Financial Data and Key Metrics Changes - The bank reported net income of $8 million or $0.15 per share for the quarter, with record pre-tax, pre-provision profits despite the pandemic [12][33] - Net interest income declined 4% on a linked quarter basis to $39.3 million, but was 10% above the third quarter of 2019 [24] - The net interest margin (NIM) decreased by 21 basis points from 3.19% to 2.98% during the quarter [24] - Non-interest income increased by 54% on a linked quarter basis and 26% year-over-year, driven by credit card fees, service charges, and securities gains [34] Business Line Data and Key Metrics Changes - Loan and deposit growth year-over-year was 23%, with quarter-over-quarter loans growing conservatively at 1.6% excluding PPP loans [13] - Overall deposits grew by 4.4% from the previous quarter, including robust demand deposit growth year-to-date [13] - Non-interest expenses were relatively flat on a linked quarter basis, with a reduction in headcount from 364 to 332 employees [35] Market Data and Key Metrics Changes - The Midwest and Southwest markets served by the bank have unemployment rates lower than the national average, with steady economic improvement [10] - The bank continues to hold approximately $369 million of PPP loans, with a significant portion expected to be forgiven in the first half of 2021 [21] Company Strategy and Development Direction - The company is focusing on fee income generating opportunities to diversify revenue and alleviate margin pressure [14] - A share repurchase program of up to $20 million was approved, reflecting confidence in the company's strength and direction [11] - The bank opened two new strategic locations in Dallas and Kansas City to expand its presence in fast-growing markets [16] Management's Comments on Operating Environment and Future Outlook - Management expressed pride in the bank's performance amidst a challenging macroeconomic climate and emphasized the importance of operational efficiencies [7][8] - The bank plans to continue building reserves throughout 2020 to strengthen its balance sheet for a stronger 2021 [8][49] - Management remains cautious in assessing and underwriting new credits while actively engaging with customers [19] Other Important Information - The bank's efficiency ratios were reported at 59% year-to-date and 53% for the quarter, despite non-recurring charges impacting these ratios [36] - The bank's criticized and classified loan total at the end of the quarter was $477 million, with classified loans at approximately $300 million [75] Q&A Session Summary Question: Can you provide more color on the $6 million of net charge-offs? - The charge-offs included several loans in the energy space and a couple in the C&I portfolio, with no systemic issues identified [53][54] Question: What contributed to the increase in non-performing assets (NPA)? - The increase was primarily due to one energy transaction and a restructured C&I loan, but NPAs decreased post-restructure [55][56] Question: What are the expectations for the buyback program? - The company aims to be prudent with the buyback, evaluating market conditions while maintaining a strong capital position [57][58] Question: Are there more cost management levers available for 2021? - The company has optimized staffing levels and expects cost reductions to positively impact 2021 [59] Question: What areas are seeing loan growth opportunities? - Loan growth is primarily coming from Texas and Kansas City, particularly in industrial and Class A multifamily real estate [61][62] Question: What are the expected trends for card fees? - Increased activity in the healthcare sector has driven card fees up, and this trend may continue in the near term [63][64] Question: What are the criticized and classified loan balances at the end of the quarter? - Criticized and classified loan totals were $477 million and approximately $300 million, respectively [75] Question: When do you expect reserve levels to peak? - Reserve levels are expected to peak at the end of the year, close to the 2% mark [76]
CrossFirst Bankshares(CFB) - 2020 Q3 - Earnings Call Transcript