CrossFirst Bankshares(CFB) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings of $21 million for Q3 2021, with diluted earnings per share of $0.41, marking the fifth consecutive quarter of earnings growth [6][14] - A release of $10 million in reserves was noted due to significant improvement in credit quality, partially offset by a $6.2 million asset impairment [6][14] - Return on average assets improved to 1.54% and return on average equity increased to 12.92% [15] Business Line Data and Key Metrics Changes - Loan growth was over 2% for the quarter, excluding PPP forgiveness, indicating a return to more normalized loan demand [15] - Interest income for Q3 was $47.3 million, slightly declining due to a 4% reduction in average loan balances, primarily from PPP loan forgiveness [16] - Non-interest income adjusted for the asset impairment increased by 28% to $5.1 million, driven by realized gains on bond sales and increased credit card fees [18] Market Data and Key Metrics Changes - Nonperforming assets decreased to 0.92% of total assets, a 36% reduction during 2021 [24] - Classified loans decreased by 27% in Q3 to $124 million, down 57% since the beginning of the year [24] - The energy sector, which comprises 51% of nonperforming assets, is positively impacted by higher commodity prices [24] Company Strategy and Development Direction - The company aims for continued growth by attracting and retaining top talent, leveraging its strong capital position, and enhancing service to clients and communities [9] - Expansion efforts are focused on markets like Frisco, Texas, and Phoenix, Arizona, with a commitment to investing in technology and digital capabilities [11][12] - The strategic plan includes a new share buyback authorization of up to $30 million to enhance earnings per share and return on equity [6][21] Management's Comments on Operating Environment and Future Outlook - The management expressed optimism about the economic recovery, noting moderate to strong growth in the markets served, despite challenges like labor shortages [11][12] - The company is committed to growth without compromising credit standards and expects continued credit improvement across all markets [13] - Management highlighted the importance of maintaining a strong capital base to support future asset growth [14] Other Important Information - The company completed its annual employee engagement survey with record results, indicating a highly engaged workforce [10] - The tax rate for Q3 was approximately 21%, expected to remain stable going forward [33] Q&A Session Summary Question: Outlook on loan growth considering new markets - Management noted steady growth in the pipeline and confidence in organic loan growth, particularly in Phoenix and Frisco [30][31] Question: Expense outlook and base run rate - Expected non-interest expense growth of 3% to 5% in Q4, primarily due to talent investment [32] Question: Appetite for energy loans with rising prices - Management will be cautious about increasing energy loans but sees opportunities in the market [36][38] Question: Insights on deposit growth and margin expansion - Focus on growing demand deposit accounts and maintaining competitive loan pricing while managing funding costs [43][45] Question: Future market expansion plans - Management is evaluating new markets but is currently focused on building infrastructure in existing ones [48]