CFB - CrossFirst Bankshares Inc. (CFB) Q1 2023 Earnings Call Transcript
2023-04-18 13:34:02 ET
CrossFirst Bankshares, Inc. (CFB)
Q1 2023 Earnings Conference Call
April 18, 2023 11:00 a.m. ET
Company Participants
Heather Worley - Director of Investor Relations
Mike Maddox - President and Chief Executive Officer
Randy Rapp - President
Ben Clouse - Chief Financial Officer
Conference Call Participants
Brady Gailey - KBW
Michael Rose - Raymond James
Matt Olney - Stephens
Andrew Liesch - Piper Sandler
Presentation
Operator
Hello and welcome to the CrossFirst Bankshares First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Heather Worley, Director of Investor Relations. Please go ahead.
Heather Worley
Good morning, and welcome to CrossFirst Bankshares' first quarter 2023 earnings conference call. I'm Heather Worley, Director of Investor Relations at CrossFirst Bank.
Before we begin, please be aware this call will include forward-looking statements, including statements about our business plans, expansion and growth opportunities, 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 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 today's earnings release and our other filings with the SEC.
We may 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 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 CrossFirst Bankshares; Randy Rapp, President of CrossFirst Bank; and Ben Clouse, CFO of CrossFirst Bankshares. At the conclusion of our prepared remarks, our operator, MJ, 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 Web site and filed with our earnings release with the SEC. Mike?
Mike Maddox
Thank you, Heather. Good morning, everyone, and thank you for joining us to discuss CrossFirst's first quarter 2023 operating results. It has certainly been an interesting start to the year, but I always look forward to this opportunity to share an update on CrossFirst's performance, as well as offer a preview of what's the come in the year ahead. I cannot be more proud of how our team has navigated the challenging environment.
We entered 2023 with a theme of optimization. Our goal this year is to build on our solid foundation and maximize the investments we have made to benefit our clients and our shareholders. We continued our momentum from 2022 into the first quarter, producing strong earnings, expanded margin, growth in our capital, and improvement in our credit quality against a challenging backdrop. We maintain a diversified balance sheet with significant liquidity to withstand market volatility.
In terms of first quarter 2023 financial performance, we reported $17.3 million in adjusted net income or $0.35 per share. We are fortunate to have an experienced team of bankers and leaders, and I am extremely proud of the way they have managed through the recent turmoil within our industry with a focus on serving our clients and continuing to build franchise value.
We have a history of financial stability and a responsible risk management mindset. These sound fundamentals have served us well since our bank was founded, and will continue to guide us into the future. We are well-capitalized with ratios above regulatory requirements. As a sign of support and confidence in our company, last quarter, we issued $17.8 million in a private preferred stock offering. The preferred shares were primarily purchased by our Board and executive team to further strengthen our capital ratios.
We are so fortunate to have a diversified client base of depositors and borrowers, consisting of successful businesses and professionals within the markets we serve. This customer base has been built over 15 years based on relationship and trust, which has proved invaluable over the last several weeks. We operate in high-quality metro markets such as Dallas-Fort Worth, Kansas City, Phoenix, and most recently, Denver and Colorado Springs. We believe our presence in these markets will strengthen our financial profile for continued success. We have had several significant accomplishments this past quarter as we continue to leverage the investments we have made in technology, our processes, and in the development of our people.
In March, we completed the final step in our Colorado and New Mexico integration as we combined the strengths of our technology and people. As we look to the rest of the year, we will be thoughtful about how we allocate our capital, with the expectation that our loan growth will moderate from first quarter levels. Due to the economic environment, we will hold to our credit standards, and we will remain true to our relationship-based banking philosophy. We are very cognizant of the continued economic uncertainty as the Fed pursues its goal of reigning in inflation. Maintaining great asset quality remains our number one priority, and it will not be compromised to facilitate growth.
We are only as good as our people and our culture. The success we achieve as an organization is directly connected to our teammates and their development, which is why I'm honored to share with all of you that we were recently recognized by Gallup as a 2023 Don Clifton Strengths-Based Culture Award Winner. This award is recognition of all the extraordinary work our employees do each day to embrace our strengths-based culture. With increased pressure on retaining top talent, this award is a strong indictor that we are investing in the right areas, especially in our people.
We know there continues to be a dynamic economic environment, so regardless of what may happen outside of our control, I am confident in our team's ability to deliver extraordinary service and help our clients, while building franchise value.
And now, I'd like to turn the call over to our President of CrossFirst Bank, Randy Rapp.
Randy Rapp
Thanks, Mike, and good morning everyone. Q1 was a unique quarter for our industry, but I could not be happier about the way our bankers and clients responded to changing market conditions, affirming the trusted relationships we have established in our markets. We have not lost any significant clients to date, and, in fact, continue to see strong loan demand. During the quarter, we integrated the Colorado and New Mexico teams, and enhanced our leadership team with the addition of Brendon Maguffee as President of our Tulsa market. In Q1, we also continued our focus on providing our clients with innovative technology solutions, completing the final phase of our digital banking platform conversion.
We have now migrated all clients to the newly enhanced platform, which we believe will assist in driving new deposit and treasury activity. Turning to Q1 highlights, we reported total loan growth of $270 million. C&I and commercial real estate both increased during the quarter, with C&I increasing $59 million, and commercial real estate increasing $198 million. During the quarter, we realized growth in areas we have recently made investments in talent, including franchise finance, energy, and the Colorado markets. Our larger markets, including Dallas, Kansas City, and Phoenix also continue to report significant loan growth.
Although we realized good loan activity, we continue to strictly adhere to our underwriting standards, while integrating the impact of a higher interest rate environment and enhanced economic uncertainty. Over the last several quarter, as liquidity in the markets has decreased and the level of competition has lessened, we have also seen an increase in loan spreads. Average C&I line utilization for the quarter was 44%, consistent with the prior quarter. And portfolio churn decreased, and is now below the historical average level. We expect portfolio churn to continue to decrease over the next several quarters, led by the decrease in commercial real estate, refinancing, and sales activity.
Our loan portfolio remains diversified with a 44% concentration in commercial real estate and 45% concentration in C&I and owner occupied real estate. Energy exposure is now $194 million or 3.4% of total portfolio. There also remains good diversity within each of those portfolios with the highest CRE property type accounting for 17% of total CRE exposure. And the largest industry segment in C&I being manufacturing at 10% of C&I exposure.
We also continue to have good transaction diversity within each portfolio with the top 25 C&I clients representing 27% of total C&I exposure or 10% of total loan exposure, and the top 25 commercial real estate transactions representing 23% of CRE exposure or 10% of total loan exposure. Our real estate portfolio also has geographic diversity with concentration in high quality markets including Dallas, Kansas City, Phoenix, and Denver. For the quarter, average deposits increased 8.3% to $5.7 billion, up $439 million in the previous quarter.
Non-interest bearing deposits decreased during the quarter to $970 million. And now represents 17% of total deposits, down from 25% at the end of '22. Some of this migration was anticipated due to several clients holding short-term outsized DDA positions at the end of the year. Ben will cover additional deposit portfolio statistics in his remarks. Continuing to grow deposits with a focus on DDA remains a top priority.
Moving to the credit highlights for Q1, we reported a drop in nonperforming assets of $2 million to $11 million resulting in a nonperforming asset to total asset ratio of 0.16%. This ratio is down from 0.64% from the same period in '22. At quarter end, we held only one piece of ORE valued at $855,000 which was subsequently then sold with a slight recovery. Classified loans to capital plus combined reserves ended Q1 at 9.3%. Down from 10% at year end '22 and down from 10.7% the same quarter last year.
For the quarter, we reported net charge-offs of $1.6 million resulting in a charge-off rate of 8 basis points on an annualized basis, and nine basis points on a trailing 12-month basis. At quarter end, we reported an allowance for credit loss to total ratio of 1.15%, and combined allowance for credit loss and reserve for unfunded commitments of 1.3%.
For the quarter, we reported provision expense of $4.4 million resulting in our provision to charge-off ratio of 269%. Provision was driven primarily by loan growth during the quarter with a total ACL of $65 million. Our current combined ACL to nonperforming loan ratio is 629%. We remain highly focused on maintaining good credit metrics moving forward. We continue to proactively monitor our portfolio and have consistent dialog with our clients and prospects about the continued impact of higher interest rates, inflation, and economic uncertainty on their businesses.
We are also continuing to closely monitor or local, U.S, and global economies looking for impactful trends. We have minimal exposure in some of the higher impacted parts of the country. And, we are pleased with our core stable Midwest markets as well as our larger markets continue to show positive job creation and population migration.
I will now turn the call over to Ben to cover the financial results in more detail. Ben?
Ben Clouse
Thanks, Randy, and good morning everyone. GAAP net income this quarter was $16.1 million or $0.33 per share which included several costs related to the Colorado integration. Adjusted net income was $17.3 million or $0.35 per share. Net income was higher this quarter due an increase in net interest income partially offset by higher non-interest expenses.
I'll frame the rest of my comments around results adjusted to remove the integration and acquisition cost where applicable which we believe is reflective of our core operating performance. We are in the early stages following the acquisition, but we are on track to achieve our cost savings target and earnings accretion as anticipated.
Quarterly adjusted return on average assets was 1.04% and adjusted return on average equity was 11.3%. These ratios were the result of strong core performance driven by balance sheet growth and an expanding margin while optimizing investments we have made. Net interest income on a fully tax equivalent basis increased $4.2 million, or 8% from the fourth quarter due to higher average earning assets and stronger loan yields partially offset by higher cost of funds and two fewer days.
Average earning assets increased $521 million compared to the prior-quarter. The yield on loans increased 63 basis points due to re-pricing as well as higher yields on new loans. The cost of funds increased due to continued pricing pressure on deposits as well as the mix of deposits shifting into higher cost products as anticipated as clients sought better yields.
Fully tax equivalent net interest margin expanded four basis points to 3.65% compared to the prior-quarter due primarily to the benefit of non-interest bearing deposits in the quarter. We expect margin to narrow from this first quarter level based on changes in our funding mix and to moderate to a level between 3.4% and 3.55% for the remainder of the year.
Given our largely variable loan portfolio, we expect an offsetting benefit of a few basis points with additional rate increases and are assuming one more rate increase of 25 basis points this year. We believe there is continued opportunity for enhancements in loan pricing.
Our percentage of demand deposits was pressured this quarter and declined to 17% of total deposits. We had a level of elevated deposits at year-end which was deployed by clients during the quarter and we experienced some shift into interest bearing accounts, but we did not experience any significant client losses.
Our total cost of funds was 2.66% for the quarter. Our total deposit beta against rate increases through the first quarter remained in the 50s in line with our expectations. During the current rate cycle, starting at the beginning of '22, we have expanded our NIM by 35 basis points with yield on loans outpacing the cost of deposits because of our largely variable loan portfolio.
As we have managed through this rate cycle, largely due to our commercial focus strategy, we have realized the majority of our through the cycle deposit beta expectations in our results already. While we acknowledge competition for deposits will persist, our unique positioning will allow us to better defend our NIM as we move forward from here.
Non-interest income was $4.4 million for the quarter and increased across several categories, including gain on sale of loans. Credit card income increased again this quarter, and we remain focused on increasing credit card transaction volume. Excluding acquisition related expenses in both the first quarter and the prior-quarter, non-interest expense increased $3.8 million.
Salaries and benefit costs were higher due to merit increases, tax and benefit limit resets and the full-quarter impact of the addition of employees from the Colorado acquisition. Additionally, deposit insurance premiums increased, primarily due to an increase in the assessment rate.
We also had a full-quarter of core deposit intangible amortization as a result of the acquisition. We've begun reassessing our expense base given the environment and the economy. With moderating loan growth, we anticipate non-interest expense to be in a range of $35 million to $36 million per quarter for the remainder of the year.
We plan to manage our cost base to be well within our amount of revenue expansion to promote continued earnings growth and operating leverage. Our tax rate was 20% for the quarter down. due to acquisition activity in the fourth quarter. We expect the tax rate to remain in a range of 20% to 22% for the year.
At the end of the quarter, stockholders equity totaled $645 million compared to $609 million at December 31, '22. The increase was due to net income, the issuance of 7.8 million of preferred, as Mike mentioned, and a decrease in the unrealized loss on available for sales securities which declined as long-term rates moderated.
As of quarter-end, we are well capitalized under all ratios. Considering the current environment, I would like to highlight a couple aspects of our balance sheet and our liquidity. As we outlined on Slide 13, we have significant liquidity of approximately $2.3 billion and have worked to expand our borrowing capacity at both the FHLB and Federal Reserve as a precaution.
We have not utilized the Federal Reserve discount window or the new BTFP and we do not foresee doing so at this point. We have significant on balance sheet liquidity. In addition to our cash, I wanted to break down our 100% available for sale investment portfolio, $244 million can be pledged to FHLB, and we have an additional $222 million of securities that we could sell today at a net gain.
The after-tax mark on our entire AFS portfolio as of 3/31/23 was 7% of capital. We also have multiple sources of additional off balance sheet liquidity, including capacity at the FHLB, the Federal Reserve, Fed Funds and other wholesale funding sources totaling approximately $1.3 billion.
Slide 14 outlines the composition of our investment portfolio. As I mentioned, we have increased the liquidity in our portfolio and shifted the ratio of munis to 64% from 72% at year-end. Securities sold in the normal course during the quarter were transacted at a net gain with reinvestment at equivalent or greater yields, providing better liquidity, a modest gain and improvement in yield.
We also included some additional detail on our deposit base on Slide 15, which shows our diversity by industry and geography. We are 70% commercial, 17% individual and 13% wholesale at quarter-end, which is consistent with our strategy. We operate largely in the Midwest and in strong markets, and we outlined our deposit composition by state, which follows our branch footprint.
We also have great diversity in depositors by industry, and we provided some detail by NAICS code categories with no industry concentrations above 5% outside of trusts and banking institutions.
Average deposit balances across our client base further illustrate our good diversity. Our effective uninsured deposits percentage is 35%, when considering pass through accounts. We also have additional capacity in our ICS program as needed to meet client requests, and we saw a modest increase in utilization of our program in the first quarter.
In summary, we had a successful first quarter with strong earnings, margin and liquidity momentum heading into the rest of the year.
Operator, we are now ready to begin the question-and-answer portion of the call.
Question-and-Answer Session
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]
Today's first question comes from Brady Gailey with KBW. Please go ahead.
Brady Gailey
Hey, thanks. Good morning, guys.
Mike Maddox
Good morning, Brady.
Ben Clouse
Good morning, Brady.
Brady Gailey
So, wholesale and brokered were up, deposits were up about $400 million in the first quarter. I was just wondering, what does that take the wholesale and broker deposit bucket to, and how high of a concentration are you comfortable taking that to?
Ben Clouse
Hey, good morning, Brady. It's Ben. That puts us at around 15%. Our goal is to clearly manage that below 20%. That's our tolerance limit. And as you heard Randy say, we're very, very focused on maintaining and growing the deposit base, in particular DDA, but it is obviously tough out there for that. So, in short, we have a little bit of room, but in the long-term it's our goal to manage that at the current level or below.
Mike Maddox
Yes, Brady, we're going to manage our growth with core deposit growth. And I think it's interesting, if you look back when we IPO'd, our wholesale funding was probably closer to 20%, and our DDA percentage was probably in the 12%-13%. So, I look at it pre-pandemic and now with all the [funny money] (ph) they got put into the system, I'm still pretty encouraged that we've been able to grow the bank a couple billion dollars, and increase our DDA percentage by 3% or so.
Brady Gailey
Yes. All right, and then 8% to 10% loan growth is a great level, especially nowadays. Do you think that deposits will grow at a similar rate as loans for the remainder of the year?
Mike Maddox
Well, we're going to manage our loan growth based on our deposit growth. So yes, if we're going to grow loans 8% to 10%, we're going to grow deposits 8% to 10%.
Brady Gailey
Okay, all right. And then I had a question just on capital. I know you all raised a modest amount of NCPP. But the stock said 80% of tangible book value, but you didn't repurchase any stock in the first quarter, at least nothing of a material size. How do you think about the share buyback with the stock trading below tangible book value?
Mike Maddox
Well, it's obviously an attractive price, but we're also deploying our capital into growth. And we continue to see high-quality opportunities in our markets. And we also have new investments in Phoenix, and in Denver, and in some of our verticals. And we want to make sure that we maintain enough capital to allow us to develop those verticals in those new markets. So, we're going to balance looking at the opportunity for buybacks, but also making sure we maintain enough capital for growth. And we still have a fair amount of room on the buyback authorization that was done. And so, we'll be strategic.
Ben Clouse
That's right, Brady. We have about $16 million left on our prior authorization. And as Mike said, we'll be opportunistic about what we can do, that's the beauty of a buyback, it's completely flexible. At this point, we're in a phase of building some capital and deploying it for loan growth.
Mike Maddox
As you know, Brady, the world changed in early March. So, I think we, along with everybody, are just going to be super conservative and really continue to build our balance sheet. And look, when things change we'll look at it. But right now, we're going to be as conservative as we can.
Brady Gailey
Yes, that makes sense. My final question is just on the guidance slide, on slide 16; I just want to make sure I'm understanding this correctly. The 3.40% to 3.55% NIM and the expenses of $35 million to $36 million per quarter, that that's not the full-year '23 guidance, that's really just the remainder of the year, so call it 2Q through 4Q?
Ben Clouse
So, Brady, the $35 million to $36 million is my expectation for Q2 through Q4, so the remainder of the year. And our NIM guidance at this point is all in. We think the year-to-date is going to land in that 3.40% to 3.55% range, which is obviously some narrowing from our very strong first quarter level.
Brady Gailey
Got it. All right, great, thanks guys.
Mike Maddox
Thanks, Brady.
Operator
The next question comes from Michael Rose with Raymond James. Please go ahead.
Michael Rose
Good morning, everyone. Thanks for taking my questions. Just wanted to follow up on that last comment on the margin commentary, so, I think if I'm understanding right, you're saying that's for the full-year, right, so that the terminal margin could actually dip below the low-end of that guidance range if you were to come in toward the lower-end, I just want to make sure I understand that. Is that the way to think about it?
Ben Clouse
Yes, I think that's possible, Michael, yes, based on the range.
Michael Rose
Okay, perfect. And then just maybe more holistically on expenses, totally understand the outlook there. But you mentioned maybe some cost measures come into play. So, should we think about that as actual real cost tightening outside of the realization of cost saves from the deal or is it more of just like you guys have been really active hiring, building out different markets over the past few years, and maybe you're just slowing the pace of that investment down. Is that more the way to think about it or is there actual real targeted cost measures in place, and if so what would those be?
Ben Clouse
I think the latter is the right way to think about it, Michael. At a high level, from the $38 million non-interest expense level in the first quarter. As we called out, we had $1.5 million or so of particular integration costs which are not going to recur. Compensation is always a little bit higher in Q1 because of the way taxes and benefits work. And then between those two, that gets us pretty close to the range I gave you. And then we're obviously looking at other things that would be volume-based, linked potentially to loan growth or other discretionary costs that we might look at to make sure we're being prudent.
Mike Maddox
Michael, we're just looking at everything, and again trying to be conservative. And there's a number of investments that might be in would-like-to-have bucket that we don't have to have. And if we're not going to maybe grow as much as we had planned, we're going to manage our expenses accordingly. And we do believe we still have the opportunity to increase our operating leverage because we have a lot of new investments that we've made. And we think we've made the investments in technology and people to continue to grow at a fair pace and scale.
Michael Rose
Okay, great. Maybe just one more for me for Randy, obviously, credit has been really good here for a while. I think there are some storm clouds building. And if you look at the most recent Moody scenarios, that I think came out yesterday, are starting to show some normalization in terms of unemployment, things the like. Just as we think about where you guys stand in some of the business build-outs here over the past few years, new markets. Would you actually potentially look to maybe proactively build reserves for CECL on coming quarters or are you just still not seeing anything yet that would indicate that there's really no need at this point to even think about that? Thanks.
Randy Rapp
Yes, hey, Michael, it's Randy. Michael, we're very proud of the movement in our credit metrics over the last year. So, when we think about ending this quarter at our NPA's level, our classified level, we feel good about that. We actually feel good about our reserve level as a total of 130. As you know, part of that split unfunded and it's part unfunded, 1.15 on the funded side. We think, over time, our unfunded are going to come down and we'll be able to move some of those reserves from the unfunded to the funded. So, I think about our total reserve level at a 1.3%. We're obviously watching the portfolio closely, having a lot of dialogue, looking at trends within the portfolio. And right now, we're really not seeing a lot of disruption in the portfolio. So, we'll continue to monitor that. But at this point, we feel good about our reserve level, and feel like a lot of our future provisioning will be based on loan growth.
Michael Rose
Great, that's it for me. And Heather, it's been a real pleasure. You'll be missed. Thanks.
Heather Worley
Thanks, Michael.
Operator
The next question comes from Matt Olney with Stephens. Please go ahead.
Matt Olney
Hey, thanks. Good morning. I think you mentioned, in the prepared remarks, you've been pleased with deposit beta so far in the cycle. I'm curious about your expectations over the next few quarters with deposit betas and what that guidance implies, and any general color you have on the spot prices on deposit? Thanks.
Ben Clouse
Sure. Good morning, Matt. It's Ben. Absolutely we expect some pressure against our deposit beta. That's the updated NIM guidance. In our modeling, we are pushing the beta up about 5% from the mid 50s, where it was into the low60s under the assumption that we'll continue to experience some level of pricing pressure. And then, obviously our mix has changed at quarter end as I mentioned in my comments.
Matt Olney
Okay, got it.
Ben Clouse
Thank you. And Mike reminded me the second part of your question. Our sort of jump off rate at the end of the quarter was about 290. And you didn't ask, but I'll offer that our new loan rate was 760.
Matt Olney
760, okay, that's helpful. Thank you for that. And, I guess on the loan yield side -- I known, Ben, there has been some noise in the past results so far as loan yield. Any noise this quarter, and specifically any of that accretive yield from essential deal this quarter?
Ben Clouse
Yes. No noise in the quarter, so, no accrual changes. We have had a number of those. We had a nice quite quarter. As I mentioned, 760 was our new loan jumping off point. Accretions specifically this quarter was about $650,000 from the deal. That will remain around $500,000 a quarter for the rest of this year.
Randy Rapp
And, Matt, this is Randy. On yield, I just want to point out I said in my comments, but really we are seeing better pricing today than we've probably seen in the last two years. And so, we are seeing those spreads widen. And I think as other banks sort of tighten their credit standards and liquidity is less prevalent, I think we will see that continue. So, we are very much focusing on pricing and making sure that we maintain our NIM through increasing our loan yields and things that's out there in the market.
Matt Olney
Okay, that's helpful, Randy. And I guess just on that note as far as loan growth, I have heard a lots of talk about just managing overall loan growth this year. Any more commentary as far as what that means specifically when you manage the growth? Or, any specific loan type that you are focused on increasing or decreasing? Is it more about pricing within each one of those, just any more commentary on the whole managing the loan growth this year? Thanks.
Randy Rapp
Yes. We obviously had a very robust first quarter. And we want to manage the growth moving forward. We do have a significant number of unfunded commitments in our real estate book that we know we'll continue to fund throughout the year as those projects build. So, we are being very cautious on adding new real estate exposure because we know that that portfolio could increase. Really the wild card there is the churn rate. What does the refinancing activity look like. We know that there is some built-in growth there with the unfunded. We see nice growth in some of the newer verticals: Franchise, finance, the sort of energy 2.0 are seeing increases. We see increases in our sponsor finance. So, as we look at loan growth, we are really focusing on C&I private client in some of our verticals over the next several quarters.
Matt Olney
Okay, that's helpful, Randy. And, I will let go the previous comments. Heather, you will be missed. Thank you.
Heather Worley
Thanks, Matt.
Operator
The next question comes from Andrew Liesch with Piper Sandler. Please go ahead.
Andrew Liesch
Hi, good morning everyone.
Randy Rapp
Good morning, Andrew.
Andrew Liesch
Just wanted to talk about margin going forward, I appreciate the guidance, but there're reference locking in from the higher rate to swap to protect against some downside for when rates are eventually cut?
Randy Rapp
Sure. Good morning, Andrew. We do have some very modest hedging in place. We did a little bit of hedging last year against rate rises which we locked in. That will begin to impact our margin in 2024. Those were forward swaps. And then, we currently have a pretty modest $250 million notional collar in place, giving up some potential upside on the top of the collar but protecting against rate declines on the bottom. Those swaps are also forward-looking from '24 through '27.
So, there are a couple of things there that will protect us on the downside out in the future. I think our expectations continue to be by 2024 and beyond will likely be in a lower rate scenario than we are today.
Andrew Liesch
Got it. All right, that's helpful. And then just curious on some of the deposit trends, how have things progressed since quarter-end, has there been more migration out of the non-interest bearing, or was that trend really expected early in the year, given that some of that money was parked in those accounts right at the end of December?
Mike Maddox
Yes, nothing of any significance that I think we've observed post quarter-end, Andrew to maybe put a little finer point on it, of the $400 million or so movement in DDA, just about half of that was client deployment. Literally, funds that were parked here for part of the quarter that we knew would be deployed. One of those clients, for example, bought Treasuries, which we're unfortunately competing against today. And the other couple of $100 million migrated into interest bearing accounts, but nothing new or different since quarter-end that we've observed at all.
Andrew Liesch
Got it. All right, thanks for taking the questions. And, Heather once again, great working with you, and you'll certainly be missed here.
Heather Worley
Thanks, Andrew. I appreciate it.
Operator
This concludes our question-and-answer session. I would now like to turn the call back to President and CEO, Mike Maddox for any closing remarks.
Mike Maddox
Well, hey, I want to thank everybody for joining us. Just really want to reiterate how proud I am of our team and really how confident we are in our positioning. We're in great markets and the team has done a great job of really putting us in a position to continue to have success and so really excited about our quarter, excited about the rest of the year.
And then in closing, I too would like to thank Heather for all her work here at CrossFirst. And we're really excited for you and Mason and your next chapters as you guys start your journey. And thank you so much for everything you've done for us and we really appreciate it. We're going to miss you, although you're still going to be hanging around. We know where you live. Anyway, thank you so much. And thank you everybody, for joining our call and we appreciate it.
Operator
The call has now concluded. Thank you for attending today's presentation. You may now disconnect.
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CrossFirst Bankshares, Inc. (CFB) Q1 2023 Earnings Call Transcript