CrossFirst Bankshares, Inc.

Good day and welcome to the Cross First Bank Shares, Inc. Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mike Daly, Chief Accounting Officer and Head of Investor Relations. Please go ahead.

Good morning and welcome to Cross First Bank Share's second quarter 2023 earnings conference call. Before we begin, please be aware this call will include forward-looking statements, including statements about our business plans, expansion and growth opportunities, expected acquisition of Canyon Bank Corporation, Inc., and our future financial performance. These comments are based on our current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from these statements. Our forward-looking statements are as of the date of this call, and we do not assume any obligation to update or revise them, except as required by law. Statements made on this call should be considered together with the risk factors identified in our earnings release and our other filings with the SEC. We may also refer to adjusted or non-GAAP financial measures. A reconciliation of non-GAAP financial measures to GAAP financial measures can be found in our earnings release. These non-GAAP financial measures are not meant to be a substitute for or superior to financial measures prepared in accordance with GAAP. Our presentation will include prepared remarks from Mike Maddox, President and CEO of Cross First Bank Shares, Randy Rapp, President of Cross First Bank, and Ben Klaus, CFO of Crossverse Bank Shares. At the conclusion of our prepared remarks, our operator Betsy will facilitate a Q&A session. At this time, I would like to turn the call over to Mike, who will begin on slide four of the presentation available on our website and follow with our earnings release. Mike?

Thank you, Mike. I look forward to this opportunity to share an update on our second quarter results. It has been an unprecedented and challenging time for the banking industry. But despite all the recent turmoil, we continue to focus on delivering value to our clients, employees, shareholders, and communities. Deposit stability and liquidity are top of mind for investors, and our financial results reflect the benefits of our relationship-driven business model. Balanced business mix, high-quality client base, desirable growing markets, and the relentless efforts of our extraordinary team. During the past quarter, we delivered a consistent level of earnings, grew our capital, managed our growth, and optimized our expense base, all focused toward delivering long-term value and making our company even stronger. We will continue to take a measured approach to expenses to drive efficiency improvement and gain additional operating leverage as we grow. Our team delivered adjusted net income of $17.3 million or 35 cents per share for the quarter. Margin was compressed as cost of funds increased higher than our earning asset yields. As the Federal Reserve continues to rein in inflation, we expect that margin will continue to be pressured. However, we remain optimistic that we will see margin stabilize given our largely variable loan portfolio and expectations for slower asset growth the rest of this year. As expected, our loan growth moderated this quarter as the economy slows and we become even more selective on new lending opportunities. Our deposit base remains stable despite the volatility in the industry. Our focus on relationship banking and building strong customer relationships continues to serve us well. We had a nice increase in fee-based revenue this quarter led by our new SBA lending team. a highlight of the acquisition we completed last year. While our loan and deposit growth have historically been very strong, strategically we continue to focus on fee income generation to diversify our revenue and enhance our profitability. We are monitoring our loan portfolio for signs of stress and are pleased with the stability of our credit quality this quarter. We also continue to build reserves, and Randy will cover more details on credit in his remarks. Our team remains focused on serving our clients, monitoring credit quality, and executing on our strategic initiatives. We started the year with a successful implementation of our digital banking platform, completing the system conversion for our Colorado and New Mexico acquisition, and immediately following entered into a definitive agreement with Canyon Community Bank Corporation and its wholly owned subsidiary, Canyon Community Bank in Tucson, Arizona. I am excited to share that we have received regulatory approval to close on the acquisition of Canyon. We are working towards closing and planning for integration and look forward to welcoming new clients and team members. We believe the acquisition of Canyon will be complementary to our existing geographic footprint in the Arizona market. The acquisition is expected to provide liquidity, lower cost deposits, and an attractive means to further expansion goals in Arizona. In June, we opened our fourth bank in the Dallas area, conveniently located in Preston Center, where we see an opportunity to build relationships and grow deposits. Since we entered the Texas market in 2016, we continue to expand our presence to serve the greater metropolitan area, which also includes bank locations in Frisco and Fort Worth. We will continue to work towards scaling and optimizing the investments we have made and remain focused on driving long-term profitability and shareholder return. Our focus continues to be on efficiency and driving operating leverage. We have made the investments in people, technology, and locations necessary to drive strong continued organic growth. We are working through a challenging time in the overall banking industry. but I am confident in our team's ability to deliver for our clients while building franchise value. Optimizing our investments is important, and we made progress in the second quarter that should provide for continued earnings improvement in the quarters to come. And now I'd like to turn the call over to our president of Cross First Bank, Randy Rapp.