on forward-looking results statements. that a our list get me that of may materially cause accompany remarks our discussing of cautionary uncertainties Investor of All will discussed per Before them. presentation per over the are differ Mike call the now call presentation, copies earnings like are to measures non-GAAP review factors provide the X share involve our I'd is GAAP available all quarterly to or website. Thanks. remind to diluted you are the CrossFirst slides statement. which that

Michael Maddox

to Thank everybody joining And you, for Matt. thank the you call.

The our we in Despite compression of credit continually assets. billion improving revenue, the margin XXXX. business. the our and our rate initiatives and finished risk of growth, of XXXX reducing core on under is we’ve impact show provisioning, the continued Strategically, history. $X the been momentum continued earnings earnings, our our in focused pandemic, increased metrics and just improving to with implemented quarter positive of and quarter had during efficiency strengthening this company first company’s most Our post-pandemic. This our the due quarter profitable our

trend and first right energy included record the direction, Our metrics million was Net asset million, the and of share for a economy $X.X are continues per continuing to $XX improve $X.XX. performance company a provision quality of in as income recovers, quarter and prices to the in stabilize. our resulted of earnings which

proud XX% during initial ratio grow and efficiency pre-provision pretax, to in XXXX. profit continue Dallas best We the steadily our extremely was investment operating which in to our since an approaching revenue company's history. improved again has report I'm

strong During XXXX, quarter X% had the we’re grew of we that a first XX%. accounts DDA and deposit pleased growth our of

grew from X% loan first Excluding PPP our quarter X% the loans, of to previous portfolio the XXXX quarter. compared and

and by pandemic, We are allocate most the with to levels. additional current continue to affected industry the reserve segments comfortable our reserves

loan provisioning We’re our loan the coming the assets to expect classified expect see of decreased to current pleased trends, for continued the our economy, non-performing quarter outlook assets our we economy through we over the remainder Based that on and quarters. outlook for and and for the the improvement XXXX. moderate portfolio the

strong remain ratios stock and capital continue to our plan. repurchase Lastly, execute on our we

success. of in success bank team a ideas grounded Our one vision shared path is to with one of the

contribute extraordinary and being of clients employees, one promise our purpose We’re team moving serving to dedicated focused of working our We communities we to to ways together into well and the company in serve. forward. our remain the people our

strategic some occurring the attracting plan, that a in and For talent us few changes a focus. to business executing team. our address of minutes our retaining strategic quality remains management spend are be I'd like highest within successful the to to

from company Dave shareholder, led become and class. retire O'Toole XXXX. the public March read up and successful helping of is board member our XXXX has XX% in Investment helping founding in de Officer in Dave growth the storied compounded XX career been CrossFirst has and and banking Officer, has instrumental of long Chief our friend is a annual As a nearly model relationship one his Financial services. Chief a banking since of service. plan after advisory announcement, with in banking our our probably rate take CrossFirst on Dave in in XXXX. announced the banks that Founding us finishing executed We've after asset a had most novo He to you he has strong to years his career

our national CFO. foot locations eight will our footprint next Investment and in Overland continue Dave step working new billion through tenure, assets. just Once continue CFO serving company hired, in states square Dave serve Park, and Dave's until CFO our from from has Chief Officer successor. $X Office his in identifies down four to search Suite the find as end X,XXX expanded to role During process a Kansas as is will to our of XXXX. currently that through We're under the

Tom of and we to the Randy During for be us credit of areas, credit Chief both Risk with growth. closely Chief allows to want building and these roles areas. growth, Director Randy practices for title continuing the the I our teams capabilities expertise enhance oversee years. Risk team and he done will under risk management assumes regulators. efficiencies, Tom leverage risk the consolidated leadership we two over outstanding our now future of the our on in depth last us the our and group to and Officer increase experience to for Credit these Credit Officer. better provide work with Robinson recognize his and enterprise support, the Executive enterprise structure take need and Rapp. out management job This continues has quarter, to and of Randy in great Tom the person will while point our

imperative making our is strategic in new technologies we competitive stay our experience evaluating sure that will today's customer with products, We're current banking and landscape. is in plan platforms. initiative further and enhance Another This competitive our major efficiencies. technology

to our grow, provide is reduce client our convenience, across Technology serve allow growing benchmarking Chief base. customer costs, company effectively efficiently the new Officer technologies and acquisition customer more to Merfen, Jana us Our

We focused we a technology, has technology to investment fund on March also our in us X, pandemic recently now to a we of X. to our employees update April return on will bank increased work to provide plan and economic public to expect and investment and current outlook. the brief most our our that for made competition plan FinTech adoption access growing to report the the happy keep hope to available. and industry. small on us The from I’d informed accelerated see commenced the provide and like we reopened perspective lobbies our I'm a COVID our that technology

clients We employees person to continue to safety conditions increase we’re as of interactions prioritize and in and the excited our health and permit.

employees necessary. to for work with in-office flexibility continue We and working opportunities our provide where and remote

economic travel, optimistic and spending continue cautiously stimulus boost vaccinations and as the that economies to We’re improve reopening including leisure, discretionary provide and The our in fiscal roll will to a local industries package the of continued increases out outlook national hospitality. growth consumer should and confidence. several fuels

these of of to last to loan complete with take forgiveness. historic continue second will first bounced we’ll round a provides to million be back million $XX forgiveness Additionally, this our with we we have We loans, the favorable these from mostly work outlook. And existing In customers X recognition of in more $XXX loans Slide with these were a gas process lows on our fee year, industry majority you successfully PPP process. believe the loans markets the by year's quarter SBA. customers. oil vast to booked and able of forgiven overview And the the loans. through

remains believe and will different still there surrounding favorable While the improved local pandemic a how create stimulus driven scenario enduring that for economies customers. We the uncertainty industries. our affect changes fiscal

expect balance remains to and We very pipeline to sheet continue strong. our grow our

employees efforts our million and our as our in now have really customers of their to our want the all hard evaluate their continue financial quarter, look our further I’m managed to growth and from amazing. on really future. the Dave very existing of and loans year. initiatives acquisitions through like market the to months, up. our first the and congratulate to supplement progressed quarter results. of thank and of optimistic I'd our work new open growth forward funded of teams for I’m $XXX been the have proud and this We our take process focusing on During strategy. and potential I expansions continues continue risk cities for XX details we’ll truly new how dedication last to you over strategic to vaccination new we

David O'Toole

everyone. afternoon good and Mike you, Thank

record a efforts, growth operating reporting of for recent Combined with history Our has operating profits. quarterly net provided growing and revenue foundation efficiency income, revenues. pretax, pre-provision we’re

completed we quarter just net the profitable Mike during and As in the XX% $XX last X% history, our over grew pre-provision income quarter. pretax indicated, the profits and million in most year our

million, X% XXXX, of as margin basis. was and and interest the to up card for income the quarter. fees the revenue the million, interest operating the our positive net income $X.X Net fully fees to were from had increased million company was increased Non-interest of XX% a were largest quarter on operating from a quarter $XX.X contributor for first analysis quarter, previous slight as XXXX the same compared from X% a previous in decrease the declined $XX.X a resulting quarter quarter. Credit however, quarter For previous and the leverage increase quarter XX% expenses international the the well. in for taxable

million balance margin Earning growth excess by significant can asset QX on nine of in average point from in QX in basis negatively were offset However, asset during an quarter. reduction Comparing XX basis partially point created XXXX, attributed decline from impact funds. and a to deposit to pre-payments having NIM nearly point our XX decline $XXX loan the earning strong sheet the from yields of larger a liquidity more in yields a be earnings. XXXX cost investment compression impacted and basis prevented

portfolio on this cash The million. of prepayments $XX on we mortgage the holdings grew we balance of from backed books continues cash loan nearly and purchased $XX to few X.XX% during loss bonds. QX X.X% mix, XX in taxable loan by balance our balance over portfolio investment points taxable the increasing in our deposits securities activity. existing yielding to The sheet as at changing quarter, investment went accumulated XXXX, change. present the the on the than million rates continued, sheet that basis and as the the non-recurring to as a downward contributed and PPP sheet seasonal challenges well as of activity, low and to We items QX remainder from of opportunities trend NIM expect investment The declined yield for elevated securities in QX has lower

As surrendered we expected, non-interest with $XX.X quarter, million. gains, $XX the recent of declined portfolio remain increase the million, at quarter remain nearly some to assets of and from they in X.X%. at but the nearly rates, were to $XXX,XXX reduction expenses that average the for previous expense a Non-interest unrealized long-term its

employee XX% The to efficiency low Our on current stabilize increased the the dependent operating of run high the rate our we assets reductions efficiencies million. again revenues. $XX help company in of of in should growth in operating making The improvements reflects current staff ratios per QX primarily a XXXX. further level achieved expenses made range, from expenses operating

XXXX down ratio cross and For year the efficiency on quarter, basis. XX.X% from XX.X% a QX non-GAAP for XX% XXXX XX.X% and the we below in entire posted

on Our X% X.XX% to levels. climbing and exceeded have provisioning assets improve average continues with pre-COVID to return would

continues positive on be investment the fund, $XXX was As XX to tax and compared our after metrics. to very ROA contributor million. overall yield stockholders equity portfolio ROE a cost illustrated, Total to March of

a the value at under an quarter $XX.XX remained XX,XXX in price our per Our continued in capital at repurchased We of tangible repurchase stock and strong ratios previously disclosed shares during of book share the average to shares program. of we first quarter-end. resulting quarter $XX.XX

assets at testing Economists stress our well harshest able required Oxford of performed and economic and banks the CrossFirst indicated continued that certain grow scenarios by pandemic portfolio level some published not earnings we of the we remains to recently Although been Federal have capitalized Reserve baseline to under the have because the credit improve, over a created feel this size, in scenarios X by quarter risk I’d the financial time. capital the good remained credit XX Tier of based look ratios we the equity like flat. to common months. results our to relatively for million And discussion $XXX and Overall, have to and Randy total last detailed continued forward the turn over for presentation improvement. about

Randall Rapp

good everyone. Thanks, Dave afternoon, and

key non-performing see As our metrics Mike classified mentioned, we QX, continue in in assets. and including credit to improvement

$XXX in decreased a X% ratio quarter, allowance classified capital plus classified million, to assets to During almost the XX.X%. of resulting

remain than in significant totals QX the XXXX loan classified in this total target, our and our higher of see the since to Although expect upcoming in seen we peak quarters. have continued improvement improvement

lease maintained despite charge-off Our X.XX% QX level QX. our and allowance a loan We very ended losses loans in to elevated for strong loans. the excluding activity PPP reserve at reported higher total

We’re do expecting elevated charge-offs to of and several to charge-offs at expect and primarily few to in parallel to running continue elevated models. we are XXXX CECL quarters C&I related transactions beginning of the are quarters. energy the The level past a in this and convert the not coming currently

to or property of of by NPAs of At COVID. $XX.X due are to QX the approximately during impacted assets, total exposure. of negatively energy XX% XX% upgrade QX, our decreased assets non-performing the lodging related to primarily million a Our X.XX% end

of set in the to of We’ll occur to energy of QX, June. As and our semiannual evaluate the in May as loans classified many redeterminations of continue related. end are are XX% assets quarter upcoming base borrowing these our

QX, the in grade we the Since on loss portfolio migration expect redeterminations this QX. the reserve held we the level and impact commodity migration to positively our We against higher of significant required QX receipt in remain portfolio. grade model environment the of price to with impact financials also in incurred showing reserves, expect positive the energy these for borrowers higher prices result the and to improved

pandemic. And scheduled with proud to the of As modifications regularly modifications have work end. COVID have in are clients our very we our expected, continued few payments. our of related how loan the to an borrowers are coming Most remaining to to our navigate bankers portfolio. I'm making back

improvement continues and overall support expect any the have I levels see As the portion non-performing rate of to I'll consumers And in growth vaccination continue stimulus prepared questions economic the activity rate begin government to you turn charge-off to prices material over businesses, increases, we it Q&A and our and call. assets, shortly. assets, quarters. back operator classified stabilize, energy coming accelerates the to answering the our to remarks. reserve look forward This wraps-up now the might to in

Operator

with Thank Raymond you. [Operator Instructions] Michael Our James. from first question Rose comes

line now is Your open.

Michael Rose

everyone. How afternoon, Hey, you? good are

Michael Maddox

Michael. Hi,

Michael Rose

from in are of lot competition outlook about is you what bit Thanks. seeing all, was what stronger loan range, just on your quarter customers announcement back Hey, believe. seeing congrats about A your wanted Last this talk had and ex-PPP kind pickup demand, you're about, a banks your of is retirement have you maybe growth. X% I What of talked on Dave you little the hearing I have of first to growth demand. some most. pretty half, quarter than a borrowers? the start you decent the guys are saying where kind maybe X% to like? And and and and talked Can obviously

David O'Toole

Yes, thanks, Michael.

would loan And I quality in that's pipeline credit. competition grow. continues areas. think compromise seeing variety on quality. yes, a key And down. growth of to for I is fierce continued to is see yields different fairly credit not high say to our But pickup so continuing in we're resulting We’re and driving the demand,

And in industrial to side, particular, still in commercial well. some opportunities strong. On seeing that to performing demand then see healthcare we're space be seeing opportunities. on And the of be the multifamily we lot the you're and QSR continues side, real some a estate continues very yes,

family our different a industries. of office then some lot clients variety in to from activity continue we So larger of see of a

Michael Rose

And quarter. a and of line were going credits syndications shared is? pickup utilization this looks is growth it be the that where down $XX to about Okay, any then like thoughts the also on and national million

You growth? and be sort expect of to those to balances a any down come headwind

David O'Toole

line But course. line utilization through We're Yes, some PPP I fairly on we in if be we From loans that, the increased will new been growth. think decline planning as on process, opportunities. utilization. we're a focused and the the kind that normal in see of surprise wouldn't balances me it for those not standpoint, consistent get it's just

Michael Rose

margin, of outlook about finally a like NIM talked given the Okay, that might as think me, moving but and for you and will you feature that forward? above the keeping maybe the Dave, liquidity X%. the have Thanks. of about seen, and any of Looks be just the challenging some sort margin we on amount securities purchases just others obviously, help

David O'Toole

to from challenging bit that our at do first very above XX Yes, average, is on in Michael, next bounce the level what's on we although Fed. overnight carrying a can liquidity really we nice of were margin any we on XXX figured off hold the did because of balance X%, that in back funds that about now, think we basis thanks balances, we margin, sheet between comment. all, most average $XXX impact we The quarter. and our balances, doing QX, earnings, about getting little weren't by much damage on the it is had the this Margin for just million were we point real right quarter not

consistent going drop the then that somewhat irregular, our that's PPP calculation. activity quarter was we think compared in in to the help NIM quarter. do it is So in down we but And what the should it'll QX be first second think to

down I next quarter, at So stay then about can point think look that the a in the on optimistically, and we take X% road.

Michael Rose

Dave. Congrats taking All my again, for right, thanks questions.

David O'Toole

you. Thanks, Thank Mike.

Operator

Thank you.

from line open. with Jennifer Securities, now is question Your comes next Truist Our Demba

Jennifer Demba

you. afternoon. Good Thank

David O'Toole

Jennifer. afternoon, Good

Jennifer Demba

moderate in are to What Just of targeting over future curious, levels levels we net you said charge-off near-term? the periods you kind going the are here. think

RandallRapp

activity moderate, in isolated my and that basis Randy. that an said somewhere sub-XX go normalize we would is we that the charge-off feel this quarters forward as we some to portfolio areas keep I try comments, and certain last had expect continue. level We several we target charge-offs the to do we internal that don't Jennifer, basis. in do of unique to have on And like And we a points. think would expect So below

Jennifer Demba

much. so Thanks

Operator

Thank you.

question with Brady KBW. comes next from Our Gailey

is line open. now Your

Brady Gailey

Good you. guys. afternoon thank Hey,

RandallRapp

Hey, Brady.

Brady Gailey

is deposits of basis points. XX cost the So around still

the to of Just lower? how that you is you way can room here? to margin do wondering And that you protect have move think a real much that continue kind

David O'Toole

cost money, we question We are of we can, reduction got There's little of reductions of to that to in quarter. the side, to that a lose of we there. at No of think no of we of this try the XX point further margin the aggressively remain basis this buckets on there But out funds cost we've protect aggressively. funds we that. continue that, funds, some question, in to a have handle reasonably just peers funding Dave. can if Brady may cost is In we’re relation for see quarter. high our we we five couple liquidity to can And our adjust plenty looking

low So the XX on be would the reasonable further in reductions. I side high side, a maybe on think five reduction, QX for

Brady Gailey

right loan Okay. working to they be cash this beyond, have you'll year money And A your PPP. probably from level until lot some through you have back they of work clients excess then at you the on borrow growth, what through that is to think next this But looked you loan year growth and get at CrossFirst? through guys. need once you year,

David O'Toole

we're from markets, growth. good question. not expansion to hopeful next over couple XX% to only And normal drive to a then, that that's expect that in continue would loan us We years see to allow some but environment. a growth will existing have the our of Yes, to XX%

Brady Gailey

active on buyback. the Then you're mentioned, Okay. you

repurchase. and I a stock repurchased that's think not XX,XXX ton you shares, of

your think fourth just as million kind this of million buybacks dollars you're at maybe last did today still this doing I stock level? TCV, quarter, a And of is quarter, the appetite XX% even in one-times in talk you year, tangible. about in size $X about about at north

David O'Toole

felt the we all like buyback Well, year, hopeful we'll limits on to pick-up strategic. stock. $XX that go do we that million do up to of think on try the some be it to year, will authority continue for most probably done. we to get put price of can we But I'm have to for the I of

do to looked any trades haven't in time. We this point block at

But So plan XXXX. at that our we're would fully execute it to just taking one be transaction objective time. in a

Michael Maddox

But multiple. be We’ll on our continue to trading stock hope buyback. our that our stock really starts trip better methodical is a at

we So market. the of were out

Brady Gailey

totally. Yes,

So or last is Dave, call your July? will be in around you this

David O'Toole

Brady, I don't know.

some past and I underway it now. suspect in be soon. in somewhat there'll virtually. I But as Mike July. a I'll on this all phone voice think if out seeing think miss kind board us close form way I of goes the of be pandemic right process pretty way, year, new wants, had the some the I is you really the this around you

Brady Gailey

It's an That's successful Hey And yes, to Dave, with you fair. right. the great. working keep to Good congrats in you. touch. luck please IPO career, on and

David O'Toole

Well, thank you.

Operator

Thank you.

Liesch with comes question next Andrew from Piper Sandler. Our

Your line open. is now

Andrew Liesch

Hey, afternoon, everyone. good

David O'Toole

Andrew. Hey,

Andrew Liesch

there. With the deposit this charges account growth million. growth amount build-off was of new run income just more $X is good the to driving in fee up see is rate It north to overall dollar for a of that, nice customer reference service

Michael Maddox

have had growth. we income nice Yes, fee

a an associated year who's pandemic supporting a had it abnormal, services. been in little has Some one of very related customer to industry successful

continue So, see But focused higher to very We're solid it. it probably little the portfolio our out do income very, building that card and related credit to focused fee on our we than all go is And our growth expect it. C&I a with services fee that at. will in normalize on income.

Andrew Liesch

last quarter $XX forward? from of just forecast. below good on this Great. in side, That's and helpful. to shy you And is million Is expense came rate going a then XX the my nicely run

David O'Toole

is think Yes, good million pretty rate. run currently, I a $XX the

some talked million, reasonable an payroll, time. the few the is And $XX adding We’re as we've will million maybe run $XX people in expansion, impact to in back we’ll at pretty which rate a some to that. and this point in make but looking investments you start to before on have space technology

Andrew Liesch

taking the Great luck and Thanks Dave, announcement. retirement good to for And, questions. hear. my congrats on

David O'Toole

Thank you, Andrew.

Michael Maddox

Thanks, Andrew.

Operator

next comes Our Instructions] Olney from Stephens. question [Operator you. Matt with Thank

Your is open. line now

Matthew Olney

thanks taking questions. the for Great,

want I mentioned million, rate. David, Just point last a $XX that is that think to on expenses. on run $XX follow-up you million operating good

a growth time year full-year? to last off hold for the from Does X% about outlook million still thinking talked the that on think of we differently X% base that year. you $XX.X I or that for now last

David O'Toole

on going year, does, track beginning we're it the little pretty what think. of at reasonable to Well, But this little in Overall, for a think the that balance pace, the at kind half we'll growth. bit up less second investments could year of year, I it our drive balance than I make And probably depends a would more. we looks are be that, there of that sheet, sheet this obviously to ratio. the that's X.X% grow ratio we X% our X% good with is the if to going a

unless So we into don't whatever. new beyond it an market, see I a level, getting expand acquisition, much that make

Matthew Olney

that's trying And it that loan going yields loan what in like is feel to back discussion do margin direction looks unusual relatively numbers, my flat take the yields. it’s anything those impact of out a core I going if and head? math, then were get right just right for When and to to Okay, helpful. the PPP, I quarter-over-quarter, the

David O'Toole

the this impacted off, margin PPP far quarter. about probably negatively not X%, too That's

would a at that, can just a yields earning higher you number, loan looking at at be if kind loans if the take the So look in pool. our you're asset of

me. little that PPP number have in yields, bit loan don't flat, have guess of pretty show We on on the actually you're exact a excluding of I front I if

Matthew Olney

have on more coming Any yields recently? color on where new been loan

RandallRapp

Matt, is this Yes, Randy.

As market. Mike a the lot for liquidity transactions. of of in the better lot there's said, competition a And there's

and pressure good yields. really profit that our but so to transactions as and finding tolerance, of a there's a proud through risk meet doing loan transactions tolerance new job well. yields, I'm shifting into of our bankers allowing building And loan But of on our are lot floors for

fairly So overall, definitely well. some there. pressure think I holding negative But it's

Matthew Olney

Okay, XQ. recognized? million did of I mentioned on And catch that to that to in relatively thank in you be can that's you. Dave, million right for $X.X expectation And that the that PPP that hold give the fees color the fees XQ, lastly and side, you remaining you think close any that yet other recognized just beyond $X.X I of

David O'Toole

As will bit much in of a And of fees. than morning how at QX little it'll corporate bit this accelerates point, not my He in quarter. I less bet be a is the trader on the little this discussed that. and those the but forgiveness that a just get certain during thinks that quarter, because

So look get nice would level, to a be that bit that you want level, we can a below might little if to that.

Looking fees so far this quickly. pretty far into April, continue to accelerated be

Matthew Olney

were us of in was lower can quarter. than bit rate kind color, expecting I give this rate from tax tax here? the the we What a think more, one just little And you

David O'Toole

of think to We've work as of give a or look room XX% the XX effective come may level been use little the here pretty few with. quarters. think on in internal all under, for last I modeling the that It's quarters we you rate, last our I couple back for still much we our

Matthew Olney

Congrats the That's Okay. And all on me. for congrats the on quarter. Dave, announcement.

David O'Toole

Thanks, you. Matt. Thank

Operator

over I'm back to you. not this at Matt any remarks. now like for turn Needham I further the would Thank call questions to closing showing time.

Matthew Needham

this company you time contact with in us and our me our with you you call taking a always, can be as on your replay thank this you might for any can via us call and today. have. reminder, And the on And interest Take care. website. accessed questions quick Again, joining follow-up investment as Thank we appreciate for afternoon.

Operator

conference concludes Thank This today’s for participating. call. you

disconnect. now may You

CrossFirst Bankshares (CFB) 23 Apr 212021 Q1 Earnings call transcript