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CBTX, Inc. Reports Third Quarter Financial Results

October 25, 2018 at 4:35 PM EDT

HOUSTON, Oct. 25, 2018 (GLOBE NEWSWIRE) -- CBTX, Inc. (the “Company”) (NASDAQ:CBTX), the bank holding company for CommunityBank of Texas N.A., today announced net income of $13.0 million, or $0.52 per diluted share, for the quarter ended September 30, 2018, compared to $10.0 million, or $0.45 per diluted share, for the quarter ended September 30, 2017 and $11.0 million, or $0.44 per diluted share, for the quarter ended June 30, 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 $59.1 million, or 9.8% annualized, to $2.5 billion compared to the quarter ended June 30, 2018.
  • Net interest income for the quarter ended September 30, 2018 totaled $31.5 million, an increase of 2.1% from the second quarter of 2018, primarily due to the impact of increased average loans and average federal funds sold, partially offset by the impact of increased interest-bearing deposits and increased rates on those deposits.
  • The efficiency ratio improved to 57.0% for the quarter ended September 30, 2018, compared to 58.2% for the quarter ended June 30, 2018.

Operating Results:

Net Interest Income

Net interest income was $31.5 million for the third quarter of 2018, compared to $27.3 million for the third quarter of 2017 and $30.9 million for the second quarter of 2018. The increase in net interest income in the third quarter of 2018 from the third quarter of 2017, was primarily due to increased average loans and increased average yields on loans and federal funds sold. The increase in net interest income in the third quarter of 2018 from the second quarter of 2018 was due to increased average loans and average federal funds sold, partially offset by the impact of increased interest-bearing deposits and increased rates on those deposits.

The yield on interest-earning assets was 4.70% for the third quarter of 2018, compared to 4.32% for the third quarter of 2017 and 4.71% for the second quarter of 2018.

The cost of interest-bearing liabilities, including borrowings, was 0.80% for the third quarter of 2018, compared to 0.60% for the third quarter of 2017 and 0.60% for the second quarter of 2018.

The net interest margin was 4.28% for the third quarter of 2018 compared to 3.98% for the third quarter of 2017 and 4.39% for the second quarter of 2018.

Provision (Recapture) for Loan Losses

Provision for loan loss was a recapture of $1.1 million for the third quarter of 2018, compared to a recapture of $1.7 million for the third quarter of 2017 and a provision of $690,000 for the second quarter of 2018. The recapture in the third quarter of 2018 was driven by strong credit quality, improved national and local economic trends, continuing low nonperforming and impaired loans and minimal charge-off history. The recapture during the third quarter of 2017 resulted from pay-offs of certain classified and problem loans, which resulted in the reversal of their related allowance for loan losses.

The allowance for loan losses was $24.5 million, or 0.99% of total loans, at September 30, 2018, compared to $23.8 million, or 1.08% of total loans, at September 30, 2017 and $25.7 million, or 1.07% of total loans, at June 30, 2018.

Noninterest Income

Noninterest income was $3.5 million for the third quarter of 2018, $4.1 million for the third quarter of 2017 and $3.5 million for the second quarter of 2018. Noninterest income for the third quarter of 2017 is higher compared to the third quarter of 2018 primarily due to gains on sales of two branches recorded in the third quarter of 2017.

Noninterest income was relatively flat from the second quarter of 2018 to the third quarter of 2018. 

Noninterest Expense

Noninterest expense was $20.0 million for the third quarter of 2018, $19.0 million for the third quarter of 2017 and $20.0 million for the second quarter of 2018.

Noninterest expense increased $947,000 in the third quarter of 2018 compared to the third quarter of 2017 primarily due to increased salaries and employee benefits, partially offset by decreased repossessed and other asset expenses. Although we sold two branches in the third quarter of 2017, net occupancy expense increased $207,000 or 9.3% in the third quarter of 2018 compared to the third quarter of 2017. This increase is primarily due to increased costs for repairs and maintenance and other expenses.

Noninterest expense during the third quarter of 2018 compared to the second quarter of 2018 was relatively flat.

Income Taxes

Income tax expense was $3.2 million for the third quarter of 2018, $3.9 million for the third quarter of 2017 and $2.6 million for the second quarter of 2018.

The effective tax rates were 19.8% for the third quarter of 2018, 28.1% for the third quarter of 2017 and 19.3% for the second quarter of 2018. The effective tax rate for the second and third quarter of 2018 primarily reflects the reduction of the federal tax rate from 35% to 21% effective January 1, 2018 as a result of the Tax Act.

Balance Sheet Highlights:

Loans

Loans were $2.5 billion at September 30, 2018, $2.2 billion at September 30, 2017 and $2.4 billion at June 30, 2018. The increases from the prior year and second quarter are primarily due to organic growth.

Asset Quality

Nonperforming assets remain low relative to total assets at $5.8 million, or 0.18% of total assets, at September 30, 2018, $9.7 million, or 0.33% of total assets, at September 30, 2017 and $4.9 million, or 0.16% of total assets at June 30, 2018.

Annualized net charge-offs (recoveries) to average loans were 0.02% for the third quarter of 2018, (0.04%) for the third quarter of 2017 and 0.05% for the second quarter of 2018.

Deposits and Borrowings

Total deposits were $2.7 billion at September 30, 2018, compared to $2.6 billion at September 30, 2017 and $2.6 billion at June 30, 2018.

Our total borrowings are comprised of notes payable, repurchase agreements and Federal Home Loan Bank (FHLB) advances and were $1.4 million at September 30, 2018, $26.6 million at September 30, 2017 and $51.4 million at June 30, 2018. The decrease in borrowings from June 30, 2018 to September 30, 2018 is due to the payoff of FHLB short-term advances of $50 million outstanding at June 30, 2018. Borrowings at September 30, 2017 include $24.4 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 September 30, 2018, the Company remained well capitalized under bank regulatory requirements. Our ratio of total shareholders’ equity to total assets was 14.8% at September 30, 2018, 12.8% at September 30, 2017 and 14.9% at June 30, 2018.

Our ratio of tangible equity to tangible assets was 12.4% at September 30, 2018, 10.1% at September 30, 2017 and 12.4% at June 30, 2018. Tangible equity to tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation” at the end of this earnings release. Our ratios of total shareholders’ equity to total assets and tangible equity to tangible assets both increased from September 30, 2017 to September 30, 2018 due to our November 2017 initial public offering of our common stock and earnings between those periods.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.2 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 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
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)

                               
Balance Sheet Data (at period end):   9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
                               
Loans, excluding loans held for sale   $  2,463,197     $  2,404,132     $  2,356,053     $  2,311,544     $  2,199,478  
Allowance for loan losses      (24,486 )      (25,746 )      (25,349 )      (24,778 )      (23,757 )
Loans, net      2,438,711        2,378,386        2,330,704        2,286,766        2,175,721  
                               
Cash and equivalents      281,640        245,265        279,915        326,199        348,578  
Debt securities      222,493        230,393        221,183        223,208        217,660  
Premises and equipment, net      52,032        52,607        53,135        53,607        54,129  
Goodwill      80,950        80,950        80,950        80,950        80,950  
Other intangible assets, net      6,038        6,276        6,521        6,770        7,031  
Repossessed real estate and other assets      175        137        295        705        1,136  
Loans held for sale      384        560        113        1,460        466  
Other assets      108,030        106,186        101,974        101,418        104,167  
Total Assets   $  3,190,453     $  3,100,760     $  3,074,790     $  3,081,083     $  2,989,838  
                               
Noninterest-bearing deposits   $  1,144,985     $  1,114,155     $  1,120,521     $  1,109,789     $  1,051,755  
Interest-bearing deposits      1,545,095        1,447,119        1,479,181        1,493,183        1,502,872  
Total deposits      2,690,080        2,561,274        2,599,702        2,602,972        2,554,627  
                               
Note payable      -        -        -        -        24,357  
Repurchase agreements      1,351        1,448        861        1,525        2,239  
Federal Home Loan Bank advances      -        50,000        -        -        -  
Junior subordinated debt      6,726        6,726        6,726        6,726        6,726  
Other liabilities      20,445        20,117        15,930        23,646        20,768  
Total Liabilities      2,718,602        2,639,565        2,623,219        2,634,869        2,608,717  
                               
Shareholders' Equity      471,851        461,195        451,571        446,214        381,121  
Total Liabilities and Shareholders' Equity   $  3,190,453     $  3,100,760     $  3,074,790     $  3,081,083     $  2,989,838  


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

                                           
    For the Three Months Ended   For the Nine Months Ended
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017   9/30/2018   9/30/2017
Interest Income                                          
Interest and fees on loans   $  31,513     $  30,493   $  28,462   $  27,726     $  27,129     $  90,468   $  79,642  
Securities      1,535        1,507      1,436      1,357        1,334        4,478      3,990  
Federal Funds and interest-bearing deposits      1,617        1,127      1,187      1,283        1,106        3,931      2,661  
Total Interest Income      34,665        33,127      31,085      30,366        29,569        98,877      86,293  
Interest Expense                                          
Deposits      2,961        2,126      1,948      1,993        1,964        7,035      5,659  
Repurchase agreements      1        1      1      —        2        3      5  
Federal Home Loan Bank advances      61        12      —      —        —        73      —  
Note payable      4        3      4      122        269        11      784  
Junior subordinated debt      112        109      93      86        83        314      236  
Total Interest Expense      3,139        2,251      2,046      2,201        2,318        7,436      6,684  
Net Interest Income      31,526        30,876      29,039      28,165        27,251        91,441      79,609  
Provision (Recapture) for Loan Losses      (1,142 )      690      865      1,050        (1,654 )      413      (1,388 )
Net Interest Income After Provision (Recapture) for Loan Losses      32,668        30,186      28,174      27,115        28,905        91,028      80,997  
Noninterest Income                                          
Deposit account service charges      1,597        1,497      1,478      1,388        1,395        4,572      4,412  
Net gain (loss) on sale of assets      152        210      130      (7 )      828        492      1,531  
Card interchange fees      922        971      927      941        803        2,820      2,512  
Earnings on bank-owned life insurance      443        465      451      460        459        1,359      1,120  
Other      412        363      375      362        601        1,150      1,485  
Total Noninterest Income      3,526        3,506      3,361      3,144        4,086        10,393      11,060  
Noninterest Expense                                          
Salaries and employee benefits      12,499        12,496      12,695      14,021        11,829        37,690      34,552  
Net occupancy expense      2,428        2,433      2,265      2,346        2,221        7,126      6,805  
Regulatory fees      488        513      545      487        458        1,546      1,689  
Data processing      664        666      683      674        662        2,013      1,955  
Printing, stationery and office      503        480      411      415        348        1,394      1,065  
Amortization of intangibles      245        248      255      263        267        748      816  
Professional and director fees      809        686      919      1,168        606        2,414      1,937  
Correspondent bank and customer related transaction expenses      66        68      67      67        67        201      219  
Loan processing costs      102        75      118      141        115        295      320  
Advertising, marketing and business development      437        475      506      508        266        1,418      953  
Repossessed real estate and other asset expense      3        5      57      66        340        65      543  
Security and protection expense      346        311      302      300        331        959      1,055  
Telephone and communications      342        394      386      344        311        1,122      972  
Other expenses      1,032        1,162      1,075      1,189        1,196        3,269      3,422  
Total Noninterest Expense      19,964        20,012      20,284      21,989        19,017        60,260      56,303  
Net Income Before Income Tax Expense      16,230        13,680      11,251      8,270        13,974        41,161      35,754  
Income Tax Expense      3,207        2,638      2,139      6,313        3,927        7,984      10,140  
Net Income   $  13,023     $  11,042   $  9,112   $  1,957     $  10,047     $  33,177   $  25,614  



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

                                             
    For the Three Months Ended   For the Nine Months Ended  
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017   9/30/2018   9/30/2017  
Profitability:                                            
Net income   $  13,023   $  11,042   $  9,112   $  1,957   $  10,047   $  33,177   $  25,614  
Basic earnings per share   $  0.52   $  0.44   $  0.37   $  0.08   $  0.46   $  1.34   $  1.16  
Diluted earnings per share   $  0.52   $  0.44   $  0.37   $  0.08   $  0.45   $  1.33   $  1.16  
                                             
Return on average assets (1)      1.6 %    1.4 %    1.2 %    0.3 %    1.3 %    1.4 %    1.2 %
Return on average shareholders' equity (1)      11.0 %    9.7 %    8.2 %    1.8 %    10.5 %    9.7 %    8.6 %
Net interest margin- tax equivalent (1)      4.3 %    4.4 %    4.2 %    4.1 %    4.1 %    4.3 %    4.1 %
Efficiency ratio (2)      57.0 %    58.2 %    62.6 %    70.2 %    60.7 %    59.2 %    62.1 %
                                             
Liquidity and Capital Ratios:                                            
Total shareholders' equity to total assets      14.8 %    14.9 %    14.7 %    14.5 %    12.8 %    14.8 %    12.8 %
Tangible equity to tangible assets (3)      12.4 %    12.4 %    12.2 %    12.0 %    10.1 %    12.4 %    10.1 %
Common equity tier 1 capital ratio      14.3 %    14.1 %    14.1 %    14.2 %    12.2 %    14.3 %    12.2 %
Tier 1 leverage ratio      12.8 %    12.9 %    12.6 %    12.3 %    10.5 %    12.8 %    10.5 %
Tier 1 risk-based capital ratio      14.5 %    14.3 %    14.4 %    14.4 %    12.5 %    14.5 %    12.5 %
Total risk-based capital ratio      15.4 %    15.3 %    15.4 %    15.4 %    13.5 %    15.4 %    13.5 %
                                             
Other Data:                                            
Weighted average common shares outstanding- Basic      24,859      24,858      24,833      23,629      22,063      24,850      22,062  
Weighted average common shares outstanding- Diluted      25,060      24,997      24,954      23,742      22,138      25,007      22,144  
Common shares outstanding at period end      24,859      24,859      24,833      24,833      22,063      24,859      22,063  
Dividends per share   $  0.05   $  0.05   $  0.05   $  0.05   $  0.05   $  0.15   $  0.15  
Book value per share   $  19.0   $  18.6   $  18.2   $  18.0   $  17.3   $  19.0   $  17.3  
Tangible book value per share (3)   $  15.5   $  15.0   $  14.7   $  14.4   $  13.3   $  15.5   $  13.3  
Employees - full-time equivalents      489      488      477      462      464      489      464  


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


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

                                                       
    For the Three Months Ended
    9/30/2018   6/30/2018   9/30/2017
          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)   $  2,404,491     $  31,513    5.20   $  2,375,253     $  30,493    5.15   $  2,191,016     $  27,129    4.91 %
Debt securities      230,592        1,535    2.64      228,262        1,507    2.65      223,132        1,334    2.37 %
Federal funds sold and other interest-earning assets      272,739        1,404    2.04      201,906        936    1.86      284,334        927    1.29 %
Nonmarketable equity securities      16,799        213    5.01      14,823        191    5.17      14,695        179    4.83 %
Total interest-earning assets      2,924,621     $  34,665    4.70      2,820,244     $  33,127    4.71      2,713,177     $  29,569    4.32 %
Allowance for loan losses      (25,689 )                  (25,392 )                  (25,316 )            
Noninterest-earnings assets      292,598                    288,416                    290,767              
Total assets   $  3,191,530                 $  3,083,268                 $  2,978,628              
Liabilities and Shareholders’ Equity                                                      
Interest-bearing liabilities:                                                      
Interest-bearing deposits   $  1,530,077     $  2,961    0.77   $  1,478,016     $  2,126    0.58   $  1,501,732     $  1,964    0.52 %
Repurchase agreements      1,516        1    0.26      1,540        1    0.26      2,404        2    0.33 %
FHLB advances      11,141        61    2.17      2,198        12    2.19      —        —    — %
Note payable      —        4    —      —        3    —      24,742        269    4.31 %
Junior subordinated debt      10,826        112    4.14      10,826        109    4.04      10,826        83    3.04 %
Total interest-bearing liabilities      1,553,560     $  3,139    0.80      1,492,580     $  2,251    0.60      1,539,704     $  2,318    0.60 %
Noninterest-bearing liabilities:                                                      
Noninterest-bearing deposits      1,145,516                    1,111,736                    1,041,731              
Other liabilities      23,600                    20,441                    18,844              
Total noninterest-bearing liabilities      1,169,116                    1,132,177                    1,060,575              
Shareholders’ equity      468,854                    458,511                    378,349              
Total liabilities and shareholders’ equity   $  3,191,530                 $  3,083,268                 $  2,978,628              
Net interest income         $  31,526               $  30,876               $  27,251      
Net interest spread (3)                3.90                4.11                3.73 %
Net interest margin (4)                4.28                4.39                3.98 %
Net interest margin—tax equivalent (5)                4.31                4.43                4.07 %
(1)     Annualized. 
(2)     Includes average outstanding balances of loans held for sale of $741,000, $425,000 and $1.1 million for the quarter ended September 30, 2018, June 30, 2018 and September 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 $261,000, $267,000 and $1.1 million for the quarter ended September 30, 2018, June 30, 2018 and September 30, 2017, respectively, has been computed using a federal income tax rate of 21% for 2018 and 35% for 2017.


                                     
    For the Nine Months Ended September 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)   $  2,366,714     $  90,468    5.11   $  2,190,975     $  79,642    4.86 %
Debt securities      227,552        4,478    2.63      220,396        3,990    2.42 %
Federal funds sold and other interest-earning assets      242,529        3,334    1.84      257,628        2,110    1.10 %
Nonmarketable equity securities      15,449        597    5.17      14,690        551    5.01 %
Total interest-earning assets      2,852,244     $  98,877    4.63      2,683,689     $  86,293    4.30 %
Allowance for loan losses      (25,318 )                  (25,719 )            
Noninterest-earnings assets      289,391                    280,139              
Total assets   $  3,116,317                 $  2,938,109              
Liabilities and Shareholders’ Equity                                    
Interest-bearing liabilities:                                    
Interest-bearing deposits   $  1,499,925     $  7,035    0.63   $  1,497,845     $  5,659    0.51 %
Repurchase agreements      1,492        3    0.27      2,409        5    0.28 %
FHLB advances      4,487        73    2.18      —        —    — %
Note payable      —        11    —      25,841        784    4.06 %
Junior subordinated debt      10,826        314    3.88      10,826        236    2.91 %
Total interest-bearing liabilities      1,516,730     $  7,436    0.66      1,536,921     $  6,684    0.58 %
Noninterest-bearing liabilities:                                    
Noninterest-bearing deposits      1,118,408                    1,012,952              
Other liabilities      21,744                    18,080              
Total noninterest-bearing liabilities      1,140,152                    1,031,032              
Shareholders’ equity      459,435                    370,156              
Total liabilities and shareholders’ equity   $  3,116,317                 $  2,938,109              
Net interest income         $  91,441               $  79,609      
Net interest spread (2)                3.98                3.72 %
Net interest margin (3)                4.29                3.97 %
Net interest margin—tax equivalent (4)                4.32                4.05 %


(1)  Annualized. 
(2) Includes average outstanding balances of loans held for sale of $571,000 and $853,000 for the nine months ended September 30, 2018 and September 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 $798,000 and $1.8 million for the nine months ended September 30, 2018 and September 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
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
Yield Trend - Annualized:                              
Interest-earnings assets:                              
Total loans    5.20 %    5.15 %    4.98 %    4.88 %    4.91 %
Debt securities    2.64 %    2.65 %    2.60 %    2.42 %    2.37 %
Federal funds sold and other interest-earning assets    2.04 %    1.86 %    1.60 %    1.37 %    1.29 %
Nonmarketable equity securities    5.01 %    5.17 %    5.32 %    5.13 %    4.83 %
Total interest-earning assets    4.70 %    4.71 %    4.49 %    4.29 %    4.32 %
                               
Interest-bearing liabilities:                              
Interest-bearing deposits    0.77 %    0.58 %    0.53 %    0.52 %    0.52 %
Repurchase agreements    0.26 %    0.26 %    0.29 %    — %    0.33 %
FHLB advances    2.17 %    2.19 %    — %    — %    — %
Note payable    — %    — %    — %    4.30 %    4.31 %
Junior subordinated debt    4.14 %    4.04 %    3.48 %    3.15 %    3.04 %
Total interest-bearing liabilities    0.80 %    0.60 %    0.55 %    0.56 %    0.60 %
                               
Net interest spread (1)    3.90 %    4.11 %    3.93 %    3.73 %    3.73 %
Net interest margin (2)    4.28 %    4.39 %    4.19 %    3.98 %    3.98 %
Net interest margin—tax equivalent (3)    4.31 %    4.43 %    4.23 %    4.06 %    4.07 %


(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
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017
Average Outstanding Balances:                              
                               
Assets                              
Interest-earnings assets:                              
Total loans (1)   $  2,404,491     $  2,375,253     $  2,319,463     $  2,252,735     $  2,191,016  
Debt securities      230,592        228,262        223,730        222,602        223,132  
Federal funds sold and other interest-earning assets      272,739        201,906        252,722        317,484        284,334  
Nonmarketable equity securities      16,799        14,823        14,701        14,698        14,695  
Total interest-earning assets      2,924,621        2,820,244        2,810,616        2,807,519        2,713,177  
Allowance for loan losses      (25,689 )      (25,392 )      (24,866 )      (24,127 )      (25,316 )
Noninterest-earnings assets      292,598        288,416        287,099        296,108        290,767  
Total assets   $  3,191,530     $  3,083,268     $  3,072,849     $  3,079,500     $  2,978,628  
                               
Liabilities and Shareholders’ Equity                              
Interest-bearing liabilities:                              
Interest-bearing deposits   $  1,530,077     $  1,478,016     $  1,491,613     $  1,519,631     $  1,501,732  
Repurchase agreements      1,516        1,540        1,418        1,793        2,404  
FHLB advances      11,141        2,198        —        —        —  
Note payable      —        —        —        11,252        24,742  
Junior subordinated debt      10,826        10,826        10,826        10,826        10,826  
Total interest-bearing liabilities      1,553,560        1,492,580        1,503,857        1,543,502        1,539,704  
Noninterest-bearing liabilities:                              
Noninterest-bearing deposits      1,145,516        1,111,736        1,097,085        1,087,416        1,041,731  
Other liabilities      23,600        20,441        21,165        23,271        18,844  
Total noninterest-bearing liabilities      1,169,116        1,132,177        1,118,250        1,110,687        1,060,575  
Shareholders’ equity      468,854        458,511        450,742        425,311        378,349  
Total liabilities and shareholders’ equity   $  3,191,530     $  3,083,268     $  3,072,849     $  3,079,500     $  2,978,628  


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


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

                                                             
    9/30/2018     6/30/2018     3/31/2018     12/31/2017     9/30/2017  
    Amount       Amount       Amount       Amount       Amount    
Loan Portfolio:                                                            
Commercial and industrial   $  569,334      23.1   $  565,850      23.5   $  559,070      23.7   $  559,363      24.1   $  548,870      24.9 %
Real estate:                                                            
Commercial real estate      776,439      31.4      780,224      32.4      767,108      32.5      738,293      31.9      689,501      31.3 %
Construction and development      487,289      19.7      449,390      18.6      436,260      18.5      449,211      19.4      424,489      19.3 %
1-4 family residential      288,737      11.7      279,227      11.6      260,580      11.0      258,584      11.2      246,564      11.2 %
Multi-family residential      236,907      9.6      229,609      9.5      236,000      10.0      220,305      9.5      211,219      9.6 %
Consumer      39,807      1.6      41,833      1.7      40,869      1.7      40,433      1.7      42,772      1.9 %
Agricultural      11,609      0.5      10,951      0.5      8,807      0.4      11,256      0.5      11,424      0.5 %
Other      59,484      2.4      53,376      2.2      52,382      2.2      40,344      1.7      29,684      1.3 %
Gross loans      2,469,606      100.0      2,410,460      100.0      2,361,076      100.0      2,317,789      100.0      2,204,523      100.0 %
Less deferred fees and unearned discount      (6,025 )            (5,768 )            (4,910 )            (4,785 )            (4,579 )      
Less allowance for loan losses      (24,486 )            (25,746 )            (25,349 )            (24,778 )            (23,757 )      
Less loans held for sale      (384 )            (560 )            (113 )            (1,460 )            (466 )      
Loans, net   $  2,438,711           $  2,378,386           $  2,330,704           $  2,286,766           $  2,175,721        
                                                             
Deposits:                                                            
Interest-bearing demand accounts   $  367,120      13.6   $  342,890      13.4   $  345,378      13.3   $  363,015      14.0   $  340,627      13.3
Money market accounts      722,382      26.9      650,747      25.4      717,548      27.6      702,299      27.0      726,903      28.5
Savings accounts      94,344      3.5      97,576      3.8      95,603      3.7      95,842      3.7      88,613      3.5
Certificates and other time deposits, $100,000 or greater      182,552      6.8      164,464      6.4      161,777      6.2      172,469      6.6      179,777      7.0
Certificates and other time deposits, less than $100,000      178,697      6.6      191,442      7.5      158,875      6.1      159,558      6.1      166,952      6.5
Total interest-bearing deposits      1,545,095      57.4      1,447,119      56.5      1,479,181      56.9      1,493,183      57.4      1,502,872      58.8
Noninterest-bearing deposits      1,144,985      42.6      1,114,155      43.5      1,120,521      43.1      1,109,789      42.6      1,051,755      41.2
Total deposits   $  2,690,080      100.0   $  2,561,274      100.0   $  2,599,702      100.0   $  2,602,972      100.0   $  2,554,627      100.0


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

                                         
    9/30/2018     6/30/2018     3/31/2018     12/31/2017     9/30/2017  
Nonperforming assets (at period end):                                        
Nonaccrual loans:                                        
Commercial and industrial   $  2,161     $  1,734     $  2,533     $  3,280     $  2,444  
Real estate:                                        
Commercial real estate      2,751        2,092        2,217        3,216        5,038  
Construction and development      13        225        233        252        265  
1-4 family residential      677        738        765        898        844  
Multi-family residential      —        —        —        —        1  
Consumer      —        4        21        —        —  
Agricultural      —        —        —        —        —  
Nonaccrual loans      5,602        4,793        5,769        7,646        8,592  
Accruing loans 90 or more days past due      —        —        —        —        —  
Total nonperforming loans      5,602        4,793        5,769        7,646        8,592  
Foreclosed assets, including other real estate:                                        
Commercial real estate, construction and development, land and land development      175        137        295        298        729  
Residential real estate      —        —        —        407        407  
Total foreclosed assets      175        137        295        705        1,136  
Total nonperforming assets   $  5,777     $  4,930     $  6,064     $  8,351     $  9,728  
                                         
Allowance for Loan Losses (at period end):                                        
Commercial and industrial   $  8,763     $  7,648     $  7,439     $  7,257     $  7,194  
Real estate:                                        
Commercial real estate      6,913        10,930        10,742        10,375        9,640  
Construction and development      3,606        3,335        3,356        3,482        3,364  
1-4 family residential      2,454        1,404        1,329        1,326        1,282  
Multi-family residential      1,630        1,479        1,520        1,419        1,360  
Consumer      394        479        517        566        626  
Agricultural      71        66        53        68        69  
Other      655        405        393        285        222  
Total allowance for loan losses   $  24,486     $  25,746     $  25,349     $  24,778     $  23,757  
                                         
Credit Quality Ratios (at period end):                                        
Nonperforming assets to total assets      0.18      0.16      0.20      0.27      0.33
Nonperforming loans to total loans      0.23      0.20      0.24      0.33      0.39
Allowance for loan losses to nonperforming loans      437.09      537.16      439.40      324.06      276.50
Allowance for loan losses to total loans      0.99      1.07      1.08      1.07      1.08



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

                                 
    For the Three Months Ended  
    9/30/2018   6/30/2018   3/31/2018   12/31/2017   9/30/2017  
Analysis of Allowance for Loan Losses                                
                                 
Allowance for loan losses at beginning of period   $  25,746     $  25,349     $  24,778     $  23,757     $  25,187    
                                 
Provision (recapture) for loan losses      (1,142 )      690        865        1,050        (1,654 )  
                                 
Net (charge-offs) recoveries                                
Commercial and industrial      (114 )      (301 )      (297 )      52        205    
Real estate:                                
Commercial real estate      (3 )      5        3        (118 )      2    
Construction and development      —        —        —        —        —    
1-4 family residential      4        —        (2 )      (7 )      2    
Multi-family residential      —        —        —        —        —    
Consumer      (4 )      3        2        9        4    
Agricultural      —        —        —        35        11    
Other      (1 )      —        —        —        —    
Total net (charge-offs) recoveries      (118 )      (293 )      (294 )      (29 )      224    
                                 
Allowance for loan losses at end of period   $  24,486     $  25,746     $  25,349     $  24,778     $  23,757    
                                 
Net charge-offs (recoveries) to average loans      0.02      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:

                                         
    9/30/2018     6/30/2018     3/31/2018     12/31/2017     9/30/2017  
Tangible Equity                                        
Total shareholders’ equity   $  471,851     $  461,195     $  451,571     $  446,214     $  381,121  
Adjustments:                                        
Goodwill      80,950        80,950        80,950        80,950        80,950  
Other intangibles      6,038        6,276        6,521        6,770        7,031  
Tangible equity   $  384,863     $  373,969     $  364,100     $  358,494     $  293,140  
Tangible Assets                                        
Total assets   $  3,190,453     $  3,100,760     $  3,074,790     $  3,081,083     $  2,989,838  
Adjustments:                                        
Goodwill      80,950        80,950        80,950        80,950        80,950  
Other intangibles      6,038        6,276        6,521        6,770        7,031  
Tangible assets   $  3,103,465     $  3,013,534     $  2,987,319     $  2,993,363     $  2,901,857  
                                         
Common shares outstanding      24,859        24,859        24,833        24,833        22,063  
                                         
Book value per share   $  19.0     $  18.6     $  18.2     $  18.0     $  17.3  
Tangible book value per share   $  15.5     $  15.0     $  14.7     $  14.4     $  13.3  
                                         
Total shareholders’ equity to total assets      14.8      14.9 %      14.7 %      14.5 %      12.8 %
Tangible equity to tangible assets      12.4      12.4 %      12.2 %      12.0 %      10.1 %
Investor Relations:

James L. Sturgeon
281.325.5013
investors@CBoTX.com

Media Contact:

Ashley Warren
713.210.7622
awarren@CBoTX.com

CBTX Inc_RGB.jpg

Source: CommunityBank of Texas, N.A.