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CBTX, Inc. Reports Fourth Quarter Financial Results

January 31, 2018 at 5:43 PM EST

HOUSTON, Jan. 31, 2018 (GLOBE NEWSWIRE) -- CBTX, Inc. (the “Company”) (NASDAQ:CBTX), the bank holding company for CommunityBank of Texas N.A., today announced net income of $2.0 million, or $0.08 per diluted share, for the quarter ended December 31, 2017, compared to $7.6 million, or $0.34 per diluted share, for the quarter ended December 31, 2016 and $10.0 million, or $0.45 per diluted share, for the quarter ended September 30, 2017.

The Company reported net income for the year ended December 31, 2017 of $27.6 million, or $1.22 per diluted share, compared to $27.2 million, or $1.22 per diluted share, for the year ended December 31, 2016.

Highlights

  • Net income for the fourth quarter of 2017 included a charge of $3.9 million related to the Tax Cuts and Jobs Act (the "Tax Act") and change of control expenses of $2.5 million ($1.6 million after tax), triggered by our initial public offering.

  • Loan growth, excluding loans held for sale, was 20.2% for the quarter (annualized) and 7.3% for the year.

  • The Company completed its previously announced initial public offering of 2,760,000 shares of its common stock to the public at $26.00 per share for gross proceeds of approximately $71.8 million. Our common stock began trading on the NASDAQ Global Market on November 8, under the ticker symbol "CBTX."

CBTX, Inc. Chairman and Chief Executive Officer Robert R. Franklin Jr. commented, “2017 was an outstanding year for our Company. We reported total assets of $3.1 billion, total loans of $2.3 billion, total deposits of $2.6 billion and net income of $27.6 million, each of which are all-time highs for our Company.”

Operating Results:

Net Interest Income

Net interest income was $28.2 million for the fourth quarter of 2017, compared to $25.8 million for the fourth quarter of 2016 and $27.3 million for the third quarter of 2017. The increase in net interest income in the fourth quarter of 2017 from the fourth quarter of 2016, was due to increased average loans and securities and increased average yields on federal funds sold and other interest-earning assets. The increase in net interest income in the fourth quarter of 2017 from the third quarter of 2017 was due to increased average loans and federal funds sold and other interest-earning assets and the impact of the November repayment of our note payable in the amount of $23.3 million. Net interest income was $107.8 million for the year ended December 31, 2017, compared to $101.5 million for year ended December 31, 2016. The increase in net interest income in 2017, as compared to 2016 was due to increased average loans and securities and increased average yields on federal funds sold and other interest-earning assets.

The average balance of total interest-earning assets was $2.8 billion for the quarter ended December 31, 2017, an increase of $99.1 million, compared to the average balance for the quarter ended December 31, 2016 and $94.3 million, compared to the average balance for the quarter ended September 30, 2017. The increase in the average interest-earnings assets for the quarter ended December 31, 2017, compared to the quarter ended September 30, 2017 is primarily due to increases in average loans and federal funds sold. The increase in the average interest-earnings assets for the quarter ended December 31, 2017, compared to the quarter ended December 31, 2016, is primarily due to increases in average loans and average securities. The average balance of interest-earning assets was $2.7 billion for the year ended December 31, 2017, an increase of $88.8 million, compared to the average for the year ended December 31, 2016. The increase in average interest-earning assets for the year ended December 31, 2017, compared to the year ended December 31, 2016 is primarily due to increases in average loans and average securities, partially offset by a decrease in average federal funds sold. 

The yield on interest-earning assets was 4.29% for the fourth quarter of 2017, compared to 4.11% for the fourth quarter of 2016 and 4.32% for the third quarter of 2017. The yield on interest-earning assets was 4.30% for the year ended December 31, 2017, compared to 4.19% for the year ended December 31, 2016. The increase from the prior year is primarily due to an increase in the yield on investments and federal funds sold.

The cost of interest-bearing liabilities, including borrowings, was 0.56% for the fourth quarter of 2017, compared to 0.57% for the fourth quarter of 2016 and 0.60% for the third quarter of 2017. The cost of interest-bearing liabilities, including borrowings, was 0.58% for the year ended December 31, 2017 compared to 0.56% for the year ended December 31, 2016.

The net interest margin was 3.98% for the fourth quarter of 2017 compared to 3.78% for the fourth quarter of 2016 and 3.98% for the third quarter of 2017. The net interest margin was 3.97% for the year ended December 31, 2017 compared to 3.87% for the year ended December 31, 2016.

Provision (Recapture) for Loan Losses

Provision for loan loss was $1.1 million for the fourth quarter of 2017, compared to a provision for the fourth quarter of 2016 of $650,000 and a recapture of $1.7 million for the third quarter of 2017. The recapture in the third quarter of 2017 is primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses. Provision for loan loss was a recapture of $338,000 for the year ended December 31, 2017, compared to a provision of $4.6 million for the year ended December 31, 2016. The recapture in the year ended December 31, 2017 was primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses.

The allowance for loan losses was $24.8 million, or 1.07% of total loans, at December 31, 2017, compared to $25.0 million, or 1.16% of total loans, at December 31, 2016 and $23.8 million, or 1.08% of total loans, at September 30, 2017. The lower balance at September 30, 2017 is primarily the result of the recaptures mentioned above.

Noninterest Income

Noninterest income was $3.1 million for the fourth quarter of 2017, $4.4 million for the fourth quarter of 2016 and $4.1 million for the third quarter of 2017. These fluctuations are primarily due to net gains recorded on sales of assets recorded in the third quarter of 2017 and the fourth quarter of 2016 resulting from sales of branches in those periods. Noninterest income was $14.2 million for the year ended December 31, 2017 and $15.7 million for the year ended December 31, 2016, a decrease of $1.5 million, or 9.8%. This decrease primarily resulted from a decrease in deposit account service charges due to a reduction of non-sufficient and overdraft charges incurred by our deposit customers and a decrease in other income due to income from our SBIC investment in 2016.

Noninterest Expense

Noninterest expense increased $3.3 million during the fourth quarter of 2017, as compared to the fourth quarter of 2016 and increased $3.0 million, as compared to the third quarter of 2017. The increase in noninterest expense compared to the fourth quarter of 2016 and the third quarter of 2017 is due primarily to a $2.5 million charge for change of control payments to certain employees triggered by our initial public offering, which is reflected in salaries and employee benefits and increased professional and director fees. Noninterest expense increased $4.8 million during 2017, as compared to 2016 due to the change of control payments previously mentioned, increased professional and director fees and increased advertising due to our branding campaign in 2017, partially offset by decreased occupancy costs due to sales of branches in 2016 and 2017.

Income Taxes

Income tax expense was $6.3 million for the fourth quarter of 2017, $3.3 million for the fourth quarter of 2016 and $3.9 million for the third quarter of 2017. During the fourth quarter of 2017, we recorded a deferred tax asset impairment of $3.9 million related to the recent Tax Cuts and Jobs Act. Income tax expense was $16.5 million for the year ended December 31, 2017 and $12.0 million for the year ended December 31, 2016, an increase of $4.5 million, due to deferred tax asset impairment previously mentioned above and true-ups and return to provision adjustments booked in 2017.

As a result of the Tax Act passed in December 2017, the Company was required to recalculate its deferred tax assets and deferred tax liabilities to account for the future impact of lower corporate tax rates and lost deductions on these assets and liabilities. The effective tax rate for the fourth quarter of 2017 including the impact of the Tax Act was 76.3% and would have been approximately 29.7% without the impact of the Tax Act. The effective tax rate for 2017 including the impact of the Tax Act was 37.4% and would have been approximately 28.6% without the impact of the Tax Act. The effective tax rates were 30.5% for the fourth quarter of 2016, 28.1% for the third quarter of 2017 and 30.7% for 2016.

Balance Sheet Highlights:

Loans

Loans were $2.3 billion at December 31, 2017, $2.1 billion at December 31, 2016 and $2.2 billion at September 30, 2017.  The increases from the prior year and linked quarter are primarily due to organic growth.

Asset Quality

Nonperforming assets were $8.4 million, or 0.27% of total assets, at December 31, 2017, $8.1 million, or 0.27% of total assets, at December 31, 2016 and $9.7 million, or 0.33% of total assets at September 30, 2017.

Nonperforming loans were $7.6 million, or 0.33% of total loans, at December 31, 2017, $6.2 million, or 0.29% of total loans, at December 31, 2016 and $8.6 million, or 0.39% of total loans, at September 30, 2017.

Annualized net charge-offs (recoveries) to average loans were 0.00% for the fourth quarter of 2017 and 0.50% for the fourth quarter of 2016 and (0.04)% for the third quarter of 2017. The recoveries in the third quarter of 2017 are primarily the result of payoffs of certain classified and problem loans.

Deposits and Borrowings

Total deposits were $2.6 billion at December 31, 2017, compared to $2.5 billion at December 31, 2016 and $2.6 billion at September 30, 2017. The increase from the prior year is primarily due to organic growth.

Total borrowings (excluding junior subordinated debentures) were $1.5 million at December 31, 2017, $30.0 million at December 31, 2016 and $26.6 million at September 30, 2017. The decrease in borrowings at December 31, 2017 is due to scheduled payments and our fourth quarter repayment in full of the outstanding balance of our note payable.

On December 13, 2017, we entered into a loan agreement providing for a $30 million revolving line of credit and from that date through December 31, 2017, we made no borrowings under that agreement.

Capital

At December 31, 2017, we were well capitalized under regulatory guidelines. At December 31, 2017, our ratio of total shareholders’ equity to total assets was 14.48% and our tangible equity to total tangible assets was 11.98%. At December 31, 2016, our ratio of total shareholders’ equity to total assets was 12.12% and our tangible equity to total tangible assets was 9.39%. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

In November 2017, we completed our initial public offering of our common stock issuing 2,760,000 common shares at $26.00 per share and net proceeds of $64.5 million, which is the primary cause of the increase in these ratios.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.1 billion asset bank, offering commercial banking solutions to local small and mid-sized businesses and professionals in Houston, Beaumont and surrounding communities in southeast Texas.  Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiary. Forward-looking statements include information regarding the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to whether the Company can: prudently manage and execute its growth strategy; manage risks associated with its acquisition and de novo branching strategy; maintain its asset quality; address the volatility and direction of market interest rates; continue to have access to debt and equity capital markets; and achieve its performance goals. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s Final Prospectus filed pursuant to Rule 424(b)(4) and other reports and statements that the Company has filed with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what its anticipates. Accordingly, you should not place undue reliance on any such forward looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybanktx.com under the Investor Relations tab.

 
CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
                               
Balance Sheet Data (at period end):   12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016
                               
Loans, excluding loans held for sale   $  2,311,544     $  2,199,478     $  2,192,443     $  2,217,656     $  2,154,885  
Allowance for loan losses      (24,778 )      (23,757 )      (25,187 )      (25,881 )      (25,006 )
Loans, net      2,286,766        2,175,721        2,167,256        2,191,775        2,129,879  
                               
Cash and equivalents      326,199        348,578        307,173        272,355        382,103  
Securities      223,208        217,660        220,330        219,978        205,978  
Premises and equipment, net      53,607        54,129        56,609        55,986        57,514  
Goodwill      80,950        80,950        80,950        80,950        80,950  
Other intangible assets, net      6,770        7,031        7,298        7,513        7,791  
Repossessed real estate and other assets      705        1,136        1,435        1,179        1,861  
Loans held for sale      1,460        466        559        675        613  
Other assets      101,418        104,167        99,267        84,137        84,833  
Total Assets   $  3,081,083     $  2,989,838     $  2,940,877     $  2,914,548     $  2,951,522  
                               
Noninterest-bearing deposits   $  1,109,789     $  1,051,755     $  1,030,865     $  993,839     $  1,025,425  
Interest-bearing deposits      1,493,183        1,502,872        1,485,919        1,504,606        1,515,335  
Total deposits      2,602,972        2,554,627        2,516,784        2,498,445        2,540,760  
                               
Note payable      -        24,357        25,464        26,571        27,679  
Repurchase agreements      1,525        2,239        2,179        2,464        2,343  
Junior subordinated debt      6,726        6,726        6,726        6,726        6,726  
Other liabilities      23,646        20,768        17,760        16,699        16,377  
Total Liabilities      2,634,869        2,608,717        2,568,913        2,550,905        2,593,885  
                               
Shareholders' Equity      446,214        381,121        371,964        363,643        357,637  
Total Liabilities and Shareholders' Equity   $  3,081,083     $  2,989,838     $  2,940,877     $  2,914,548     $  2,951,522  


 
CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
                                           
    For the Three Months Ended   For the Years Ended
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016   12/31/2017   12/31/2016
Interest Income                                          
Interest and fees on loans   $  27,726     $  27,129     $  26,560     $  25,953   $  26,298   $  107,368     $  103,723
Securities      1,357        1,334        1,353        1,303      1,055      5,347        3,801
Federal Funds and interest-bearing deposits      1,283        1,106        813        742      658      3,944        2,427
Total Interest Income      30,366        29,569        28,726        27,998      28,011      116,659        109,951
Interest Expense                                          
Deposits      1,993        1,964        1,857        1,838      1,914      7,652        7,073
Repurchase agreements      —        2        1        2      2      5        5
Note payable      122        269        264        251      256      906        1,061
Junior subordinated debt      86        83        79        74      72      322        266
Total Interest Expense      2,201        2,318        2,201        2,165      2,244      8,885        8,405
Net Interest Income      28,165        27,251        26,525        25,833      25,767      107,774        101,546
Provision (Recapture) for Loan Losses      1,050        (1,654 )      (694 )      960      650      (338 )      4,575
Net Interest Income After Provision (Recapture) for Loan Losses      27,115        28,905        27,219        24,873      25,117      108,112        96,971
Noninterest Income                                          
Deposit account service charges      1,388        1,395        1,517        1,500      1,591      5,800        6,538
Net gain on sale of assets      (7 )      828        339        364      1,282      1,524        1,922
Card interchange fees      941        803        877        832      830      3,453        3,352
Earnings on bank-owned life insurance      460        459        335        326      340      1,580        1,356
Other      362        601        458        426      357      1,847        2,581
Total Noninterest Income      3,144        4,086        3,526        3,448      4,400      14,204        15,749
Noninterest Expense                                          
Salaries and employee benefits      14,021        11,829        11,299        11,424      11,181      48,573        44,239
Net occupancy expense      2,346        2,221        2,351        2,233      2,448      9,151        10,100
Regulatory fees      487        458        621        610      606      2,176        2,300
Data processing      674        662        651        642      623      2,629        2,484
Printing, stationery and office      415        348        370        347      444      1,480        1,537
Amortization of intangibles      263        267        271        278      283      1,079        1,167
Professional and director fees      1,168        606        706        625      680      3,105        2,481
Correspondent bank and customer related transaction expenses      67        67        78        74      77      286        320
Loan processing costs      141        115        133        72      191      461        509
Advertising, marketing and business development      508        266        508        179      219      1,461        789
Repossessed real estate and other asset expense      66        340        85        118      99      609        318
Security and protection expense      300        331        352        372      363      1,355        1,718
Telephone and communications      344        311        307        354      384      1,316        1,444
Other expenses      1,189        1,196        1,127        1,099      1,040      4,611        4,096
Total Noninterest Expense      21,989        19,017        18,859        18,427      18,638      78,292        73,502
Net Income Before Income Tax Expense      8,270        13,974        11,886        9,894      10,879      44,024        39,218
Income Tax Expense      6,313        3,927        3,181        3,032      3,322      16,453        12,010
Net Income   $  1,957     $  10,047     $  8,705     $  6,862   $  7,557   $  27,571     $  27,208


 
CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)
                                             
    For the Three Months Ended   For the Years Ended  
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016   12/31/2017   12/31/2016  
Profitability:                                            
Net income   $  1,957   $  10,047   $  8,705   $  6,862   $  7,557   $  27,571   $  27,208  
Basic earnings per share   $  0.08   $  0.46   $  0.39   $  0.31   $  0.34   $  1.23   $  1.23  
Diluted earnings per share   $  0.08   $  0.45   $  0.39   $  0.31   $  0.34   $  1.22   $  1.22  
                                             
Return on average assets (1)      0.25 %    1.34 %    1.20 %    0.95 %    1.02 %    0.93 %    0.95 %
Return on average shareholders' equity (1)      1.83 %    10.54 %    9.46 %    7.73 %    8.47 %    7.18 %    7.79 %
Net interest margin- tax equivalent (1)      4.06 %    4.07 %    4.08 %    4.02 %    3.87 %    4.06 %    3.96 %
Efficiency ratio (2)      70.23 %    60.69 %    62.76 %    62.93 %    61.78 %    64.19 %    62.66 %
                                             
Liquidity and Capital Ratios:                                            
Total shareholders' equity to total assets      14.48 %    12.75 %    12.65 %    12.48 %    12.12 %    14.48 %    12.12 %
Tangible equity to tangible assets (3)      11.98 %    10.10 %    9.95 %    9.74 %    9.39 %    11.98 %    9.39 %
Common equity tier 1 capital ratio      14.19 %    12.23 %    12.00 %    11.32 %    11.52 %    14.19 %    11.52 %
Tier 1 leverage ratio      12.30 %    10.48 %    10.39 %    10.10 %    9.78 %    12.30 %    9.78 %
Tier 1 risk-based capital ratio      14.44 %    12.49 %    12.26 %    11.58 %    11.78 %    14.44 %    11.78 %
Total risk-based capital ratio      15.42 %    13.48 %    13.33 %    12.64 %    12.85 %    15.42 %    12.85 %
                                             
Other Data:                                            
Weighted average common shares outstanding- Basic      23,629      22,063      22,062      22,062      21,993      22,457      22,049  
Weighted average common shares outstanding- Diluted      23,742      22,138      22,148      22,162      22,067      22,573      22,235  
Common shares outstanding at period end      24,833      22,063      22,063      22,062      22,062      24,833      22,062  
Dividends per share   $  0.05   $  0.05   $  0.05   $  0.05   $  0.05   $  0.20   $  0.20  
Book value per share   $  17.97   $  17.27   $  16.86   $  16.48   $  16.21   $  17.97   $  16.21  
Tangible book value per share (3)   $  14.44   $  13.29   $  12.86   $  12.47   $  12.19   $  14.44   $  12.19  
Employees - full-time equivalents      462      464      472      479      479      462      479  
                                             
(1)  Quarterly ratios are annualized.
(2)  Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(3)  Non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”


 
CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)
                                                   
    For the Three Months Ended  
    12/31/2017   9/30/2017   12/31/2016  
          Interest             Interest             Interest      
    Average   Earned/   Average   Average   Earned/   Average   Average   Earned/   Average  
    Outstanding   Interest   Yield/   Outstanding   Interest   Yield/   Outstanding   Interest   Yield/  
    Balance   Paid   Rate (1)   Balance   Paid   Rate (1)   Balance   Paid   Rate (1)  
Assets                                                  
Interest-earnings assets:                                                  
Total loans (2)   $  2,252,735     $  27,726    4.88 $  2,191,016     $  27,129    4.91 $  2,179,862     $  26,298    4.80 %
Securities (available for sale and held to maturity)      222,602        1,357    2.42    223,132        1,334    2.37    192,938        1,055    2.18 %
Federal funds sold and other interest-earning assets      317,484        1,093    1.37    284,334        927    1.29    320,955        485    0.60 %
Nonmarketable equity securities      14,698        190    5.13    14,695        179    4.83    14,683        173    4.66 %
Total interest-earning assets      2,807,519     $  30,366    4.29    2,713,177     $  29,569    4.32    2,708,438     $  28,011    4.11 %
Allowance for loan losses      (24,127 )                (25,316 )                (27,357 )            
Noninterest-earnings assets      296,108                  290,767                  278,850              
Total assets   $  3,079,500               $  2,978,628               $  2,959,931              
Liabilities and Shareholders’ Equity                                                  
Interest-bearing liabilities:                                                  
Interest-bearing deposits   $  1,519,631     $  1,993    0.52 $  1,501,732     $  1,964    0.52 $  1,524,262     $  1,914    0.50 %
Repurchase agreements      1,793        —    —    2,404        2    0.33    2,155        2    0.18 %
Note payable      11,252        122    4.30    24,742        269    4.31    28,064        256    3.63 %
Junior subordinated debt      10,826        86    3.15    10,826        83    3.04    10,826        72    2.65 %
Total interest-bearing liabilities      1,543,502     $  2,201    0.56    1,539,704     $  2,318    0.60    1,565,307     $  2,244    0.57 %
Noninterest-bearing liabilities:                                                  
Noninterest-bearing deposits      1,087,416                  1,041,731                  1,015,577              
Other liabilities      23,271                  18,844                  24,139              
Total noninterest-bearing liabilities      1,110,687                  1,060,575                  1,039,716              
Shareholders’ equity      425,311                  378,349                  354,908              
Total liabilities and shareholders’ equity   $  3,079,500               $  2,978,628               $  2,959,931              
Net interest income         $  28,165             $  27,251             $  25,767      
Net interest spread (3)                3.73              3.73              3.54 %
Net interest margin (4)                3.98              3.98              3.78 %
Net interest margin—tax equivalent (5)                4.06              4.07              3.87 %
                                                   
(1)  Annualized.
(2)  Includes average outstanding balances of loans held for sale of $521,000, $1.0 million and $592,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively.
(3)  Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(4)  Net interest margin is equal to net interest income divided by average interest‑earning assets.
(5)  To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $549,000, $1.1 million and $605,000 for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016, respectively, has been computed using a federal income tax rate of 35%.


 
CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)
                                     
    For the Years Ended December 31,  
    2017     2016  
          Interest               Interest      
    Average   Earned/   Average     Average   Earned/   Average  
    Outstanding   Interest   Yield/     Outstanding   Interest   Yield/  
(Dollars in thousands)   Balance   Paid   Rate     Balance   Paid   Rate  
Assets                                    
Interest-earnings assets:                                    
Total loans (1)   $  2,206,541     $  107,368    4.87   $  2,140,917     $  103,723    4.84 %
Securities (available for sale and held to maturity)      220,953        5,347    2.42      169,509        3,801    2.24 %
Federal funds sold and other interest-earning assets      272,715        3,204    1.17      301,018        1,732    0.58 %
Nonmarketable equity securities      14,692        740    5.04      14,683        695    4.73 %
Total interest-earning assets      2,714,901     $  116,659    4.30      2,626,127     $  109,951    4.19 %
Allowance for loan losses      (25,319 )                  (26,826 )            
Noninterest-earnings assets      284,165                    276,413              
Total assets   $  2,973,747                 $  2,875,714              
Liabilities and Shareholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing deposits   $  1,503,350     $  7,652    0.51   $  1,458,566     $  7,073    0.48 %
Repurchase agreements      2,254        5    0.27      1,918        5    0.26 %
Note payable      22,164        906    4.09      29,624        1,061    3.58 %
Junior subordinated debt      10,826        322    2.97      10,826        266    2.46 %
Total interest-bearing liabilities      1,538,594     $  8,885    0.58      1,500,934     $  8,405    0.56 %
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits      1,031,707                    1,010,403              
Other liabilities      19,388                    15,270              
Total noninterest-bearing liabilities      1,051,095                    1,025,673              
Shareholders’ equity      384,058                    349,107              
Total liabilities and shareholders’ equity   $  2,973,747                 $  2,875,714              
Net interest income         $  107,774               $  101,546      
Net interest spread (2)                3.72                3.63 %
Net interest margin (3)                3.97                3.87 %
Net interest margin—tax equivalent (4)                4.06                3.96 %
                                     
(1)  Includes average outstanding balances of loans held for sale of $769,000 and $905,000 for the years ended December 31, 2017 and 2016, respectively.
(2)  Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(3)  Net interest margin is equal to net interest income divided by average interest‑earning assets.
(4)  To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $2.3 million and $2.4 million for the years ended December 31, 2017 and 2016, respectively, has been computed using a federal income tax rate of 35%.


 
CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)
                                 
    For the Three Months Ended  
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016  
Yield Trend - Annualized:                                
Interest-earnings assets:                                
Total loans      4.88 %    4.91 %    4.83 %    4.83 %    4.80 %
Securities (available for sale and held to maturity)      2.42 %    2.37 %    2.45 %    2.43 %    2.18 %
Federal funds sold and other interest-earning assets      1.37 %    1.29 %    1.12 %    0.87 %    0.60 %
Nonmarketable equity securities      5.13 %    4.83 %    4.81 %    5.33 %    4.66 %
Total interest-earning assets      4.29 %    4.32 %    4.32 %    4.26 %    4.11 %
                                 
Interest-bearing liabilities:                                
Interest-bearing deposits      0.52 %    0.52 %    0.50 %    0.49 %    0.50 %
Repurchase agreements      — %    0.33 %    0.17 %    0.33 %    0.18 %
Note payable      4.30 %    4.31 %    4.10 %    3.78 %    3.63 %
Junior subordinated debt      3.15 %    3.04 %    2.93 %    2.77 %    2.65 %
Total interest-bearing liabilities      0.56 %    0.60 %    0.58 %    0.57 %    0.57 %
                                 
Net interest spread (1)      3.73 %    3.73 %    3.74 %    3.69 %    3.54 %
Net interest margin (2)      3.98 %    3.98 %    3.99 %    3.93 %    3.78 %
Net interest margin—tax equivalent (3)      4.06 %    4.07 %    4.08 %    4.02 %    3.87 %
                                 
(1)  Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(2)  Net interest margin is equal to net interest income divided by average interest‑earning assets.
(3)  To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 35%.


 
CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances (Unaudited)
(In thousands)
                               
    For the Three Months Ended
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016
Average Outstanding Balances:                              
                               
Assets                              
Interest-earnings assets:                              
Total loans (1)   $  2,252,735     $  2,191,016     $  2,203,145     $  2,178,626     $  2,179,862  
Securities (available for sale and held to maturity)      222,602        223,132        220,905        217,086        192,938  
Federal funds sold and other interest-earning assets      317,484        284,334        228,393        257,152        320,955  
Nonmarketable equity securities      14,698        14,695        14,691        14,685        14,683  
Total interest-earning assets      2,807,519        2,713,177        2,667,134        2,667,549        2,708,438  
Allowance for loan losses      (24,127 )      (25,316 )      (26,424 )      (25,419 )      (27,357 )
Noninterest-earnings assets      296,108        290,767        273,760        273,437        278,850  
Total assets   $  3,079,500     $  2,978,628     $  2,914,470     $  2,915,567     $  2,959,931  
                               
Liabilities and Shareholders’ Equity                              
Interest-bearing liabilities:                              
Interest-bearing deposits   $  1,519,631     $  1,501,732     $  1,478,579     $  1,513,348     $  1,524,262  
Repurchase agreements      1,793        2,404        2,356        2,468        2,155  
Note payable      11,252        24,742        25,841        26,965        28,064  
Junior subordinated debt      10,826        10,826        10,826        10,826        10,826  
Total interest-bearing liabilities      1,543,502        1,539,704        1,517,602        1,553,607        1,565,307  
Noninterest-bearing liabilities:                              
Noninterest-bearing deposits      1,087,416        1,041,731        1,010,823        985,690        1,015,577  
Other liabilities      23,271        18,844        16,910        16,421        24,139  
Total noninterest-bearing liabilities      1,110,687        1,060,575        1,027,733        1,002,111        1,039,716  
Shareholders’ equity      425,311        378,349        369,135        359,849        354,908  
Total liabilities and shareholders’ equity   $  3,079,500     $  2,978,628     $  2,914,470     $  2,915,567     $  2,959,931  
                                         
(1)  Includes average outstanding balances of loans held for sale.


 
CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)
                                                     
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016  
    Amount     Amount     Amount     Amount     Amount    
Loan Portfolio:                                                    
Commercial and industrial   $  559,363      24.1 $  548,870      24.9 $  535,116      24.4 $  524,201      23.6 $  511,554      23.7 %
Real estate:                                                    
Commercial real estate      738,293      31.9    689,501      31.3    690,044      31.4    723,253      32.5    697,794      32.3 %
Construction and development      449,211      19.4    424,489      19.3    433,966      19.8    522,508      23.5    491,626      22.8 %
1-4 family residential      258,584      11.2    246,564      11.2    240,073      10.9    237,218      10.7    236,882      11.0 %
Multi-family residential      220,305      9.5    211,219      9.6    208,222      9.5    124,246      5.6    133,210      6.2 %
Consumer      40,433      1.7    42,772      1.9    41,130      1.9    41,326      1.9    39,694      1.8 %
Agricultural      11,256      0.5    11,424      0.5    10,650      0.4    10,217      0.4    11,106      0.5 %
Other      40,344      1.7    29,684      1.3    38,237      1.7    39,869      1.8    38,180      1.7 %
Gross loans      2,317,789      100.0    2,204,523      100.0    2,197,438      100.0    2,222,838      100.0    2,160,046      100.0 %
Less deferred fees and unearned discount      (4,785 )          (4,579 )          (4,436 )          (4,507 )          (4,548 )      
Less allowance for loan losses      (24,778 )          (23,757 )          (25,187 )          (25,881 )          (25,006 )      
Less loans held for sale      (1,460 )          (466 )          (559 )          (675 )          (613 )      
Loans, net   $  2,286,766         $  2,175,721         $  2,167,256         $  2,191,775         $  2,129,879        
                                                     
Deposits:                                                    
Interest-bearing demand accounts   $  363,015      14.0 $  340,627      13.3 $  343,826      13.7 $  355,235      14.2 $  359,560      14.2
Money market accounts      702,299      27.0    726,903      28.5    698,546      27.7    714,863      28.6    731,942      28.8
Savings accounts      95,842      3.7    88,613      3.5    88,083      3.5    88,360      3.5    85,927      3.4
Certificates and other time deposits, greater than $100,000      172,469      6.6    179,777      7.0    182,143      7.2    171,147      6.9    179,621      7.1
Certificates and other time deposits, less than $100,000      159,558      6.1    166,952      6.5    173,321      6.9    175,001      7.0    158,285      6.2
Total interest-bearing deposits      1,493,183      57.4    1,502,872      58.8    1,485,919      59.0    1,504,606      60.2    1,515,335      59.7
Noninterest-bearing deposits      1,109,789      42.6    1,051,755      41.2    1,030,865      41.0    993,839      39.8    1,025,425      40.3
Total deposits   $  2,602,972      100.0 $  2,554,627      100.0 $  2,516,784      100.0 $  2,498,445      100.0 $  2,540,760      100.0


 
CBTX, INC. AND SUBSIDIARY
Credit Quality (Unaudited)
(In thousands)
                                 
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016  
Nonaccrual loans (at period end):                                
Commercial and industrial   $  3,280   $  2,444   $  2,348   $  2,040   $  2,318  
Real estate:                                
Commercial real estate      3,216      5,038      4,964      2,317      2,118  
Construction and development      252      265      362      414      458  
1-4 family residential      898      844      578      1,283      1,302  
Multi-family residential      —     1     3     5     7  
Consumer      —      —      —      —      —  
Agricultural      —      —      —     6     36  
Other      —      —      —      —        
Total nonaccrual loans   $  7,646   $  8,592   $  8,255   $  6,065   $  6,239  
                                 
Nonperforming assets (at period end):                                
Nonaccrual loans   $  7,646   $  8,592   $  8,255   $  6,065   $  6,239  
Accruing loans 90 or more days past due      —      —      —      —      —  
Total nonperforming loans      7,646      8,592      8,255      6,065      6,239  
Foreclosed assets, including other real estate:                                
Commercial real estate, construction and development, land and land development      298      729      1,018      1,179      1,078  
Residential real estate      407      407      417      —      —  
Other      —      —      —      —      783  
Total foreclosed assets      705      1,136      1,435      1,179      1,861  
Total nonperforming assets   $  8,351   $  9,728   $  9,690   $  7,244   $  8,100  
                                 
Allowance for Loan Losses (at period end):                                
Commercial and industrial   $  7,257   $  7,194   $  8,466   $  7,746   $  6,409  
Real estate:                                
Commercial real estate      10,375      9,640      10,000      10,507      10,770  
Construction and development      3,482      3,364      3,313      4,145      4,598  
1-4 family residential      1,326      1,282      1,138      1,111      1,286  
Multi-family residential      1,419      1,360      1,341      800      916  
Consumer      566      626      599      615      353  
Agricultural      68      69      64      63      79  
Other      285      222      266      894      595  
Total allowance for loan losses   $  24,778   $  23,757   $  25,187   $  25,881   $  25,006  
                                 
Credit Quality Ratios (at period end):                                
Nonperforming assets to total assets      0.27    0.33    0.33    0.25    0.27
Nonperforming loans to total loans      0.33    0.39    0.38    0.27    0.29
Allowance for loan losses to nonperforming loans      324.06    276.50    305.11    426.73    400.80
Allowance for loan losses to total loans      1.07    1.08    1.15    1.17    1.16


 
CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
(In thousands)
                                             
    For the Three Months Ended   For the Years Ended  
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016   12/31/2017   12/31/2016  
Analysis of Allowance for Loan Losses                                            
                                             
Allowance for loan losses at beginning of period   $  23,757     $  25,187     $  25,881     $  25,006     $  27,096     $  25,006     $  25,315    
                                             
Provision (recapture) for loan losses      1,050        (1,654 )      (694 )      960        650        (338 )      4,575    
                                             
Net charge-offs (recoveries)                                            
Commercial and industrial      (52 )      (205 )      (66 )      117        2,748        (206 )      3,874    
Real estate:                                            
Commercial real estate      118        (2 )      (2 )      (3 )      (64 )      111        481    
Construction and development      —        —        —        —        —        —        —    
1-4 family residential      7        (2 )      (8 )      (2 )      (1 )      (5 )      (3 )  
Multi-family residential      —        —        —        —        —        —        —    
Consumer      (9 )      (4 )      90        (27 )      (2 )      50        232    
Agricultural      (35 )      (11 )      (6 )      —        —        (52 )      241    
Other      —        —        (8 )      —        59        (8 )      59    
Total net charge-offs (recoveries)      29        (224 )      —        85        2,740        (110 )      4,884    
                                             
Allowance for loan losses at end of period   $  24,778     $  23,757     $  25,187     $  25,881     $  25,006     $  24,778     $  25,006    
                                             
Net charge-offs (recoveries) to average loans      —      (0.04 )%      —      0.02      0.50      —      0.23  
                                                           

CBTX, INC. AND SUBSIDIARY
Non‑GAAP to GAAP Reconciliation (Unaudited)
(In thousands, except per share data and percentages)

Our accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. However, we also evaluate our performance based on certain additional non‑GAAP financial measures. We classify a financial measure as being a non‑GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows. Non‑GAAP financial measures do not include operating and other statistical measures or ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP. Non‑GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the way we calculate the non‑GAAP financial measures may differ from that of other companies reporting measures with similar names.

We calculate (1) tangible equity as total shareholders’ equity, less goodwill and other intangible assets, net of accumulated amortization, and (2) tangible book value per share as tangible equity divided by shares of common stock outstanding at the end of the relevant period. The most directly comparable GAAP financial measure for tangible book value per share is book value per share. We calculate tangible assets as total assets less goodwill and other intangible assets, net of accumulated amortization. The most directly comparable GAAP financial measure for tangible equity to tangible assets is total shareholders’ equity to total assets. We believe that tangible book value per share and tangible equity to tangible assets are measures that are important to many investors in the marketplace who are interested in book value per share and total shareholders’ equity to total assets, exclusive of change in intangible assets.

The following tables reconcile, as of the dates set forth below, total shareholders’ equity to tangible equity, total assets to tangible assets and presents book value per share, tangible book value per share, tangible equity to tangible assets and shareholders’ equity to total assets:

                                 
    12/31/2017   9/30/2017   6/30/2017   3/31/2017   12/31/2016  
Tangible Equity                                
Total shareholders’ equity   $  446,214   $  381,121   $  371,964   $  363,643   $  357,637  
Adjustments:                                
Goodwill      80,950      80,950      80,950      80,950      80,950  
Other intangibles      6,770      7,031      7,298      7,513      7,791  
Tangible equity   $  358,494   $  293,140   $  283,716   $  275,180   $  268,896  
Tangible Assets                                
Total assets   $  3,081,083   $  2,989,838   $  2,940,877   $  2,914,548   $  2,951,522  
Adjustments:                                
Goodwill      80,950      80,950      80,950      80,950      80,950  
Other intangibles      6,770      7,031      7,298      7,513      7,791  
Tangible assets   $  2,993,363   $  2,901,857   $  2,852,629   $  2,826,085   $  2,862,781  
                                 
Common shares outstanding      24,833      22,063      22,063      22,062      22,062  
                                 
Book value per share   $  17.97   $  17.27   $  16.86   $  16.48   $  16.21  
Tangible book value per share   $  14.44   $  13.29   $  12.86   $  12.47   $  12.19  
                                 
Total shareholders’ equity to total assets      14.48    12.75 %    12.65 %    12.48 %    12.12 %
Tangible equity to tangible assets      11.98    10.10 %    9.95 %    9.74 %    9.39 %
                                 
Investor Relations:

James L. Sturgeon
281.325.5013
investors@CBoTX.com

Media Contact:

Ashley Warren
713.210.7622
awarren@CBoTX.com

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Source: CommunityBank of Texas, N.A.