CrossFirst Bankshares, Inc. (NASDAQ:CFB) reported strong second quarter results, showcasing its ability to generate consistent earnings growth while maintaining a disciplined approach to capital allocation. The company delivered net income of $18.6 million, or $0.37 per diluted share, for the quarter ended June 30, 2024, representing a 2% increase from the previous quarter. This performance was underpinned by robust loan and deposit growth, improved credit quality, and strategic expense management.

Financials

For the full year 2023, CrossFirst reported annual net income of $66,669,000 and annual revenue of $455,322,000. The company's annual operating cash flow was $96,001,000, while its annual free cash flow reached $87,047,000. These solid financial results demonstrate CrossFirst's ability to consistently generate profitable growth and effectively deploy its capital.

Asset and Loan Growth

During the second quarter, total assets grew to $7.6 billion, a 2% increase from the prior quarter, driven by loan growth in the company's dynamic Texas, Colorado, and Arizona markets. CrossFirst's loan portfolio remains well-diversified, with 44% in commercial and industrial (C&I) and owner-occupied commercial real estate, and 44% in non-owner-occupied commercial real estate. The company's energy portfolio accounts for 4% of total loans.

Deposit Growth

Deposit growth was also a highlight, with total deposits increasing 2% to $6.7 billion. The company's focus on improving its deposit mix resulted in a slight increase in non-interest-bearing deposits, which now represent 14% of the total deposit base. CrossFirst's management team remains committed to driving further deposit growth and optimizing its funding structure.

Credit Quality

Credit quality continued to be a strength, with the company reporting a decrease in its non-performing assets to total assets ratio from 27 basis points at the end of the first quarter to 22 basis points at the end of the second quarter. Classified assets to capital plus combined reserves also improved, declining to 13.3% from 15.8% in the previous quarter. These positive credit trends reflect CrossFirst's disciplined underwriting and proactive portfolio management.

Net Interest Margin

The company's net interest margin remained stable at 3.20% on a fully tax-equivalent basis, in line with management's expectations. CrossFirst's earning assets continue to be primarily variable-rate, with 66% repricing or maturing within the next 12 months. The company's liability structure also provides flexibility, with 27% of client deposits indexed to market rates and a significant portion of the CD portfolio maturing in the next year.

Outlook

Looking ahead, CrossFirst expects to maintain its net interest margin in the range of 3.20% to 3.25% for the full year 2024, assuming two interest rate cuts by the Federal Reserve. The company has also moderated its loan growth guidance to a range of 6% to 8% for the year, down from its previous expectations, as it remains focused on maintaining credit quality and reducing its commercial real estate concentration.

Expense Management

On the expense front, CrossFirst made progress in improving its efficiency, completing a successful renegotiation of its core services contract, which is expected to result in annual run-rate savings of approximately $2 million. The company also continues to strategically invest in talent, adding five new production employees during the quarter, while keeping its overall headcount flat.

Capital Management

CrossFirst's capital position remains strong, with the company leveraging its earnings power to both build capital and return capital to shareholders. During the second quarter, the company repurchased 237,000 shares at a weighted average cost of $12.78 per share, well below its tangible book value per share of $14.02 at the end of the quarter. Management remains committed to maintaining a balanced approach to capital allocation, focusing on organic growth, strategic acquisitions, and opportunistic share repurchases.

Conclusion

CrossFirst Bankshares delivered a solid second quarter performance, demonstrating its ability to generate consistent earnings growth, maintain strong credit quality, and prudently manage its capital. The company's diversified business model, disciplined risk management, and strategic investments position it well to navigate the current economic environment and capitalize on growth opportunities in its dynamic markets. With a focus on optimizing its funding structure, driving fee income, and enhancing operational efficiency, CrossFirst is poised to continue delivering value to its shareholders.