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CBTX, Inc. Reports Second Quarter Financial Results

July 25, 2019 at 5:00 PM EDT

HOUSTON, July 25, 2019 (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 $14.3 million, or $0.57 per diluted share, for the quarter ended June 30, 2019, compared to $10.5 million, or $0.42 per diluted share, for the quarter ended March 31, 2019 and $11.0 million, or $0.44 per diluted share, for the quarter ended June 30, 2018.

“We are pleased that the first half of 2019 gave us record profitability, solid loan growth, and strong credit quality,” said Robert Franklin, Jr., Chairman, Chief Executive Officer, and President of the Company. “Our dedicated team continues to work to build our business one quality relationship at a time,” he added. “For the rest of 2019, we will continue to focus on our goals and stay disciplined to our process which we feel drives shareholder value.”

“We continue to see good opportunities throughout our markets: Houston, East Texas, and Dallas,” said Franklin. “Although pricing in our markets continues to be challenging on both the loan and deposit sides, we believe that our strong discipline and relationship-driven approach gives us the ability to win new business while maintaining a solid net interest margin.”

Franklin further noted, “Our markets remain favorable and we look for that to continue through the remainder of the year. We are cautious about 2020 given the intensity of the political climate going into the presidential election along with downward pressure on interest rates, but we feel well positioned to weather the effects of either on our future.”

Highlights

  • Loans increased to $2.6 billion at June 30, 2019, compared to $2.5 billion at March 31, 2019 and $2.4 billion at June 30, 2018.
     
  • Net interest margin on a tax equivalent basis was 4.53% for the quarter ended June 30, 2019, compared to 4.56% for the first quarter of 2019 and 4.43% for the second quarter of 2018.
     
  • The cost of interest-bearing deposits remains low at 1.01% for the three months ended June 30, 2019, compared to 0.94% for the three months ended March 31, 2019 and 0.58% for the three months ended June 30, 2018.
     
  • Noninterest income was $7.3 million for the second quarter of 2019, including a gain of $3.3 million recorded related to bank-owned life insurance.
     
  • Nonperforming assets remain low relative to total assets at 0.10% at June 30, 2019 compared to 0.09% of total assets at March 31, 2019 and 0.16% of total assets at June 30, 2018.

Operating Results

Net Interest Income

Net interest income was $34.3 million for the second quarter of 2019, compared to $33.3 million for the first quarter of 2019 and $30.9 million for the second quarter of 2018. The increase in net interest income in the second quarter of 2019 from the first quarter of 2019 was primarily due to higher average loans and the impact of one additional day in the second quarter of 2019 compared the first quarter of 2019, partially offset by higher average Federal Home Loan Bank, or FHLB, advances and repurchase agreements.

The increase in net interest income in the second quarter of 2019 from the second quarter of 2018 was primarily due to higher average loans, higher average yields on loans and higher yields on federal funds sold and other interest-earning assets, partially offset by the impact of higher rates on interest-bearing deposits and increased average FHLB advances and repurchase agreements.

Provision for Loan Losses

Provision for loan loss was $807,000 for the second quarter of 2019, compared to $1.1 million for the first quarter of 2019 and $690,000 for the second quarter of 2018.

The allowance for loan losses was $25.3 million, or 0.96% of total loans, at June 30, 2019, compared to $24.6 million, or 0.97% of total loans, at March 31, 2019, and $25.7 million, or 1.07% of total loans, at June 30, 2018.  

Noninterest Income

Noninterest income was $7.3 million for the second quarter of 2019, $3.5 million for the first quarter of 2019 and $3.5 million for the second quarter of 2018. During the second quarter of 2019, the Company received nontaxable death benefit proceeds of $4.7 million under bank-owned life insurance policies and recorded a gain of $3.3 million over the carrying value.

Noninterest Expense

Noninterest expense was $23.4 million for the second quarter of 2019, $22.6 million for the first quarter of 2019 and $20.0 million for the second quarter of 2018. Noninterest expense increased $818,000 during the second quarter of 2019 compared to the first quarter of 2019 primarily due to an increase in salaries and employee benefits resulting from increased headcount and increased legal fees included in professional and director fees The Bank incurred legal fees of $1.4 million in the second quarter of 2019 compared to $1.1 million in the first quarter of 2019.

Noninterest expense increased $3.4 million in the second quarter of 2019 compared to the second quarter of 2018. Salaries and benefits increased $1.7 million resulting from annual salary increases in 2019 and increased stock compensation expense due to grants of restricted stock during the current quarter. Professional and director fees increased due to legal fees noted above.

Income Taxes

Income tax expense was $3.1 million for the second quarter of 2019, $2.6 million for the first quarter of 2019 and $2.6 million for the second quarter of 2018.

The effective tax rates were 17.69% for the second quarter of 2019, 19.86% for the first quarter of 2019 and 19.28% for the second quarter of 2018. The decrease in the effective tax rate for the second quarter of 2019 was due to the non-taxable gain related to bank-owned life insurance.

Balance Sheet Highlights:

Loans

Loans, excluding loans held for sale, were $2.6 billion at June 30, 2019, $2.5 billion at March 31, 2019 and $2.4 billion at June 30, 2018. Loans, excluding loans held for sale, increased 9.9% during the twelve months ended June 30, 2019 due to organic growth.

Asset Quality

Nonperforming assets remain low relative to total assets at $3.3 million, or 0.10% of total assets, at June 30, 2019, $3.0 million, or 0.09% of total assets, at March 31, 2019 and $4.9 million, or 0.16% of total assets at June 30, 2018.

Annualized net charge-offs to average loans were 0.02% for the second quarter of 2019, 0.03% for the first quarter of 2019 and 0.05% for the second quarter of 2018.

Deposits and Borrowings

Total deposits were $2.7 billion at June 30, 2019 and $2.8 billion at March 31, 2019 and $2.6 billion at June 30, 2018. Deposits increased 6.9% during the twelve months ended June 30, 2019 due to normal fluctuations in customer activities.

We define total borrowings as the total of repurchase agreements, FHLB advances and notes payable. Total borrowings were $90.8 million, $1.6 million and $51.4 million at June 30, 2019, March 31, 2019 and June 30, 2018,  respectively. Borrowings increased during the three months ended June 30, 2019 due to short-term liquidity needs.

Capital

At June 30, 2019, the Company remained well capitalized under bank regulatory requirements.

Our ratio of tangible equity to tangible assets was 12.96% at June 30, 2019, 12.89% at March 31, 2019 and 12.41% at June 30, 2018. 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, which was 15.18% at June 30, 2019, 15.19% at March 31, 2019 and 14.87% at June 30, 2018. See the table captioned “Non‑GAAP to GAAP Reconciliation” at the end of this earnings 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,” “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 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.

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.

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: 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; avoid or address interruptions or breaches in the Company’s information system security; address the costs and effects of regulatory or other government inquiries, the results of regulatory examinations, investigations or reviews or the ability to obtain the required regulatory approvals; 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 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 (Unaudited) 
(In thousands, except per share data and percentages)
 
    Three Months Ended   Six Months Ended
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018   6/30/2019   6/30/2018
Profitability:                                          
Net income   $ 14,315     $ 10,490     $ 14,112     $ 13,023     $ 11,042     $ 24,805     $ 20,154  
Basic earnings per share   $ 0.57     $ 0.42     $ 0.57     $ 0.52     $ 0.44     $ 1.00     $ 0.81  
Diluted earnings per share   $ 0.57     $ 0.42     $ 0.56     $ 0.52     $ 0.44     $ 0.99     $ 0.81  
                                           
Return on average assets (1)     1.72 %     1.30 %     1.71 %     1.62 %     1.44 %     1.52 %     1.32 %
Return on average shareholders' equity (1)     11.30 %     8.59 %     11.66 %     11.02 %     9.66 %     9.97 %     8.94 %
Net interest margin- tax equivalent (1)     4.53 %     4.56 %     4.42 %     4.31 %     4.43 %     4.55 %     4.33 %
Efficiency ratio (2)     56.25 %     61.34 %     58.67 %     56.96 %     58.20 %     58.64 %     60.34 %
                                           
Liquidity and Capital Ratios:                                          
Total shareholders' equity to total assets     15.18 %     15.19 %     14.87 %     14.79 %     14.87 %     15.18 %     14.87 %
Tangible equity to tangible assets (3)     12.96 %     12.89 %     12.56 %     12.40 %     12.41 %     12.96 %     12.41 %
Common equity tier 1 capital ratio     14.71 %     14.53 %     14.71 %     14.29 %     14.08 %     14.71 %     14.08 %
Tier 1 risk-based capital ratio     14.71 %     14.53 %     14.76 %     14.53 %     12.87 %     14.71 %     12.87 %
Total risk-based capital ratio     15.59 %     15.41 %     15.63 %     15.44 %     14.32 %     15.59 %     14.32 %
Tier 1 leverage ratio     13.12 %     13.02 %     12.74 %     12.84 %     15.29 %     13.12 %     15.29 %
                                           
Other Data:                                          
Weighted average common shares outstanding- Basic     24,921       24,910       24,886       24,859       24,858       24,916       24,845  
Weighted average common shares outstanding- Diluted     25,042       25,054       25,046       25,060       24,997       25,047       24,977  
Common shares outstanding at period end     24,923       24,918       24,907       24,859       24,859       24,923       24,859  
Dividends per share   $ 0.10     $ 0.10     $ 0.05     $ 0.05     $ 0.05     $ 0.20     $ 0.10  
Book value per share   $ 20.59     $ 20.01     $ 19.58     $ 18.98     $ 18.55     $ 20.59     $ 18.55  
Tangible book value per share (3)   $ 17.13     $ 16.54     $ 16.10     $ 15.48     $ 15.04     $ 17.13     $ 15.04  
Employees - full-time equivalents     508       494       495       489       488       508       488  

 

_________________________________
(1)   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 (Unaudited)
(In thousands)
 
Balance Sheet Data (at period end):   6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
                               
Loans, excluding loans held for sale   $ 2,642,289     $ 2,544,709     $ 2,446,823     $ 2,463,197     $ 2,404,132  
Allowance for loan losses     (25,342 )     (24,643 )     (23,693 )     (24,486 )     (25,746 )
Loans, net     2,616,947       2,520,066       2,423,130       2,438,711       2,378,386  
                               
Cash and equivalents     266,776       276,515       382,070       281,640       245,265  
Securities     232,601       228,684       229,964       222,493       230,393  
Premises and equipment, net     51,346       51,453       51,622       52,032       52,607  
Goodwill     80,950       80,950       80,950       80,950       80,950  
Other intangible assets, net     5,318       5,538       5,775       6,038       6,276  
Loans held for sale     1,408       852       -       384       560  
Operating lease right-to-use asset     12,355       12,879       -       -       -  
Other assets     111,805       106,525       105,585       108,205       106,323  
Total assets   $ 3,379,506     $ 3,283,462     $ 3,279,096     $ 3,190,453     $ 3,100,760  
                               
Noninterest-bearing deposits   $ 1,201,287     $ 1,229,172     $ 1,183,058     $ 1,144,985     $ 1,114,155  
Interest-bearing deposits     1,537,620       1,521,827       1,583,224       1,545,095       1,447,119  
Total deposits     2,738,907       2,750,999       2,766,282       2,690,080       2,561,274  
                               
Repurchase agreements     805       1,600       2,498       1,351       1,448  
Federal Home Loan Bank advances     90,000       -       -       -       50,000  
Junior subordinated debt     -       -       1,571       6,726       6,726  
Operating lease liabilities     14,806       15,134       -       -       -  
Other liabilities     21,830       17,076       21,120       20,445       20,117  
Total liabilities     2,866,348       2,784,809       2,791,471       2,718,602       2,639,565  
                               
Shareholders' equity     513,158       498,653       487,625       471,851       461,195  
Total liabilities and shareholders' equity   $ 3,379,506     $ 3,283,462     $ 3,279,096     $ 3,190,453     $ 3,100,760  
                                         
                                         

 

CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)
 
    Three Months Ended   Six Months Ended
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018   6/30/2019   6/30/2018
Interest income                                          
Interest and fees on loans   $ 35,608   $ 33,793   $ 33,427     $ 31,513     $ 30,493   $ 69,401   $ 58,955
Securities     1,519     1,557     1,542       1,535       1,507     3,076     2,943
Federal Funds and other interest-earning assets     1,359     1,483     1,696       1,404       936     2,842     1,930
Equity investments     163     152     217       213       191     315     384
Total interest income     38,649     36,985     36,882       34,665       33,127     75,634     64,212
Interest expense                                          
Deposits     3,822     3,584     3,551       2,961       2,126     7,406     4,074
FHLB advances and repurchase agreements     524     65     1       62       13     589     14
Note payable and junior subordinated debt     4     8     110       116       112     12     209
Total interest expense     4,350     3,657     3,662       3,139       2,251     8,007     4,297
Net interest income     34,299     33,328     33,220       31,526       30,876     67,627     59,915
Provision (recapture) for loan losses     807     1,147     (2,169 )     (1,142 )     690     1,954     1,555
Net interest income after provision (recapture) for loan losses     33,492     32,181     35,389       32,668       30,186     65,673     58,360
Noninterest income                                          
Deposit account service charges     1,657     1,629     1,709       1,597       1,497     3,286     2,975
Net gain (loss) on sale of assets     69     88     168       152       210     157     340
Card interchange fees     941     864     921       922       971     1,805     1,898
Earnings on bank-owned life insurance     3,721     430     456       443       465     4,151     916
Other     915     482     605       412       363     1,397     738
Total noninterest income     7,303     3,493     3,859       3,526       3,506     10,796     6,867
Noninterest expense                                          
Salaries and employee benefits     14,185     13,822     13,834       12,499       12,496     28,007     25,191
Net occupancy expense     2,338     2,267     2,268       2,428       2,433     4,605     4,698
Regulatory fees     446     464     507       488       513     910     1,058
Data processing     661     714     664       664       666     1,375     1,349
Software     425     440     408       400       403     865     768
Printing, stationery and office     327     353     303       291       303     680     567
Amortization of intangibles     225     232     237       245       248     457     503
Professional and director fees     2,282     2,091     1,123       809       686     4,373     1,605
Correspondent bank and customer related transaction expenses     66     65     64       66       68     131     135
Loan processing costs     124     95     153       102       75     219     193
Advertising, marketing and business development     532     440     406       437       475     972     981
Repossessed real estate and other asset expense             7       3       5           62
Security and protection expense     367     323     317       346       311     690     613
Telephone and communications     456     378     408       342       394     834     780
Other expenses     969     901     1,057       844       936     1,870     1,793
Total noninterest expense     23,403     22,585     21,756       19,964       20,012     45,988     40,296
Net income before income tax expense     17,392     13,089     17,492       16,230       13,680     30,481     24,931
Income tax expense     3,077     2,599     3,380       3,207       2,638     5,676     4,777
Net income   $ 14,315   $ 10,490   $ 14,112     $ 13,023     $ 11,042   $ 24,805   $ 20,154
                                               
                                               

 

CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited) 
(In thousands, except percentages)
 
    Three Months Ended
    6/30/2019   3/31/2019   6/30/2018
          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)   $ 2,591,928     $ 35,608   5.51 %   $ 2,500,788     $ 33,793   5.48 %   $ 2,375,253     $ 30,493   5.15 %
Securities     233,339       1,519   2.61 %     231,650       1,557   2.73 %     228,262       1,507   2.65 %
Federal funds sold and other interest-earning assets     219,639       1,359   2.48 %     239,281       1,483   2.51 %     201,906       936   1.86 %
Equity investments     15,218       163   4.32 %     12,285       152   5.02 %     14,823       191   5.17 %
Total interest-earning assets     3,060,124     $ 38,649   5.07 %     2,984,004     $ 36,985   5.03 %     2,820,244     $ 33,127   4.71 %
Allowance for loan losses     (24,829 )               (24,016 )               (25,392 )          
Noninterest-earnings assets     299,234                 302,915                 288,416            
Total assets   $ 3,334,529               $ 3,262,903               $ 3,083,268            
Liabilities and Shareholders’ Equity                                                
Interest-bearing liabilities:                                                
Interest-bearing deposits   $ 1,514,697     $ 3,822   1.01 %   $ 1,544,039     $ 3,584   0.94 %   $ 1,478,016     $ 2,126   0.58 %
FHLB advances and repurchase agreements     83,899       524   2.51 %     11,578       65   2.28 %     3,738       13   1.39 %
Note payable and junior subordinated debt           4   -       365       8   8.89 %     10,826       112   4.15 %
Total interest-bearing liabilities     1,598,596     $ 4,350   1.09 %     1,555,982     $ 3,657   0.95 %     1,492,580     $ 2,251   0.60 %
Noninterest-bearing liabilities:                                                
Noninterest-bearing deposits     1,194,645                 1,177,086                 1,111,736            
Other liabilities     32,991                 34,634                 20,441            
Total noninterest-bearing liabilities     1,227,636                 1,211,720                 1,132,177            
Shareholders’ equity     508,297                 495,201                 458,511            
Total liabilities and shareholders’ equity   $ 3,334,529               $ 3,262,903               $ 3,083,268            
Net interest income         $ 34,299             $ 33,328             $ 30,876    
Net interest spread (3)               3.98 %               4.08 %               4.11 %
Net interest margin (4)               4.50 %               4.53 %               4.39 %
Net interest margin—tax equivalent (5)               4.53 %               4.56 %               4.43 %

_________________________________
(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 $258,000, $255,000 and $267,000 for the quarter ended June 30, 2019, March 31, 2019 and June 30, 2018, respectively, were computed using a federal income tax rate of 21%.

 
 
CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited) 
(In thousands, except percentages)
 
     Six Months Ended June 30,
    2019    2018 
          Interest             Interest    
    Average   Earned/   Average   Average   Earned/   Average
    Outstanding   Interest   Yield/   Outstanding   Interest   Yield/
(Dollars in thousands)   Balance   Paid   Rate (1)   Balance   Paid   Rate (1)
Assets                                
Interest-earnings assets:                                
Total loans (2)   $ 2,546,610     $ 69,401   5.50 %   $ 2,347,512     $ 58,955   5.06 %
Securities     232,499       3,076   2.67 %     226,008       2,943   2.63 %
Federal funds sold and other interest-earning assets     229,405       2,842   2.50 %     227,172       1,930   1.71 %
Equity investments     13,537       315   4.69 %     14,763       384   5.26 %
Total interest-earning assets     3,022,051     $ 75,634   5.05 %     2,815,455     $ 64,212   4.60 %
Allowance for loan losses     (24,426 )               (25,131 )          
Noninterest-earnings assets     301,065                 287,764            
Total assets   $ 3,298,690               $ 3,078,088            
Liabilities and Shareholders’ Equity                                
Interest-bearing liabilities:                                
Interest-bearing deposits   $ 1,529,283     $ 7,406   0.98 %   $ 1,484,777     $ 4,074   0.55 %
FHLB advances and repurchase agreements     47,939       589   2.48 %     2,585       14   1.09 %
Note payable and junior subordinated debt           12         10,826       209   3.89 %
Total interest-bearing liabilities     1,577,222     $ 8,007   1.02 %     1,498,188     $ 4,297   0.58 %
Noninterest-bearing liabilities:                                
Noninterest-bearing deposits     1,185,919                 1,104,451            
Other liabilities     33,764                 20,801            
Total noninterest-bearing liabilities     1,219,683                 1,125,252            
Shareholders’ equity     501,785                 454,648            
Total liabilities and shareholders’ equity   $ 3,298,690               $ 3,078,088            
Net interest income         $ 67,627             $ 59,915    
Net interest spread (3)               4.03 %               4.02 %
Net interest margin (4)               4.51 %               4.29 %
Net interest margin—tax equivalent (5)               4.55 %               4.33 %

_________________________________
(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 $513,000 and $537,000 for the six months ended June 30, 2019 and June 30, 2018, respectively, were computed using a federal income tax rate of 21%.

 
 
CBTX, INC. AND SUBSIDIARY
Rate/Volume Analysis (Unaudited) 
(In thousands)
 
    Three Months Ended June 30, 2019 Compared to
      Three Months Ended March 31, 2019
    Increase (Decrease) due to      
(Dollars in thousands)   Volume   Rate   Days   Total
Interest-earning assets:                        
Total loans   $ 1,245     $ 194     $ 376   $ 1,815  
Securities     11       (66 )     17     (38 )
Federal funds sold and other interest-earning assets     (123 )     (17 )     16     (124 )
Equity investments     37       (28 )     2     11  
Total increase in interest income     1,170       83       411     1,664  
Interest-bearing liabilities:                        
Interest-bearing deposits     (69 )     267       40     238  
FHLB advances and repurchase agreements     487       (29 )     1     459  
Note payable and junior subordinated debt     (4 )               (4 )
Total increase in interest expense     414       238       41     693  
Increase (decrease) in net interest income   $ 756     $ (155 )   $ 370   $ 971  

 

    Three Months Ended June 30, 2019, Compared to
    Three Months Ended June 30, 2018
    Increase (Decrease) due to    
(Dollars in thousands)   Volume   Rate   Total 
Interest-earning assets:                  
Total loans   $  2,782     $  2,333     $  5,115  
Securities      34        (22 )      12  
Federal funds sold and other interest-earning assets      82        341        423  
Equity investments      5        (33 )      (28 )
Total increase in interest income      2,903        2,619        5,522  
Interest-bearing liabilities:                  
Interest-bearing deposits      53        1,643        1,696  
FHLB advances and repurchase agreements      441        70        511  
Note payable and junior subordinated debt      (108 )      —        (108 )
Total increase in interest expense      386        1,713        2,099  
Increase in net interest income   $  2,517     $  906     $  3,423  

 

    Six Months Ended June 30, 2019, Compared to
    Six Months Ended June 30, 2018
    Increase (Decrease) due to    
(Dollars in thousands)   Volume   Rate   Total 
Interest-earning assets:                  
Total loans   $ 5,000     $ 5,446     $ 10,446  
Securities     85       48       133  
Federal funds sold and other interest-earning assets     19       893       912  
Equity investments     (32 )     (37 )     (69 )
Total increase in interest income     5,072       6,350       11,422  
Interest-bearing liabilities:                  
Interest-bearing deposits     122       3,210       3,332  
FHLB advances and repurchase agreements     494       81       575  
Note payable and junior subordinated debt     (197 )           (197 )
Total increase in interest expense     419       3,291       3,710  
Increase in net interest income   $ 4,653     $ 3,059     $ 7,712  
                         
                         

 

CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)
 
    Three Months Ended
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Yield Trend - Annualized:                    
Interest-earnings assets:                    
Total loans   5.51 %   5.48 %   5.37 %   5.20 %   5.15 %
Securities   2.61 %   2.73 %   2.70 %   2.64 %   2.65 %
Federal funds sold and other interest-earning assets   2.48 %   2.51 %   2.30 %   2.04 %   1.86 %
Equity investments   4.32 %   5.02 %   5.79 %   5.01 %   5.17 %
Total interest-earning assets   5.07 %   5.03 %   4.87 %   4.70 %   4.71 %
                     
Interest-bearing liabilities:                    
Interest-bearing deposits   1.01 %   0.94 %   0.89 %   0.77 %   0.58 %
FHLB advances and repurchase agreements   2.51 %   2.28 %   0.21 %   1.94 %   1.39 %
Note payable and junior subordinated debt   -     8.89 %   4.45 %   4.25 %   4.15 %
Total interest-bearing liabilities   1.09 %   0.95 %   0.91 %   0.80 %   0.60 %
                     
Net interest spread (1)   3.98 %   4.08 %   3.96 %   3.90 %   4.11 %
Net interest margin (2)   4.50 %   4.53 %   4.39 %   4.28 %   4.39 %
Net interest margin—tax equivalent (3)   4.53 %   4.56 %   4.42 %   4.31 %   4.43 %

_________________________________
(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 (Unaudited) 
(In thousands)
 
    Three Months Ended
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Average Outstanding Balances:                              
                               
Assets                              
Interest-earnings assets:                              
Total loans (1)   $ 2,591,928     $ 2,500,788     $ 2,468,415     $ 2,404,491     $ 2,375,253  
Securities     233,339       231,650       226,882       230,592       228,262  
Federal funds sold and other interest-earning assets     219,639       239,281       293,299       272,739       201,906  
Equity investments     15,218       12,285       14,789       16,799       14,823  
Total interest-earning assets     3,060,124       2,984,004       3,003,385       2,924,621       2,820,244  
Allowance for loan losses     (24,829 )     (24,016 )     (24,305 )     (25,689 )     (25,392 )
Noninterest-earnings assets     299,234       302,915       295,236       292,598       288,416  
Total assets   $ 3,334,529     $ 3,262,903     $ 3,274,316     $ 3,191,530     $ 3,083,268  
                               
Liabilities and Shareholders’ Equity                              
Interest-bearing liabilities:                              
Interest-bearing deposits   $ 1,514,697     $ 1,544,039     $ 1,578,146     $ 1,530,077     $ 1,478,016  
FHLB advances and repurchase agreements     83,899       11,578       1,925       12,657       3,738  
Note payable and junior subordinated debt           365       9,817       10,826       10,826  
Total interest-bearing liabilities     1,598,596       1,555,982       1,589,888       1,553,560       1,492,580  
Noninterest-bearing liabilities:                              
Noninterest-bearing deposits     1,194,645       1,177,086       1,181,035       1,145,516       1,111,736  
Other liabilities     32,991       34,634       23,083       23,600       20,441  
Total noninterest-bearing liabilities     1,227,636       1,211,720       1,204,118       1,169,116       1,132,177  
Shareholders’ equity     508,297       495,201       480,310       468,854       458,511  
Total liabilities and shareholders’ equity   $ 3,334,529     $ 3,262,903     $ 3,274,316     $ 3,191,530     $ 3,083,268  

 

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

 
 
 CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)
 
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
    Amount     Amount     Amount     Amount     Amount  
                                                   
Loan Portfolio:                                                  
Commercial and industrial   $ 540,084     20.4 %   $ 559,882     21.9 %   $ 519,779     21.2 %   $ 569,334     23.1 %   $ 565,850     23.5 %
Real estate:                                                  
Commercial real estate     854,513     32.2 %     811,742     31.8 %     795,733     32.4 %     776,439     31.4 %     780,224     32.4 %
Construction and development     559,672     21.1 %     572,861     22.5 %     515,533     21.0 %     487,289     19.7 %     449,390     18.6 %
1-4 family residential     281,525     10.6 %     281,502     11.0 %     282,011     11.5 %     288,737     11.7 %     279,227     11.6 %
Multi-family residential     298,887     11.3 %     213,582     8.4 %     221,194     9.0 %     236,907     9.6 %     229,609     9.5 %
Consumer     39,803     1.5 %     39,072     1.5 %     39,421     1.6 %     39,807     1.6 %     41,833     1.7 %
Agricultural     9,923     0.4 %     8,915     0.4 %     11,076     0.5 %     11,609     0.5 %     10,951     0.5 %
Other     65,471     2.5 %     64,215     2.5 %     68,382     2.8 %     59,484     2.4 %     53,376     2.2 %
Gross loans     2,649,878     100.0 %     2,551,771     100.0 %     2,453,129     100.0 %     2,469,606     100.0 %     2,410,460     100.0 %
Less deferred fees and unearned discount     (6,181 )         (6,210 )         (6,306 )         (6,025 )         (5,768 )    
Less allowance for loan losses     (25,342 )         (24,643 )         (23,693 )         (24,486 )         (25,746 )    
Less loans held for sale     (1,408 )         (852 )                   (384 )         (560 )    
Loans, net   $ 2,616,947         $ 2,520,066         $ 2,423,130         $ 2,438,711         $ 2,378,386      
                                                   
                                                   
Deposits:                                                  
Interest-bearing demand accounts   $ 351,326     12.8 %   $ 352,623     12.8 %   $ 387,457     14.0 %   $ 367,120     13.6 %   $ 342,890     13.4 %
Money market accounts     717,883     26.2 %     695,968     25.3 %     737,770     26.7 %     722,382     26.9 %     650,747     25.4 %
Savings accounts     91,828     3.4 %     96,251     3.5 %     96,962     3.5 %     94,344     3.5 %     97,576     3.8 %
Certificates and other time deposits, $100,000 or greater     189,741     6.9 %     181,507     6.6 %     189,007     6.8 %     182,552     6.8 %     164,464     6.4 %
Certificates and other time deposits, less than $100,000     186,842     6.8 %     195,478     7.1 %     172,028     6.2 %     178,697     6.6 %     191,442     7.5 %
Total interest-bearing deposits     1,537,620     56.1 %     1,521,827     55.3 %     1,583,224     57.2 %     1,545,095     57.4 %     1,447,119     56.5 %
Noninterest-bearing deposits     1,201,287     43.9 %     1,229,172     44.7 %     1,183,058     42.8 %     1,144,985     42.6 %     1,114,155     43.5 %
Total deposits   $ 2,738,907     100.0 %   $ 2,750,999     100.0 %   $ 2,766,282     100.0 %   $ 2,690,080     100.0 %   $ 2,561,274     100.0 %
                                                                       
                                                                       

 

CBTX, INC. AND SUBSIDIARY
Credit Quality (Unaudited)
(In thousands, except percentages)
 
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Nonperforming assets (at period end):                              
Nonaccrual loans:                              
Commercial and industrial   $ 1,795     $ 1,390     $ 1,317     $ 2,161     $ 1,734  
Real estate:                              
Commercial real estate     850       862       1,517       2,751       2,092  
Construction and development                       13       225  
1-4 family residential     624       635       656       677       738  
Multi-family residential                              
Consumer           47                   4  
Agricultural                              
Nonaccrual loans     3,269       2,934       3,490       5,602       4,793  
Accruing loans 90 or more days past due     9                          
Total nonperforming loans     3,278       2,934       3,490       5,602       4,793  
Foreclosed assets:                              
Real estate     36             12       175        
Other           41                   137  
Total foreclosed assets     36       41       12       175       137  
Total nonperforming assets   $ 3,314     $ 2,975     $ 3,502     $ 5,777     $ 4,930  
                               
Allowance for Loan Losses (at period end):                              
Commercial and industrial   $ 7,792     $ 8,416     $ 7,719     $ 8,763     $ 7,648  
Real estate:                              
Commercial real estate     7,371       6,784       6,730       6,913       10,930  
Construction and development     4,579       4,700       4,298       3,606       3,335  
1-4 family residential     2,236       2,249       2,281       2,454       1,404  
Multi-family residential     2,178       1,457       1,511       1,630       1,479  
Consumer     458       357       387       394       479  
Agricultural     73       50       62       71       66  
Other     655       630       705       655       405  
Total allowance for loan losses   $ 25,342     $ 24,643     $ 23,693     $ 24,486     $ 25,746  
                               
Credit Quality Ratios (at period end):                              
Nonperforming assets to total assets     0.10 %     0.09 %     0.11 %     0.18 %     0.16 %
Nonperforming loans to total loans     0.12 %     0.12 %     0.14 %     0.23 %     0.20 %
Allowance for loan losses to nonperforming loans     773.09 %     839.91 %     678.88 %     437.09 %     537.16 %
Allowance for loan losses to total loans     0.96 %     0.97 %     0.97 %     0.99 %     1.07 %
                                         
                                         

 

CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
 (In thousands, except percentages)
 
    Three Months Ended
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Analysis of Allowance for Loan Losses                              
                               
Allowance for loan losses at beginning of period   $ 24,643     $ 23,693     $ 24,486     $ 25,746     $ 25,349  
                               
Provision (recapture) for loan losses     807       1,147       (2,169 )     (1,142 )     690  
                               
Net (charge-offs) recoveries                              
Commercial and industrial     22       (206 )     1,521       (114 )     (301 )
Real estate:                              
Commercial real estate     2       2       (156 )     (3 )     5  
Construction and development                 (1 )            
1-4 family residential     (11 )     1             4        
Consumer     (78 )     6       1       (4 )     3  
Agricultural                 10              
Other      (43 )      —        1        (1 )      —  
Total net (charge-offs) recoveries      (108 )      (197 )      1,376        (118 )      (293 )
                               
Allowance for loan losses at end of period   $  25,342     $  24,643     $  23,693     $  24,486     $  25,746  
                               
Net charge-offs (recoveries) to average loans(1)     0.02 %     0.03 %     (0.22 %)     0.02 %     0.05 %

_________________________________
(1)   Annualized.

 
 
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 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:

                               
    6/30/2019   3/31/2019   12/31/2018   9/30/2018   6/30/2018
Tangible Equity                              
Total shareholders’ equity   $ 513,158     $ 498,653     $ 487,625     $ 471,851     $ 461,195  
Adjustments:                              
Goodwill     80,950       80,950       80,950       80,950       80,950  
Other intangibles     5,318       5,538       5,775       6,038       6,276  
Tangible equity   $ 426,890     $ 412,165     $ 400,900     $ 384,863     $ 373,969  
Tangible Assets                              
Total assets   $ 3,379,506     $ 3,283,462     $ 3,279,096     $ 3,190,453     $ 3,100,760  
Adjustments:                              
Goodwill     80,950       80,950       80,950       80,950       80,950  
Other intangibles     5,318       5,538       5,775       6,038       6,276  
Tangible assets   $ 3,293,238     $ 3,196,974     $ 3,192,371     $ 3,103,465     $ 3,013,534  
                               
Common shares outstanding     24,923       24,918       24,907       24,859       24,859  
                               
Book value per share   $ 20.59     $ 20.01     $ 19.58     $ 18.98     $ 18.55  
Tangible book value per share   $ 17.13     $ 16.54     $ 16.10     $ 15.48     $ 15.04  
Total shareholders’ equity to total assets     15.18 %     15.19 %     14.87 %     14.80 %     14.87 %
Tangible equity to tangible assets     12.96 %     12.89 %     12.56 %     12.40 %     12.41 %
                                         

Investor Relations: James L. Sturgeon 281.325.5013 investors@CBoTX.com  Media Contact: Ashley Warren 713.210.7622 awarren@CBoTX.com