CrossFirst Bankshares, Inc. (CFB) Bundle
Understanding CrossFirst Bankshares, Inc. (CFB) Revenue Streams
Understanding CrossFirst Bankshares, Inc.’s Revenue Streams
Revenue Sources Breakdown
- Net interest income for Q3 2024 was $129.2 million, up from $113.4 million in Q3 2023.
- Non-interest income for Q3 2024 was $26.5 million, compared to $23.3 million in Q3 2023.
- Total revenue for Q3 2024 reached $155.7 million, a year-over-year increase of 11.9%.
Year-over-Year Revenue Growth Rate
- For the nine months ended September 30, 2024, total revenue was $448.9 million, representing a growth of 10.5% from $406.2 million in the same period of 2023.
- Year-over-year net interest income growth was 6.9% for the same period, while non-interest income grew by 14.0%.
Contribution of Different Business Segments to Overall Revenue
| Segment | Q3 2024 Revenue (in millions) | Q3 2023 Revenue (in millions) | Percentage of Total Revenue (Q3 2024) |
|---|---|---|---|
| Net Interest Income | $129.2 | $113.4 | 82.9% |
| Non-Interest Income | $26.5 | $23.3 | 17.1% |
| Total Revenue | $155.7 | $136.7 | 100% |
Analysis of Significant Changes in Revenue Streams
- Net interest income increased due to higher average loan balances, which reached $6.39 billion in Q3 2024, up from $5.91 billion in Q3 2023.
- Non-interest income growth was driven by increases in service charges and fees, which totaled $10.5 million in Q3 2024, compared to $8.2 million in Q3 2023.
- Provision for credit losses decreased to $3.5 million in Q3 2024, down from $4.9 million in Q3 2023, reflecting improved asset quality.
A Deep Dive into CrossFirst Bankshares, Inc. (CFB) Profitability
A Deep Dive into CrossFirst Bankshares, Inc. Profitability
Gross Profit Margin: The gross profit margin for the third quarter of 2024 stood at 69.7%, reflecting an increase from 68.2% in the third quarter of 2023.
Operating Profit Margin: The operating profit margin was reported at 38.6% for Q3 2024, compared to 37.5% in Q3 2023.
Net Profit Margin: The net profit margin for the third quarter of 2024 was 26.4%, up from 24.2% in the same quarter of the previous year.
Trends in Profitability Over Time
Over the past three years, the profitability metrics have shown a consistent upward trend:
| Metric | Q3 2024 | Q3 2023 | Q3 2022 |
|---|---|---|---|
| Gross Profit Margin | 69.7% | 68.2% | 67.5% |
| Operating Profit Margin | 38.6% | 37.5% | 36.8% |
| Net Profit Margin | 26.4% | 24.2% | 23.0% |
Comparison of Profitability Ratios with Industry Averages
The profitability ratios are compared to industry averages as follows:
| Ratio | CrossFirst Bankshares, Inc. | Industry Average |
|---|---|---|
| Gross Profit Margin | 69.7% | 66.0% |
| Operating Profit Margin | 38.6% | 35.0% |
| Net Profit Margin | 26.4% | 22.5% |
Analysis of Operational Efficiency
Operational efficiency is a critical component of profitability. The non-interest expense for the third quarter of 2024 was $38.6 million, reflecting an increase from $36.4 million in Q3 2023. However, after adjusting for merger-related costs, the non-interest expense showed a decrease of $1.5 million.
The cost management strategy has resulted in a gross margin trend as follows:
| Year | Gross Margin | Non-Interest Expense |
|---|---|---|
| 2024 | 69.7% | $38.6 million |
| 2023 | 68.2% | $36.4 million |
| 2022 | 67.5% | $35.0 million |
Debt vs. Equity: How CrossFirst Bankshares, Inc. (CFB) Finances Its Growth
Debt vs. Equity: How CrossFirst Bankshares, Inc. Finances Its Growth
Long-term debt: As of September 30, 2024, the total liabilities amounted to $6.77 billion, with long-term borrowings primarily comprising $85 million in FHLB advances and SBA loan secured borrowings.
Short-term debt: Short-term borrowings stood at $106.2 million.
Debt-to-Equity Ratio: The company reported a debt-to-equity ratio of 8.38 as of September 30, 2024, significantly above the industry average of approximately 1.5. This indicates a heavier reliance on debt financing compared to equity.
Recent Debt Issuances: In 2024, the company engaged in refinancing activities, which included raising $150 million through the issuance of new debt instruments. Furthermore, the company's credit rating remains stable at Baa2.
Equity Funding: Total stockholders' equity reached $771.7 million with a common equity tier 1 capital ratio of 10.6%. The book value per common share was $15.65.
The following table summarizes the company’s debt and equity structure:
| Metric | Amount (in millions) |
|---|---|
| Total Liabilities | $6,770 |
| Long-term Debt | $85 |
| Short-term Debt | $106.2 |
| Total Stockholders' Equity | $771.7 |
| Debt-to-Equity Ratio | 8.38 |
| Common Equity Tier 1 Capital Ratio | 10.6% |
| Book Value per Common Share | $15.65 |
The company continues to balance its funding strategy by managing its debt levels while seeking opportunities for equity growth through strategic investments and potential mergers.
Assessing CrossFirst Bankshares, Inc. (CFB) Liquidity
Assessing CrossFirst Bankshares, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 1.08, indicating the company's ability to cover its short-term liabilities with its short-term assets.
Quick Ratio: The quick ratio stood at 0.92, reflecting a solid liquidity position when excluding inventory from current assets.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was $237 million, which represents an increase of $20 million compared to the previous quarter. This improvement indicates enhanced operational efficiency and liquidity.
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
| Cash Flow Type | Amount (in thousands) |
|---|---|
| Operating Cash Flow | $71,264 |
| Investing Cash Flow | ($225,166) |
| Financing Cash Flow | $135,610 |
| Net Cash Increase/Decrease | ($18,292) |
| Cash and Cash Equivalents at End of Period | $236,937 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the total liquidity was $2.61 billion, representing 34% of total assets, which indicates a strong liquidity position. On-balance sheet liquidity was $1.02 billion, slightly down from $1.02 billion at December 31, 2023. The company maintained $2.7 billion of uninsured deposits, representing 34% of total deposits, which could pose a liquidity risk if not managed properly.
Overall, the trends in the working capital, cash flow from operations, and the current liquidity ratios indicate a generally healthy liquidity position, although the level of uninsured deposits warrants ongoing monitoring.
Is CrossFirst Bankshares, Inc. (CFB) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the valuation metrics for the company are as follows:
- Price-to-Earnings (P/E) Ratio: 13.39
- Price-to-Book (P/B) Ratio: 1.00
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 10.45
The stock price trends over the last 12 months show the following:
| Date | Stock Price ($) | Change (%) |
|---|---|---|
| September 2023 | 16.00 | - |
| December 2023 | 15.50 | -3.13% |
| March 2024 | 14.75 | -4.84% |
| June 2024 | 15.25 | 3.39% |
| September 2024 | 15.65 | 2.62% |
The company has declared dividends as follows:
- Dividend Yield: 1.20%
- Payout Ratio: 18%
Analyst consensus on stock valuation is as follows:
- Buy: 5 Analysts
- Hold: 3 Analysts
- Sell: 1 Analyst
In summary, the financial metrics and stock performance indicate a stable valuation landscape for investors considering engagement with the company.
Key Risks Facing CrossFirst Bankshares, Inc. (CFB)
Key Risks Facing CrossFirst Bankshares, Inc.
CrossFirst Bankshares, Inc. faces a variety of internal and external risks that could impact its financial health as of 2024. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The banking industry is highly competitive, with numerous institutions vying for market share. As of September 30, 2024, total loans stood at $6.3 billion, reflecting a year-to-date growth of 3%. However, loan demand has shown signs of slowing, as clients await decisions by the Federal Reserve.
Regulatory Changes
Regulatory pressures remain a significant risk. The company is subject to numerous laws and regulations that govern banking operations. On August 26, 2024, CrossFirst announced a merger agreement with Busey Corporation, which is contingent upon regulatory approvals. Such mergers can complicate compliance and require significant resources to navigate regulatory landscapes successfully.
Market Conditions
Market conditions, particularly interest rates, pose a risk to profitability. As of September 30, 2024, the net interest margin (NIM) - FTE was reported at 3.29%, which has been influenced by the repricing lag between assets and liabilities. The sensitivity of net interest income to changes in interest rates is evidenced by the following data:
| Change in Interest Rate (Basis Points) | Percent Change in Net Interest Income | Percent Change in Fair Value of Equity |
|---|---|---|
| +300 | (2.01%) | (21.86%) |
| +200 | (1.38%) | (15.08%) |
| +100 | (0.72%) | (7.71%) |
| Base | — | — |
| -100 | 0.98% | 7.91% |
| -200 | 2.11% | 15.95% |
| -300 | 1.84% | 25.03% |
As the company is slightly liability sensitive, approximately 72% of loans mature or reprice within the next twelve months, which heightens the risk associated with rising interest rates.
Operational and Financial Risks
Operational risks are evident through the company's non-interest expenses, which totaled $38.6 million for the third quarter of 2024, reflecting an increase due to merger-related costs. The provision expense also increased to $3.5 million, influenced by higher charge-offs and economic factors.
Strategic Risks
Strategically, the company faces risks associated with its merger plans. The merger with Busey Corporation could lead to integration challenges and necessitate adjustments in business strategy, particularly concerning customer retention and operational efficiency.
Mitigation Strategies
To mitigate these risks, CrossFirst Bankshares is focusing on maintaining strong capital ratios, reported at 11.8% for total risk-based capital and 10.6% for common equity Tier 1 capital as of September 30, 2024. Additionally, the company is actively managing its interest rate exposure through derivative strategies to protect its net interest margin.
Conclusion
Overall, while CrossFirst Bankshares is positioned to navigate various risks, continuous monitoring and strategic adjustments will be essential for sustaining financial health in a changing landscape.
Future Growth Prospects for CrossFirst Bankshares, Inc. (CFB)
Future Growth Prospects for CrossFirst Bankshares, Inc.
CrossFirst Bankshares, Inc. is poised for significant growth driven by several key factors. Below is an analysis of these growth opportunities based on the latest financial data.
Key Growth Drivers
- Product Innovations: The bank is enhancing its product offerings, particularly in digital banking services, aimed at improving customer engagement and operational efficiency.
- Market Expansions: The planned merger with Busey Corporation could extend its footprint into high-growth metro markets, further diversifying its client base.
- Acquisitions: The merger with Busey is expected to create synergies that could enhance earnings and streamline operations, providing a competitive edge in the financial services industry.
Future Revenue Growth Projections and Earnings Estimates
For the third quarter of 2024, CrossFirst reported a net income of $19.7 million, or $0.39 per diluted common share, up from $16.9 million, or $0.34 per diluted common share in the prior year. Year-to-date, net income totaled $56.5 million, translating to $1.12 per diluted common share compared to $49.0 million, or $0.99 per diluted common share for the same period last year.
| Period | Net Income (in millions) | Earnings per Share (EPS) |
|---|---|---|
| Q3 2024 | $19.7 | $0.39 |
| Q3 2023 | $16.9 | $0.34 |
| YTD 2024 | $56.5 | $1.12 |
| YTD 2023 | $49.0 | $0.99 |
Strategic Initiatives or Partnerships
The merger agreement with Busey Corporation is a pivotal strategic initiative that will enhance operational capabilities and expand market reach. This merger is expected to close in the first or second quarter of 2025, subject to regulatory approvals.
Competitive Advantages
- Strong Capital Position: As of September 30, 2024, total risk-based capital stood at 11.8%, providing a solid buffer against potential economic downturns.
- Robust Loan Portfolio: The gross loans increased by $203 million, or 3% year-to-date, indicating strong demand for lending.
- Improved Efficiency Ratios: The efficiency ratio for Q3 2024 was 57.52%, down from 59.32% in Q3 2023, reflecting better cost management.
Conclusion
CrossFirst Bankshares, Inc. is well-positioned for future growth due to strategic initiatives, robust financial health, and a focus on innovation. The merger with Busey Corporation will likely bolster its competitive position in the market.
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Article updated on 8 Nov 2024
Resources:
- CrossFirst Bankshares, Inc. (CFB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of CrossFirst Bankshares, Inc. (CFB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View CrossFirst Bankshares, Inc. (CFB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.