CrossFirst Bankshares Inc. (CFB) Q1 2024 Earnings Call Transcript
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Overview
The earnings call summary and Q&A indicate strong financial performance with loan growth, increased noninterest income, and a stable NIM. Management's optimistic guidance on fee income and NIM stability, despite minor concerns on loan churn, suggests a positive outlook. The Q&A clarifies concerns about credit cycles and deposit growth, further supporting a positive sentiment. The absence of any major negative factors and the expectation of stable or improving margins contribute to a positive prediction for the stock price movement.
Key Financial Performance
Total Assets $7.5 billion, an increase from previous periods, reflecting strong organic growth.
Net Income $18.2 million, or $0.36 earnings per share, a 3% increase from the previous quarter due to lower provision expense and higher noninterest income.
Loan Growth $121 million for the quarter, resulting in a growth rate of 2% for the quarter or 8% on an annualized basis, driven by commercial real estate, C&I, and owner-occupied real estate.
Average Loan Yield 8.58%, indicating a strong performance in loan production.
Deposits $6.6 billion, up 1.5% or $96 million from the previous quarter, reflecting organic growth in client deposits.
Noninterest Income $5.6 million, a 26% increase year-over-year, driven by treasury, credit card, and SBA contributions.
Net Interest Margin 3.20%, down 3 basis points from the prior quarter, with an underlying yield on earning assets increasing 16 basis points.
Cost of Deposits 3.87%, an increase of 13 basis points, reflecting the competitive environment.
Net Charge-offs $1.5 million, resulting in a charge-off rate of 10 basis points on an annualized basis, primarily due to small C&I credits.
Allowance for Credit Loss to Total Loan Ratio 1.2%, flat compared to the end of Q4, indicating stable credit quality.
Liquidity Ratio 33% of assets, consistent with the prior quarter, indicating strong liquidity.
Share Buybacks 112,000 shares repurchased at a weighted average cost of $13.10, compared to tangible book value per share of $13.70.
Operating Highlights
New Business Opportunities: Despite a challenging macro environment, CrossFirst Bankshares continues to see good new business opportunities in its markets and verticals.
Market Expansion: The company reported organic growth in client deposits led by Kansas City, Oklahoma, and Phoenix markets.
Non-Interest Income Growth: Year-over-year growth in non-interest income was fueled by the development of newer markets and verticals, specifically in SBA and treasury fees.
Loan Growth: Total loan growth was $121 million, resulting in a growth rate of 2% for the quarter or 8% on an annualized basis.
Credit Metrics: The non-performing asset to total asset ratio decreased to 27 basis points from 34 basis points at the end of Q4.
Deposit Growth: Deposits increased 1.5% to $6.6 billion, up $96 million from the previous quarter.
Cost Management: The company is focused on driving additional efficiencies and gaining operating leverage in 2024.
Strategic Acquisitions: The increase in the commercial real estate portfolio is attributed to two strategic acquisitions made over the last 18 months.
Shareholder Return Strategy: The company restarted share buybacks in Q1 2024, repurchasing 112,000 shares at a weighted average cost of $13.10.
Risk or Challenges
Macro Environment Challenges: Despite a challenging macro environment, the company continues to see good new business opportunities, but acknowledges the pressure on net interest margin, earnings, and capital due to the historic rising rate environment.
Commercial Real Estate (CRE) Risks: Commercial real estate is an area of heightened focus, with expectations of increased portfolio churn in the coming quarters, particularly as clients intend to sell or stabilize properties.
Loan Portfolio Concentration: The company is focused on reducing concentration in commercial real estate back toward historic levels, indicating a risk associated with overexposure in this area.
Regulatory and Economic Factors: The company mentions risks and uncertainties that could cause actual results to differ materially from forward-looking statements, including regulatory issues and economic factors.
Credit Quality Concerns: There is an expectation of increased churn in the commercial real estate portfolio, which may lead to credit quality concerns in future quarters.
Interest Rate Sensitivity: The company is slightly liability sensitive, and the expected pressure on net interest margin continues to narrow as they renew CDs.
Operational Efficiency: The company is focused on driving additional efficiencies and gaining operating leverage, indicating potential challenges in managing operational costs.
Guidance & Outlook
Loan Growth Strategy: Total loan growth was $121 million resulting in a growth rate of 2% for the quarter or 8% on an annualized basis, with a focus on quality deals and risk management.
Non-Interest Income Growth: Year-over-year growth in non-interest income was fueled by the development of newer markets and verticals, specifically SBA and treasury fees.
Employee Engagement: Received the Don Clifton Strengths-Based Culture Award for the second consecutive year, reflecting a strong workplace culture that enhances performance.
Credit Quality Management: Maintaining solid credit metrics with a focus on scrutinizing the existing loan portfolio for negative credit trends.
Strategic Acquisitions: Two strategic acquisitions over the last 18 months have contributed to the increase in the commercial real estate portfolio.
Future Loan and Deposit Growth: Expect loan and deposit growth in 2024 in a range of 8% to 10%.
Net Interest Margin Outlook: Expected margin in a range of 3.20% to 3.25%, assuming two rate cuts this year.
Non-Interest Expense Guidance: Expect a run rate around $37 million per quarter for non-interest expenses.
Shareholder Return Strategy: Restarted share buybacks with 112,000 shares repurchased at a weighted average cost of $13.10.
Capital Building Focus: Continue to focus on building capital while balancing shareholder returns.
Shareholder Return Plan
Share Buyback Program: In the first quarter, CrossFirst Bankshares restarted share buybacks after pausing through all of 2023. They repurchased 112,000 shares at a weighted average cost of $13.10, compared to tangible book value per share of $13.70 at quarter end.
Key Q&A
Earnings Word Cloud
CFB Transcript
The earnings call highlights strong financial performance with a 2% increase in net income, 6% loan growth annualized, and a robust return on equity of 10.6%. The company is also optimistic about deposit growth outpacing loan growth, and management's proactive approach to capital deployment and share buybacks is positive. Despite some risks in CRE exposure and market conditions, the overall sentiment is buoyed by solid financial metrics, shareholder returns, and strategic focus on growth, suggesting a positive stock price movement in the near term.
The earnings call summary and Q&A indicate strong financial performance with loan growth, increased noninterest income, and a stable NIM. Management's optimistic guidance on fee income and NIM stability, despite minor concerns on loan churn, suggests a positive outlook. The Q&A clarifies concerns about credit cycles and deposit growth, further supporting a positive sentiment. The absence of any major negative factors and the expectation of stable or improving margins contribute to a positive prediction for the stock price movement.
CFB Report
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