CrossFirst Bankshares Q2 2024 Earnings Call Transcript

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July 16, 2024

There are 9 speakers on the call.

Operator

Good day, and welcome to the Cross First Bancshares Inc. 2nd Quarter 2024 Conference Call. All participants will be in a listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Mike Daley, Chief Accounting Officer and Head of Investor Relations.

Operator

Please go ahead.

Speaker 1

Good morning, and welcome to Crossroads Bancshares' 2nd quarter earnings conference call. Before we begin, please be aware this call will include forward looking statements, including statements about our business plans, growth opportunities, expense control initiatives, cash requirements and sources of liquidity, capital allocation strategies and plans and our future financial performance. These comments are based on our current Our forward looking

Speaker 2

statements are

Speaker 1

Our forward looking statements are as of the date of this call, and we do not assume any obligation to update or revise them, except as required by law. Statements made on this call should be considered together with the risk factors identified in today's earnings release and our other filings with the SEC. We may also refer to adjusted or non GAAP financial measures. A reconciliation of non GAAP financial measures to GAAP financial measures can be found in our earnings release. These non GAAP financial measures are not meant to be a substitute for or superior to financial measures prepared in accordance with GAAP.

Speaker 1

Our presentation will include prepared remarks from Mike Maddox, President and CEO of Crossverse Bancshares Randy Rapp, President of Crossverse Bank and Ben Clouse, CFO of CrossFirst Bancshares. At the conclusion of our prepared remarks, our operator Betsy will facilitate a Q and A session.

Speaker 3

At this time, I would like to

Speaker 1

turn the call over to Mike, who will begin on Slide 8 of the presentation available on our website and filed with our earnings release.

Speaker 4

Mike? Good morning and thank you for joining us to discuss Crossroads' 2nd quarter financial results. I'd like to start by thanking our Colorado Springs Market President, Corey Lippert and our Colorado Springs team for hosting us today for the call. Our company had a great quarter delivering solid earnings growth, maintaining strong credit quality and strategically returning capital to shareholders. We increased earnings in the quarter to $18,600,000 or $0.37 per diluted share.

Speaker 4

The earnings growth is a result of our focused strategy to scale our markets and verticals, resulting in expansion of net interest income and fee income. In turn, we continue to drive operating leverage across our expense base. Not only did we increase earnings, but credit quality improved in the quarter and we continue to feel good about our reserve levels against lower classified assets and manageable non performing balances. I also want to highlight the longer term progress we have made as evidenced by solid growth in year to date operating revenue and over 6% growth in adjusted net income compared to a year ago, despite the increased cost of deposits. We are pleased to see steady performance in our fee lines with service charge and credit card revenues growing in combined 17% year over year through the 1st 6 months.

Speaker 4

We continue to focus on initiatives to drive profitable growth and leverage the investments we have made in new markets, technology and talent. Total assets grew to $7,600,000,000 an increase of 2% from the previous quarter, led by loan growth from our dynamic Texas, Colorado and Arizona markets. We continue to see selective new business opportunities. We have strategically moderated loan growth remain focused on quality relationships, while strictly adhering to our credit underwriting and pricing guidelines. We are fortunate to be located in great markets with strong economies, which we believe will allow us to continue to produce steady growth with high quality customers.

Speaker 4

Building density and scaling our markets continues to be a priority. As I mentioned, we continue to be pleased with our credit quality metrics. Past dues, non accruals, non performing assets and classified assets are all improved in the quarter. We acknowledge that market conditions continue apply pressure to borrowers across the country. We are actively monitoring credit risks through regular portfolio reviews, quarterly deep dives across all lines of business and regular reviews by independent third parties to validate our assessment of risk

Speaker 5

in the

Speaker 4

portfolio, which Randy will cover in more detail in a moment. Deposit growth continues to be an area of focus and we continue to make progress on a number of our deposit initiatives. The 2nd quarter is always challenging for deposit growth as our customers make tax payments in April. Despite that headwind, we drove net growth in client deposits led by Texas and our Energy Group. We also made progress this quarter on our focus to improve our efficiency ratio.

Speaker 4

I'm pleased to report that we completed a successful negotiation of our core services contract, which we expect will result in meaningful savings. Ben will cover the details during his remarks. Our strong earnings growth allowed us to both build capital in the quarter, while also returning capital to our shareholders through our share buyback program. For much of the quarter, our stock price was trading at a price that we believe does not fairly reflect the true value of our company. We took advantage of that opportunity and bought back stock at an average price that was well below book value, which is highly accretive value to our shareholders.

Speaker 4

We plan to continue to leverage our earnings power to build capital while also remaining opportunistic with the buyback. Finally, I'd like to thank our employees for their continued hard work, their expertise and their strong commitment to our clients, shareholders and communities. We have a team of highly experienced bankers who remain focused on optimization and efficiency as we continue to scale our operations while enhancing franchise value. And now I'd like to turn the call over to our President of Cross First Bank, Randy Rapp.

Speaker 2

Thanks, Mike, and good morning, everyone. In Q2, we continued to report solid loan and deposit growth, increased fee income and improved credit metrics. Total loan growth for the quarter was $95,000,000 resulting in a growth rate of 6% on an annualized basis. Primary contributors to growth in the quarter were C and I, energy and commercial real estate. In Q2, we hired an experienced C and I team in the Dallas market that was able to move a significant number of long term relationships late in the quarter.

Speaker 2

The growth in CRE was primarily fundings on existing construction facilities in the multifamily and industrial space. We continue to focus on increasing loan yields and the average loan yield on new production in the quarter was a strong 8.93%. At quarter end, average C and I line utilization was 52%, which is above the historical usage 50%. As expected, portfolio churn increased slightly during the quarter and is now at a historical average level. We continue to expect this churn to increase over the next several quarters, primarily in the commercial real estate portfolio.

Speaker 2

Our loan portfolio continues to remain balanced with 44% in commercial real estate and 44% in C and I and owner occupied real estate. Energy outstandings were $234,000,000 or 4% of total portfolio. On Slide 9, you can see there remains good diversity within each of those portfolios with the highest CRE property type, industrial, accounting for 22% of total CRE exposure and the largest industry segment in C and I being restaurants at 12% of C and I exposure and 4% of total loans. Our exposure in the restaurant space is primarily to proven quick service operators with multiple locations, and there remains good brand granularity in this portfolio. In the CRE portfolio, total office exposure is now $286,000,000 which is down slightly from the end of Q1 and is 4.5% of total loans.

Speaker 2

The average office loan size decreased slightly to $6,300,000 and the largest is $25,000,000 The average loan to value is 63% and the majority of the portfolio is suburban Class A and B office. Approximately 63% of the portfolio is set to mature in the next 2 years. However, 83 percent of these maturities are loans with floating rates, which have been repricing up throughout this rate cycle. We continue to have $113,800,000 office transaction graded special mention, which has the support of a strong guarantor, and the remainder of the portfolio has a pass grade. The majority of the office exposure is in our footprint centered in North Texas, Kansas City and Colorado.

Speaker 2

During Q2, total CRE commitments remained relatively to $651,000,000 at the end of Q2. Total CRE outstandings remain relatively flat at 2,690,000,000 dollars As previously mentioned, we anticipate increased churn in the CRE portfolio, which will lower total CRE exposure and are focused on reducing our total CRE exposure back below 300% of capital in the next several quarters. Moving to credit highlights on Slide 10. For Q2, we reported a decrease in our non performing assets to total assets ratio from 27 basis points at the end of Q1 to 22 basis points at the end of Q2. The decrease was primarily due to a reduction in past due ninety transactions, client payments and some partial charge offs.

Speaker 2

The remaining non performing loans are primarily C and I transactions with the largest exposure remaining under 5,000,000 dollars The ORE balances ended the quarter at $4,800,000 and includes residential lots and residences in the Austin market. Classified assets to capital plus combined reserves decreased to 13.3% at the end of Q2 from 15.8% at the end of Q1. At the end of Q1, classified totals were comprised 72% in the C and I space, 12% commercial real estate and 14% owner occupied real estate. Classified loans in the energy portfolio are inequitable. As anticipated, at the end of Q2, reported a decrease in past due transactions back to historical levels.

Speaker 2

The largest transaction in the 30 to 89 past due total is a $7,000,000,000 credit that is scheduled to pay off in late July. For the quarter, we reported net charge offs of $1,000,000 resulting in a charge off rate of 7 basis points on an annualized basis and 9 basis points on a trailing 12 month basis. Charge offs for the quarter were primarily attributable to 1 C and I credit. At quarter end, we reported allowance for credit loss to total loan loss ratio of 1.2% and a combined allowance for credit loss and reserve for unfunded commitments ratio of 1.28%, both of which are consistent with the prior quarter. Provision expense totaled $2,400,000 resulting in a provision to charge off ratio of 232%.

Speaker 2

With a total ACL of $76,200,000 our current ACL to non performing loan ratio is 6 40%. We are pleased with the improvements in our credit metrics during the quarter and remain highly focused on maintaining good credit quality moving forward. As a reminder, our ongoing credit monitoring activities include 3rd party reviews that cover 65% of our portfolio on an annual basis. Those reviews continue to validate our credit monitoring practices and approach to risk rates. Turning to Slide 11.

Speaker 2

For Q2, deposits increased 2% to $6,707,000,000 from the previous quarter. Non interest bearing deposits increased slightly during the quarter to $958,000,000 and represent 14% of total deposits. In the quarter, time deposits grew 5.6 percent to $1,900,000,000 and money market deposits grew 4.5 percent to $3,100,000,000 Tax payments in April have historically provided pressure on deposits in Q2 and the deposit market remains highly competitive. In Q2, we increased fee income with service charge fees increasing 11% over Q1 to $2,300,000 while credit card income increased 5% over Q1 to $1,600,000 We have previously made significant investments in these programs, which are now gaining traction in the market. We are pleased with our overall deposit, loan and fee income growth in the 2nd quarter.

Speaker 2

Strong portfolio management remains a key focus for the remainder of the year given the economic uncertainty, and we are proud of the decrease in non performing assets, classified assets, charge offs and past dues reported for the quarter. I will now turn the call over to Ben to cover the financial results in more detail. Ben?

Speaker 3

Thanks, Randy, and good morning, everyone. As Mike said, net income this quarter was $18,600,000 or $0.37 per diluted share on a GAAP basis. This was an increase of about 2% from last quarter or $0.01 of EPS. Operating revenue consisting of net interest income and non interest income also expanded 2% this quarter. Provision expense was modestly higher as the prior quarter included a higher mix of commitment funding that was already preserved.

Speaker 3

Non interest expense was up slightly less than 1% and included an incremental cost for restructuring our core system contract. This restructuring is expected to generate significant savings going forward with an expected earn back of 4 months and expected annual run rate savings of approximately $2,000,000 per year on our current volumes. Adjusting for the core contract restructuring would add another $0.01 to EPS. The quarterly return on average assets was 1.0% and return on average common equity was 10.6%. We realized continued balance sheet growth in the quarter, as Randy outlined, and we are really pleased to see profitability improvement in the quarter's results.

Speaker 3

Interest income expanded this quarter driven by both higher yields and higher average balances. Slide 12 outlines the underlying changes in net interest margin this quarter. Yield on loans increased 7 basis points, resulting in an earning asset yield of 6.78% this quarter. Average yield on new loans for the quarter was 8.93%. Better yields on our investment securities portfolio also contributed.

Speaker 3

Average earning assets increased 161 $1,000,000 compared to the prior quarter, primarily due to loan growth, which was somewhat back loaded toward the end of the quarter. Our total cost of deposits was 3.92% for the quarter, increasing 5 basis points. Our total non maturity deposit beta against the entire rate cycle through the 2nd quarter remained at 57%, in line with our expectations, and the pace of increase in the cost of deposits continued to moderate, falling from a 13 basis point increase last quarter. Our deposit base remained consistent with the prior quarter in terms of diversification and composition and client deposits grew by quarter end. Our loan to deposit ratio was down slightly to 94%.

Speaker 3

We utilized borrowing within the quarter due to some seasonal client cash outflows, which resolved by the end of the quarter, leaving the ending balance flat to last quarter. And wholesale funding moved up slightly by 1 percent to 16% of assets. Fully tax equivalent net interest margin was consistent with the prior quarter at 3.20 percent, in line with our expected range.

Speaker 2

We expect some improvement to our

Speaker 3

NIM with any rate cuts this year. For the quarter, yield on assets kept pace with the increase in cost of funds. Our NIM has remained stable in the low 320s since the Q2 of 2023. We've worked diligently to position our balance sheet to perform in the current higher for longer rate environment, while preparing for potential rate cuts. Our earning assets continue to be primarily variable at 66% reprice or mature in the next 12 months.

Speaker 3

As Randy outlined, our loan growth was on the lower end expected range this quarter and we are moderating our estimated loan growth in 2024 to a range of 6% to 8% for the year. On the liability side, we have good variability as well. 27% of our client deposits are indexed and will automatically move down with any Fed rate movements. In addition, we have short duration broker deposits of 16%. Our CD portfolio duration has continued to shorten as we incentivize clients to move into 6 9 month products.

Speaker 3

And we have 850,000,000 appliance CDs that mature in the next 12 months. As we rate environment outlook continues to be very dynamic and we continue to assume 2 rate cuts this year with a potential September cut being the only significant impact for 2024. Based on that assumption and including somewhat lower loan growth, our expected margin is still in the range of 320 to 325 for the year. The absence of a rate cut would leave our margin at the lower end of that range. Non interest income was $5,700,000 for the quarter, expanding 2% from last quarter.

Speaker 3

Growing non interest income is a key strategic priority for us. And as previously mentioned, the biggest driver of this expansion was service charges and credit card revenues. These will be continued focus areas of growth in 2024. Moving to Slide 13. Non interest expense increased slightly this quarter compared to the prior quarter, driven by the core contract restructuring, as I mentioned.

Speaker 3

Expenses would have declined otherwise and been in line with our guidance. Compensation declined due to lower taxes and benefits, partially due to seasonality. Our headcount was unchanged from the prior quarter and remains at the same level as a year ago as we continue to scale with some remixing of talent toward production roles. We expect non interest expense to be around $37,000,000 per quarter for the rest of 2024, including the core contract renegotiation savings. We remain highly focused on our efforts to drive additional efficiencies and gain operating leverage in 2024 as evidenced by operating revenue growth outpacing expense growth this quarter.

Speaker 3

Our tax rate this quarter was consistent with last quarter at 21%, and we expect the tax rate to remain in a range of 20% to 22% this year. On Slide 14, our liquidity remains strong consistent with the prior quarter at 34% of assets. We have liquidity of approximately $2,600,000,000 from on and off balance sheet sources. On Slide 15, we continue to advance our goal of building capital this quarter as we saw continued asset growth and strong earnings. We continue to focus on building capital, balanced with shareholder return.

Speaker 3

As Mike mentioned, we took advantage of some price pressure on our stock and increased our level of buybacks. We repurchased 237,000 shares at a weighted average cost of $12.78 compared to tangible book value per share of $14.02 at quarter end. We believe we can continue to achieve our goal of building capital while dedicating a portion of our earnings to shareholder return. In summary, we are very happy with the first half of 2024 with strong earnings, continued organic growth and advancement of our strategy. Operator, we are now ready to begin the question and answer portion of the call.

Operator

We will now begin the question and answer session. The first question today comes from Michael Rose with Raymond James. Please go ahead.

Speaker 5

Hey, good morning, everyone. Thanks for taking my questions. Maybe we could just start on deposits. Hey, good morning. Maybe we could just start on deposits.

Speaker 5

The growth was really strong. I know you kind of cited energy in Texas, I believe, but I know also that you recently signed up with Nimbus. And just wanted to see how we should think about the pace and complexion of deposit growth. Like do you think that the NIB mix is essentially a stabilized level? How would you comment on costs?

Speaker 5

And how should we think about continued deposit growth as we move not only through the next two quarters, but also into next year? Thanks.

Speaker 4

Yes. Thanks, Michael. I think we do feel like our mix has stabilized. We're obviously continuing to focus on improving that mix by growing our non interest bearing. And we had nice growth across our footprint.

Speaker 4

I did highlight a couple of our pilot groups that outperformed a little bit. But we're in dynamic markets and so we continue to see great opportunity to grow deposits in our markets and our footprint. Nimbus is still in process. We have not launched that yet, and we expect that will launch in the Q4. So the growth in the second quarter was just core deposit growth from our markets.

Speaker 5

So should we assume that there's the potential for deposit growth to actually outpace loan to growth? And then hopefully if there's a little bit more clarity on the economy as we move into next year that loan growth could accelerate. Is that kind of the way we should think about it?

Speaker 4

Yes. I think that's a fair way to think about it, and we're trying to be thoughtful on loan growth. We want to stick to our pricing model and to our credit standards. And so and as Randy said, we're focused on reducing our CRE concentration down under that 300 mark. And so we're trying to be thoughtful as we look at that area as well.

Speaker 4

And we expect loan churn to pick up a little bit, which will allow us to also increase our new loan volume.

Speaker 2

Michael, this is Randy. I might add, as highlighted, we made some tweaks to our incentive model to highlight deposit growth.

Speaker 4

And I

Speaker 2

think we're starting to see that gain traction as well in our markets. And so we have all our relationship managers not asking, doesn't matter what line of business they're in, they're asking for deposits. And as we think about new loans, we're making sure that, that comes with a full relationship and deposits as well.

Speaker 5

Okay. And then maybe just finally for me, just to kind of tie all this together. So it sounds like the potential for stronger deposit growth, you're being very thoughtful on loan growth. Maybe you look to add a little bit incrementally to the securities book. But it would seem to me that the actual ability to grow NIM, assuming we only get 2 cuts this year, whatever it's going to be is somewhat limited, just given those dynamics.

Speaker 5

Is that kind of fair as we kind of think about it into next year? Or am I missing something? Thanks.

Speaker 4

Michael, I still think we have the opportunity to grow NIM and net interest income. A lot of our loan growth in the second quarter was late in the quarter. And otherwise, our net interest income would have been stronger. We think we'll have a little headwind in the Q3 with that and or a tailwind, I mean. And I think you're going to continue to see solid growth the rest of the year.

Speaker 4

And hopefully, with the rate cut or in September, if not sooner, we ought to get some expansion of our net.

Speaker 3

Michael, it's Ben. I would add while we're a little bit more balanced on sensitivity than we were a quarter ago, we will benefit from a rate cut and we're positioned for that. Mike and Randy talked about non interest bearing, but

Speaker 2

those have moved a little bit.

Speaker 3

But I think it's important to note they've grown with the growth of our balance sheet and really haven't moved off of that 14%, 15% level in a while.

Speaker 5

Very helpful. I'll step back. Thanks for taking my questions.

Speaker 2

Thanks, Mike.

Operator

The next question comes from Woody Lai with KBW. Please go ahead.

Speaker 6

Hey, good morning guys.

Speaker 7

Hi, Woody. Good morning.

Speaker 6

Yes. So it's a really strong quarter for credit. I was hoping that you could just give us some color on what drove the classified improvement in the quarter?

Speaker 2

Hey, Woody, this is Randy. Yes, it was really across the whole portfolio. I mean, there was no we saw decreases in CRE, in C and I. And really, it was just portfolio performance. I mean we were able to we had some transactions refinanced.

Speaker 2

We had some that were restructured with additional equity, which allowed us to upgrade it. And so it was really no one thing that drove that decrease during the quarter.

Speaker 6

Makes sense. And then as it relates to the reserve, just on a percentage basis, it was flat. Given some of the credit metric improvement that we saw, did you tweak some of the qualitative factors in the quarter to keep that percentage flat?

Speaker 3

Woody, it's Ben. We look at those qualitative factors obviously every quarter. We've not made any significant moves in those. We're cautiously optimistic about the economic outlook, which I don't think is probably different than anyone else would think about it. Our goal really is to continue to maintain a reserve at that level, at that 120 level, which we think is appropriate and the underlying change is primarily driven by loan growth and charge offs.

Speaker 3

Obviously, it's how the math works.

Speaker 6

Yes. All right. That's all for me. I'll hop in the queue.

Speaker 2

Thanks, buddy.

Operator

The next question comes from Andrew Liesch with Piper Sandler. Please go ahead.

Speaker 7

Hey everyone. Thanks for taking the questions here. Good morning. The commercial real estate as a percentage of capital, you mentioned a couple of times now your goal is to get it below 300%. Do you have where that was at the end of the quarter?

Speaker 2

Yes, it's about 320. And Andrew, historically, we've been in the 270 range. We made a strategic decision to increase that given market conditions and opportunities we were seeing. And so that peaked at about $330,000,000 and then now we're starting to work that back down below $300,000,000 but we finished

Speaker 4

at about $320,000,000 Well, the prescottage has also changed with the 2 acquisitions we've made in Colorado and Arizona that were a little heavier real estate. And so we're just trying to methodically work that back down.

Speaker 7

Right, right. Makes sense there. And then on the expense front here, you get the savings from the contract renegotiation. It sounds like a lot of that's going to be reinvested back into the franchise. Just curious where some

Speaker 3

of the suspending might be? Does this include the

Speaker 8

new team that you hired?

Speaker 3

Good morning, Andrew. It's Ben. That is probably the biggest portion. As I said, we continue to remix our headcount a little bit while really holding it flat to continue to tilt it more toward production roles as we find efficiencies or leverage in our expense base, which as Mike said, is our long term goal. The other lesser factors would be we, of course, continue to experience a significant amount of inflation in our cost base as our balance sheet continues to grow, in particular, in the second half of the year.

Speaker 3

Our regulatory assessment is growing. And then last piece would be we have a little bit of a tilt on our marketing business development spends toward the second half of the year. But the primary driver is investment production talent.

Speaker 2

Andrew, to add to that, we're seeing some disruption in our markets and which is really presenting some nice talent opportunities for us. And so we're trying to be very selective in how we add that talent, but the market disruption is generating some high degree of interest in CrossFirst.

Speaker 4

Yes. And we were able to add 5 more production people in the quarter that really weren't budgeted. But just through normal attrition and the employee base, we were able to keep our total headcount flat. So as Randy said, we are seeing some opportunities, and we want to make sure we are in a position to take advantage of that.

Speaker 7

Great. That's really encouraging to hear. Thanks for taking the questions. I'll step back.

Speaker 4

Thanks,

Operator

The next question comes from Matt Olney with Stephens. Please go ahead.

Speaker 8

Hey, thanks. Good morning, everybody.

Speaker 4

Good morning, Matt. I

Speaker 8

want to ask more about capital and capital deployment. And I think in the Q2, you deployed some capital via the buyback and looks like that trade is working out well so far. And I think, late last year, you deployed some capital via the little restructuring. I guess over the last few weeks, we've seen these bank valuations move higher. We've seen rates move lower.

Speaker 8

I'm curious around kind of the updated thoughts around capital from here and potential for deployment given these more recent moves over the last few weeks?

Speaker 3

Hey, Matt. It's been As you said, we deliberately hit the buyback harder in particular earlier on in the Q2. That, of course, is the beauty of a buyback. It's flexibility. And the math is nowhere near as desirable today, we're happy about as we've seen a lot of price improvement through the quarter and through July.

Speaker 3

As Mike said, we continue to have a long term goal to build our ratios from where they are. They all moved up a little bit quarter over quarter and nicely year over year. You are correct. We utilized around $1,000,000,000 of capital in 4th quarter to do a bond trade, although we did that in a way that was actually positive to our risk weighted capital ratio because of how we NIM improvement. So our goal remains to continue, as Mike said, to be opportunistic about that capital deployment and continue to build those ratios.

Speaker 4

Yes. And Matthew, look, we're really pleased with movement in our stock price. And today, it probably makes a little more sense to deploy that capital into high quality growth in our markets. And so as Ben said, we want to continue to build capital, but we're in markets that are going to provide us plenty of opportunity to put on high quality growth as well. Yes.

Speaker 8

Okay. Appreciate that. Thanks for the color. And then, I think, Ben, you mentioned that the balance sheet migrated a little bit more towards being rate neutral, more so than what we saw the previous quarter. Any more color on what drove this move?

Speaker 8

And any commentary about expectations of movements from here? Thanks.

Speaker 3

Sure, Matt. Really 2 main drivers that produced the small change from Q1 to Q2. 1, our level of repricing assets increased as we added a higher mix of variable rate loans in the quarter. We also carried a bit more cash. Then on the liability side, we've shifted our time deposit maturities out a little bit further.

Speaker 3

They're now a little bit more spread out than they were in the Q1. So between those two things, we've shifted a little bit more neutral, but we will we are continuing to position in such a way that we'll benefit from our rate cut.

Speaker 8

Okay. Thanks for the commentary. That's all for me.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Mike Maddox for any closing remarks.

Speaker 4

Well, I just want to thank everyone for joining the call today. Again, we're really pleased with our quarter, and I want to thank our teams for all their hard work. And we continue to see improving conditions, and we believe that the rest of the year should continue to be strong. And we'll continue to focus on really profitable growth and continue to take advantage of the opportunities we're seeing in our dynamic markets. So thank you again for joining us, and you have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • CrossFirst delivered Q2 EPS of $0.37, a 2% increase quarter-over-quarter, driven by expansion in net interest income and fee income alongside disciplined expense management.
  • Credit quality continued to improve, with non-performing assets falling to 0.22% of assets, the classified assets ratio decreasing to 13.3%, and net charge-offs remaining low at 7 bps on an annualized basis.
  • Total loans grew by $95 million (6% annualized) with new production yielding 8.93%, while deposits increased 2%, supported by targeted initiatives to boost non-interest-bearing balances to 14% of total.
  • The bank completed a core system contract renegotiation expected to generate $2 million in annual savings (four-month payback), contributing to non-interest expenses that were essentially flat year-over-year.
  • CrossFirst repurchased 237,000 shares at an average price of $12.78 (below tangible book value of $14.02), underscoring its strategy to build capital while remaining opportunistic with buybacks.
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Earnings Conference Call
CrossFirst Bankshares Q2 2024
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