CBTX, Inc. Reports Second Quarter Financial Results

July 26, 2018 at 4:50 PM EDT

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

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

Highlights

Total loans, excluding loans held for sale, increased $48.1 million, or 8.2% annualized, to $2.4 billion compared to the quarter ended March 31, 2018.

Net interest income for the quarter ended June 30, 2018 totaled $30.9 million, an increase of 6.3% from the first quarter of 2018, primarily due to increased average loans and yields on loans.

The efficiency ratio improved to 58.2% for the quarter ended June 30, 2018, compared to 62.6% for the quarter ended March 31, 2018.

Operating Results:

Net Interest Income

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

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

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

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

Provision (Recapture) for Loan Losses

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

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

Noninterest Income

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

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

Noninterest Expense

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

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

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

Income Taxes

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

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

Balance Sheet Highlights:

Loans

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

Asset Quality

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

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

Deposits and Borrowings

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

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

Capital

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

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

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

About CBTX, Inc.

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

Forward-Looking Statements

This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiary. Forward-looking statements include information regarding the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to whether the Company can: prudently manage and execute its growth strategy; manage risks associated with its acquisition and de novo branching strategy; maintain its asset quality; address the volatility and direction of market interest rates; continue to have access to debt and equity capital markets; and achieve its performance goals. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (‘SEC”) and other reports and statements that the Company has filed with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what its anticipates. Accordingly, you should not place undue reliance on any such forward looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybankoftx.com under the Investor Relations tab.


CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

Balance Sheet Data (at period end):	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017

Loans, excluding loans held for sale	$	2,404,132		$	2,356,053		$	2,311,544		$	2,199,478		$	2,192,443
Allowance for loan losses		(25,746	)		(25,349	)		(24,778	)		(23,757	)		(25,187	)
Loans, net		2,378,386			2,330,704			2,286,766			2,175,721			2,167,256

Cash and equivalents		245,265			279,915			326,199			348,578			307,173
Debt securities		230,393			221,183			223,208			217,660			220,330
Premises and equipment, net		52,607			53,135			53,607			54,129			56,609
Goodwill		80,950			80,950			80,950			80,950			80,950
Other intangible assets, net		6,276			6,521			6,770			7,031			7,298
Repossessed real estate and other assets		137			295			705			1,136			1,435
Loans held for sale		560			113			1,460			466			559
Other assets		106,186			101,974			101,418			104,167			99,267
Total Assets	$	3,100,760		$	3,074,790		$	3,081,083		$	2,989,838		$	2,940,877

Noninterest-bearing deposits	$	1,114,155		$	1,120,521		$	1,109,789		$	1,051,755		$	1,030,865
Interest-bearing deposits		1,447,119			1,479,181			1,493,183			1,502,872			1,485,919
Total deposits		2,561,274			2,599,702			2,602,972			2,554,627			2,516,784

Note payable		-			-			-			24,357			25,464
Repurchase agreements		1,448			861			1,525			2,239			2,179
Federal Home Loan Bank advances		50,000			-			-			-			-
Junior subordinated debt		6,726			6,726			6,726			6,726			6,726
Other liabilities		20,117			15,930			23,646			20,768			17,760
Total Liabilities		2,639,565			2,623,219			2,634,869			2,608,717			2,568,913

Shareholders' Equity		461,195			451,571			446,214			381,121			371,964
Total Liabilities and Shareholders' Equity	$	3,100,760		$	3,074,790		$	3,081,083		$	2,989,838		$	2,940,877


CBTX, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Income (Unaudited)
(In thousands)


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


CBTX, INC. AND SUBSIDIARY
Financial Highlights (Unaudited)
(In thousands, except per share data and percentages)


	For the Three Months Ended															For the Six Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017			6/30/2018			6/30/2017
Profitability:
Net income	$	11,042		$	9,112		$	1,957		$	10,047		$	8,705		$	20,154		$	15,567
Basic earnings per share	$	0.44		$	0.37		$	0.08		$	0.46		$	0.39		$	0.81		$	0.71
Diluted earnings per share	$	0.44		$	0.37		$	0.08		$	0.45		$	0.39		$	0.81		$	0.70

Return on average assets ⁽¹⁾		1.44	%		1.20	%		0.25	%		1.34	%		1.20	%		1.32	%		1.08	%
Return on average shareholders' equity ⁽¹⁾		9.66	%		8.20	%		1.83	%		10.54	%		9.46	%		8.94	%		8.58	%
Net interest margin- tax equivalent ⁽¹⁾		4.43	%		4.23	%		4.06	%		4.07	%		4.08	%		4.33	%		4.05	%
Efficiency ratio ⁽²⁾		58.20	%		62.60	%		70.23	%		60.69	%		62.76	%		60.34	%		62.84	%

Liquidity and Capital Ratios:
Total shareholders' equity to total assets		14.87	%		14.69	%		14.48	%		12.75	%		12.65	%		14.87	%		12.65	%
Tangible equity to tangible assets ⁽³⁾		12.41	%		12.19	%		11.98	%		10.10	%		9.95	%		12.41	%		9.95	%
Common equity tier 1 capital ratio		14.08	%		14.12	%		14.19	%		12.23	%		12.00	%		14.08	%		12.00	%
Tier 1 leverage ratio		12.87	%		12.58	%		12.30	%		10.48	%		10.39	%		12.87	%		10.39	%
Tier 1 risk-based capital ratio		14.32	%		14.37	%		14.44	%		12.49	%		12.26	%		14.32	%		12.26	%
Total risk-based capital ratio		15.29	%		15.35	%		15.42	%		13.48	%		13.33	%		15.29	%		13.33	%

Other Data:
Weighted average common shares outstanding- Basic		24,858			24,833			23,629			22,063			22,062			24,845			22,062
Weighted average common shares outstanding- Diluted		24,997			24,954			23,742			22,138			22,148			24,977			22,148
Common shares outstanding at period end		24,859			24,833			24,833			22,063			22,063			24,859			22,063
Dividends per share	$	0.05		$	0.05		$	0.05		$	0.05		$	0.05		$	0.10		$	0.10
Book value per share	$	18.55		$	18.18		$	17.97		$	17.27		$	16.86		$	18.55		$	16.86
Tangible book value per share⁽³⁾	$	15.04		$	14.66		$	14.44		$	13.29		$	12.86		$	15.04		$	12.86
Employees - full-time equivalents		488			477			462			464			472			488			472

_____________________________

(1)   Quarterly ratios are annualized.
(2)   Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
(3)   Non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”



CBTX, INC. AND SUBSIDIARY
Net Interest Margin (Unaudited)
(In thousands, except percentages)

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

_____________________________

(1)   Annualized.
(2)   Includes average outstanding balances of loans held for sale of $425,000, $544,000 and $770,000 for the quarter ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively.
(3)   Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(4)   Net interest margin is equal to net interest income divided by average interest‑earning assets.
(5)   To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $267,000, $270,000 and $585,000 for the quarter ended June 30, 2018, March 31, 2018 and June 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.



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

______________________________

(1)   Annualized.
(2)   Includes average outstanding balances of loans held for sale of $484,000 and $730,000 for the six months ended June 30, 2018 and June 30, 2017, respectively.
(3)   Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(4)   Net interest margin is equal to net interest income divided by average interest‑earning assets.
(5)   To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment of $537,000 and $1.2 million for the six months ended June 30, 2018 and June 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.



CBTX, INC. AND SUBSIDIARY
Yield Trend (Unaudited)

	For the Three Months Ended
	6/30/2018		3/31/2018		12/31/2017		9/30/2017		6/30/2017
Yield Trend - Annualized:
Interest-earnings assets:
Total loans	5.15	%	4.98	%	4.88	%	4.91	%	4.83	%
Debt securities	2.65	%	2.60	%	2.42	%	2.37	%	2.45	%
Federal funds sold and other interest-earning assets	1.86	%	1.60	%	1.37	%	1.29	%	1.12	%
Nonmarketable equity securities	5.17	%	5.32	%	5.13	%	4.83	%	4.81	%
Total interest-earning assets	4.71	%	4.49	%	4.29	%	4.32	%	4.32	%

Interest-bearing liabilities:
Interest-bearing deposits	0.58	%	0.53	%	0.52	%	0.52	%	0.50	%
Repurchase agreements	0.26	%	0.29	%	—	%	0.33	%	0.17	%
FHLB advances	2.19	%	—	%	—	%	—	%	—	%
Note payable	—	%	—	%	4.30	%	4.31	%	4.10	%
Junior subordinated debt	4.04	%	3.48	%	3.15	%	3.04	%	2.93	%
Total interest-bearing liabilities	0.60	%	0.55	%	0.56	%	0.60	%	0.58	%

Net interest spread ⁽¹⁾	4.11	%	3.93	%	3.73	%	3.73	%	3.74	%
Net interest margin ⁽²⁾	4.39	%	4.19	%	3.98	%	3.98	%	3.99	%
Net interest margin—tax equivalent ⁽³⁾	4.43	%	4.23	%	4.06	%	4.07	%	4.08	%

_____________________________

(1)   Net interest spread is the average yield on interest‑earning assets minus the average rate on interest‑bearing liabilities.
(2)   Net interest margin is equal to net interest income divided by average interest‑earning assets.
(3)   To make pre‑tax income and resultant yields on tax‑exempt investments and loans comparable to those on taxable investments and loans, a tax equivalent adjustment has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.



CBTX, INC. AND SUBSIDIARY
Average Outstanding Balances (Unaudited)
(In thousands)

	For the Three Months Ended
	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Average Outstanding Balances:

Assets
Interest-earnings assets:
Total loans ⁽¹⁾	$	2,375,253		$	2,319,463		$	2,252,735		$	2,191,016		$	2,203,145
Debt securities		228,262			223,730			222,602			223,132			220,905
Federal funds sold and other interest-earning assets		201,906			252,722			317,484			284,334			228,393
Nonmarketable equity securities		14,823			14,701			14,698			14,695			14,691
Total interest-earning assets		2,820,244			2,810,616			2,807,519			2,713,177			2,667,134
Allowance for loan losses		(25,392	)		(24,866	)		(24,127	)		(25,316	)		(26,424	)
Noninterest-earnings assets		288,416			287,099			296,108			290,767			273,760
Total assets	$	3,083,268		$	3,072,849		$	3,079,500		$	2,978,628		$	2,914,470

Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	1,478,016		$	1,491,613		$	1,519,631		$	1,501,732		$	1,478,579
Repurchase agreements		1,540			1,418			1,793			2,404			2,356
FHLB advances		2,198			—			—			—			—
Note payable		—			—			11,252			24,742			25,841
Junior subordinated debt		10,826			10,826			10,826			10,826			10,826
Total interest-bearing liabilities		1,492,580			1,503,857			1,543,502			1,539,704			1,517,602
Noninterest-bearing liabilities:
Noninterest-bearing deposits		1,111,736			1,097,085			1,087,416			1,041,731			1,010,823
Other liabilities		20,441			21,165			23,271			18,844			16,910
Total noninterest-bearing liabilities		1,132,177			1,118,250			1,110,687			1,060,575			1,027,733
Shareholders’ equity		458,511			450,742			425,311			378,349			369,135
Total liabilities and shareholders’ equity	$	3,083,268		$	3,072,849		$	3,079,500		$	2,978,628		$	2,914,470

___________________________

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



CBTX, INC. AND SUBSIDIARY
Period End Balances (Unaudited)
(In thousands, except percentages)

	6/30/2018					3/31/2018					12/31/2017					9/30/2017					6/30/2017
	Amount			%		Amount			%		Amount			%		Amount			%		Amount			%
Loan Portfolio:
Commercial and industrial	$	565,850		23.5	%	$	559,070		23.7	%	$	559,363		24.1	%	$	548,870		24.9	%	$	535,116		24.4	%
Real estate:
Commercial real estate		780,224		32.4	%		767,108		32.5	%		738,293		31.9	%		689,501		31.3	%		690,044		31.4	%
Construction and development		449,390		18.6	%		436,260		18.5	%		449,211		19.4	%		424,489		19.3	%		433,966		19.8	%
1-4 family residential		279,227		11.6	%		260,580		11.0	%		258,584		11.2	%		246,564		11.2	%		240,073		10.9	%
Multi-family residential		229,609		9.5	%		236,000		10.0	%		220,305		9.5	%		211,219		9.6	%		208,222		9.5	%
Consumer		41,833		1.7	%		40,869		1.7	%		40,433		1.7	%		42,772		1.9	%		41,130		1.9	%
Agricultural		10,951		0.5	%		8,807		0.4	%		11,256		0.5	%		11,424		0.5	%		10,650		0.4	%
Other		53,376		2.2	%		52,382		2.2	%		40,344		1.7	%		29,684		1.3	%		38,237		1.7	%
Gross loans		2,410,460		100.0	%		2,361,076		100.0	%		2,317,789		100.0	%		2,204,523		100.0	%		2,197,438		100.0	%
Less deferred fees and unearned discount		(5,768	)				(4,910	)				(4,785	)				(4,579	)				(4,436	)
Less allowance for loan losses		(25,746	)				(25,349	)				(24,778	)				(23,757	)				(25,187	)
Less loans held for sale		(560	)				(113	)				(1,460	)				(466	)				(559	)
Loans, net	$	2,378,386				$	2,330,704				$	2,286,766				$	2,175,721				$	2,167,256

Deposits:
Interest-bearing demand accounts	$	342,890		13.4	%	$	345,378		13.3	%	$	363,015		14.0	%	$	340,627		13.3	%	$	343,826		13.7	%
Money market accounts		650,747		25.4	%		717,548		27.6	%		702,299		27.0	%		726,903		28.5	%		698,546		27.7	%
Savings accounts		97,576		3.8	%		95,603		3.7	%		95,842		3.7	%		88,613		3.5	%		88,083		3.5	%
Certificates and other time deposits, $100,000 or greater		164,464		6.4	%		161,777		6.2	%		172,469		6.6	%		179,777		7.0	%		182,143		7.2	%
Certificates and other time deposits, less than $100,000		191,442		7.5	%		158,875		6.1	%		159,558		6.1	%		166,952		6.5	%		173,321		6.9	%
Total interest-bearing deposits		1,447,119		56.5	%		1,479,181		56.9	%		1,493,183		57.4	%		1,502,872		58.8	%		1,485,919		59.0	%
Noninterest-bearing deposits		1,114,155		43.5	%		1,120,521		43.1	%		1,109,789		42.6	%		1,051,755		41.2	%		1,030,865		41.0	%
Total deposits	$	2,561,274		100.0	%	$	2,599,702		100.0	%	$	2,602,972		100.0	%	$	2,554,627		100.0	%	$	2,516,784		100.0	%


CBTX, INC. AND SUBSIDIARY
Credit Quality (Unaudited)
(In thousands, except percentages)

	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Nonperforming assets (at period end):
Nonaccrual loans:
Commercial and industrial	$	1,734		$	2,533		$	3,280		$	2,444		$	2,348
Real estate:
Commercial real estate		2,092			2,217			3,216			5,038			4,964
Construction and development		225			233			252			265			362
1-4 family residential		738			765			898			844			578
Multi-family residential		—			—			—			1			3
Consumer		4			21			—			—			—
Agricultural		—			—			—			—			—
Nonaccrual loans		4,793			5,769			7,646			8,592			8,255
Accruing loans 90 or more days past due		—			—			—			—			—
Total nonperforming loans		4,793			5,769			7,646			8,592			8,255
Foreclosed assets, including other real estate:
Commercial real estate, construction and development, land and land development		137			295			298			729			1,018
Residential real estate		—			—			407			407			417
Total foreclosed assets		137			295			705			1,136			1,435
Total nonperforming assets	$	4,930		$	6,064		$	8,351		$	9,728		$	9,690

Allowance for Loan Losses (at period end):
Commercial and industrial	$	7,648		$	7,439		$	7,257		$	7,194		$	8,466
Real estate:
Commercial real estate		10,930			10,742			10,375			9,640			10,000
Construction and development		3,335			3,356			3,482			3,364			3,313
1-4 family residential		1,404			1,329			1,326			1,282			1,138
Multi-family residential		1,479			1,520			1,419			1,360			1,341
Consumer		479			517			566			626			599
Agricultural		66			53			68			69			64
Other		405			393			285			222			266
Total allowance for loan losses	$	25,746		$	25,349		$	24,778		$	23,757		$	25,187

Credit Quality Ratios (at period end):
Nonperforming assets to total assets		0.16	%		0.20	%		0.27	%		0.33	%		0.33	%
Nonperforming loans to total loans		0.20	%		0.24	%		0.33	%		0.39	%		0.38	%
Allowance for loan losses to nonperforming loans		537.16	%		439.40	%		324.06	%		276.50	%		305.11	%
Allowance for loan losses to total loans		1.07	%		1.08	%		1.07	%		1.08	%		1.15	%


CBTX, INC. AND SUBSIDIARY
Allowance for Loan Losses (Unaudited)
(In thousands, except percentages)

	For the Three Months Ended
	6/30/2018				3/31/2018				12/31/2017				9/30/2017				6/30/2017
Analysis of Allowance for Loan Losses

Allowance for loan losses at beginning of period	$	25,349			$	24,778			$	23,757			$	25,187			$	25,881

Provision (recapture) for loan losses		690				865				1,050				(1,654	)			(694	)

Net (charge-offs) recoveries
Commercial and industrial		(301	)			(297	)			52				205				66
Real estate:
Commercial real estate		5				3				(118	)			2				2
Construction and development		—				—				—				—				—
1-4 family residential		—				(2	)			(7	)			2				8
Multi-family residential		—				—				—				—				—
Consumer		3				2				9				4				(90	)
Agricultural		—				—				35				11				6
Other		—				—				—				—				8
Total net (charge-offs) recoveries		(293	)			(294	)			(29	)			224				—

Allowance for loan losses at end of period	$	25,746			$	25,349			$	24,778			$	23,757			$	25,187

Net charge-offs (recoveries) to average loans		0.05		%		0.05		%		—		%		(0.04	)	%		—		%

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

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

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

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


	6/30/2018			3/31/2018			12/31/2017			9/30/2017			6/30/2017
Tangible Equity
Total shareholders’ equity	$	461,195		$	451,571		$	446,214		$	381,121		$	371,964
Adjustments:
Goodwill		80,950			80,950			80,950			80,950			80,950
Other intangibles		6,276			6,521			6,770			7,031			7,298
Tangible equity	$	373,969		$	364,100		$	358,494		$	293,140		$	283,716
Tangible Assets
Total assets	$	3,100,760		$	3,074,790		$	3,081,083		$	2,989,838		$	2,940,877
Adjustments:
Goodwill		80,950			80,950			80,950			80,950			80,950
Other intangibles		6,276			6,521			6,770			7,031			7,298
Tangible assets	$	3,013,534		$	2,987,319		$	2,993,363		$	2,901,857		$	2,852,629

Common shares outstanding		24,859			24,833			24,833			22,063			22,063

Book value per share	$	18.55		$	18.18		$	17.97		$	17.27		$	16.86
Tangible book value per share	$	15.04		$	14.66		$	14.44		$	13.29		$	12.86

Total shareholders’ equity to total assets		14.87	%		14.69	%		14.48	%		12.75	%		12.65	%
Tangible equity to tangible assets		12.41	%		12.19	%		11.98	%		10.10	%		9.95	%

Investor Relations:

James L. Sturgeon
281.325.5013
investors@CBoTX.com

Media Contact:

Ashley Warren
713.210.7622
awarren@CBoTX.com

Source: CommunityBank of Texas, N.A.

News Release Details

CBTX, Inc. Reports Second Quarter Financial Results