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CBTX, Inc. Reports First Quarter Financial Results

April 30, 2020 at 6:00 AM EDT

HOUSTON, April 30, 2020 (GLOBE NEWSWIRE) -- CBTX, Inc., or the Company (NASDAQ: CBTX), the bank holding company for CommunityBank of Texas, N.A., or the Bank, today announced net income of $7.5 million, or $0.30 per diluted share, for the quarter ended March 31, 2020, compared to $12.6 million, or $0.50 per diluted share, for the quarter ended December 31, 2019 and $10.5 million, or $0.42 per diluted share, for the quarter ended March 31, 2019.

“Our first quarter turned largely on our focus on the impacts of the COVID-19 pandemic and the effects it played on our communities, customers and employees,” said Robert R. Franklin, Jr., Chairman, CEO and President of the Company. “We are a bank with a team that is well-experienced working through challenging times in our markets, including dealing with hurricanes, floods and economic crises that have occurred in the past. That experience allowed us to keep our services available for our customers and work to keep our employees safe.”

Mr. Franklin continued, “We have worked over the years to emphasize building quality relationships with customers through the good and bad times. We believe staying true to our mission has resulted in a proven track record of a quality loan portfolio evidenced by our continued strong capital, credit quality and liquidity metrics.”

“I am proud of our team and their work to support our customers during these anxious times. It is evident by our team’s tireless efforts on the SBA’s paycheck protection loan program to find solutions to assist our customers with the large volume of loan applications in a very short period of time,” said Mr. Franklin.

He added, “We are pleased to be able to help with what we think is a positive impact to our customers and communities. We believe our team’s continued performance gives us and our customers optimism for opportunities to come as the circumstances in our markets continue to evolve.”

Highlights 

  • Net income was $7.5 million for the first quarter of 2020, a decrease of $5.1 million and $2.9 million compared to the fourth quarter of 2019 and the first quarter of 2019, respectively, primarily due to the increase in the provision for credit losses during the first quarter of 2020.
  • The provision for credit losses was $5.0 million for the first quarter of 2020, primarily due to the impact of the Corona-virus, or COVID-19, and the drop in the prices of oil and gas on current and forecasted economic factors, compared to a recapture of $148,000 for the fourth quarter of 2019 and a provision of $1.1 million for the first quarter of 2019.
  • The Company’s adoption of the new accounting standard related to current expected credit losses, or CECL, effective on January 1, 2020, resulted in a net reduction to retained earnings of $3.0 million.
  • The allowance for credit losses, or ACL, for loans increased to $31.2 million at March 31, 2020, compared to $25.3 million at December 31, 2019 and $24.6 million at March 31, 2019.
  • Net interest margin on a tax equivalent basis was 4.06% for the quarter ended March 31, 2020, compared to 4.18% for the quarter ended December 31, 2019 and 4.56% for the quarter ended March 31, 2019.  
  • Maintained strong capital ratios with the Company’s total risk-based capital ratio being 16.42%, compared to 16.41% at December 31, 2019, and 15.41% at March 31,2019.

Operating Results

Net Interest Income

Net interest income was $32.2 million for the first quarter of 2020, compared to $33.8 million for the fourth quarter of 2019 and $33.3 million for the first quarter of 2019. Net interest income decreased $1.6 million during the first quarter of 2020, compared to the fourth quarter of 2019, primarily due to the decrease in rates for loans, the decrease in average loans, the decrease in rates for other interest-earning assets and the impact of the decrease of one day between the periods, which was partially offset by the decrease in rates for interest-bearing deposits and the decrease in average advances from the Federal Home Loan Bank.

Net interest income decreased $1.1 million during the first quarter of 2020, compared to the first quarter of 2019, primarily due to a decrease in rates for loans, securities and other interest-earning assets and the increase in average interest-bearing deposits and advances from the Federal Home Loan Bank, partially offset by the increase in average loans and other interest-earning assets, the decrease in rates on interest-bearing deposits and increased average advances from the Federal Home Loan Bank and the increase of one day between the periods.

The yields on interest-earning assets trended downward to 4.56% for the first quarter of 2020, compared to 4.73% for the fourth quarter of 2019 and 5.03% for the first quarter of 2019. The rates on interest-bearing deposits fluctuated within a narrow band during these periods. The cost of interest-bearing liabilities was 0.94% for the first quarter of 2020, 1.11% for the fourth quarter of 2019 and 0.95% for the first quarter of 2019. Yields on interest-earning assets decreased, and the costs of interest-bearing liabilities did not decrease to the same extent, which caused compression of the Company’s net interest margin on a tax equivalent basis to 4.06% for the first quarter of 2020, from 4.18% for the fourth quarter of 2019 and 4.56% for the first quarter of 2019.

Although competitive pressures have caused the costs of interest-bearing deposits to not drop in tandem to decreases in market rates, they remain a low-cost source of funds, as compared to other sources of funds such as debt.

Provision/Recapture for Credit Losses

The provision for credit losses was $5.0 million for the first quarter of 2020, compared to a recapture of $148,000 for the fourth quarter of 2019 and a provision of $1.1 million for the first quarter of 2019. The increase in the provision for credit losses for the first quarter of 2020 was primarily due to the impact of COVID-19 and the drop in the prices of oil and gas during the first quarter of 2020 on the local and national economy and on current and forecasted expected credit losses. The recapture in the fourth quarter of 2019 was primarily due to a decrease in loan balances.

Effective January 1, 2020, the Company adopted the new accounting standard related to CECL. As a result, the ACL for loans was increased $874,000 and the liability related to the ACL unfunded commitments increased $2.9 million with the associated deferred tax assets increasing $809,000, which resulted in a net reduction to retained earnings of $3.0 million upon adoption.

The ACL for loans was $31.2 million, or 1.17% of total loans, at March 31, 2020, compared to $25.3 million, or 0.96% of total loans, at December 31, 2019 and $24.6 million, or 0.97% of total loans, at March 31, 2019. The increase in the ACL for loans was primarily due to the impact of COVID-19, as discussed above, and the drop in the price of oil and gas during the first quarter of 2020. These factors resulted in an approximate increase of 0.21% to the ACL as a percentage of total loans.

The Company’s oil and gas loans represented 7.2% of gross loans at March 31, 2020, 7.5% at December 31, 2019 and 8.0% at March 31, 2019. The Company’s direct oil and gas loans are loans to an entity with more than 50% of its revenue related to the well-head, oil in the ground or extracting oil or gas. This includes any activity, product or service related to the oil and gas industry, such as exploration and production, or E&P, drilling, downhole equipment or services, oil field services, machine shops, pump or compressor at the well, midstream companies and midstream service companies. The Company’s indirect oil and gas loans are loans to an entity with a material portion of its revenue (20%-50%) from the type of companies defined above as “direct.” Examples of indirect oil and gas loans include loans to trucking companies, machine shops and commercial real estate with significant reliance on oil and gas companies.

The liability associated with the ACL for unfunded commitments was $3.7 million at March 31, 2020, compared to $378,000 at December 31, 2019 and March 31, 2019. The increase was primarily due to the adoption of CECL and the impact of COVID-19 and oil and gas price declines as discussed above. The economic impact from COVID-19 and oil and gas prices resulted in an approximate increase of 0.08% to the liability associated with the ACL as a percentage of total availability on unfunded commitments.

Noninterest Income

Noninterest income was $4.3 million for the first quarter of 2020, $3.7 million for the fourth quarter of 2019 and $3.5 million for the first quarter of 2019. The increase in noninterest income during the first quarter of 2020, as compared to the fourth quarter of 2019 and first quarter of 2019 is primarily due to increased interest rate swap origination fees due to new interest rate swap transactions.

Noninterest Expense

Noninterest expense was $22.1 million for the first quarter of 2020, compared to $22.1 million for the fourth quarter of 2019 and $22.6 million for the first quarter of 2019. The decrease in noninterest expense of $496,000 between the first quarter of 2020 and the first quarter of 2019 was primarily due to lower professional and director fees, predominately legal fees, and lower regulatory fees, partially offset by increased salaries and benefits as a result of annual salary increases and increased employee headcount on a full-time equivalent basis.

Income Taxes

Income tax expense was $1.9 million for the first quarter of 2020, $2.9 million for the fourth quarter of 2019 and $2.6 million for the first quarter of 2019. The effective tax rates were 19.85% for the first quarter of 2020, 18.69% for the fourth quarter of 2019 and 19.86% for the first quarter of 2019. The differences between the federal statutory rate of 21% and the effective tax rates were largely attributable to permanent differences primarily related to tax exempt interest and bank-owned life insurance.

Balance Sheet Highlights

Loans

Loans, excluding loans held for sale, were $2.7 billion at March 31, 2020, $2.6 billion at December 31, 2019 and $2.5 billion at March 31, 2019.

In support of customers financially impacted by COVID-19, the Company began providing short-term loan modifications by offering relief through payment deferrals during the first quarter of 2020. The Company has deferred payments, including principal and interest, totaling $936,000 as of March 31, 2020. These deferral arrangements provide for one-month to six-month deferral periods.

Asset Quality

Nonperforming assets remain low relative to total assets at $1.4 million, or 0.04% of total assets, at March 31, 2020, compared to $977,000, or 0.03% of total assets, at December 31, 2019 and $3.0 million, or 0.09% of total assets, at March 31, 2019.

Annualized net charge-offs (recoveries) to average loans were (0.05%) for the first quarter of 2020, 0.02% for the fourth quarter of 2019 and 0.03% for the first quarter of 2019.

Deposits and Borrowings

Total deposits were $2.8 billion at March 31, 2020, $2.9 billion at December 31, 2019 and $2.8 billion at March 31, 2019, with the differences due to normal fluctuations in customer activities.

We define total borrowings as the total of repurchase agreements, Federal Home Loan Bank advances and notes payable. Total borrowings were $51.4 million, $50.5 million and $1.6 million at March 31, 2020, December 31, 2019 and March 31, 2019, respectively. Borrowings fluctuated between the first quarter of 2020 and first quarter of 2019 due to increased Federal Home Loan Bank advances to fund loan growth.

Capital

At March 31, 2020, the Company continued to be well capitalized and maintain strong capital ratios under bank regulatory requirements. The Company’s total risk-based capital ratio was 16.42% at March 31, 2020, compared to 16.41% at December 31, 2019, and 15.41% at March 31, 2019. The Company’s tier 1 leverage ratio was 13.18% at March 31, 2020, compared to 13.11% at December 31, 2019, and 13.02% at March 31, 2019. The Company’s total shareholders’ equity to total assets was 15.67% at March 31, 2020, 15.40% at December 31, 2019 and 15.19% at March 31, 2019.

Our ratio of tangible equity to tangible assets was 13.51% at March 31, 2020, 13.26% at December 31, 2019 and 12.89% at March 31, 2019. Tangible equity to tangible assets is a non-GAAP financial measure. The most directly comparable GAAP financial measure of tangible equity to tangible assets is total shareholders’ equity to total assets. See the table captioned “Non‑GAAP to GAAP Reconciliation” at the end of this press release.

Non-GAAP Financial Measures

The Company’s accounting and reporting policies conform to United States generally accepted accounting principles, or GAAP, and the prevailing practices in the banking industry. The Company’s management also evaluates performance based on certain additional non-GAAP financial measures. The Company classifies 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.

This press release contains certain non-GAAP financial measures including “tangible book value,” “tangible book value per common share,” and “tangible equity to tangible assets,” which are supplemental measures that are not required by, or are not presented in accordance with, GAAP. Non-GAAP financial measures do not include operating, other statistical measures or ratios 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.

Please refer to the table titled “Non-GAAP to GAAP Reconciliation” at the end of this earnings release for a reconciliation of these non-GAAP financial measures.

The Company will hold a conference call to discuss results for the quarter ended March 31, 2020 on April 30, 2020 at 8:00 a.m. Central Standard Time. Investors and interested parties may listen to the teleconference via telephone by calling (877) 620-1733 if calling from the U.S. or Canada (or (470) 414-9785 if calling from outside the U.S.).  The conference call ID number is 7692825. To access the live webcast of the conference call, individuals can visit the Investor Relations page of the Company’s website: https://ir.cbtxinc.com/events-and-presentations. An archived edition of the earnings webcast will also be posted on the Company’s website later that day and will remain available to interested parties via the same link for one year.

The conference call will contain forward-looking statements in addition to statements of historical fact. The actual achievement of any forecasted results or the unfolding of future economic or business developments in a way anticipated or projected by the company involves numerous risks and uncertainties that may cause the company’s actual performance to be materially different from that stated or implied in the forward-looking statements. Such risks and uncertainties include, among other things, risks discussed within the “Risk Factors” section of the Company’s most recent Forms 10-Q and 10-K and subsequent 8-Ks. 

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.4 billion asset bank, offering commercial banking solutions to small and mid-sized businesses and professionals in Houston, Dallas, Beaumont and surrounding communities in 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: manage the economic risks related to the impact of COVID-19 and the recent drop in oil and gas prices (including risks related to its customers’ credit quality, the Company’s ability to borrow, and the impact of a resultant recession generally), and other hazards such as natural disasters and adverse weather, acts of war or terrorism, other pandemics, an outbreak of hostilities or other international or domestic calamities and the governmental or military response thereto, and other matters beyond the Company’s control; the geographic concentration of our markets in Beaumont and Houston, Texas; manage changes and the continued health or availability of management personnel; the amount of nonperforming and classified assets that the Company holds and the efforts to resolve the nonperforming assets; deterioration of its asset quality; interest rate risks associated with the Company’s business; business and economic conditions generally and in the financial services industry, nationally and within the Company’s primary markets; volatility and direction of oil prices, including risks related to the recent collapse in oil prices, and the strength of the energy industry, generally and within Texas; the composition of the Company’s loan portfolio, including the identity of its borrowers and the concentration of loans in specialized industries, especially the creditworthiness of energy company borrowers; changes in the value of collateral securing the loans; the Company’s ability to maintain important deposit customer relationships and the Company’s reputation; the Company’s ability to maintain effective internal control over financial reporting; the Company’s ability to pursue available remedies in the event of a loan default for loans under the Payment Protection Program (“PPP”) and the risk of holding the PPP loans at unfavorable interest rates as compared to the loans to customers that we would have otherwise lent to; the volatility and direction of market interest rates; liquidity risks associated with the Company’s business; systems failures, interruptions or breaches involving the Company’s information technology and telecommunications systems or third‑party servicers; the failure of certain third-party vendors to perform; the institution and outcome of litigation and other legal proceedings against the Company or to which it may become subject; operational risks associated with the Company’s business; the costs, effects and results of regulatory examinations, investigations, including the ongoing investigation by the Financial Crimes Enforcement Network, or FinCEN, of the U.S. Department of Treasury, or reviews or the ability to obtain the required regulatory approvals; changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters; governmental or regulatory responses to the COVID-19 pandemic and newly enacted fiscal stimulus that impact the Company’s loan portfolio and forbearance practice; and other governmental interventions in the U.S. financial system that may impact how the Company achieves its performance goals. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. 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 it 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
Financial Highlights
(In thousands, except per share data and percentages)
                
  Three Months Ended
  3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
Profitability:               
Net income $ 7,541  $ 12,636  $ 13,076  $ 14,315  $ 10,490 
Basic earnings per share $ 0.30  $ 0.51  $ 0.52  $ 0.57  $ 0.42 
Diluted earnings per share $ 0.30  $ 0.50  $ 0.52  $ 0.57  $ 0.42 
                
Return on average assets (1)  0.87%  1.43%  1.53%  1.72%  1.30%
Return on average shareholders' equity (1)  5.64%  9.40%  9.92%  11.30%  8.59%
Net interest margin- tax equivalent (1)  4.06%  4.18%  4.43%  4.53%  4.56%
Efficiency ratio (2)  60.44%  58.96%  56.98%  56.25%  61.34%
                
Liquidity and Capital Ratios:               
Total shareholders' equity to total assets  15.67%  15.40%  15.31%  15.18%  15.19%
Tangible equity to tangible assets (3)  13.51%  13.26%  13.13%  12.96%  12.89%
Common equity tier 1 capital ratio  15.23%  15.52%  14.99%  14.71%  14.53%
Tier 1 risk-based capital ratio  15.23%  15.52%  14.99%  14.71%  14.53%
Total risk-based capital ratio  16.42%  16.41%  15.88%  15.59%  15.41%
Tier 1 leverage ratio  13.18%  13.11%  13.23%  13.12%  13.02%
                
Other Data:               
Weighted average common shares outstanding- Basic   24,926    24,951    24,923    24,921    24,910 
Weighted average common shares outstanding- Diluted   25,000    25,071    25,046    25,042    25,054 
Common shares outstanding at period end   24,746    24,980    24,923    24,923    24,918 
Dividends per share $ 0.10  $ 0.10  $ 0.10  $ 0.10  $ 0.10 
Book value per share $ 21.70  $ 21.45  $ 21.07  $ 20.59  $ 20.01 
Tangible book value per share (3) $ 18.23  $ 18.01  $ 17.62  $ 17.13  $ 16.54 
Employees - full-time equivalents   512    500    504    508    494 

__________________________

(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” at the end of this earnings release.

 
CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(In thousands)
                
Balance Sheet Data (at period end): 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
                
Loans, excluding loans held for sale $ 2,671,587  $ 2,639,085  $ 2,676,824  $ 2,642,289  $ 2,544,709 
Allowance for credit losses for loans   (31,194)   (25,280)   (25,576)   (25,342)   (24,643)
Loans, net   2,640,393    2,613,805    2,651,248    2,616,947    2,520,066 
                
Cash and equivalents   284,898    372,064    289,399    266,776    276,515 
Securities   234,014    231,262    228,061    232,601    228,684 
Premises and equipment   50,243    50,875    51,183    51,346    51,453 
Goodwill   80,950    80,950    80,950    80,950    80,950 
Other intangible assets   4,700    4,938    5,106    5,318    5,538 
Loans held for sale   882    1,463    —    1,408    852 
Operating lease right-to-use asset   12,577    12,926    12,864    12,355    12,879 
Other assets   116,993    110,261    112,774    111,805    106,525 
Total assets $ 3,425,650  $ 3,478,544  $ 3,431,585  $ 3,379,506  $ 3,283,462 
                
Noninterest-bearing deposits $ 1,195,541  $ 1,184,861  $ 1,196,720  $ 1,201,287  $ 1,229,172 
Interest-bearing deposits   1,596,692    1,667,527    1,547,607    1,537,620    1,521,827 
Total deposits   2,792,233    2,852,388    2,744,327    2,738,907    2,750,999 
                
Federal Home Loan Bank advances   50,000    50,000    120,000    90,000    — 
Repurchase agreements   1,415    485    1,208    805    1,600 
Operating lease liabilities   15,356    15,704    15,513    14,806    15,134 
Other liabilities   29,772    24,246    25,317    21,830    17,076 
Total liabilities   2,888,776    2,942,823    2,906,365    2,866,348    2,784,809 
                
Total shareholders’ equity   536,874    535,721    525,220    513,158    498,653 
Total liabilities and shareholders’ equity $ 3,425,650  $ 3,478,544  $ 3,431,585  $ 3,379,506  $ 3,283,462 
                     



 
CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income
(In thousands)
                
  Three Months Ended
  3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
Interest income               
Interest and fees on loans $ 33,617 $ 35,634  $ 36,353 $ 35,608 $ 33,793
Securities   1,363   1,442    1,436   1,519   1,557
Other interest-earning assets   1,055   1,279    1,212   1,359   1,483
Equity investments   176   213    192   163   152
Total interest income   36,211   38,568    39,193   38,649   36,985
Interest expense               
Deposits   3,766   4,463    4,130   3,822   3,584
Federal Home Loan Bank advances   221   316    483   523   64
Repurchase agreements   —   —    1   1   1
Note payable and junior subordinated debt   4   3    4   4   8
Total interest expense   3,991   4,782    4,618   4,350   3,657
Net interest income   32,220   33,786    34,575   34,299   33,328
Provision (recapture) for credit losses               
Provision (recapture) for credit losses for loans   4,739   (148)   579   807   1,147
Provision for credit losses for unfunded commitments   310   —    —   —   —
Total provision (recapture) for credit losses   5,049   (148)   579   807   1,147
Net interest income after provision (recapture) for credit losses   27,171   33,934    33,996   33,492   32,181
Noninterest income               
Deposit account service charges   1,485   1,587    1,681   1,657   1,629
Card interchange fees   922   1,007    908   941   864
Earnings on bank-owned life insurance   416   430    430   3,721   430
Net gain on sales of assets   123   305    190   69   88
Other   1,381   388    906   915   482
Total noninterest income   4,327   3,717    4,115   7,303   3,493
Noninterest expense               
Salaries and employee benefits   14,223   14,264    13,951   14,185   13,822
Occupancy expense   2,424   2,417    2,484   2,338   2,267
Professional and director fees   1,152   1,220    1,455   2,282   2,091
Data processing and software   1,222   1,074    1,121   1,086   1,154
Regulatory fees   103   84    144   446   464
Advertising, marketing and business development   364   452    407   532   440
Telephone and communications   419   506    434   456   378
Security and protection expense   374   364    410   367   323
Amortization of intangibles   221   216    221   225   232
Other expenses   1,587   1,513    1,418   1,486   1,414
Total noninterest expense   22,089   22,110    22,045   23,403   22,585
Net income before income tax expense   9,409   15,541    16,066   17,392   13,089
Income tax expense   1,868   2,905    2,990   3,077   2,599
Net income  $ 7,541 $ 12,636  $ 13,076 $ 14,315 $ 10,490
                 


 
CBTX, INC. AND SUBSIDIARY
Net Interest Margin
(In thousands, except percentages)
                         
  Three Months Ended
  3/31/2020 12/31/2019 3/31/2019
     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-earning assets:                        
Total loans (2) $ 2,634,507  $ 33,617 5.13% $ 2,682,842  $ 35,634 5.27% $ 2,500,788  $ 33,793 5.48%
Securities   233,917    1,363 2.34%   232,441    1,442 2.46%   231,650    1,557 2.73%
Other interest-earning assets   315,099    1,055 1.35%   300,395    1,279 1.69%   239,281    1,483 2.51%
Equity investments   13,661    176 5.18%   16,140    213 5.24%   12,285    152 5.02%
Total interest-earning assets   3,197,184  $ 36,211 4.56%   3,231,818  $ 38,568 4.73%   2,984,004  $ 36,985 5.03%
Allowance for credit losses for loans   (25,831)        (25,591)        (24,016)     
Noninterest-earning assets   296,698         298,615         302,915      
Total assets $ 3,468,051       $ 3,504,842       $ 3,262,903      
Liabilities and Shareholders’ Equity                        
Interest-bearing liabilities:                        
Interest-bearing deposits $ 1,650,064  $ 3,766 0.92% $ 1,646,883  $ 4,463 1.08% $ 1,544,039  $ 3,584 0.94%
Federal Home Loan Bank advances   50,000    221 1.78%   68,913    316 1.82%   9,722    64 2.67%
Repurchase agreements   763    —  —    423    —  —    1,856    1 0.22%
Note payable and junior subordinated debt   —    4  —    —    3  —    365    8 4.44%
Total interest-bearing liabilities   1,700,827  $ 3,991 0.94%   1,716,219  $ 4,782 1.11%   1,555,982  $ 3,657 0.95%
Noninterest-bearing liabilities:                        
Noninterest-bearing deposits   1,184,776         1,212,939         1,177,086      
Other liabilities   44,620         42,406         34,634      
Total noninterest-bearing liabilities   1,229,396         1,255,345         1,211,720      
Shareholders’ equity   537,828         533,278         495,201      
Total liabilities and shareholders’ equity $ 3,468,051       $ 3,504,842       $ 3,262,903      
Net interest income    $ 32,220      $ 33,786      $ 33,328  
Net interest spread (3)       3.62%       3.62%       4.08%
Net interest margin (4)       4.05%       4.15%       4.53%
Net interest margin—tax equivalent (5)       4.06%       4.18%       4.56%

__________________________
(1) Annualized.
(2) Includes average outstanding balances related to loans held for sale.
(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) Tax equivalent adjustments of $81,000, $251,000 and $255,000 for the quarters ended March 31, 2020, December 31, 2019 and March 31, 2019, respectively, were computed using a federal income tax rate of 21%.

 
CBTX, INC. AND SUBSIDIARY
Rate/Volume Analysis 
(In thousands)
             
  Three Months Ended March 31, 2020, Compared to
    Three Months Ended December 31, 2019
  Increase (Decrease) due to   
(Dollars in thousands) Rate Volume Days Total
Interest-earning assets:            
Total loans $ (988) $ (642) $ (387) $ (2,017)
Securities   (73)   9    (15)   (79)
Other interest-earning assets   (273)   63    (14)   (224)
Equity investments   (2)   (33)   (2)   (37)
Total increase (decrease) in interest income   (1,336)   (603)   (418)   (2,357)
Interest-bearing liabilities:            
Interest-bearing deposits   (657)   9    (49)   (697)
Federal Home Loan Bank advances   (5)   (87)   (3)   (95)
Repurchase agreements   —    —       — 
Note payable and junior subordinated debt   1    —    —    1 
Total increase in interest expense   (661)   (78)   (52)   (791)
Increase (decrease) in net interest income $ (675) $ (525) $ (366) $ (1,566)
                 


             
  Three Months Ended March 31, 2020, Compared to
    Three Months Ended March 31, 2019
  Increase (Decrease) due to  
(Dollars in thousands) Rate Volume  Days Total 
Interest-earning assets:            
Total loans $ (2,358) $ 1,807  $ 375 $ (176)
Securities   (226)   15    17   (194)
Other interest-earning assets   (913)   469    16   (428)
Equity investments   5    17    2   24 
Total increase (decrease) in interest income   (3,492)   2,308    410   (774)
Interest-bearing liabilities:            
Interest-bearing deposits   (103)   246    39   182 
Federal Home Loan Bank advances   (109)   265    1   157 
Repurchase agreements   —    (1)   —   (1)
Note payable and junior subordinated debt   —    (4)   —   (4)
Total increase in interest expense   (212)   506    40   334 
Increase (decrease) in net interest income $ (3,280) $ 1,802  $ 370 $ (1,108)
                


 
CBTX, INC. AND SUBSIDIARY
Yield Trend
           
  Three Months Ended
  3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
           
Interest-earning assets:          
Total loans 5.13% 5.27% 5.43% 5.51% 5.48%
Securities 2.34% 2.46% 2.41% 2.61% 2.73%
Other interest-earning assets 1.35% 1.69% 2.25% 2.48% 2.51%
Equity investments 5.18% 5.24% 4.72% 4.32% 5.02%
Total interest-earning assets 4.56% 4.73% 4.98% 5.07% 5.03%
           
Interest-bearing liabilities:          
Interest-bearing deposits 0.92% 1.08% 1.05% 1.01% 0.94%
Federal Home Loan Bank advances 1.78% 1.82% 2.29% 2.53% 2.67%
Repurchase agreements  —   —  0.38% 0.46% 0.22%
Note payable and junior subordinated debt  —   —   —   —  4.44%
Total interest-bearing liabilities 0.94% 1.11% 1.12% 1.09% 0.95%
           
Net interest spread (1) 3.62% 3.62% 3.86% 3.98% 4.08%
Net interest margin (2) 4.05% 4.15% 4.39% 4.50% 4.53%
Net interest margin—tax equivalent (3) 4.06% 4.18% 4.43% 4.53% 4.56%

______________________
(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) Tax equivalent adjustments were computed using a federal income tax rate of 21%.

 
CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances 
(In thousands)
                
  Three Months Ended
  3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
                
Assets               
Interest-earning assets:               
Total loans (1) $ 2,634,507  $ 2,682,842  $ 2,655,941  $ 2,591,928  $ 2,500,788 
Securities   233,917    232,441    234,525    233,339    231,650 
Other interest-earning assets   315,099    300,395    215,900    219,639    239,281 
Equity investments   13,661    16,140    16,154    15,218    12,285 
Total interest-earning assets   3,197,184    3,231,818    3,122,520    3,060,124    2,984,004 
Allowance for credit losses for loans   (25,831)   (25,591)   (25,422)   (24,829)   (24,016)
Noninterest-earning assets   296,698    298,615    296,861    299,234    302,915 
Total assets $ 3,468,051  $ 3,504,842  $ 3,393,959  $ 3,334,529  $ 3,262,903 
                
Liabilities and Shareholders’ Equity               
Interest-bearing liabilities:               
Interest-bearing deposits $ 1,650,064  $ 1,646,883  $ 1,557,503  $ 1,514,697  $ 1,544,039 
Federal Home Loan Bank advances   50,000    68,913    83,804    83,022    9,722 
Repurchase agreements   763    423    1,043    877    1,856 
Note payable and junior subordinated debt   —    —    —    —    365 
Total interest-bearing liabilities   1,700,827    1,716,219    1,642,350    1,598,596    1,555,982 
Noninterest-bearing liabilities:               
Noninterest-bearing deposits   1,184,776    1,212,939    1,189,087    1,194,645    1,177,086 
Other liabilities   44,620    42,406    39,775    32,991    34,634 
Total noninterest-bearing liabilities   1,229,396    1,255,345    1,228,862    1,227,636    1,211,720 
Shareholders’ equity   537,828    533,278    522,747    508,297    495,201 
Total liabilities and shareholders’ equity $ 3,468,051  $ 3,504,842  $ 3,393,959  $ 3,334,529  $ 3,262,903 
                     

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

 
CBTX, INC. AND SUBSIDIARY
Loans and Deposits Period End Balances
(In thousands, except percentages)
                          
  3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
  Amount  Amount  Amount  Amount  Amount 
                          
Loan Portfolio:                         
Commercial and industrial $ 542,650  20.3% $ 527,607  19.9% $ 523,831  19.5% $ 540,084  20.4% $ 559,882  21.9%
Real estate:                         
Commercial real estate   904,395  33.8%   900,746  34.0%   875,329  32.6%   854,513  32.2%   811,742  31.8%
Construction and development   558,343  20.8%   527,812  19.9%   572,276  21.4%   559,672  21.1%   572,861  22.5%
1-4 family residential   276,142  10.3%   280,192  10.6%   287,434  10.7%   281,525  10.6%   281,502  11.0%
Multi-family residential   267,152  10.0%   277,209  10.5%   298,396  11.1%   298,887  11.3%   213,582  8.4%
Consumer   38,133  1.4%   36,782  1.4%   37,975  1.4%   39,803  1.5%   39,072  1.5%
Agriculture   7,520  0.3%   9,812  0.4%   10,836  0.4%   9,923  0.4%   8,915  0.4%
Other   84,076  3.1%   86,513  3.3%   76,860  2.9%   65,471  2.5%   64,215  2.5%
Gross loans   2,678,411  100.0%   2,646,673  100.0%   2,682,937  100.0%   2,649,878  100.0%   2,551,771  100.0%
Less allowance for credit losses   (31,194)     (25,280)     (25,576)     (25,342)     (24,643)  
Less deferred fees and unearned discount   (5,942)     (6,125)     (6,113)     (6,181)     (6,210)  
Less loans held for sale   (882)     (1,463)     —      (1,408)     (852)  
Loans, net $ 2,640,393    $ 2,613,805    $ 2,651,248    $ 2,616,947    $ 2,520,066   
                          
                          
Deposits:                         
Interest-bearing demand accounts $ 359,943  12.9% $ 369,744  13.0% $ 337,746  12.3% $ 351,326  12.8% $ 352,623  12.8%
Money market accounts   760,036  27.2%   805,942  28.3%   739,436  26.9%   717,883  26.2%   695,968  25.3%
Savings accounts   90,227  3.2%   92,183  3.2%   91,413  3.3%   91,828  3.4%   96,251  3.5%
Certificates and other time deposits, $100,000 or greater   212,341  7.6%   208,018  7.3%   198,561  7.3%   189,741  6.9%   181,507  6.6%
Certificates and other time deposits, less than $100,000   174,145  6.3%   191,640  6.7%   180,451  6.6%   186,842  6.8%   195,478  7.1%
Total interest-bearing deposits   1,596,692  57.2%   1,667,527  58.5%   1,547,607  56.4%   1,537,620  56.1%   1,521,827  55.3%
Noninterest-bearing deposits   1,195,541  42.8%   1,184,861  41.5%   1,196,720  43.6%   1,201,287  43.9%   1,229,172  44.7%
Total deposits $ 2,792,233  100.0% $ 2,852,388  100.0% $ 2,744,327  100.0% $ 2,738,907  100.0% $ 2,750,999  100.0%
                                    


 
CBTX, INC. AND SUBSIDIARY
Credit Quality
(In thousands, except percentages)
                    
  3/31/2020  12/31/2019  9/30/2019  6/30/2019  3/31/2019
Nonperforming Assets (at period end):                   
Nonaccrual loans:                   
Commercial and industrial $ 449   $ 596   $ 354   $ 1,795   $ 1,390 
Real estate:                   
Commercial real estate   67     67     159     850     862 
Construction and development   519     —     —     —     — 
1-4 family residential   413     314     629     624     635 
Multi-family residential   —     —     —     —     — 
Consumer   —     —     —     —     47 
Agriculture   —     —     —     —     — 
Nonaccrual loans   1,448     977     1,142     3,269     2,934 
Accruing loans 90 or more days past due   —     —     —     9     — 
Total nonperforming loans   1,448     977     1,142     3,278     2,934 
Foreclosed assets   —     —     —     36     41 
Total nonperforming assets $ 1,448   $ 977   $ 1,142   $ 3,314   $ 2,975 
                    
Allowance for Credit Losses for Loans (at period end):                   
Commercial and industrial $ 9,535   $ 7,671   $ 7,470   $ 7,792   $ 8,416 
Real estate:                   
Commercial real estate   9,576     7,975     7,788     7,371     6,784 
Construction and development   5,795     4,446     4,825     4,579     4,700 
1-4 family residential   2,430     2,257     2,338     2,236     2,249 
Multi-family residential   2,413     1,699     1,829     2,178     1,457 
Consumer   477     388     558     458     357 
Agriculture   129     74     82     73     50 
Other   839     770     686     655     630 
Total allowance for credit losses for loans $ 31,194   $ 25,280   $ 25,576   $ 25,342   $ 24,643 
                    
Credit Quality Ratios (at period end):                   
Nonperforming assets to total assets  0.04%   0.03%   0.03%   0.10%   0.09%
Nonperforming loans to total loans  0.05%   0.04%   0.04%   0.12%   0.12%
Allowance for credit losses for loans to nonperforming loans  2,154.28%   2,587.51%   2,239.58%   773.09%   839.91%
Allowance for credit losses for loans to total loans  1.17%   0.96%   0.96%   0.96%   0.97%


 
CBTX, INC. AND SUBSIDIARY
Allowance for Credit Losses for Loans
(In thousands, except percentages)
                
  Three Months Ended
  3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019
Analysis of Allowance for Credit Losses for Loans               
                
Allowance for credit losses for loans at beginning of period $ 25,280  $ 25,576  $ 25,342  $ 24,643  $ 23,693 
                
Adoption of CECL   874    —    —    —    — 
                
Provision (recapture)   4,739    (148)   579    807    1,147 
                
Net (charge-offs) recoveries               
Commercial and industrial   398    (205)   (374)   22    (206)
Real estate:               
Commercial real estate   —    (1)   33    2    2 
Construction and development   —    —    —    —    — 
1-4 family residential   1    —    1    (11)   1 
Consumer   (99)   47    (1)   (78)   6 
Agriculture   —    10    —    —    — 
Other   1    1    (4)   (43)   — 
Total net (charge-offs) recoveries   301    (148)   (345)   (108)   (197)
                
Allowance for credit losses for loans at end of period $ 31,194  $ 25,280  $ 25,576  $ 25,342  $ 24,643 
                
Net charge-offs (recoveries) to average loans (1)  (0.05%)  0.02%  0.05%  0.02%  0.03%

 

_________________________
(1)   Annualized.

CBTX, INC. AND SUBSIDIARY
Non‑GAAP to GAAP Reconciliation 
(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, other statistical measures or ratios 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 tangible equity as total shareholders’ equity, less goodwill and other intangible assets, net of accumulated amortization, and 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 table reconciles, 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 total shareholders’ equity to total assets:

                    
  3/31/2020  12/31/2019  9/30/2019  6/30/2019  3/31/2019
Tangible Equity                   
Total shareholders’ equity $ 536,874   $ 535,721   $ 525,220   $ 513,158   $ 498,653 
Adjustments:                   
Goodwill   80,950     80,950     80,950     80,950     80,950 
Other intangibles   4,700     4,938     5,106     5,318     5,538 
Tangible equity $ 451,224   $ 449,833   $ 439,164   $ 426,890   $ 412,165 
Tangible Assets                   
Total assets $ 3,425,650   $ 3,478,544   $ 3,431,585   $ 3,379,506   $ 3,283,462 
Adjustments:                   
Goodwill   80,950     80,950     80,950     80,950     80,950 
Other intangibles   4,700     4,938     5,106     5,318     5,538 
Tangible assets $ 3,340,000   $ 3,392,656   $ 3,345,529   $ 3,293,238   $ 3,196,974 
                    
Common shares outstanding   24,746     24,980     24,923     24,923     24,918 
                    
Book value per share $ 21.70   $ 21.45   $ 21.07   $ 20.59   $ 20.01 
Tangible book value per share $ 18.23   $ 18.01   $ 17.62   $ 17.13   $ 16.54 
Total shareholders’ equity to total assets  15.67%   15.40%   15.31%   15.18%   15.19%
Tangible equity to tangible assets  13.51%   13.26%   13.13%   12.96%   12.89%

Investor Relations: Justin M. Long 281.325.5013 investors@CBoTX.com Media Contact: Ashley Warren 713.210.7622 awarren@CBoTX.com