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

News Release Details

CBTX, Inc. Reports Second Quarter Financial Results