CrossFirst Bankshares, Inc. Reports First Quarter 2022 Results

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

First Quarter 2022 Key Financial Performance Metrics

Net Income ROAA Net Interest Margin (FTE) Diluted EPS ROE
$16.8 million 1.23% 3.29%(1) $0.33 10.44%

LEAWOOD, Kan., April 18, 2022 (GLOBE NEWSWIRE) -- CrossFirst Bankshares, Inc. (Nasdaq: CFB), the bank holding company for CrossFirst Bank, today reported operating results for the first quarter of 2022, with first quarter net income of $16.8 million, or $0.33 per diluted share.

CEO Commentary:

"We delivered a strong quarter of loan growth with solid financial results to start 2022. We’ve made significant progress on our goals of investing in talent and technology to support our continued success, and I’m excited about our progress and execution to further our strategy,” said CrossFirst’s CEO and President, Mike Maddox. “Our people are the foundation of what we do, and we are committed to being an employer of choice which is fundamental to delivering for our clients and shareholders.”

2022 First Quarter Highlights:

  • $5.5 billion of assets, with net income for the quarter ended March 31, 2022 of $16.8 million, an increase of $4.8 million or 40% compared to the first quarter of 2021
  • Implemented CECL on January 1, 2022, with a combined allowance for credit losses (“ACL”) and reserve for off-balance sheet credit risk from unfunded commitments (“RUC”) totaling $60 million or 1.39% of outstanding loans, excluding Paycheck Protection Program (“PPP”) loans, at March 31, 2022, compared to $58 million or 1.39% of outstanding loans, excluding PPP loans, at December 31, 2021
  • Return on Average Assets of 1.23% and a Return on Equity of 10.44% for the quarter ended March 31, 2022
  • Net Interest Margin (Fully Tax-Equivalent)(1) of 3.29% for the quarter ended March 31, 2022, compared to 3.01% for the same quarter last year
  • $127 million of loan growth, excluding PPP loans, from the previous quarter and $145 million or 3% loan growth from the same quarter last year
  • Book value per share of $12.53 at March 31, 2022 compared to $12.17 at March 31, 2021
  Quarter-to-Date 
  March 31, 
(Dollars in millions except per share data) 2022  2021 
Operating revenue(2)$48.1 $45.3 
Net income$16.8 $12.0 
Diluted earnings per share$0.33 $0.23 
Return on average assets 1.23% 0.84%
Return on average common equity 10.44% 7.80%
Net interest margin(1) 3.24% 2.97%
Net interest margin, fully tax-equivalent(1)(4) 3.29% 3.01%
Efficiency ratio 57.57% 50.41%
Non-GAAP core operating efficiency ratio, fully tax-equivalent(3)(4) 56.66% 49.64%


(1) The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest earning asset. All periods presented reflect this change.
(2) Net interest income plus non-interest income.
(3) Represents a non-GAAP measure. See "Table 5. Non-GAAP Financial Measures" for a reconciliation of these measures.
(4) 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 $47.8 million for the first quarter of 2022, a decrease of 1% from the first quarter of 2021 and a decrease of 3% from the previous quarter. Interest income was slightly down from the first quarter of 2021 as a result of lower average loans outstanding and a reduction of PPP fee income. Average earning assets totaled $5.4 billion for the first quarter of 2022, a decrease of $223 million or 4% from the same quarter in 2021. For the first quarter of 2022, interest income declined compared to the prior quarter primarily due to fewer days in the quarter and nonaccrual loan movement.

Interest expense for the first quarter of 2022 was $4.6 million, or 34% lower than the first quarter of 2021 and 19% lower than the previous quarter. Average interest-bearing deposits decreased to $3.5 billion in the first quarter of 2022, or a 15% decrease from the same prior year period. FHLB and short-term borrowing decreases also impacted interest expense for the current quarter, decreasing $0.2 million or 14% compared to the first quarter of 2021. The decline in cost of funds from the previous quarter to 0.39%, compared to 0.48% for the fourth quarter of 2021, was the primary driver of lower interest expense sequentially. The prepayment of $40 million of FHLB advances in the fourth quarter of 2021 was a primary driver of the higher cost of funds in the fourth quarter. The prepayment penalty on the FHLB advances contributed to a 0.05% increase in the previous quarter.

Net interest income totaled $43.1 million for the first quarter of 2022 or 1% less than the fourth quarter of 2021, and 5% higher than the first quarter of 2021. Tax-equivalent net interest margin decreased to 3.29% in the current quarter, from 3.30% in the previous quarter, and increased from 3.01% in the same quarter in 2021.   During the first quarter of 2022, CrossFirst realized $0.9 million in fees from the forgiveness of $34 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 first quarter of 2022.

Non-Interest Income

Non-interest income increased $0.8 million in the first quarter of 2022 or 19% compared to the same quarter of 2021 and increased $0.1 million compared to the fourth quarter of 2021. The increase in non-interest income compared to the previous quarter was due to a $0.2 million increase in credit card fees and $0.2 million increase in service charge income, partly offset by a $0.2 million decrease in letter of credit fees. The increase in non-interest income compared to the same quarter of 2021, was primarily due to increases of $0.3 million in credit card fees and $0.5 million in service charge income.

Non-Interest Expense

Non-interest expense for the first quarter of 2022 was $27.7 million, which increased 21% compared to the first quarter of 2021 and increased 4% from the fourth quarter of 2021. Salaries and benefit costs were higher in the current quarter by $1.5 million compared to the prior quarter and $4.4 million higher than the same quarter in the prior year mainly due to increased hiring for market expansion and increased incentive expenses. Software and communication expenses increased $0.2 million compared to the same quarter in the prior year, offset by a $0.4 million decrease in deposit insurance premiums. Compared to the prior quarter, occupancy expense increased $0.1 million and software and communication expenses increased $0.1 million, partly offset by a decrease in other non-interest expenses.

CrossFirst’s effective tax rate for the first quarter of 2022 was 20%, as compared to 19% for the first quarter of 2021 and 22% in the fourth quarter of 2021. The tax rate for the first quarter of 2022 decreased slightly compared to the prior quarter due to the impact of stock-based awards vesting. 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.

The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest earning asset. All periods presented reflect this change.

Balance Sheet Performance & Analysis

During the first quarter of 2022, total assets decreased by $103 million or 2% compared to December 31, 2021, and decreased $480 million or 8% compared to March 31, 2021. Total assets decreased on a linked quarter basis primarily due to a $206 million decrease in cash and cash equivalents, partly offset by a $97 million increase in net loans. The year-over-year decrease was due to decreases in cash and cash equivalents of $354 million and PPP loan forgiveness of $305 million. Non-interest-bearing deposits decreased $53 million compared to December 31, 2021, and increased $316 million from March 31, 2021. During the first quarter of 2022, available-for-sale investment securities decreased $23 million to $723 million compared to December 31, 2021. The securities yields decreased 2 basis points to a tax equivalent yield of 3.00% for the first quarter of 2022 compared to the prior quarter.

Loan Results

During the first quarter of 2022, the Company experienced an increase in average loans of $112 million compared to the fourth quarter of 2021, and a decrease of $174 million or 4% compared to the first quarter of 2021. The year-over-year reduction in average loans was primarily a result of PPP loan forgiveness. Net of PPP loans, average loans grew 4% compared to the quarter ended December 31, 2021. Loan yields decreased 17 basis points to 4.00% during the first quarter of 2022 and increased 6 basis points compared to the same prior year quarter.

  1Q22   4Q21   3Q21   2Q21   1Q21  QoQ Growth ($)(1) QoQ Growth (%)(1)(2) YoY Growth ($) YoY Growth (%)(2)
                            
 (Dollars in millions)
Average loans (gross)                               
Commercial$1,434  $1,328  $1,233  $1,221  $1,329  $106  8 % $105  8 %
Energy 274   290   311   341   351   (16) (6)   (77) (22) 
Commercial real estate 1,327   1,272   1,213   1,203   1,183   55  4    144  12  
Construction and land development 593   579   611   633   598   14  2    (5) (1) 
Residential and multifamily real estate 604   612   659   659   688   (8) (1)   (84) (12) 
Paycheck Protection Program 42   84   147   296   308   (42) (50)   (266) (86) 
Consumer 59   56   57   56   50   3  5    9  18  
Total$4,333  $4,221  $4,231  $4,409  $4,507  $112  3 % $(174) (4)%
                                
Yield on average loans for the period ending 4.00%  4.17%  4.00%  3.99%  3.94%            
(1) Represents current quarter to prior quarter change.
(2) 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 first quarter of 2022, the Company experienced an increase in average deposits of 2% compared to the previous quarter, and a 4% decline in average deposits compared to the first quarter of 2021. The deposit growth for the quarter was driven by a continued increase in non-interest-bearing and transaction deposits, which represented 25% and 13% of total deposits, respectively, at March 31, 2022. In addition, the Company continued to improve the overall cost of deposits, which declined 2 basis points during the first quarter of 2022. The cost of interest-bearing deposits has declined 16 basis points over the last twelve months primarily as a result of the lower interest rate environment.

  1Q22   4Q21   3Q21   2Q21   1Q21  QoQ
Growth ($)(1)		 QoQ
Growth (%)(1)(2)		 YoY
Growth ($)		 YoY Growth (%)(2)
 (Dollars in millions)
Average deposits                               
Non-interest bearing deposits$1,157  $1,058  $910  $802  $731  $99  9 % $426  58 %
Transaction deposits 586   543   511   665   717   43  8    (131) (18) 
Savings and money market deposits 2,303   2,272   2,276   2,385   2,422   31  1    (119) (5) 
Time deposits 587   662   752   869   972   (75) (11)   (385) (40) 
Total$4,633  $4,535  $4,449  $4,721  $4,842  $98  2 % $(209) (4)%
                                
Cost of deposits for the period ending 0.31%  0.33%  0.38%  0.41%  0.48%            
Cost of interest-bearing deposits for the period ending 0.41%  0.43%  0.47%  0.50%  0.57%            
(1) Represents current quarter to prior quarter change.
(2) 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 March 31, 2022, other borrowings totaled $228 million, as compared to $238 million at December 31, 2021, and $287 million at March 31, 2021.

Asset Quality Position

Credit quality metrics generally improved during the first quarter of 2022 as the allowance for credit losses (“ACL”) decreased by $3 million compared to the prior quarter, reflecting some stabilization in the Company’s economic outlook. The allowance for credit losses was $55 million or 1.27% of outstanding loans and 167% of nonaccruing loans at March 31, 2022. The combined allowance for credit losses and accrual for off-balance sheet credit risk from unfunded commitments (“RUC”) was $60 million or 1.38% of outstanding loans and 182% of nonaccruing loans at March 31, 2022. Excluding PPP loans, the allowance for credit losses was 1.28% of outstanding loans and the combined allowance for credit losses and accrual for off-balance sheet credit risk from unfunded loan commitments was 1.39%.

The allowance for credit losses to total loans decreased to 1.27% at March 31, 2022 from 1.37% at December 31, 2021. The improvements in credit metrics compared to March 31, 2021 were primarily driven by upgrades in COVID-19 impacted segments and the Energy portfolio. Net charge-offs were $1.1 million for the first quarter of 2022 as compared to $0.8 million for the fourth quarter of 2021. The charge-offs for the current quarter were primarily related to commercial and industrial and energy credits. The following table provides information regarding asset quality.

Asset quality(Dollars in millions) 1Q22   4Q21   3Q21   2Q21
   1Q21
 
Non-accrual loans$33.1   $31.4   $48.1   $54.7   $63.3  
Other real estate owned 1.0    1.1    1.1    1.7    2.3  
Nonperforming assets 35.6    32.7    49.8    58.1    68.9  
Loans 90+ days past due and still accruing 1.5    0.1    0.5    1.8    3.2  
Loans 30 - 89 days past due 15.9    3.5    37.6    18.8    11.0  
Net charge-offs (recoveries) 1.1    0.8    1.3    2.6    8.2  
                      
Asset quality metrics(%) 1Q22   4Q21   3Q21   2Q21
   1Q21
 
Nonperforming assets to total assets 0.64 %  0.58 %  0.92 %  1.09 %  1.15 %
Allowance for credit loss to total loans 1.27    1.37    1.51    1.78    1.65  
Allowance for credit loss + RUC to total loans(1) 1.38    -    -    -    -  
Allowance for credit loss to nonperforming loans 160    185    132    134    112  
Net charge-offs (recoveries) to average loans(2) 0.10    0.07    0.13    0.23    0.74  
Provision to average loans(2) (0.06)   (0.47)   (0.94)   0.32    0.67  
Classified Loans / (Total Capital + ACL) 10.8    10.8    17.3    24.0    38.2  
Classified Loans / (Total Capital + ACL + RUC)(1) 10.7    -    -    -    -  
(1) Includes the accrual for off-balance sheet credit risk from unfunded commitments that resulted from CECL adoption on January 1, 2022.
(2) Interim periods annualized.
 

Capital Position

At March 31, 2022, stockholders' equity totaled $623 million, or $12.53 per share, compared to $668 million, or $13.23 per share, at December 31, 2021. During the first quarter of 2022, CrossFirst continued its $30 million share repurchase program by purchasing 1,058,332 shares or 2% of common stock outstanding. In addition, accumulated other comprehensive income (loss) declined by $43 million between December 31, 2021 and March 31, 2022; driven by a $45 million decrease in the unrealized gain (loss) on available-for-sale securities, net of tax.

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 13% at March 31, 2022. The Company remains well-capitalized.

Conference Call and Webcast

CrossFirst will hold a conference call to review first quarter 2022 financial results on Tuesday, April 19, 2022, at 10 a.m. CT / 11 a.m. ET. The conference call and webcast may also include discussion of Company developments, forward-looking statements and other material information about business and financial matters. 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 6954906. 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/moxcfams. 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 6954906, 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 Quarterly Report on Form 10-Q 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 and geopolitical events. 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. 2021 - 2022 Quarterly Analysis of Changes in Net Interest Income
  • Table 4. Linked Quarterly Analysis of Changes in Net Interest Income
  • Table 5. Non-GAAP Financial Measures

TABLE 1. CONSOLIDATED BALANCE SHEETS

 March 31, 2022 December 31, 2021
 (Unaudited)  
 (Dollars in thousands)
Assets     
Cash and cash equivalents$276,927  $482,727 
Available-for-sale securities - taxable 196,721   192,146 
Available-for-sale securities - tax-exempt 526,057   553,823 
Loans 4,349,568   4,256,213 
Allowance for credit losses on loans(1) 55,231   58,375 
Net loans 4,294,337   4,197,838 
Premises and equipment, net 65,799   66,069 
Restricted equity securities 10,526   11,927 
Interest receivable 16,933   16,023 
Foreclosed assets held for sale 973   1,148 
Bank-owned life insurance 67,886   67,498 
Other 61,962   32,258 
Total assets$5,518,121  $5,621,457 
Liabilities and stockholders’ equity     
Deposits     
Noninterest-bearing$1,110,284  $1,163,224 
Savings, NOW and money market 2,999,329   2,895,986 
Time 512,067   624,387 
Total deposits 4,621,680   4,683,597 
Federal Home Loan Bank advances 226,600   236,600 
Other borrowings 1,022   1,009 
Interest payable and other liabilities 45,620   32,678 
Total liabilities 4,894,922   4,953,884 
Stockholders’ equity     
Common stock, $0.01 par value:     
authorized - 200,000,000 shares, issued - 52,926,555 and 52,590,015 shares at March 31, 2022 and December 31, 2021, respectively 529   526 
Treasury stock, at cost:     
3,198,302 and 2,139,970 shares held at March 31, 2022 and December 31, 2021, respectively (45,109)  (28,347)
Additional paid-in capital 527,468   526,806 
Retained earnings 161,323   147,099 
Accumulated other comprehensive income (loss) (21,012)  21,489 
Total stockholders’ equity 623,199   667,573 
Total liabilities and stockholders’ equity$5,518,121  $5,621,457 

(1) As of December 31, 2021, this line represents the allowance for loan losses.

        TABLE 2. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 Three Months Ended
 March 31,
 2022
 2021
 (Dollars in thousands except per share data)
Interest Income     
Loans, including fees$42,728  $43,758 
Available-for-sale securities - taxable 1,044   751 
Available-for-sale securities - tax-exempt 3,692   3,351 
Deposits with financial institutions 152   128 
Dividends on bank stocks 144   165 
Total interest income 47,760   48,153 
Interest Expense     
Deposits 3,511   5,728 
Fed funds purchased and repurchase agreements -   1 
Federal Home Loan Bank Advances 1,109   1,283 
Other borrowings 25   24 
Total interest expense 4,645   7,036 
Net Interest Income 43,115   41,117 
Provision for Credit Losses(1) (625)  7,500 
Net Interest Income after Provision for Credit Losses(1) 43,740   33,617 
Non-Interest Income     
Service charges and fees on customer accounts 1,408   957 
Realized gains (losses) on available-for-sale securities (26)  10 
Unrealized gains (losses), net on equity securities (103)  (39)
Income from bank-owned life insurance 388   416 
Swap fees and credit valuation adjustments, net 118   155 
ATM and credit card interchange income 2,664   2,328 
Other non-interest income 493   317 
Total non-interest income 4,942   4,144 
Non-Interest Expense     
Salaries and employee benefits 17,941   13,553 
Occupancy 2,493   2,494 
Professional fees 805   782 
Deposit insurance premiums 737   1,151 
Data processing 812   716 
Advertising 692   303 
Software and communication 1,270   1,065 
Foreclosed assets, net (53)  50 
Other non-interest expense 2,969   2,704 
Total non-interest expense 27,666   22,818 
Net Income Before Taxes 21,016   14,943 
Income tax expense 4,188   2,908 
Net Income$16,828  $12,035 
Basic Earnings Per Share$0.33  $0.23 
Diluted Earnings Per Share$0.33  $0.23 

(1) For the three-months ended March 31, 2021, this line represents the provision for loan losses.

TABLE 3. 2021 - 2022 QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME
(UNAUDITED)

  Three Months Ended 
  March 31, 
  2022   2021 
 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(1)$220,802  $1,188 2.15% $211,646  $916 1.73%
Securities - tax-exempt(1)(2) 533,674   4,467 3.35   449,925   4,055 3.61 
Federal funds sold -   - -   -   - - 
Interest-bearing deposits in other banks 309,948   152 0.20   452,305   128 0.11 
Gross loans, net of unearned income(3) 4,332,831   42,728 4.00   4,506,843   43,758 3.94 
Total interest-earning assets(1)(2) 5,397,255  $48,535 3.64%  5,620,719  $48,857 3.52%
Allowance for credit losses (57,922)        (78,371)      
Other non-interest-earning assets 224,405         255,819       
Total assets$5,563,738        $5,798,167       
Interest-bearing liabilities                 
Transaction deposits$585,990  $222 0.15% $716,763  $364 0.21%
Savings and money market deposits 2,302,552   1,847 0.33   2,421,765   2,388 0.40 
Time deposits 587,452   1,442 1.00   972,006   2,976 1.24 
Total interest-bearing deposits 3,475,994   3,511 0.41   4,110,534   5,728 0.57 
FHLB and short-term borrowings 231,156   1,109 1.95   290,187   1,284 1.79 
Trust preferred securities, net of fair value adjustments 1,012   25 10.25   965   24 9.96 
Non-interest-bearing deposits 1,157,387   - -   731,472   - - 
Cost of funds 4,865,549  $4,645 0.39%  5,133,158  $7,036 0.56%
Other liabilities 44,442         39,134       
Stockholders’ equity 653,747         625,875       
Total liabilities and stockholders' equity$5,563,738        $5,798,167       
Net interest income(2)   $43,890       $41,821   
Net interest spread(1)(2)      3.25%       2.96%
Net interest margin(1)(2)      3.29%       3.01%

(1) The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest earning asset. All periods presented reflect this change.
(2) 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%.
(3) Average gross loan balances include nonaccrual loans.
(4) 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
 March 31, 2022 over 2021
 Average Volume Yield/Rate Net Change(2)
 (Dollars in thousands)
Interest Income        
Securities - taxable$41  $231  $272 
Securities - tax-exempt(1) 716   (304)  412 
Federal funds sold -   -   - 
Interest-bearing deposits in other banks (49)  73   24 
Gross loans, net of unearned income (1,708)  678   (1,030)
Total interest income(1) (1,000)  678   (322)
Interest Expense        
Transaction deposits (59)  (83)  (142)
Savings and money market deposits (113)  (428)  (541)
Time deposits (1,022)  (512)  (1,534)
Total interest-bearing deposits (1,194)  (1,023)  (2,217)
FHLB and short-term borrowings (277)  102   (175)
Trust preferred securities, net of fair value adjustments 1   -   1 
Total interest expense (1,470)  (921)  (2,391)
Net interest income(1)$470  $1,599  $2,069 

(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 4. LINKED QUARTERLY ANALYSIS OF CHANGES IN NET INTEREST INCOME (UNAUDITED)

    
  Three Months Ended 
  March 31, 2022   December 31, 2021 
 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$220,802  $1,188 2.15% $194,850  $1,044 2.14%
Securities - tax-exempt(1) 533,674   4,467 3.35   522,860   4,385 3.35 
Federal funds sold -   - -   -   - - 
Interest-bearing deposits in other banks 309,948   152 0.20   387,828   143 0.15 
Gross loans, net of unearned income(2) 4,332,831   42,728 4.00   4,220,842   44,392 4.17 
Total interest-earning assets(1) 5,397,255  $48,535 3.64%  5,326,380  $49,964 3.72%
Allowance for credit losses (57,922)        (64,102)      
Other non-interest-earning assets 224,405         228,204       
Total assets$5,563,738        $5,490,482       
Interest-bearing liabilities                 
Transaction deposits$585,990  $222 0.15% $543,088  $216 0.16%
Savings and money market deposits 2,302,552   1,847 0.33   2,272,307   1,824 0.32 
Time deposits 587,452   1,442 1.00   661,978   1,694 1.02 
Total interest-bearing deposits 3,475,994   3,511 0.41   3,477,373   3,734 0.43 
FHLB and short-term borrowings 231,156   1,109 1.95   261,600   1,999 3.03 
Trust preferred securities, net of fair value adjustments 1,012   25 10.25   1,000   24 9.67 
Non-interest-bearing deposits 1,157,387   - -   1,058,462   - - 
Cost of funds 4,865,549  $4,645 0.39%  4,798,435  $5,757 0.48%
Other liabilities 44,442         35,632       
Stockholders’ equity 653,747         656,415       
Total liabilities and stockholders' equity$5,563,738        $5,490,482       
Net interest income(1)   $43,890       $44,207   
Net interest spread(1)      3.25%       3.24%
Net interest margin(1)      3.29%       3.30%

(1) The Company changed the annualization method on the available-for-sale securities portfolio from Actual/Actual to 30/360 and moved the unrealized gain (loss) on available-for-sale securities from an interest-earning asset to a non-interest earning asset. All periods presented reflect this change.
(2) 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%.
(3) Average loan balances include nonaccrual loans.
(4) 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.

LINKED QUARTER VOLUME & RATE VARIANCE TO NET INTEREST INCOME (UNAUDITED)

 Three Months Ended
 March 31, 2022 over December 31, 2021
 Average Volume Yield/Rate Net Change(2)
 (Dollars in thousands)
Interest Income        
Securities - taxable$140  $4  $144 
Securities - tax-exempt(1) 90   (8)  82 
Federal funds sold -   -   - 
Interest-bearing deposits in other banks (33)  42   9 
Gross loans, net of unearned income 785   (2,449)  (1,664)
Total interest income(1) 982   (2,411)  (1,429)
Interest Expense        
Transaction deposits 12   (5)  7 
Savings and money market deposits 8   14   22 
Time deposits (215)  (37)  (252)
Total interest-bearing deposits (195)  (28)  (223)
FHLB and short-term borrowings (217)  (673)  (890)
Trust preferred securities, net of fair value adjustments -   1   1 
Total interest expense (412)  (700)  (1,112)
Net interest income(1)$1,394  $(1,711) $(317)

(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:

    • 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 credit losses.
 Quarter Ended 
 3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021 
  (Dollars in thousands)
Non-GAAP core operating income:                   
Net income$16,828  $20,801  $21,000  $15,577  $12,035 
Add: Unrealized loss on equity security -   -   6,200   -   - 
Less: Tax effect(2) -   -   1,302   -   - 
Unrealized loss on equity security, net of tax -   -   4,898   -   - 
Add: Accelerated employee benefits -   -   -   719   - 
Less: Tax effect(3) -   -   -   210   - 
Accelerated employee benefits, net of tax -   -   -   509   - 
Less: BOLI settlement benefits(1) -   -   -   1,841   - 
Non-GAAP core operating income$16,828  $20,801  $25,898  $14,245  $12,035 
                    
(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 
  3/31/2022   12/31/2021   9/30/2021   6/30/2021   3/31/2021 
                    
  (Dollars in thousands)
Non-GAAP core return on average tangible common equity:                  
Net income available to common stockholders$16,828  $20,801  $21,000  $15,577  $12,035 
Non-GAAP core operating income 16,828   20,801   25,898   14,245   12,035 
Average common equity 653,747   656,415   644,715   633,417   625,875 
Less: average goodwill and intangibles 121   140   160   179   199 
Average tangible common equity$653,626  $656,275  $644,555  $633,238  $625,676 
Return on average common equity 10.44%  12.57%  12.92%  9.86%  7.80%
Non-GAAP core return on average tangible common equity 10.44%  12.57%  15.94%  9.02%  7.80%


  Quarter Ended 
  3/31/2022   12/31/2021   9/30/2021   6/30/2021   3/31/2021 
  (Dollars in thousands)
Non-GAAP core operating return on average assets:                   
Net income$16,828  $20,801  $21,000  $15,577  $12,035 
Non-GAAP core operating income 16,828   20,801   25,898   14,245   12,035 
Average assets$5,563,738  $5,490,482  $5,408,984  $5,673,638  $5,798,167 
Return on average assets 1.23%  1.50%  1.54%  1.10%  0.84%
Non-GAAP core operating return on average assets 1.23%  1.50%  1.90%  1.01%  0.84%


  Quarter Ended
 3/31/2022  12/31/2021  9/30/2021  6/30/2021  3/31/2021
  (Dollars in thousands except per share data)
Tangible common stockholders' equity:                   
Total stockholders' equity$623,199  $667,573  $652,407  $637,190  $628,834 
Less: goodwill and other intangible assets 110   130   149   169   188 
Tangible common stockholders' equity$623,089  $667,443  $652,258  $637,021  $628,646 
Tangible book value per share:                   
Tangible common stockholders' equity$623,089  $667,443  $652,257  $637,021  $628,646 
Shares outstanding at end of period 49,728,253   50,450,045   51,002,698   50,958,680   51,678,669 
Book value per share$12.53  $13.23  $12.79  $12.50  $12.17 
Tangible book value per share$12.53  $13.23  $12.79  $12.50  $12.16 


  Quarter Ended 
  3/31/2022   12/31/2021   9/30/2021  6/30/2021   3/31/2021 
                   
  (Dollars in thousands)
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE)                  
Non-interest expense$27,666  $26,715  $24,036  $25,813  $22,818 
Less: Accelerated employee benefits -   -   -   719   - 
Adjusted Non-interest expense (numerator)$27,666  $26,715  $24,036  $25,094  $22,818 
Net interest income 43,115   43,445   41,801   42,328   41,117 
Tax equivalent interest income(1) 775   762   748   734   704 
Non-interest income (loss) 4,942   4,796   (1,105)  5,825   4,144 
Add: Unrealized loss on equity security -   -   6,200   -   - 
Less: BOLI settlement benefits -   -   -   1,841   - 
Total tax-equivalent income (denominator)$48,832  $49,003  $47,644  $47,046  $45,965 
Efficiency Ratio 57.57%  55.38%  59.06%  53.61%  50.41%
Non-GAAP Core Operating Efficiency Ratio - Fully Tax Equivalent (FTE) 56.66%  54.52%  50.45%  53.34%  49.64%
                    
(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 
 3/31/2022 12/31/2021 9/30/2021 6/30/2021
 3/31/2021 
 (Dollars in thousands) 
Non-GAAP Pre-Tax Pre-Provision Profit                
Net income before taxes$21,016  $26,526  $26,660  $18,840  $14,943 
Add: Provision for credit losses (625)  (5,000)  (10,000)  3,500   7,500 
Non-GAAP Pre-Tax Pre-Provision Profit$20,391  $21,526  $16,660  $22,340  $22,443 
                    

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


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CFB 1Q 2022 Earnings Call