Financial Data and Key Metrics Changes - GAAP net income for the quarter was $16.9 million or $0.34 per share, with adjusted net income of $18.6 million or $0.37 per share, reflecting a 7% growth in adjusted earnings [18][30] - Net interest income on a fully tax equivalent basis increased slightly by $0.5 million from the previous quarter, driven by higher average earning assets and loan yields [19] - The effective net interest margin narrowed by 8 basis points to 3.19%, with expectations for Q4 to be in the range of 3.20% to 3.25% [20][44] Business Line Data and Key Metrics Changes - Total loan growth was $149 million, resulting in a growth rate of 2.6% for the quarter, primarily due to the Tucson acquisition [35] - Non-interest income was $6 million for the quarter, a 3% increase from the second quarter, driven by treasury and credit card revenues [21] - Average loan yield on new production was strong at 8.54%, with a total cost of deposits at 3.59% against loan yields of 6.96% [12][43] Market Data and Key Metrics Changes - Core deposits increased while wholesale borrowings declined, improving the funding composition [31] - Non-interest bearing deposits increased to $1 billion, representing 16% of total deposits, up from 15% in the previous quarter [40] - The company reported an increase in non-performing assets to $36.1 million, resulting in a non-performing asset to total asset ratio of 50 basis points [14] Company Strategy and Development Direction - The company is focused on improving profitability by scaling its franchise in high-growth markets, optimizing expenses, and maintaining credit quality [30][33] - The Tucson acquisition is expected to enhance liquidity and lower cost deposits, with full onboarding of clients anticipated by mid-November [10] - The company aims to continue driving efficiencies and operating leverage while managing expenses [45][116] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining solid credit quality despite external challenges, with a focus on proactive management of relationships [11][17] - The company anticipates moderate loan growth in the last quarter of 2023, with a healthy pipeline of new transactions heading into 2024 [17][33] - Management noted that competition for deposits remains strong, but they believe they are near the peak of deposit pricing [44] Other Important Information - The company completed the Tucson acquisition, which was immediately accretive with modest dilution and a short earn-back period of less than two years [47] - The liquidity position remains strong, with approximately $2.4 billion from on and off-balance sheet sources [23] - The tangible book value per share decreased by 3% compared to the prior quarter due to unrealized losses on available-for-sale securities [22] Q&A Session Summary Question: What is the outlook for loan growth in the coming quarters? - Management indicated that loan growth is expected to be moderate, driven by customer demand and credit decision-making [57][113] Question: How is the company managing its securities portfolio? - The company is evaluating options to improve yields on earning assets and is considering restructuring scenarios [49][120] Question: What are the expectations for non-interest income moving forward? - Management expects non-interest income to remain stable, with potential for growth in treasury and credit card platforms [98][117] Question: How does the company view its capital ratios and potential buybacks? - Management confirmed that they expect to meet their capital targets and may consider returning capital to shareholders if stock prices remain low [107][108]
CrossFirst Bankshares(CFB) - 2023 Q3 - Earnings Call Transcript