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CBTX, Inc. Reports Second Quarter Financial Results

July 26, 2018 at 4:50 PM EDT

HOUSTON, July 26, 2018 (GLOBE NEWSWIRE) -- CBTX, Inc. (the “Company”) (NASDAQ:CBTX), the bank holding company for CommunityBank of Texas N.A., today announced net income of $11.0 million, or $0.44 per diluted share, for the quarter ended June 30, 2018, compared to $8.7 million, or $0.39 per diluted share, for the quarter ended June 30, 2017 and $9.1 million, or $0.37 per diluted share, for the quarter ended March 31, 2018.

For 2018, net income and earnings per share were positively impacted by the 14% reduction of the corporate U.S. statutory federal tax rate from 35% to 21% as a result of the enactment of the Tax Cuts and Jobs Act (the “Tax Act”), which became effective January 1, 2018.

Highlights

  • Total loans, excluding loans held for sale, increased $48.1 million, or 8.2% annualized, to $2.4 billion compared to the quarter ended March 31, 2018.
  • Net interest income for the quarter ended June 30, 2018 totaled $30.9 million, an increase of 6.3% from the first quarter of 2018, primarily due to increased average loans and yields on loans.
  • The efficiency ratio improved to 58.2% for the quarter ended June 30, 2018, compared to 62.6% for the quarter ended March 31, 2018.

Operating Results:

Net Interest Income

Net interest income was $30.9 million for the second quarter of 2018, compared to $26.5 million for the second quarter of 2017 and $29.0 million for the first quarter of 2018. The increase in net interest income in the second quarter of 2018 from the second quarter of 2017, was due to increased average loans and increased average yields on loans and federal funds sold. The increase in net interest income in the second quarter of 2018 from the first quarter of 2018 was due to increased average loans and average loan yields.

The yield on interest-earning assets was 4.71% for the second quarter of 2018, compared to 4.32% for the second quarter of 2017 and 4.49% for the first quarter of 2018.

The cost of interest-bearing liabilities, including borrowings, was 0.60% for the second quarter of 2018, compared to 0.58% for the second quarter of 2017 and 0.55% for the first quarter of 2018.

The net interest margin was 4.39% for the second quarter of 2018 compared to 3.99% for the second quarter of 2017 and 4.19% for the first quarter of 2018.

Provision (Recapture) for Loan Losses

Provision for loan loss was $690,000 for the second quarter of 2018, compared to a recapture of $694,000 for the second quarter of 2017 and a provision of $865,000 for the first quarter of 2018.

The allowance for loan losses was $25.7 million, or 1.07% of total loans, at June 30, 2018, compared to $25.2 million, or 1.15% of total loans, at June 30, 2017 and $25.3 million, or 1.08% of total loans, at March 31, 2018.

Noninterest Income

Noninterest income was $3.5 million for the second quarter of 2018, $3.5 million for the second quarter of 2017 and $3.4 million for the first quarter of 2018. Although noninterest income was relatively flat between the second quarter 2018 and the second quarter 2017, there was a decrease in gains on sales of loans and assets, offset by an increase in earnings on bank-owned life insurance. 

Noninterest income increased from the first quarter of 2018 to the second quarter of 2018 primarily due to higher gains on sales of loans and assets in the second quarter of 2018. 

Noninterest Expense

Noninterest expense was $20.0 million for the second quarter of 2018, $18.9 million for the second quarter of 2017 and $20.3 million for the first quarter of 2018.

Noninterest expense during the second quarter of 2018 compared to the first quarter of 2018 was relatively flat, with decreases in salaries and employee benefits and professional and director fees offset by increased occupancy costs.

Noninterest expense increased $1.2 million in the second quarter of 2018 compared to the second quarter of 2017 primarily due to increased salaries, employee benefits, incentive compensation, health insurance premiums and stock compensation expense.

Income Taxes

Income tax expense was $2.6 million for the second quarter of 2018, $3.2 million for the second quarter of 2017 and $2.1 million for the first quarter of 2018.

The effective tax rates were 19.3% for the second quarter of 2018, 26.8% for the second quarter of 2017 and 19.0% for the first quarter of 2018. The effective tax rate for the first and second quarter of 2018 reflect reduction of the federal tax rate from 35% to 21% in the fourth quarter of 2017.

Balance Sheet Highlights:

Loans

Loans were $2.4 billion at June 30, 2018, $2.2 billion at June 30, 2017 and $2.4 billion at March 31, 2018. The increases from the prior year and first quarter are primarily due to organic growth.

Asset Quality

Nonperforming assets remain low relative to total assets at $4.9 million, or 0.16% of total assets, at June 30, 2018, $9.7 million, or 0.33% of total assets, at June 30, 2017 and $6.1 million, or 0.20% of total assets at March 31, 2018.

Annualized net charge-offs (recoveries) to average loans were 0.05% for the second quarter of 2018, 0.00% for the second quarter of 2017 and 0.05% for the first quarter of 2018.

Deposits and Borrowings

Total deposits were $2.6 billion at June 30, 2018, compared to $2.5 billion at June 30, 2017 and $2.6 billion at March 31, 2018.

Total borrowings (excluding junior subordinated debentures) were $51.4 million at June 30, 2018, $27.6 million at June 30, 2017 and $861,000 at March 31, 2018. The increase in borrowings from March 31, 2018 to June 30, 2018 is due to Federal Home Loan Bank (FHLB) short-term advances of $50 million. Borrowings at June 30, 2017 include $25.5 million for our note payable, which was repaid due to scheduled payments and repayment in full during the quarter ended December 31, 2017.

Capital

At June 30, 2018, the Company remains well capitalized. Our ratio of total shareholders’ equity to total assets was 14.87% at June 30, 2018, 12.65% at June 30, 2017 and 14.69% at March 31, 2018.

Our ratio of tangible equity to total tangible assets was 12.41% at June 30, 2018, 9.95% at June 30, 2017 and 12.19% at March 31, 2018. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

Our ratio of tangible equity to total assets increased from June 30, 2017 to June 30, 2018 due to our November 2017 initial public offering of our common stock.

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 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (‘SEC”) 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.communitybankoftx.com under the Investor Relations tab.

                               
CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
                               
Balance Sheet Data (at period end):   6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
                               
Loans, excluding loans held for sale   $ 2,404,132     $ 2,356,053     $ 2,311,544     $ 2,199,478     $ 2,192,443  
Allowance for loan losses     (25,746 )     (25,349 )     (24,778 )     (23,757 )     (25,187 )
Loans, net     2,378,386       2,330,704       2,286,766       2,175,721       2,167,256  
                               
Cash and equivalents     245,265       279,915       326,199       348,578       307,173  
Debt securities     230,393       221,183       223,208       217,660       220,330  
Premises and equipment, net     52,607       53,135       53,607       54,129       56,609  
Goodwill     80,950       80,950       80,950       80,950       80,950  
Other intangible assets, net     6,276       6,521       6,770       7,031       7,298  
Repossessed real estate and other assets     137       295       705       1,136       1,435  
Loans held for sale     560       113       1,460       466       559  
Other assets     106,186       101,974       101,418       104,167       99,267  
Total Assets   $ 3,100,760     $ 3,074,790     $ 3,081,083     $ 2,989,838     $ 2,940,877  
                               
Noninterest-bearing deposits   $ 1,114,155     $ 1,120,521     $ 1,109,789     $ 1,051,755     $ 1,030,865  
Interest-bearing deposits     1,447,119       1,479,181       1,493,183       1,502,872       1,485,919  
Total deposits     2,561,274       2,599,702       2,602,972       2,554,627       2,516,784  
                               
Note payable     -       -       -       24,357       25,464  
Repurchase agreements     1,448       861       1,525       2,239       2,179  
Federal Home Loan Bank advances     50,000       -       -       -       -  
Junior subordinated debt     6,726       6,726       6,726       6,726       6,726  
Other liabilities     20,117       15,930       23,646       20,768       17,760  
Total Liabilities     2,639,565       2,623,219       2,634,869       2,608,717       2,568,913  
                               
Shareholders' Equity     461,195       451,571       446,214       381,121       371,964  
Total Liabilities and Shareholders' Equity   $ 3,100,760     $ 3,074,790     $ 3,081,083     $ 2,989,838     $ 2,940,877  
                                         
                                         

 

 
CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
 
                                           
    For the Three Months Ended   For the Six Months Ended
    6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017   6/30/2018   6/30/2017
Interest Income                                          
Interest and fees on loans   $ 30,493   $ 28,462   $ 27,726     $ 27,129     $ 26,560     $ 58,955   $ 52,513
Securities     1,507     1,436     1,357       1,334       1,353       2,943     2,656
Federal Funds and interest-bearing deposits     1,127     1,187     1,283       1,106       813       2,314     1,555
Total Interest Income     33,127     31,085     30,366       29,569       28,726       64,212     56,724
Interest Expense                                          
Deposits     2,126     1,948     1,993       1,964       1,857       4,074     3,695
Repurchase agreements     1     1           2       1       2     3
Federal Home Loan Bank advances     12                           12    
Note payable     3     4     122       269       264       7     515
Junior subordinated debt     109     93     86       83       79       202     153
Total Interest Expense     2,251     2,046     2,201       2,318       2,201       4,297     4,366
Net Interest Income     30,876     29,039     28,165       27,251       26,525       59,915     52,358
Provision (Recapture) for Loan Losses     690     865     1,050       (1,654 )     (694 )     1,555     266
Net Interest Income After Provision (Recapture) for Loan Losses     30,186     28,174     27,115       28,905       27,219       58,360     52,092
Noninterest Income                                          
Deposit account service charges     1,497     1,478     1,388       1,395       1,517       2,975     3,017
Net gain (loss) on sale of assets     210     130     (7 )     828       339       340     703
Card interchange fees     971     927     941       803       877       1,898     1,709
Earnings on bank-owned life insurance     465     451     460       459       335       916     661
Other     363     375     362       601       458       738     884
Total Noninterest Income     3,506     3,361     3,144       4,086       3,526       6,867     6,974
Noninterest Expense                                          
Salaries and employee benefits     12,496     12,695     14,021       11,829       11,299       25,191     22,723
Net occupancy expense     2,433     2,265     2,346       2,221       2,351       4,698     4,584
Regulatory fees     513     545     487       458       621       1,058     1,231
Data processing     666     683     674       662       651       1,349     1,293
Printing, stationery and office     480     411     415       348       370       891     717
Amortization of intangibles     248     255     263       267       271       503     549
Professional and director fees     686     919     1,168       606       706       1,605     1,331
Correspondent bank and customer related transaction expenses     68     67     67       67       78       135     152
Loan processing costs     75     118     141       115       133       193     205
Advertising, marketing and business development     475     506     508       266       508       981     687
Repossessed real estate and other asset expense     5     57     66       340       85       62     203
Security and protection expense     311     302     300       331       352       613     724
Telephone and communications     394     386     344       311       307       780     661
Other expenses     1,162     1,075     1,189       1,196       1,127       2,237     2,226
Total Noninterest Expense     20,012     20,284     21,989       19,017       18,859       40,296     37,286
Net Income Before Income Tax Expense     13,680     11,251     8,270       13,974       11,886       24,931     21,780
Income Tax Expense     2,638     2,139     6,313       3,927       3,181       4,777     6,213
Net Income   $ 11,042   $ 9,112   $ 1,957     $ 10,047     $ 8,705     $ 20,154   $ 15,567
                                                 
                                                 


 
CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)
 
                                             
    For the Three Months Ended   For the Six Months Ended  
    6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017   6/30/2018   6/30/2017  
Profitability:                                            
Net income   $ 11,042   $ 9,112   $ 1,957   $ 10,047   $ 8,705   $ 20,154   $ 15,567  
Basic earnings per share   $ 0.44   $ 0.37   $ 0.08   $ 0.46   $ 0.39   $ 0.81   $ 0.71  
Diluted earnings per share   $ 0.44   $ 0.37   $ 0.08   $ 0.45   $ 0.39   $ 0.81   $ 0.70  
                                             
Return on average assets (1)     1.44 %   1.20 %   0.25 %   1.34 %   1.20 %   1.32 %   1.08 %
Return on average shareholders' equity (1)     9.66 %   8.20 %   1.83 %   10.54 %   9.46 %   8.94 %   8.58 %
Net interest margin- tax equivalent (1)     4.43 %   4.23 %   4.06 %   4.07 %   4.08 %   4.33 %   4.05 %
Efficiency ratio (2)     58.20 %   62.60 %   70.23 %   60.69 %   62.76 %   60.34 %   62.84 %
                                             
Liquidity and Capital Ratios:                                            
Total shareholders' equity to total assets     14.87 %   14.69 %   14.48 %   12.75 %   12.65 %   14.87 %   12.65 %
Tangible equity to tangible assets (3)     12.41 %   12.19 %   11.98 %   10.10 %   9.95 %   12.41 %   9.95 %
Common equity tier 1 capital ratio     14.08 %   14.12 %   14.19 %   12.23 %   12.00 %   14.08 %   12.00 %
Tier 1 leverage ratio     12.87 %   12.58 %   12.30 %   10.48 %   10.39 %   12.87 %   10.39 %
Tier 1 risk-based capital ratio     14.32 %   14.37 %   14.44 %   12.49 %   12.26 %   14.32 %   12.26 %
Total risk-based capital ratio     15.29 %   15.35 %   15.42 %   13.48 %   13.33 %   15.29 %   13.33 %
                                             
Other Data:                                            
Weighted average common shares outstanding- Basic     24,858     24,833     23,629     22,063     22,062     24,845     22,062  
Weighted average common shares outstanding- Diluted     24,997     24,954     23,742     22,138     22,148     24,977     22,148  
Common shares outstanding at period end     24,859     24,833     24,833     22,063     22,063     24,859     22,063  
Dividends per share   $ 0.05   $ 0.05   $ 0.05   $ 0.05   $ 0.05   $ 0.10   $ 0.10  
Book value per share   $ 18.55   $ 18.18   $ 17.97   $ 17.27   $ 16.86   $ 18.55   $ 16.86  
Tangible book value per share (3)   $ 15.04   $ 14.66   $ 14.44   $ 13.29   $ 12.86   $ 15.04   $ 12.86  
Employees - full-time equivalents     488     477     462     464     472     488     472  

_____________________________

(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
    6/30/2018   3/31/2018   6/30/2017
          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)   $ 2,375,253     $ 30,493   5.15 %   $ 2,319,463     $ 28,462   4.98 %   $ 2,203,145     $ 26,560   4.83 %
Debt securities     228,262       1,507   2.65 %     223,730       1,436   2.60 %     220,905       1,353   2.45 %
Federal funds sold and other interest-earning assets     201,906       936   1.86 %     252,722       994   1.60 %     228,393       637   1.12 %
Nonmarketable equity securities     14,823       191   5.17 %     14,701       193   5.32 %     14,691       176   4.81 %
Total interest-earning assets     2,820,244     $ 33,127   4.71 %     2,810,616     $ 31,085   4.49 %     2,667,134     $ 28,726   4.32 %
Allowance for loan losses     (25,392 )                 (24,866 )                 (26,424 )            
Noninterest-earnings assets     288,416                   287,099                   273,760              
Total assets   $ 3,083,268                 $ 3,072,849                 $ 2,914,470              
Liabilities and Shareholders’ Equity                                                      
Interest-bearing liabilities:                                                      
Interest-bearing deposits   $ 1,478,016     $ 2,126   0.58 %   $ 1,491,613     $ 1,948   0.53 %   $ 1,478,579     $ 1,857   0.50 %
Repurchase agreements     1,540       1   0.26 %     1,418       1   0.29 %     2,356       1   0.17 %
FHLB advances     2,198       12   2.19 %             %             %
Note payable           3   %           4   %     25,841       264   4.10 %
Junior subordinated debt     10,826       109   4.04 %     10,826       93   3.48 %     10,826       79   2.93 %
Total interest-bearing liabilities     1,492,580     $ 2,251   0.60 %     1,503,857     $ 2,046   0.55 %     1,517,602     $ 2,201   0.58 %
Noninterest-bearing liabilities:                                                      
Noninterest-bearing deposits     1,111,736                   1,097,085                   1,010,823              
Other liabilities     20,441                   21,165                   16,910              
Total noninterest-bearing liabilities     1,132,177                   1,118,250                   1,027,733              
Shareholders’ equity     458,511                   450,742                   369,135              
Total liabilities and shareholders’ equity   $ 3,083,268                 $ 3,072,849                 $ 2,914,470              
Net interest income         $ 30,876               $ 29,039               $ 26,525      
Net interest spread (3)               4.11 %               3.93 %               3.74 %
Net interest margin (4)               4.39 %               4.19 %               3.99 %
Net interest margin—tax equivalent (5)               4.43 %               4.23 %               4.08 %
                                                       

_____________________________

(1)   Annualized.
(2)   Includes average outstanding balances of loans held for sale of $425,000, $544,000 and $770,000 for the quarter ended June 30, 2018, March 31, 2018 and June 30, 2017, 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 $267,000, $270,000 and $585,000 for the quarter ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.

                                     
                                     
    For the Six Months Ended June 30,
    2018   2017
          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)   $ 2,347,512     $ 58,955   5.06 %   $ 2,190,953     $ 52,513   4.83 %
Debt securities     226,008       2,943   2.63 %     219,005       2,656   2.45 %
Federal funds sold and other interest-earning assets     227,172       1,929   1.71 %     244,053       1,186   0.98 %
Nonmarketable equity securities     14,763       385   5.26 %     14,688       369   5.07 %
Total interest-earning assets     2,815,455     $ 64,212   4.60 %     2,668,699     $ 56,724   4.29 %
Allowance for loan losses     (25,131 )                 (25,932 )            
Noninterest-earnings assets     287,764                   275,208              
Total assets   $ 3,078,088                 $ 2,917,975              
Liabilities and Shareholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing deposits   $ 1,484,777     $ 4,074   0.55 %   $ 1,495,867     $ 3,695   0.50 %
Repurchase agreements     1,480       2   0.27 %     2,412       3   0.25 %
FHLB advances     1,105       12   2.19 %             %
Note payable           7   %     26,400       515   3.93 %
Junior subordinated debt     10,826       202   3.76 %     10,826       153   2.85 %
Total interest-bearing liabilities     1,498,188     $ 4,297   0.58 %     1,535,505     $ 4,366   0.57 %
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits     1,104,451                   998,326              
Other liabilities     20,801                   18,157              
Total noninterest-bearing liabilities     1,125,252                   1,016,483              
Shareholders’ equity     454,648                   365,987              
Total liabilities and shareholders’ equity   $ 3,078,088                 $ 2,917,975              
Net interest income         $ 59,915               $ 52,358      
Net interest spread (2)               4.02 %               3.71 %
Net interest margin (3)               4.29 %               3.96 %
Net interest margin—tax equivalent (4)               4.33 %               4.05 %
                                     

______________________________

(1)   Annualized. 
(2)   Includes average outstanding balances of loans held for sale of $484,000 and $730,000 for the six months ended June 30, 2018 and June 30, 2017, 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 $537,000 and $1.2 million for the six months ended June 30, 2018 and June 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017. 

 
 
CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)
                               
    For the Three Months Ended
    6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Yield Trend - Annualized:                              
Interest-earnings assets:                              
Total loans   5.15 %   4.98 %   4.88 %   4.91 %   4.83 %
Debt securities   2.65 %   2.60 %   2.42 %   2.37 %   2.45 %
Federal funds sold and other interest-earning assets   1.86 %   1.60 %   1.37 %   1.29 %   1.12 %
Nonmarketable equity securities   5.17 %   5.32 %   5.13 %   4.83 %   4.81 %
Total interest-earning assets   4.71 %   4.49 %   4.29 %   4.32 %   4.32 %
                               
Interest-bearing liabilities:                              
Interest-bearing deposits   0.58 %   0.53 %   0.52 %   0.52 %   0.50 %
Repurchase agreements   0.26 %   0.29 %   %   0.33 %   0.17 %
FHLB advances   2.19 %   %   %   %   %
Note payable   %   %   4.30 %   4.31 %   4.10 %
Junior subordinated debt   4.04 %   3.48 %   3.15 %   3.04 %   2.93 %
Total interest-bearing liabilities   0.60 %   0.55 %   0.56 %   0.60 %   0.58 %
                               
Net interest spread (1)   4.11 %   3.93 %   3.73 %   3.73 %   3.74 %
Net interest margin (2)   4.39 %   4.19 %   3.98 %   3.98 %   3.99 %
Net interest margin—tax equivalent (3)   4.43 %   4.23 %   4.06 %   4.07 %   4.08 %
                               

_____________________________

(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 21% for 2018 and 35% for 2017.

 
 
CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances (Unaudited)
(In thousands)
                               
    For the Three Months Ended
    6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017
Average Outstanding Balances:                              
                               
Assets                              
Interest-earnings assets:                              
Total loans (1)   $ 2,375,253     $ 2,319,463     $ 2,252,735     $ 2,191,016     $ 2,203,145  
Debt securities     228,262       223,730       222,602       223,132       220,905  
Federal funds sold and other interest-earning assets     201,906       252,722       317,484       284,334       228,393  
Nonmarketable equity securities     14,823       14,701       14,698       14,695       14,691  
Total interest-earning assets     2,820,244       2,810,616       2,807,519       2,713,177       2,667,134  
Allowance for loan losses     (25,392 )     (24,866 )     (24,127 )     (25,316 )     (26,424 )
Noninterest-earnings assets     288,416       287,099       296,108       290,767       273,760  
Total assets   $ 3,083,268     $ 3,072,849     $ 3,079,500     $ 2,978,628     $ 2,914,470  
                               
Liabilities and Shareholders’ Equity                              
Interest-bearing liabilities:                              
Interest-bearing deposits   $ 1,478,016     $ 1,491,613     $ 1,519,631     $ 1,501,732     $ 1,478,579  
Repurchase agreements     1,540       1,418       1,793       2,404       2,356  
FHLB advances     2,198                          
Note payable                 11,252       24,742       25,841  
Junior subordinated debt     10,826       10,826       10,826       10,826       10,826  
Total interest-bearing liabilities     1,492,580       1,503,857       1,543,502       1,539,704       1,517,602  
Noninterest-bearing liabilities:                              
Noninterest-bearing deposits     1,111,736       1,097,085       1,087,416       1,041,731       1,010,823  
Other liabilities     20,441       21,165       23,271       18,844       16,910  
Total noninterest-bearing liabilities     1,132,177       1,118,250       1,110,687       1,060,575       1,027,733  
Shareholders’ equity     458,511       450,742       425,311       378,349       369,135  
Total liabilities and shareholders’ equity   $ 3,083,268     $ 3,072,849     $ 3,079,500     $ 2,978,628     $ 2,914,470  
                                         


___________________________

(1)   Includes average outstanding balances of loans held for sale.

 
 
CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)
                                                             
    6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017  
    Amount       Amount       Amount       Amount       Amount    
Loan Portfolio:                                                            
Commercial and industrial   $ 565,850     23.5 %   $ 559,070     23.7 %   $ 559,363     24.1 %   $ 548,870     24.9 %   $ 535,116     24.4 %
Real estate:                                                            
Commercial real estate     780,224     32.4 %     767,108     32.5 %     738,293     31.9 %     689,501     31.3 %     690,044     31.4 %
Construction and development     449,390     18.6 %     436,260     18.5 %     449,211     19.4 %     424,489     19.3 %     433,966     19.8 %
1-4 family residential     279,227     11.6 %     260,580     11.0 %     258,584     11.2 %     246,564     11.2 %     240,073     10.9 %
Multi-family residential     229,609     9.5 %     236,000     10.0 %     220,305     9.5 %     211,219     9.6 %     208,222     9.5 %
Consumer     41,833     1.7 %     40,869     1.7 %     40,433     1.7 %     42,772     1.9 %     41,130     1.9 %
Agricultural     10,951     0.5 %     8,807     0.4 %     11,256     0.5 %     11,424     0.5 %     10,650     0.4 %
Other     53,376     2.2 %     52,382     2.2 %     40,344     1.7 %     29,684     1.3 %     38,237     1.7 %
Gross loans     2,410,460     100.0 %     2,361,076     100.0 %     2,317,789     100.0 %     2,204,523     100.0 %     2,197,438     100.0 %
Less deferred fees and unearned discount     (5,768 )           (4,910 )           (4,785 )           (4,579 )           (4,436 )      
Less allowance for loan losses     (25,746 )           (25,349 )           (24,778 )           (23,757 )           (25,187 )      
Less loans held for sale     (560 )           (113 )           (1,460 )           (466 )           (559 )      
Loans, net   $ 2,378,386           $ 2,330,704           $ 2,286,766           $ 2,175,721           $ 2,167,256        
                                                             
Deposits:                                                            
Interest-bearing demand accounts   $ 342,890     13.4 %   $ 345,378     13.3 %   $ 363,015     14.0 %   $ 340,627     13.3 %   $ 343,826     13.7 %
Money market accounts     650,747     25.4 %     717,548     27.6 %     702,299     27.0 %     726,903     28.5 %     698,546     27.7 %
Savings accounts     97,576     3.8 %     95,603     3.7 %     95,842     3.7 %     88,613     3.5 %     88,083     3.5 %
Certificates and other time deposits, $100,000 or greater     164,464     6.4 %     161,777     6.2 %     172,469     6.6 %     179,777     7.0 %     182,143     7.2 %
Certificates and other time deposits, less than $100,000     191,442     7.5 %     158,875     6.1 %     159,558     6.1 %     166,952     6.5 %     173,321     6.9 %
Total interest-bearing deposits     1,447,119     56.5 %     1,479,181     56.9 %     1,493,183     57.4 %     1,502,872     58.8 %     1,485,919     59.0 %
Noninterest-bearing deposits     1,114,155     43.5 %     1,120,521     43.1 %     1,109,789     42.6 %     1,051,755     41.2 %     1,030,865     41.0 %
Total deposits   $ 2,561,274     100.0 %   $ 2,599,702     100.0 %   $ 2,602,972     100.0 %   $ 2,554,627     100.0 %   $ 2,516,784     100.0 %
                                                                       
                                                                       


 
CBTX, INC. AND SUBSIDIARY
Credit Quality (Unaudited)
(In thousands, except percentages)
                                         
    6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017  
Nonperforming assets (at period end):                                        
Nonaccrual loans:                                        
Commercial and industrial   $ 1,734     $ 2,533     $ 3,280     $ 2,444     $ 2,348  
Real estate:                                        
Commercial real estate     2,092       2,217       3,216       5,038       4,964  
Construction and development     225       233       252       265       362  
1-4 family residential     738       765       898       844       578  
Multi-family residential                       1       3  
Consumer     4       21                    
Agricultural                              
Nonaccrual loans     4,793       5,769       7,646       8,592       8,255  
Accruing loans 90 or more days past due                              
Total nonperforming loans     4,793       5,769       7,646       8,592       8,255  
Foreclosed assets, including other real estate:                                        
Commercial real estate, construction and development, land and land development     137       295       298       729       1,018  
Residential real estate                 407       407       417  
Total foreclosed assets     137       295       705       1,136       1,435  
Total nonperforming assets   $ 4,930     $ 6,064     $ 8,351     $ 9,728     $ 9,690  
                                         
Allowance for Loan Losses (at period end):                                        
Commercial and industrial   $ 7,648     $ 7,439     $ 7,257     $ 7,194     $ 8,466  
Real estate:                                        
Commercial real estate     10,930       10,742       10,375       9,640       10,000  
Construction and development     3,335       3,356       3,482       3,364       3,313  
1-4 family residential     1,404       1,329       1,326       1,282       1,138  
Multi-family residential     1,479       1,520       1,419       1,360       1,341  
Consumer     479       517       566       626       599  
Agricultural     66       53       68       69       64  
Other     405       393       285       222       266  
Total allowance for loan losses   $ 25,746     $ 25,349     $ 24,778     $ 23,757     $ 25,187  
                                         
Credit Quality Ratios (at period end):                                        
Nonperforming assets to total assets     0.16 %     0.20 %     0.27 %     0.33 %     0.33 %
Nonperforming loans to total loans     0.20 %     0.24 %     0.33 %     0.39 %     0.38 %
Allowance for loan losses to nonperforming loans     537.16 %     439.40 %     324.06 %     276.50 %     305.11 %
Allowance for loan losses to total loans     1.07 %     1.08 %     1.07 %     1.08 %     1.15 %
                                         
                                         


 
CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
(In thousands, except percentages)
                                 
    For the Three Months Ended  
    6/30/2018   3/31/2018   12/31/2017   9/30/2017   6/30/2017  
Analysis of Allowance for Loan Losses                                
                                 
Allowance for loan losses at beginning of period   $ 25,349     $ 24,778     $ 23,757     $ 25,187     $ 25,881    
                                 
Provision (recapture) for loan losses     690       865       1,050       (1,654 )     (694 )  
                                 
Net (charge-offs) recoveries                                
Commercial and industrial     (301 )     (297 )     52       205       66    
Real estate:                                
Commercial real estate     5       3       (118 )     2       2    
Construction and development                                
1-4 family residential           (2 )     (7 )     2       8    
Multi-family residential                                
Consumer     3       2       9       4       (90 )  
Agricultural                 35       11       6    
Other                             8    
Total net (charge-offs) recoveries     (293 )     (294 )     (29 )     224          
                                 
Allowance for loan losses at end of period   $ 25,746     $ 25,349     $ 24,778     $ 23,757     $ 25,187    
                                 
Net charge-offs (recoveries) to average loans     0.05   %   0.05   %     %   (0.04 ) %     %
                                           
                                           

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:

                                         
    6/30/2018     3/31/2018     12/31/2017     9/30/2017     6/30/2017  
Tangible Equity                                        
Total shareholders’ equity   $ 461,195     $ 451,571     $ 446,214     $ 381,121     $ 371,964  
Adjustments:                                        
Goodwill     80,950       80,950       80,950       80,950       80,950  
Other intangibles     6,276       6,521       6,770       7,031       7,298  
Tangible equity   $ 373,969     $ 364,100     $ 358,494     $ 293,140     $ 283,716  
Tangible Assets                                        
Total assets   $ 3,100,760     $ 3,074,790     $ 3,081,083     $ 2,989,838     $ 2,940,877  
Adjustments:                                        
Goodwill     80,950       80,950       80,950       80,950       80,950  
Other intangibles     6,276       6,521       6,770       7,031       7,298  
Tangible assets   $ 3,013,534     $ 2,987,319     $ 2,993,363     $ 2,901,857     $ 2,852,629  
                                         
Common shares outstanding     24,859       24,833       24,833       22,063       22,063  
                                         
Book value per share   $ 18.55     $ 18.18     $ 17.97     $ 17.27     $ 16.86  
Tangible book value per share   $ 15.04     $ 14.66     $ 14.44     $ 13.29     $ 12.86  
                                         
Total shareholders’ equity to total assets     14.87 %     14.69 %     14.48 %     12.75 %     12.65 %
Tangible equity to tangible assets     12.41 %     12.19 %     11.98 %     10.10 %     9.95 %
                                         
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.