CrossFirst Bankshares, Inc. Reports Fourth Quarter and Full Year 2021 Results

| Source: CrossFirst Bankshares, Inc. CrossFirst Bankshares, Inc.


Fourth Quarter 2021 Key Financial Performance Metrics


Net Income ROAA Net Interest Margin (FTE) Diluted EPS ROE
$20.8 million 1.50% 3.28% $0.40 12.57%

LEAWOOD, Kan., Jan. 24, 2022 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported operating results for the fourth quarter and full year 2021, with fourth quarter net income of $20.8 million, or $0.40 per diluted share, and full year net income of $69.4 million, or $1.33 per diluted share.

CEO Commentary:

"We built significant momentum in 2021 with solid earnings, operating revenue at an all-time high and a return to loan growth in the last half of the year. We also made meaningful progress this past year in deposit mix and growing fee income while making investments in talent and technology to drive growth, serve our clients in extraordinary ways and deliver value to our shareholders,” said CrossFirst’s CEO and President, Mike Maddox. “Our fourth quarter was a great capstone to the year with continued loan growth and significant improvement in credit quality.”

2021 Fourth Quarter and Full Year Highlights:
  • $5.6 billion of assets with net income for the fiscal year ended December 31, 2021 of $69 million, an increase of $57 million or 451% from the prior year ended December 31, 2020
  • Improvement in credit quality during 2021 as evidenced by the decrease in nonperforming assets to total assets ratio from 1.39% at December 31, 2020 to 0.58% at December 31, 2021
  • Return on Average Assets of 1.24% and a Return on Equity of 10.84% for the fiscal year ended December 31, 2021
  • Net Interest Margin (Fully Tax-Equivalent) of 3.15% for the fiscal year ended December 31, 2021, compared to 3.13% for the prior year ended December 31, 2020
  • Annualized loan growth of 7% for the fourth quarter of 2021, excluding PPP loans
  • Non-interest-bearing deposit growth of 62% from December 31, 2020 which represented 25% of total deposits at December 31, 2021
  Quarter-to-Date   Full Year 
  December 31,   December 31, 
(Dollars in millions except per share data) 2021  2020   2021  2020 
Operating revenue(1)$48.2 $44.5  $182.4 $172.0 
Net income$20.8 $8.1  $69.4 $12.6 
Diluted earnings per share$0.40 $0.15  $1.33 $0.24 
Return on average assets 1.50% 0.58%  1.24% 0.24%
Return on average common equity 12.57% 5.19%  10.84% 2.05%
Non-GAAP core return on average tangible common equity(2) 12.57% 5.19%  11.40% 3.27%
Net interest margin 3.22% 3.07%  3.09% 3.08%
Net interest margin, fully tax-equivalent(3) 3.28% 3.12%  3.15% 3.13%
Efficiency ratio 55.38% 53.35%  54.50% 58.13%
Non-GAAP core operating efficiency ratio, fully tax-equivalent(2)(3) 54.52% 52.54%  52.02% 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 these measures.
(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%.

Income from Operations

Net Interest Income

Interest income was $49.2 million for the fourth quarter of 2021, a decrease of 1% from the fourth quarter of 2020 and an increase of 4% from the previous quarter. Interest income was slightly down from the fourth quarter of 2020 as a result of lower average loans outstanding and a reduction of $4.5 million in PPP fee income. Average earning assets totaled $5.4 billion for the fourth quarter of 2021, a decrease of $23 million or 1% from the same quarter in 2020. The tax-equivalent yield on earning assets increased from 3.62% to 3.70% during the fourth quarter of 2021 compared to the previous quarter, mostly driven by loans moving off nonaccrual status. For full year 2021, interest income was $193.2 million, which declined compared to full year 2020 primarily due to the yield movements on earning assets.

Interest expense for the fourth quarter of 2021 was $5.8 million, or 28% lower than the fourth quarter of 2020 and 4% higher than the previous quarter. Average interest-bearing deposits decreased to $3.5 billion in the fourth quarter of 2021, or a 9% decrease from the same prior year period. Cost of funds for the quarter was 0.48%, compared to 0.46% for the third quarter of 2021. During the fourth quarter of 2021, $40 million of FHLB advances were paid off early, which drove the cost of funds increase. Excluding the prepayment penalty, cost of funds would have decreased 0.05% compared to the third quarter of 2021. For full year 2021, interest expense was $24.5 million, a decrease of 43% compared to full year 2020 due to lower market rates.

Net interest income totaled $43.4 million for the fourth quarter of 2021 or 4% higher than the third quarter of 2021, and 5% higher than the fourth quarter of 2020. Tax-equivalent net interest margin increased to 3.28% in the current quarter, from 3.20% in the previous quarter, and increased from 3.12% in the same quarter in 2020.   During the fourth quarter of 2021, CrossFirst realized $1.3 million in fees from the forgiveness of $44 million of PPP loans. The Company will continue to recognize fees over the life of the loans or as the loans are forgiven. The tax-equivalent adjustment, which accounts for income taxes saved on the interest earned on nontaxable securities and loans, was $0.8 million for the fourth quarter of 2021. Full year 2021 net interest income grew to $168.7 million, an increase of 5% compared to full year 2020, while tax-equivalent net interest margin increased to 3.15% from 3.13% for the prior year.

Non-Interest Income

Non-interest income increased $1.8 million in the fourth quarter of 2021 or 63% compared to the same quarter of 2020 and increased $5.9 million compared to the third quarter of 2021. The increase in non-interest income compared to the previous quarter was due to the $6.2 million impairment loss recorded in the previous quarter. The increase in non-interest income compared to the same quarter of 2020, was primarily due to increases of $0.9 million in credit card fees and $0.4 million in service charge income. Full year 2021 non-interest income was up $1.9 million or 16% compared to full year 2020. The main drivers of the increase were increases in service charges and fees on customer accounts of $1.8 million, $1.7 million in income from bank-owned life insurance and a $3.6 million increase in ATM and credit card interchange income.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2021 was $26.7 million, which increased 13% compared to the fourth quarter of 2020 and increased 11% from the third quarter of 2021. Salaries and benefit costs were higher in the current quarter by $1.1 million compared to the prior quarter and $1.7 million higher than the same quarter in the prior year mainly due to increased hiring for market expansion and increased incentive expenses.   Full year 2021 non-interest expense decreased $0.6 million or 1% compared to full year 2020 primarily due to a $7.4 million goodwill impairment recorded in the second quarter of 2020. This decrease was partly offset by a $3.3 million increase in salary and employee benefits, $1.0 million increase in occupancy, and $2.8 million increase in other non-interest expense as compared to the prior year. The other non-interest expense increase was primarily due to increases in commercial card costs as a result of our growing customer base and increased use as a result of the COVID-19 pandemic. In addition, insured cash sweep (“ICS”) deposits increased in 2021 from 2020, which drove related fees higher.

CrossFirst’s effective tax rate for the fourth quarter of 2021 was 22% as compared to 18% for the fourth quarter of 2020. The 2021 tax rate for the quarter increased due to a greater mix of taxable income to tax-exempt income. For both comparable periods, the Company continued to benefit from the tax-exempt municipal bond portfolio and bank-owned life insurance. The tax-exempt benefit diminishes as the Company’s ratio of taxable income to tax-exempt income increases.

Balance Sheet Performance & Analysis

During the fourth quarter of 2021, total assets increased by $220 million or 4% compared to September 30, 2021, and decreased $38 million or 1% compared to December 31, 2020.   Total assets increased on a linked quarter basis primarily due to a $166 million increase in cash and cash equivalents and decreased year-over-year primarily due to a $186 million decline in loans driven by the PPP loan forgiveness program.   The year-over-year decrease was partly offset by increases in cash and cash equivalents and securities of $74 million and $91 million, respectively. Non-interest-bearing deposits increased $202 million compared to September 30, 2021, and increased $445 million from December 31, 2020. During the fourth quarter of 2021, available-for-sale investment securities increased $38 million to $746 million compared to September 30, 2021. The securities yields increased 2 basis points to a tax equivalent yield of 2.89% for the fourth quarter of 2021 compared to the prior quarter.

Loan Results

During the fourth quarter of 2021, the Company experienced a decrease in average loans of $10 million compared to September 30, 2021, and a decrease of $273 million or 6% compared to December 31, 2020. The year-over-year reduction in average loans was primarily a result of PPP loan forgiveness. Net of PPP loans, average loans grew 1% compared to September 30, 2021. Loan yields increased 17 basis points to 4.17% during the fourth quarter of 2021 and increased 17 basis points over the last twelve months.

  4Q21   3Q21   2Q21   1Q21   4Q20  QoQ Growth ($) QoQ Growth (%)(1) YoY Growth ($) YoY Growth (%)(1)
 (Dollars in millions)
Average loans (gross)                               
Commercial$1,328  $1,233  $1,221  $1,329  $1,367  $95  8 % $(39) (3)%
Energy 290   311   341   351   381   (21) (7)   (91) (24) 
Commercial real estate 1,272   1,213   1,203   1,183   1,194   59  5    78  7  
Construction and land development 579   611   633   598   585   (32) (5)   (6) (1) 
Residential and multifamily real estate 612   659   659   688   664   (47) (7)   (52) (8) 
Paycheck Protection Program 84   147   296   308   258   (63) (43)   (174) (67) 
Consumer 56   57   56   50   45   (1) (2)   11  24  
Total$4,221  $4,231  $4,409  $4,507  $4,494  $(10) (0)% $(273) (6)%
                                
Yield on average loans for the period ending 4.17%  4.00%  3.99%  3.94%  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 & Other Borrowing Results

During the fourth quarter of 2021, the Company experienced an increase in average deposits of 2% compared to September 30, 2021, and a less than 1% decline in average deposits compared to December 31, 2020. The deposit growth for the quarter was driven by a continued increase in non-interest-bearing deposits, which represented 25% of total deposits at December 31, 2021. In addition, the Company continued to improve the overall cost of deposits, which declined 5 basis points during the fourth quarter of 2021. The cost of interest-bearing deposits has declined 26 basis points over the last twelve months primarily as a result of the lower interest rate environment.

  4Q21   3Q21   2Q21   1Q21   4Q20  QoQ
Growth ($)		 QoQ
Growth (%)(1)		 YoY
Growth ($)		 YoY Growth (%)(1)
 (Dollars in millions)
Average deposits                               
Non-interest bearing deposits$1,058  $910  $802  $731  $732  $148  16 % $326  45 %
Transaction deposits 543   511   665   717   575   32  6    (32) (6) 
Savings and money market deposits 2,272   2,276   2,385   2,422   2,158   (4) (0)   114  5  
Time deposits 662   752   869   972   1,087   (90) (12)   (425) (39) 
Total$4,535  $4,449  $4,721  $4,842  $4,552  $86  2 % $(17) (0)%
                                
Cost of deposits for the period ending 0.33%  0.38%  0.41%  0.48%  0.58%            
Cost of interest-bearing deposits for the period ending 0.43%  0.47%  0.50%  0.57%  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, 2021, other borrowings totaled $238 million, as compared to $278 million at September 30, 2021, and $296 million at December 31, 2020.

Asset Quality Position

Credit quality metrics continued to improve during the fourth quarter of 2021 as classified assets decreased $45 million and the ratio of nonperforming assets to total assets decreased to 0.58% from 0.92% in the previous quarter. The improvements in credit metrics were primarily driven by upgrades in COVID-19 impacted segments and the Energy portfolio. Net charge-offs were $0.8 million for the fourth quarter of 2021 as compared to $1.3 million for the third quarter of 2021. The charge-offs for the current quarter were related to energy and commercial and industrial credits.

The overall decrease in the allowance for loan losses for the current quarter reflects some stabilization in the Company’s economic outlook and improved credit performance. These factors resulted in a $5 million release of reserves during the fourth quarter of 2021. The following table provides information regarding asset quality.

Asset quality (Dollars in millions) 4Q21   3Q21   2Q21   1Q21   4Q20 
Non-accrual loans$31.4   $48.1   $54.7  $63.3  $75.1 
Other real estate owned 1.1    1.1    1.7   2.3   2.3 
Nonperforming assets 32.7    49.8    58.1   68.9   78.4 
Loans 90+ days past due and still accruing 0.1    0.5    1.8   3.2   1.0 
Loans 30 - 89 days past due 3.5    37.6    18.8   11.0   18.1 
Net charge-offs (recoveries) 0.8    1.3    2.6   8.2   11.6 
                    
Asset quality metrics (%) 4Q21   3Q21   2Q21   1Q21   4Q20 
Nonperforming assets to total assets 0.58 %  0.92 %  1.09%  1.15%  1.39%
Allowance for loan loss to total loans 1.37    1.51    1.78   1.65   1.70 
Allowance for loan loss to nonperforming loans 185    132    134   112   99 
Net charge-offs (recoveries) to average loans(1) 0.07    0.13    0.23   0.74   1.03 
Provision to average loans(1) (0.47)   (0.94)   0.32   0.67   0.96 
Classified Loans / (Total Capital + ALLL) 10.8    17.3    24.0   38.2   40.9 
(1) Interim periods annualized. 

Capital Position

At December 31, 2021, stockholders' equity totaled $668 million, or $13.23 per share, compared to $624 million, or $12.08 per share, at December 31, 2020. During the fourth quarter of 2021, CrossFirst continued its $30 million share repurchase program by purchasing 566,164 shares or 1% of common stock outstanding.

The ratio of common equity Tier 1 capital to risk-weighted assets was approximately 12% and the total capital to risk-weighted assets was approximately 14% at December 31, 2021. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call to review fourth quarter and full-year 2021 financial results on Tuesday, January 25, 2022, at 10 a.m. CT / 11 a.m. ET. The results are scheduled to be released after the market closes on Monday, January 24, 2022. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. To access the event by telephone, please dial (877) 621-5851 at least fifteen minutes prior to the start of the call and provide conference number 9688475. International callers should dial +1 (470) 495-9492 and enter the same conference number.

The call will also be broadcast live over the internet and can be accessed via the following link: https://edge.media-server.com/mmc/p/rienoizn. Please visit the site at least 15 minutes prior to the call to allow time for registration.

For those unable to join the presentation, a replay of the call will be available two hours after the conclusion of the live call. To access the replay, dial (855) 859-2056 and provide conference number 9688475, passcode 9067. International callers should dial +1 (404) 537-3406 and enter the same confirmation number. A replay of the webcast will also be available for 90 days on the company’s website https://investors.crossfirstbankshares.com/.

Cautionary Notice about Forward-Looking Statements

The financial results in this press 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 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 that 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 Bank

CrossFirst Bankshares, Inc. (Nasdaq: CFB) is a Kansas corporation and a registered bank holding company for its wholly owned subsidiary CrossFirst Bank, which is headquartered in Leawood, Kansas. CrossFirst has nine full-service banking locations in Kansas, Missouri, Oklahoma, Texas, and Arizona that offer products and services to businesses, professionals, individuals, and families.

Unaudited Financial Tables

  • Table 1. Consolidated Balance Sheets
  • Table 2. Consolidated Statements of Operations
  • Table 3. 2020 - 2021 Year-to-Date Analysis of Changes in Net Interest Income
  • Table 4. 2020 - 2021 Quarterly Analysis of Changes in Net Interest Income
  • Table 5. Non-GAAP Financial Measures

TABLE 1. CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 As of December 31,
 2021  2020 
 (Dollars in thousands)
Assets     
Cash and cash equivalents$482,727  $408,810 
Available-for-sale securities - taxable 192,146   177,238 
Available-for-sale securities - tax-exempt 553,823   477,350 
Loans, net of allowance for loan losses of $58,375 and $75,295 at December 31, 2021 and 2020, respectively 4,197,838   4,366,602 
Premises and equipment, net 66,069   70,509 
Restricted equity securities 11,927   15,543 
Interest receivable 16,023   17,236 
Foreclosed assets held for sale 1,148   2,347 
Bank-owned life insurance 67,498   67,498 
Other 32,258   56,170 
Total assets$5,621,457  $5,659,303 
Liabilities and stockholders’ equity     
Deposits     
Noninterest-bearing$1,163,224  $718,459 
Savings, NOW and money market 2,895,986   2,932,799 
Time 624,387   1,043,482 
Total deposits 4,683,597   4,694,740 
Federal funds purchased and repurchase agreements -   2,306 
Federal Home Loan Bank advances 236,600   293,100 
Other borrowings 1,009   963 
Interest payable and other liabilities 32,678   43,766 
Total liabilities 4,953,884   5,034,875 
Stockholders’ equity     
Common stock, $0.01 par value:     
authorized - 200,000,000 shares, issued - 52,590,015 and 52,289,129 shares at December 31, 2021 and 2020, respectively 526   523 
Treasury stock, at cost:     
2,139,970 and 609,613 shares held at December 31, 2021 and 2020, respectively (28,347)  (6,061)
Additional paid-in capital 526,806   522,911 
Retained earnings 147,099   77,652 
Accumulated other comprehensive income 21,489   29,403 
Total stockholders’ equity 667,573   624,428 
Total liabilities and stockholders’ equity$5,621,457  $5,659,303 

        TABLE 2. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 Three Months Ended Twelve Months Ended
 December 31, December 31,
 2021  2020  2021  2020 
 (Dollars in thousands except per share data)
Interest Income           
Loans, including fees$44,392  $45,147  $174,660  $183,738 
Available-for-sale securities - taxable 850   899   3,273   5,073 
Available-for-sale securities - tax-exempt 3,623   3,255   14,033   13,013 
Deposits with financial institutions 143   56   502   639 
Dividends on bank stocks 194   177   682   985 
Total interest income 49,202   49,534   193,150   203,448 
Interest Expense           
Deposits 3,734   6,610   18,523   36,585 
Fed funds purchased and repurchase agreements -   2   3   164 
Federal Home Loan Bank Advances 1,999   1,361   5,837   6,341 
Other borrowings 24   24   96   109 
Total interest expense 5,757   7,997   24,459   43,199 
Net Interest Income 43,445   41,537   168,691   160,249 
Provision for Loan Losses (5,000)  10,875   (4,000)  56,700 
Net Interest Income after Provision for Loan Losses 48,445   30,662   172,691   103,549 
Non-Interest Income           
Service charges and fees on customer accounts 1,250   856   4,580   2,803 
Realized gains on available-for-sale securities (20)  (21)  1,023   1,704 
Gain on sale of loans -   44   -   44 
Gains (losses), net on equity securities (82)  (6)  (6,325)  47 
Income from bank-owned life insurance 395   436   3,483   1,809 
Swap fees and credit valuation adjustments, net 119   (284)  275   (204)
ATM and credit card interchange income 2,427   1,516   7,996   4,379 
Other non-interest income 707   408   2,628   1,151 
Total non-interest income 4,796   2,949   13,660   11,733 
Non-Interest Expense           
Salaries and employee benefits 16,468   14,725   61,080   57,747 
Occupancy 2,381   2,427   9,688   8,701 
Professional fees 981   1,120   3,519   4,218 
Deposit insurance premiums 710   1,150   3,705   4,301 
Data processing 742   654   2,878   2,719 
Advertising 756   349   2,090   1,219 
Software and communication 1,136   978   4,234   3,750 
Foreclosed assets, net 17   74   697   1,239 
Goodwill impairment -   -   -   7,397 
Other non-interest expense 3,524   2,255   11,491   8,677 
Total non-interest expense 26,715   23,732   99,382   99,968 
Net Income Before Taxes 26,526   9,879   86,969   15,314 
Income tax expense 5,725   1,785   17,556   2,713 
Net Income$20,801  $8,094  $69,413  $12,601 
Basic Earnings Per Share$0.41  $0.16  $1.35  $0.24 
Diluted Earnings Per Share$0.40  $0.15  $1.33  $0.24 

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

  Twelve Months Ended 
  December 31, 
  2021   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$204,889  $3,955 1.93% $267,715  $6,058 2.26%
Securities - tax-exempt(1) 518,058   16,981 3.28   447,324   15,745 3.52 
Federal funds sold -   - -   1,020   18 1.73 
Interest-bearing deposits in other banks 389,893   502 0.13   179,978   621 0.35 
Gross loans, net of unearned income(2) 4,340,791   174,660 4.02   4,310,345   183,738 4.26 
Total interest-earning assets(1) 5,453,631  $196,098 3.60%  5,206,382  $206,180 3.96%
Allowance for loan losses (73,544)        (68,897)      
Other non-interest-earning assets 211,384         220,994       
Total assets$5,591,471        $5,358,479       
Interest-bearing liabilities                 
Transaction deposits$608,063  $1,152 0.19% $447,777  $1,696 0.38%
Savings and money market deposits 2,338,315   8,225 0.35   1,993,964   14,033 0.70 
Time deposits 812,774   9,146 1.13   1,155,492   20,856 1.80 
Total interest-bearing deposits 3,759,152   18,523 0.49   3,597,233   36,585 1.02 
FHLB and short-term borrowings 279,379   5,840 2.09   417,956   6,508 1.56 
Trust preferred securities, net of fair value adjustments 982   96 9.76   939   106 11.34 
Non-interest-bearing deposits 876,309   - -   684,294   - - 
Cost of funds 4,915,822  $24,459 0.50%  4,700,422  $43,199 0.92%
Other liabilities 35,447         43,331       
Stockholders’ equity 640,202         614,726       
Total liabilities and stockholders' equity$5,591,471        $5,358,479       
Net interest income(1)   $171,639       $162,981   
Net interest spread(1)      3.10%       3.04%
Net interest margin(1)      3.15%       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, 2021 over 2020
 Average Volume Yield/Rate Net Change(2)
 (Dollars in thousands)
Interest Income        
Securities - taxable$(1,297) $(806) $(2,103)
Securities - tax-exempt(1) 2,364   (1,128)  1,236 
Federal funds sold (18)  -   (18)
Interest-bearing deposits in other banks 437   (556)  (119)
Gross loans, net of unearned income 1,294   (10,372)  (9,078)
Total interest income(1) 2,780   (12,862)  (10,082)
Interest Expense        
Transaction deposits 483   (1,027)  (544)
Savings and money market deposits 2,092   (7,900)  (5,808)
Time deposits (5,193)  (6,517)  (11,710)
Total interest-bearing deposits (2,618)  (15,444)  (18,062)
FHLB and short-term borrowings (2,518)  1,850   (668)
Trust preferred securities, net of fair value adjustments 5   (15)  (10)
Total interest expense (5,131)  (13,609)  (18,740)
Net interest income(1)$7,911  $747  $8,658 


(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. 2020 - 2021 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

  Three Months Ended 
  December 31, 
  2021   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$196,576  $1,044 2.11% $215,348  $1,075 1.99%
Securities - tax-exempt(1) 547,948   4,385 3.17   458,651   3,939 3.42 
Federal funds sold -   - -   -   - - 
Interest-bearing deposits in other banks 387,828   143 0.15   208,650   56 0.11 
Gross loans, net of unearned income(2) 4,220,842   44,392 4.17   4,493,806   45,147 4.00 
Total interest-earning assets(1) 5,353,194  $49,964 3.70%  5,376,455  $50,217 3.71%
Allowance for loan losses (64,102)        (80,770)      
Other non-interest-earning assets 201,390         227,511       
Total assets$5,490,482        $5,523,196       
Interest-bearing liabilities                 
Transaction deposits$543,088  $216 0.16% $574,811  $306 0.21%
Savings and money market deposits 2,272,307   1,824 0.32   2,158,044   2,344 0.43 
Time deposits 661,978   1,694 1.02   1,086,825   3,960 1.45 
Total interest-bearing deposits 3,477,373   3,734 0.43   3,819,680   6,610 0.69 
FHLB and short-term borrowings 261,600   1,999 3.03   304,923   1,363 1.78 
Trust preferred securities, net of fair value adjustments 1,000   24 9.67   954   24 9.97 
Non-interest-bearing deposits 1,058,462   - -   732,028   - - 
Cost of funds 4,798,435  $5,757 0.48%  4,857,585  $7,997 0.65%
Other liabilities 35,632         45,115       
Stockholders’ equity 656,415         620,496       
Total liabilities and stockholders' equity$5,490,482        $5,523,196       
Net interest income(1)   $44,207       $42,220   
Net interest spread(1)      3.22%       3.06%
Net interest margin(1)      3.28%       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 gross 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, 2021 over 2020
 Average Volume Yield/Rate Net Change(2)
 (Dollars in thousands)
Interest Income        
Securities - taxable$(95) $64  $(31)
Securities - tax-exempt(1) 745   (299)  446 
Federal funds sold -   -   - 
Interest-bearing deposits in other banks 61   26   87 
Gross loans, net of unearned income (2,710)  1,955   (755)
Total interest income(1) (1,999)  1,746   (253)
Interest Expense        
Transaction deposits (17)  (73)  (90)
Savings and money market deposits 116   (636)  (520)
Time deposits (1,289)  (977)  (2,266)
Total interest-bearing deposits (1,190)  (1,686)  (2,876)
FHLB and short-term borrowings (216)  852   636 
Trust preferred securities, net of fair value adjustments 1   (1)  - 
Total interest expense (1,405)  (835)  (2,240)
Net interest income(1)$(594) $2,581  $1,987 


(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:

  • We calculate ‘‘non-GAAP core operating income’’ as net income adjusted to remove non-recurring or non-core income and expense items related to:

    • Goodwill impairment - We performed an interim review of goodwill as of June 30, 2020. The book value of goodwill exceeded its fair market value and resulted in a full $7.4 million impairment.

    • Charges and adjustments associated with the full vesting of a former executive - We incurred additional charges in the second quarter of 2021 related to the acceleration of $0.7 million of certain cash, stock-based compensation, and employee costs.

    • Bank Owned Life Insurance - We obtain bank owned life insurance on key employees throughout the organization and received a $1.8 million benefit in the second quarter of 2021.

    • Unrealized loss on equity security – During the quarter ended September 30, 2021, the Company recorded a $6.2 million impairment loss related to an equity investment that was received as part of a restructured loan agreement.

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

  • We calculate "core return on average tangible common equity" as non-GAAP core operating income (as defined above) divided by average tangible common equity. Average tangible common equity is calculated as average common equity less average goodwill and intangibles and average preferred equity. The most directly comparable GAAP measure is return on average common equity.
  • We calculate "non-GAAP core operating return on average assets" as non-GAAP core operating income (as defined above) divided by average assets. The most directly comparable GAAP financial measure is return on average assets, which is calculated as net income divided by average assets.
  • We calculate ‘‘non-GAAP core operating return on average common equity’’ as non-GAAP core operating income (as defined above) less preferred dividends divided by average common equity. The most directly comparable GAAP financial measure is return on average common equity, which is calculated as net income less preferred dividends divided by average common equity.
  • We calculate "tangible common stockholders' equity" as total stockholders' equity less goodwill and intangibles and preferred equity. The most directly comparable GAAP measure is total stockholders' equity.
  • We calculate ‘‘tangible book value per share’’ as tangible common stockholders' equity (as defined above) divided by the total number of shares outstanding. The most directly comparable GAAP measure is book value per share.
  • We calculate "non-GAAP core operating efficiency ratio - fully tax equivalent (FTE)" as non-interest expense adjusted to remove non-recurring, or non-core, non-interest expenses as defined above under non-GAAP core operating income divided by net interest income on a fully tax-equivalent basis plus non-interest income adjusted to remove non-recurring, or non-core, non-interest income as defined above under non-GAAP core operating income. The most directly comparable financial measure is the efficiency ratio.
  • We calculate "non-GAAP pre-tax pre-provision profit" as net income before taxes plus the provision for loan losses.

  Quarter Ended   Twelve Months Ended 
 12/31/2021  9/30/2021  6/30/2021  3/31/2021  12/31/2020  12/31/2021  12/31/2020 
  (Dollars in thousands) 
Non-GAAP core operating income:                           
Net income$20,801  $21,000  $15,577  $12,035  $8,094  $69,413  $12,601 
Add: Unrealized loss on equity security -   6,200   -   -   -   6,200   - 
Less: Tax effect(2) -   1,302   -   -   -   1,302   - 
Unrealized loss on equity security, net of tax -   4,898   -   -   -   4,898   - 
Add: Goodwill impairment(1) -   -   -   -   -   -   7,397 
Add: Accelerated employee benefits -   -   719   -   -   719   - 
Less: Tax effect(3) -   -   210   -   -   210   - 
Accelerated employee benefits, net of tax -   -   509   -   -   509   - 
Less: BOLI settlement benefits(1) -   -   1,841   -   -   1,841   - 
Non-GAAP core operating income$20,801  $25,898  $14,245  $12,035  $8,094  $72,979  $19,998 
(1) No tax effect. 
(2) Represents the tax impact of the adjustments at a tax rate of 21.0%. 
(3) Represents the tax impact of the adjustments above at a tax rate of 21.0%, plus a permanent tax benefit associated with stock-based grants. 


  Quarter Ended   Twelve Months Ended 
  12/31/2021   9/30/2021   6/30/2021   3/31/2021   12/31/2020   12/31/2021   12/31/2020 
  (Dollars in thousands) 
Non-GAAP core return on average tangible common equity:                          
Net income available to common stockholders$20,801  $21,000  $15,577  $12,035  $8,094  $69,413  $12,601 
Non-GAAP core operating income 20,801   25,898   14,245   12,035   8,094   72,979   19,998 
Average common equity 656,415   644,715   633,417   625,875   620,496   640,202   614,726 
Less: average goodwill and intangibles 140   160   179   199   218   170   3,898 
Average tangible common equity$656,275  $644,555  $633,238  $625,676  $620,278  $640,032  $610,828 
Return on average common equity 12.57%  12.92%  9.86%  7.80%  5.19%  10.84%  2.05%
Non-GAAP core return on average tangible common equity 12.57%  15.94%  9.02%  7.80%  5.19%  11.40%  3.27%


  Quarter Ended   Twelve Months Ended 
  12/31/2021   9/30/2021   6/30/2021   3/31/2021   12/31/2020   12/31/2021   12/31/2020 
  (Dollars in thousands) 
Non-GAAP core operating return on average assets:                           
Net income$20,801  $21,000  $15,577  $12,035  $8,094  $69,413  $12,601 
Non-GAAP core operating income 20,801   25,898   14,245   12,035   8,094   72,979   19,998 
Average assets$5,490,482  $5,408,984  $5,673,638  $5,798,167  $5,523,196  $5,591,471  $5,358,479 
Return on average assets 1.50%  1.54%  1.10%  0.84%  0.58%  1.24%  0.24%
Non-GAAP core operating return on average assets 1.50%  1.90%  1.01%  0.84%  0.58%  1.31%  0.37%


  Quarter Ended
 12/31/2021  9/30/2021  6/30/2021  3/31/2021  12/31/2020
  (Dollars in thousands except per share data)
Tangible common stockholders' equity:                  
Total stockholders' equity$667,573  $652,407  $637,190  $628,834  $624,428
Less: goodwill and other intangible assets 130   149   169   188   208
Tangible common stockholders' equity$667,443  $652,258  $637,021  $628,646  $624,220
Tangible book value per share:                  
Tangible common stockholders' equity$667,443  $652,257  $637,021  $628,646  $624,220
Shares outstanding at end of period 50,450,045   51,002,698   50,958,680   51,678,669   51,679,516
Book value per share$13.23  $12.79  $12.50  $12.17  $12.08
Tangible book value per share$13.23  $12.79  $12.50  $12.16  $12.08


  Quarter Ended   Twelve Months Ended 
  12/31/2021   9/30/2021   6/30/2021   3/31/2021   12/31/2020   12/31/2021   12/31/2020 
  (Dollars in thousands) 
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)                           
Non-interest expense$26,715  $24,036   $25,813  $22,818  $23,732  $99,382  $99,968 
Less: Accelerated employee benefits -   -    719   -   -   719   - 
Less: goodwill impairment -   -    -   -   -   -   7,397 
Adjusted Non-interest expense (numerator)$26,715  $24,036   $25,094  $22,818  $23,732  $98,663  $92,571 
Net interest income 43,445   41,801    42,328   41,117   41,537   168,691   160,249 
Tax equivalent interest income(1) 762   748    734   704   683   2,948   2,732 
Non-interest income (loss) 4,796   (1,105)   5,825   4,144   2,949   13,660   11,733 
Add: Unrealized loss on equity security -   6,200    -   -   -   6,200   - 
Less: BOLI settlement benefits -   -    1,841   -   -   1,841   - 
Total tax-equivalent income (denominator)$49,003  $47,644   $47,046  $45,965  $45,169  $189,658  $174,714 
Efficiency Ratio 55.38%  59.06 %  53.61%  50.41%  53.35%  54.50%  58.13%
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE) 54.52%  50.45 %  53.34%  49.64%  52.54%  52.02%  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 
 12/31/2021  9/30/2021  6/30/2021  3/31/2021  12/31/2020  12/31/2021  12/31/2020 
  (Dollars in thousands) 
Non-GAAP Pre-Tax Pre-Provision Profit                           
Net income before taxes$26,526   $26,660   $18,840  $14,943  $9,879  $86,969   $15,314 
Add: Provision for loan losses (5,000)   (10,000)   3,500   7,500   10,875   (4,000)   56,700 
Non-GAAP Pre-Tax Pre-Provision Profit$21,526   $16,660   $22,340  $22,443  $20,754  $82,969   $72,014 

INVESTOR CONTACT
Heather Worley 
Heather@crossfirst.com | (214) 676-4666
https://investors.crossfirstbankshares.com



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4Q and Full-Year 2021 Earnings