cfb-20200630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 001-39028

CROSSFIRST BANKSHARES, INC.

(Exact Name of Registrant as Specified in its Charter)

Kansas

26-3212879

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11440 Tomahawk Creek Parkway

Leawood,

66211

(Address of principal executive offices)

(Zip Code)

(913) 312-6822

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.01 per share

CFB

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 10, 2020, the registrant had 52,188,708 shares of common stock, par value $0.01, outstanding.

CrossFirst Bankshares, Inc.

Form 10-Q

Quarter Ended June 30, 2020

Index


Part I. Financial Information
Item 1. Financial Statements
Forward-Looking Information			4
Consolidated Balance Sheets - Unaudited			5
Consolidated Statements of Operations - Unaudited			6
Consolidated Statements of Other Comprehensive Income (Loss) - Unaudited			7
Consolidated Statements of Stockholders’ Equity - Unaudited			8
Consolidated Statements of Cash Flows - Unaudited			10
Notes to Consolidated Financial Statements (unaudited)

Note 1: Nature of Operations and Summary of Significant Accounting Policies			11
Note 2: Earnings (Loss) Per Share			16
Note 3: Securities			16
Note 4: Loans and Allowance for Loan Losses			19

Note 5: Derivatives and Hedging			28
Note 6: Goodwill and Other Intangible Assets			30
Note 7: Time Deposits and Borrowings			31
Note 8: Change in Accumulated Other Comprehensive Income (“AOCI”)			31
Note 9: Regulatory Matters			31

Note 10: Stock-Based Compensation			32
Note 11: Income Tax			34
Note 12: Disclosures about Fair Value of Financial Instruments			35
Note 13: Commitments and Credit Risk			38
Note 14: Legal and Regulatory Proceedings			38
Note 15: Subsequent Events			38
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			39



Second Quarter 2020 Highlights			39
Selected Financial Data (unaudited)			44
Results of Operations			46
Summary			46
Net Interest Income			47
Provision for Loan Losses			50
Non-Interest Income			51
Non-Interest Expense			52
Income Taxes			53
Analysis of Financial Condition			53
Balance Sheet Summary			53
Securit ies Portfolio			54
Loan Portfolio			54
Allowance for Loan Losses (‘‘ALLL’’)			55
Nonperforming Assets and Other Asset Quality Metrics			57
Deposits and Other Borrowings			59


Liquidity			59
Contractual Obligations			60
Capital Resources and Off-Balance Sheet Arrangements			60
Critical Accounting Policies			61
GAAP Reconciliation and Management ’s Explanation of Non-GAAP Financial Measures			62
Item 3. Quantitative and Qualitative Disclosures about Market Risk			65
Item 4. Controls and Procedures			66

Part II. Other Information
Item 1. Legal Proceedings			67
Item 1A. Risk Factors			67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			67
Item 3. Defaults Upon Senior Securities			67
Item 4. Mine Safety Disclosures			67
Item 5. Other Information			67
Item 6. Exhibits			68

Signatures

Table of Contents

Forward-Looking Information

This report may contain forward-looking statements that reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “strive,” “projection,” “goal,” “target,” “outlook,” “aim,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature.

These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. Such possible events or factors include: risks associated with the current outbreak of the novel coronavirus, or the COVID-19 pandemic, changes in economic conditions in the Company’s market area, changes in policies by regulatory agencies, governmental legislation and regulation, fluctuations in interest rates, changes in liquidity requirements, demand for loans in the Company’s market area, changes in accounting and tax principles, estimates made on income taxes, competition with other entities that offer financial services, cybersecurity threats, and such other factors as discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”) on March 10, 2020, in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 filed with the SEC on May 14, 2020, and in our other filings with the SEC.

We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CROSSFIRST BANKSHARES, INC.

CONSOLIDATED BALANCE SHEETS


	June 30, 2020		December 31, 2019

	(Unaudited)
	(Dollars in thousands)
Assets



Cash and cash equivalents	$	194,371	$	187,320
Available-for-sale securities - taxable	256,121		298,208
Available-for-sale securities - tax-exempt	443,962		443,426



Loans, net of allowance for loan losses of $71,185 and $56,896 at June 30, 2020 and December 31, 2019, respectively	4,342,039		3,795,348
Premises and equipment, net	68,889		70,210
Restricted equity securities	20,675		17,278
Interest receivable	19,399		15,716
Foreclosed assets held for sale	2,502		3,619
Deferred tax asset	14,841		13,782
Goodwill and other intangible assets, net	247		7,694
Bank-owned life insurance	66,598		65,689
Other	32,610		12,943
Total assets	$	5,462,254	$	4,931,233
Liabilities and stockholders’ equity
Deposits
Non-interest bearing	$	750,333	$	521,826
Savings, NOW and money market	2,393,269		2,162,187
Time	1,160,541		1,239,746
Total deposits	4,304,143		3,923,759
Federal funds purchased and repurchase agreements	49,881		14,921
Federal Home Loan Bank advances	450,617		358,743

Other borrowings	942		921
Interest payable and other liabilities	48,579		31,245
Total liabilities	4,854,162		4,329,589
Stockholders’ equity
Redeemable preferred stock, $0.01 par value, $25.00 liquidation value:


authorized - 5,000,000 shares, issued - 0 shares at June 30, 2020 and December 31, 2019, respectively	—		—
Common stock, $0.01 par value:


authorized - 200,000,000 shares, issued - 52,167,573 and 51,969,203 shares at June 30, 2020 and December 31, 2019, respectively	521		520
Additional paid-in capital	521,133		519,870
Retained earnings	61,344		64,803

Accumulated other comprehensive income	25,094		16,451
Total stockholders’ equity	608,092		601,644
Total liabilities and stockholders’ equity	$	5,462,254	$	4,931,233

See Notes to Consolidated Financial Statements (unaudited)

Table of Contents

CROSSFIRST BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS - UNAUDITED


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(Dollars in thousands except per share data)
Interest Income
Loans, including fees	$	46,323	$	47,989	$	94,662	$	92,992

Available-for-sale securities - taxable	1,358		2,335		3,132		4,655
Available-for-sale securities - tax-exempt	3,260		2,916		6,572		5,851
Deposits with financial institutions	45		676		536		1,482
Dividends on bank stocks	268		276		560		529

Total interest income	51,254		54,192		105,462		105,509
Interest Expense
Deposits	8,405		17,497		22,677		33,418
Fed funds purchased and repurchase agreements	46		133		108		427
Federal Home Loan Bank Advances	1,620		1,651		3,231		3,110
Other borrowings	26		37		61		75
Total interest expense	10,097		19,318		26,077		37,030
Net Interest Income	41,157		34,874		79,385		68,479
Provision for Loan Losses	21,000		2,850		34,950		5,700
Net Interest Income after Provision for Loan Losses	20,157		32,024		44,435		62,779
Non-Interest Income
Service charges and fees on customer accounts	647		211		1,155		369
Gain on sale of available-for-sale debt securities	320		406		713		433

Impairment of premises and equipment held for sale	—		(424)		—		(424)
Gain on sale of loans	—		79		—		158
Income from bank-owned life insurance	453		473		909		940
Swap fee income (loss), net	(32)		159		(41)		536
ATM and credit card interchange income	896		459		1,381		836
Other non-interest income	350		309		612		469
Total non-interest income	2,634		1,672		4,729		3,317
Non-Interest Expense
Salaries and employee benefits	14,004		14,450		28,394		29,040
Occupancy	2,045		2,062		4,130		4,221
Professional fees	1,295		714		1,966		1,496
Deposit insurance premiums	1,039		881		2,055		1,718
Data processing	721		625		1,413		1,219
Advertising	223		477		723		1,190
Software and communication	937		828		1,813		1,507

Foreclosed assets, net	1,135		19		1,154		25
Goodwill impairment	7,397		—		7,397		—
Other non-interest expense	2,214		1,904		4,188		4,175
Total non-interest expense	31,010		21,960		53,233		44,591
Net Income (Loss) Before Taxes	(8,219)		11,736		(4,069)		21,505
Income tax expense (benefit)	(863)		2,297		(570)		2,716
Net Income (Loss)	$	(7,356)	$	9,439	$	(3,499)	$	18,789
Basic Earnings (Loss) Per Share	$	(0.14)	$	0.21	$	(0.07)	$	0.41
Diluted Earnings (Loss) Per Share	$	(0.14)	$	0.20	$	(0.07)	$	0.40

See Notes to Consolidated Financial Statements (unaudited)

Table of Contents

CROSSFIRST BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (LOSS) - UNAUDITED


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
	(Dollars in thousands)
Net Income (Loss)	$	(7,356)	$	9,439	$	(3,499)	$	18,789
Other Comprehensive Income
Unrealized gain on available-for-sale debt securities	3,618		9,977		12,150		22,327
Less: income tax	884		2,449		2,968		5,480
Unrealized gain on available-for-sale debt securities, net of income tax	2,734		7,528		9,182		16,847
Reclassification adjustment for realized gains included in income	320		406		713		433
Less: income tax	78		100		174		107
Less: reclassification adjustment for realized gains included in income, net of income tax	242		306		539		326
Other comprehensive income	2,492		7,222		8,643		16,521
Comprehensive Income (Loss)	$	(4,864)	$	16,661	$	5,144	$	35,310

See Notes to Consolidated Financial Statements (unaudited)

Table of Contents

CROSSFIRST BANKSHARES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - UNAUDITED



												Accumulated
							Additional					Other
	Preferred Stock				Common Stock						Paid in	Retained				Comprehensive
	Shares	Amount		Shares	Amount		Capital		Earnings			Income		Total
	(Dollars in thousands)
Balance at March 31, 2019	—	$	—	45,202,370	$	452	$	428,412	$	45,293		$	6,357	$	480,514
Net income	—	—		—	—		—		9,439			—		9,439
Change in unrealized appreciation on available-for-sale securities	—	—		—	—		—		—			7,222		7,222
Issuance of shares	—	—		149,765	1		889		—			—		890
Issuance of shares from equity-based awards	—	—		15,506	—		(102)		—			—		(102)


Employee receivables from sale of stock	—	—		—	—		2		84			—		86
Stock-based compensation	—	—		—	—		1,147		—			—		1,147
Employee stock purchase plan additions	—	—		—	—		(1)		—			—		(1)


Balance at June 30, 2019	—	$	—	45,367,641	$	453	$	430,347	$	54,816		$	13,579	$	499,195


												Accumulated
							Additional					Other
	Preferred Stock				Common Stock						Paid in	Retained				Comprehensive
	Shares	Amount		Shares	Amount		Capital		Earnings			Income		Total
	(Dollars in thousands)
Balance at March 31, 2020	—	$	—	52,098,062	$	521	$	520,134	$	68,689		$	22,602	$	611,946
Net loss	—	—		—	—		—		(7,356)			—		(7,356)

Change in unrealized appreciation on available-for-sale securities	—	—		—	—		—		—			2,492		2,492

Issuance of shares from equity-based awards	—	—		69,511	—		(83)		—			—		(83)


Employee receivables from sale of stock	—	—		—	—		—		11			—		11
Stock-based compensation	—	—		—	—		1,082		—			—		1,082



Balance at June 30, 2020	—	$	—	52,167,573	$	521	$	521,133	$	61,344		$	25,094	$	608,092

See Notes to Consolidated Financial Statements (unaudited)

Table of Contents


											Accumulated
							Additional				Other
	Preferred Stock				Common Stock						Paid in		Retained		Comprehensive
	Shares	Amount		Shares	Amount		Capital		Earnings		Income (Loss)		Total
	(Dollars in thousands)
Balance at December 31, 2018	1,200,000	$	12	45,074,322	$	451	$	454,512	$	38,371	$	(3,010)	$	490,336
Net income	—	—		—	—		—		18,789		—		18,789
Change in unrealized appreciation on available-for-sale securities	—	—		—	—		—		—		16,521		16,521
Issuance of shares	—	—		250,968	2		1,715		—		—		1,717
Issuance of shares from equity-based awards	—	—		52,351	—		(236)		—		—		(236)
Retired shares	(1,200,000)	(12)		(10,000)	—		(30,088)		(55)		—		(30,155)
Preferred dividends declared	—	—		—	—		—		(175)		—		(175)
Employee receivables from sale of stock	—	—		—	—		4		113		—		117
Stock-based compensation	—	—		—	—		2,245		—		—		2,245
Employee stock purchase plan additions	—	—		—	—