Norton Rose Fulbright
0001473844false00014738442020-10-282020-10-28

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 28, 2020

CBTX, Inc.

(Exact name of registrant as specified in its charter)

Texas

001-38280

20-8339782

(State or other jurisdiction of

(Commission File Number)

(I.R.S. Employer

incorporation or organization)

Identification No.)

9 Greenway Plaza, Suite 110

Houston, Texas 77046

(Address of principal executive offices)

(713) 210-7600

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.01 per share

CBTX

The Nasdaq Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§230.12b-2 of this chapter).

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Item 2.02 Results of Operations and Financial Condition.

On October 28, 2020, CBTX, Inc. issued a press release announcing its financial results for the quarter ended September 30, 2020.  A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information furnished in Item 2.02 of this Form 8-K and Exhibit 99.1 to such report shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any registration statement or other filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number

Description of Exhibit

99.1

Press Release of CBTX, Inc. dated October 28, 2020.

104

Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded with the Inline XBRL document.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

CBTX, Inc.

Date: October 28, 2020

By:

/s/ Robert T. Pigott, Jr.

Robert T. Pigott, Jr.

Senior Executive Vice President and

Chief Financial Officer

Graphic

Exhibit 99.1

CBTX, Inc. Reports Third quarter Financial Results

Houston, Texas, October 28, 2020 -- 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 $6.4 million, or $0.26 per diluted share, for the quarter ended September 30, 2020, compared to $2.2 million, or $0.09 per diluted share, for the quarter ended June 30, 2020 and $13.1 million, or $0.52 per diluted share, for the quarter ended September 30, 2019.

Robert R. Franklin, Jr., Chairman, CEO and President of the Company remarked, “During the third quarter, we continued to work through the impact of the pandemic on our operations and the economy. The quarter provided us more visibility into the relationships that had entered into deferrals and the impact of the shutdown on their businesses. We are pleased that our markets are opening cautiously including the more affected industries such as schools, restaurants and hotels. We believe that the fourth quarter will be one of caution as we begin to see more clearly the longer-term effect of the pandemic.”

Mr. Franklin added, “As we move through the fourth quarter, we will stay close to our borrowers to understand the stresses they may be experiencing. We will also be watchful around the economic uncertainty that may be created by our contentious political climate and the outcomes of the upcoming elections. We will continue to build reserve as needed and recognize real time our stressed relationships. Although challenges remain, we are using our experiences gained in past difficult times as we seek to identify and address any potential problematic credits through classifications and plans with our customers.”

Mr. Franklin continued, “Our capital remains strong, we continued our dividend program and we resumed our buyback program during the third quarter. Although we remain watchful, we believe that our experience, relationships and focus will provide us continued opportunities in the fourth quarter and into 2021. We are optimistic about the new year as the world learns to live with COVID-19. Our great bank family has done an excellent job continuing to provide the great service our customers have come to expect throughout the current stresses both at home and at work. It is in times like these that our team shines the brightest.”

Highlights

Net income was $6.4 million for the third quarter of 2020, an increase of $4.3 million compared to the second quarter of 2020 and a decrease of $6.7 million for the third quarter of 2020 compared to the third quarter of 2019 primarily due to fluctuations in the provision for credit losses.
The provision for credit losses was $4.1 million for the third quarter of 2020, compared to $9.9 million for the second quarter of 2020 and $579,000 for the third quarter of 2019. The increase in 2020 was primarily due to the impact of COVID-19 and the sustained instability of the oil and gas industry on current and forecasted economic factors and increased adversely graded loans.
The allowance for credit losses, or ACL, for loans increased to $44.1 million at September 30, 2020, compared to $39.7 million at June 30, 2020 and $25.6 million at September 30, 2019.
Loans on COVID-19 related deferral arrangements decreased to 41 loans with total principal outstanding of $82.4 million as of September 30, 2020, down from 689 loans with total principal outstanding of $545.0 million as of June 30, 2020. A total of 16 of the 41 loans on deferral arrangements at the end of the third quarter were scheduled to return to payment in October of 2020.
Net interest margin on a tax equivalent basis was 3.55% for the quarter ended September 30, 2020, compared to 3.68% for the quarter ended June 30, 2020 and 4.43% for the quarter ended September 30, 2019.  
Maintained strong capital ratios with the Company’s total risk-based capital ratio being 16.67% at September 30, 2020, compared to 16.56% at June 30, 2020 and 15.88% at September 30, 2019.

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Operating Results

Net Interest Income

Net interest income was $31.7 million for the third quarter of 2020, compared to $32.2 million for the second quarter of 2020 and $34.6 million for the third quarter of 2019. Net interest income decreased $450,000 during the third quarter of 2020, compared to the second quarter of 2020, primarily due to lower rates on loans and other securities, partially offset by the impact of increased average loans and lower rates on interest-bearing deposits. Net interest income decreased $2.9 million during the third quarter of 2020, compared to the third quarter of 2019, primarily due to lower rates on loans and other interest-earning assets and higher average interest-bearing deposits, partially offset by the impact of increased average loans and other interest earning-assets and lower rates on interest-bearing deposits.

The yield on interest-earning assets was 3.75% for the third quarter of 2020, compared to 3.91% for the second quarter of 2020 and 4.98% for the third quarter of 2019. The cost of interest-bearing liabilities was 0.46% for the third quarter of 2020, 0.52% for the second quarter of 2020 and 1.12% for the third quarter of 2019. Yields on interest-earning assets decreased, and the costs of interest-bearing liabilities did not decrease to the same extent, which caused compression of the Company’s net interest margin on a tax equivalent basis to 3.55% for the third quarter of 2020, from 3.68% for the second quarter of 2020 and 4.43% for the third quarter of 2019.

Provision/Recapture for Credit Losses

The provision for credit losses was $4.1 million for the third quarter of 2020, compared to $9.9 million for the second quarter of 2020 and $579,000 for the third quarter of 2019. The increase in the provision for credit losses during 2020 was primarily due to the impact of COVID-19 and the sustained instability of the oil and gas industry during such periods on the local and national economy and on current and forecasted economic factors and an increase in adversely graded loans.

The ACL for loans was $44.1 million, or 1.49% of total loans, at September 30, 2020, compared to $39.7 million, or 1.35% of total loans, at June 30, 2020 and $25.6 million, or 0.96% of total loans, at September 30, 2019. The increase in the ACL for loans was primarily due to the impact of COVID-19 and the sustained instability of the oil and gas industry on current and forecasted economic factors during 2020 and an increase in adversely graded loans.

The liability associated with the ACL for unfunded commitments was $4.5 million at September 30, 2020, compared to $5.0 million at June 30, 2020 and $378,000 at September 30, 2019. The increase in 2020 was primarily due to the adoption of Accounting Standards Update, or ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, or CECL, effective January 1, 2020, the impact of COVID-19 and the sustained instability of the oil and gas industry, as noted above.

Noninterest Income

Noninterest income was $4.0 million for the third quarter of 2020, $2.9 million for the second quarter of 2020 and $4.1 million for the third quarter of 2019. The increase in noninterest income during the third quarter of 2020, as compared to the second quarter of 2020 and third quarter of 2019 was primarily due to nontaxable death proceeds of $2.0 million received under bank-owned life insurance policies. The Company recorded a gain of $769,000 over the carrying value during the third quarter of 2020.

Noninterest Expense

Noninterest expense was $23.9 million for the third quarter of 2020, compared to $22.5 million for the second quarter of 2020 and $22.0 million for the third quarter of 2019. The increase in noninterest expense of $1.4 million between the third and second quarter of 2020 was primarily due to increased professional and director fees, mainly consulting fees related to Bank Secrecy Act/Anti-Money Laundering, or BSA/AML, compliance  matters, and increased salaries and employee benefits.

The increase in noninterest expense of $1.8 million between the third quarter of 2020 and the third quarter of 2019 primarily related to an increase in professional and director fees, mainly consulting fees related to BSA/AML matters, increased regulatory fees and increased salaries and employee benefits.

Income Taxes

2


Income tax expense was $1.3 million for the third quarter of 2020, $539,000 for the second quarter of 2020 and $3.0 million for the third quarter of 2019. The effective tax rates were 17.31% for the third quarter of 2020, 19.95% for the second quarter of 2020 and 18.61% for the third quarter of 2019. The differences between the federal statutory rate of 21% and the effective tax rates were largely attributable to permanent differences primarily related to tax exempt interest and bank-owned life insurance earnings.

Balance Sheet Highlights

Loans

Loans, excluding loans held for sale, were $3.0 billion at September 30, 2020, $2.9 billion at June 30, 2020 and $2.7 billion at September 30, 2019.

In support of customers impacted by COVID-19, the Company offered relief through payment deferrals. The deferral periods range from one to six-months, with the majority of the deferrals involving three-month arrangements. As of September 30, 2020, the Company had 41 loans on deferral with total outstanding principal of $82.4 million, down from 689 loans on deferral with total outstanding principal of $545.0 million as of June 30, 2020.

Asset Quality

Nonperforming assets remain low at $15.6 million, or 0.41% of total assets, at September 30, 2020, $11.2 million, or 0.29% of total assets, at June 30, 2020 and $1.1 million, or 0.03% of total assets, at September 30, 2019. The increase in nonperforming assets during the third quarter of 2020 is primarily related to two loans totaling $5.0 million.

During the nine months ended September 30, 2020, 37 loans totaling $36.4 million were restructured as troubled debt restructurings, or TDRs, which include 35 loans totaling $36.0 million that were provided a deferral arrangement as the borrower was impacted by the COVID-19 pandemic and resultant economic circumstances.  As of September 30, 2020, eight of these 35 TDRs were still on a deferral arrangement and had principal balances totaling $14.4 million.

Annualized net charge-offs to average loans were 0.02% for the third quarter of 2020, 0.01% for the second quarter of 2020 and 0.05% for the third quarter of 2019.

Deposits and Borrowings

Total deposits were $3.2 billion at September 30, 2020, $3.3 billion at June 30, 2020 and $2.7 billion at September 30, 2019.

The Company defines total borrowings as the total of repurchase agreements, Federal Home Loan Bank advances and notes payable. Total borrowings were $52.2 million, $52.5 million and $121.2 million at September 30, 2020, June 30, 2020 and September 30, 2019, respectively. Borrowings fluctuated between the third quarter of 2020 and third quarter of 2019 due to increased Federal Home Loan Bank advances to fund loan growth in 2019.

Capital

At September 30, 2020, the Company continued to be well capitalized and maintained strong capital ratios under bank regulatory requirements. The Company’s total risk-based capital ratio was 16.67% at September 30, 2020, compared to 16.56% at June 30, 2020, and 15.88% at September 30, 2019. The Company’s Tier 1 leverage ratio was 11.90% at September 30, 2020, compared to 11.96% at June 30, 2020, and 13.23% at September 30, 2019. The Company’s total shareholders’ equity to total assets ratio was 14.18% at September 30, 2020, 13.77% at June 30, 2020 and 15.31% at September 30, 2019.

The ratio of tangible equity to tangible assets was 12.22% at September 30, 2020, 11.84% at June 30, 2020 and 13.13% at September 30, 2019. Tangible equity to tangible assets is a non-GAAP financial measure. The most directly comparable financial measure calculated in accordance with United States generally accepted accounting principles, or GAAP, to tangible equity to tangible assets is total shareholders’ equity to total assets. See the table captioned “Non-GAAP to GAAP Reconciliation” at the end of this press release.

3


Non-GAAP Financial Measures

The Company’s accounting and reporting policies conform to GAAP and the prevailing practices in the banking industry. The Company’s management also evaluates performance based on certain non-GAAP financial measures. The Company classifies a financial measure as being a non-GAAP financial measure if that financial measure excludes or includes amounts, or is subject to adjustments that have the effect of excluding or including amounts, that are not included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP as in effect from time to time in the United States in our statements of income, balance sheets or statements of cash flows.

This press release contains certain non-GAAP financial measures including “tangible book value,” “tangible book value per common share,” and “tangible equity to tangible assets,” which are supplemental measures that are not required by, or are not presented in accordance with, GAAP. Non-GAAP financial measures do not include operating, other statistical measures or ratios calculated using exclusively financial measures calculated in accordance with GAAP. Non-GAAP financial measures should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the way we calculate the non-GAAP financial measures may differ from that of other companies reporting measures with similar names.

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

Conference Call Information

The Company will hold a conference call to discuss results for the quarter ended September 30, 2020 on October 29, 2020 at 8:00 a.m. Central Standard Time. Investors and interested parties may listen to the teleconference via telephone by calling (877) 620-1733 if calling from the U.S. or Canada (or (470) 414-9785 if calling from outside the U.S.).  The conference call ID number is 9087182. To access the live webcast of the conference call, individuals can visit the Investor Relations page of the Company’s website: https://ir.cbtxinc.com/events-and-presentations. An archived edition of the earnings webcast will also be posted on the Company’s website later that day and will remain available to interested parties via the same link for one year.  

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

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.8 billion asset bank, offering commercial banking solutions to small and mid-sized businesses and professionals in Houston, Dallas, Beaumont and surrounding communities in Texas. Visit www.communitybankoftx.com for more information.

Forward-Looking Statements

This release may contain certain forward-looking statements within the meaning of the securities laws that are based on various facts and derived utilizing important assumptions, current expectations, estimates and projections about the Company and its subsidiary. Forward-looking statements include information regarding the Company’s future financial performance, business and growth strategy, projected plans and objectives, as well as projections of macroeconomic and industry trends, which are inherently unreliable due to the multiple factors that impact economic trends, and any such variations may be material. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts, although not all forward-looking statements include the foregoing. Further, certain factors that could affect our future results and cause actual results to differ materially from those expressed in the forward-looking statements include, but are not limited to: whether the Company can: manage the economic risks related to the impact of COVID-19 and the sustained instability of the oil and gas industry (including risks related to its customers’ credit quality,

4


deferrals and modifications to loans, the Company’s ability to borrow, and the impact of a resultant recession generally), and other hazards such as natural disasters and adverse weather, acts of war or terrorism, other pandemics, an outbreak of  hostilities or other international or domestic calamities and the governmental or military response thereto, and other matters beyond the Company’s control; the geographic concentration of our markets in Beaumont and Houston, Texas; whether the Company can manage changes and the continued health or availability of management personnel; the amount of nonperforming and classified assets that the Company holds and the efforts to resolve the nonperforming assets; deterioration of its asset quality; interest rate risks associated with the Company’s business; business and economic conditions generally and in the financial services industry, nationally and within the Company’s primary markets; volatility and direction of oil prices, including risks related to the instability of oil prices, and the strength of the energy industry, generally and within Texas; the composition of the Company’s loan portfolio, including the identity of its borrowers and the concentration of loans in specialized industries, especially the creditworthiness of energy company borrowers; changes in the value of collateral securing the loans; the Company’s ability to maintain important deposit customer relationships and the Company’s reputation; the Company’s ability to maintain effective internal control over financial reporting; the Company’s ability to pursue available remedies in the event of a loan default for loans under the PPP and the risk of holding the PPP loans at unfavorable interest rates as compared to the loans to customers that we would have otherwise lent to; the volatility and direction of market interest rates; liquidity risks associated with the Company’s business; systems failures, interruptions or breaches involving the Company’s information technology and telecommunications systems or third-party servicers; the failure of certain third-party vendors to perform; the institution and outcome of litigation and other legal proceedings against the Company or to which it may become subject; operational risks associated with the Company’s business; the costs, effects and results of regulatory examinations, investigations, including the ongoing investigation by the Financial Crimes Enforcement Network, or FinCEN, of the U.S. Department of Treasury, or reviews or the ability to obtain the required regulatory approvals; the Company’s ability to meet the requirements of its Formal Agreement with the Office of the Comptroller of the Currency, and the risk that such Formal Agreement may have a negative impact on the Company’s financial performance and results of operations; changes in the laws, rules, regulations, interpretations or policies relating to financial institution, accounting, tax, trade, monetary and fiscal matters; governmental or regulatory responses to the COVID-19 pandemic and newly enacted fiscal stimulus that impact the Company’s loan portfolio and forbearance practice; and other governmental interventions in the U.S. financial system that may impact how the Company achieves its performance goals. Additionally, many of these risks and uncertainties are currently elevated by and may or will continue to be elevated by the COVID-19 pandemic. The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or 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.

5


CBTX, INC. AND SUBSIDIARY

Financial Highlights

(In thousands, except per share data and percentages)

Three Months Ended

Nine Months Ended

    

9/30/2020

    

6/30/2020

    

3/31/2020

    

12/31/2019

    

9/30/2019

    

9/30/2020

9/30/2019

Profitability:

Net income

$

6,421

$

2,163

$

7,541

$

12,636

$

13,076

$

16,125

$

37,881

Basic earnings per share

$

0.26

$

0.09

$

0.30

$

0.51

$

0.52

$

0.65

$

1.52

Diluted earnings per share

$

0.26

$

0.09

$

0.30

$

0.50

$

0.52

$

0.65

$

1.51

Return on average assets(1)

0.66%

0.23%

0.87%

1.43%

1.53%

0.58%

1.52%

Return on average shareholders' equity(1)

4.70%

1.60%

5.64%

9.40%

9.92%

3.97%

9.95%

Net interest margin- tax equivalent(1)

3.55%

3.68%

4.06%

4.18%

4.43%

3.76%

4.51%

Efficiency ratio(2)

66.77%

64.15%

60.44%

58.96%

56.98%

63.76%

58.09%

Liquidity and Capital Ratios:

Total shareholders' equity to total assets

14.18%

13.77%

15.67%

15.40%

15.31%

14.18%

15.31%

Tangible equity to tangible assets(3)

12.22%

11.84%

13.51%

13.26%

13.13%

12.22%

13.13%

Common equity tier 1 capital ratio

15.41%

15.30%

15.23%

15.52%

14.99%

15.41%

14.99%

Tier 1 risk-based capital ratio

15.41%

15.30%

15.23%

15.52%

14.99%

15.41%

14.99%

Total risk-based capital ratio

16.67%

16.56%

16.42%

16.41%

15.88%

16.67%

15.88%

Tier 1 leverage ratio

11.90%

11.96%

13.18%

13.11%

13.23%

11.90%

13.23%

Credit Quality:

Allowance for credit losses for loans to total loans

1.49%

1.35%

1.17%

0.96%

0.96%

1.49%

0.96%

Nonperforming assets to total assets

0.41%

0.29%

0.04%

0.03%

0.03%

0.41%

0.03%

Nonperforming loans to total loans

0.53%

0.38%

0.05%

0.04%

0.04%

0.53%

0.04%

Net charge-offs (recoveries) to average loans(1)

0.02%

0.01%

(0.05%)

0.02%

0.05%

0.03%

Other Data:

Weighted average common shares outstanding - basic

24,748

24,752

24,926

24,951

24,923

24,808

24,918

Weighted average common shares outstanding - diluted

24,770

24,780

25,000

25,071

25,046

24,847

25,053

Common shares outstanding at period end

24,713

24,755

24,746

24,980

24,923

24,713

24,923

Dividends per share

$

0.10

$

0.10

$

0.10

$

0.10

$

0.10

$

0.30

$

0.30

Book value per share

$

21.89

$

21.71

$

21.70

$

21.45

$

21.07

$

21.89

$

21.07

Tangible book value per share(3)

$

18.44

$

18.26

$

18.23

$

18.01

$

17.62

$

18.44

$

17.62

Employees - full-time equivalents

515

523

512

500

504

515

504


(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.

6


CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

(In thousands)

Balance Sheet Data (at period end):

    

9/30/2020

    

6/30/2020

3/31/2020

12/31/2019

9/30/2019

Loans, excluding loans held for sale

$

2,964,526

$

2,934,888

$

2,671,587

$

2,639,085

$

2,676,824

Allowance for credit losses for loans

(44,069)

(39,678)

(31,194)

(25,280)

(25,576)

Loans, net

2,920,457

2,895,210

2,640,393

2,613,805

2,651,248

Cash and equivalents

377,572

492,400

284,898

372,064

289,399

Securities

226,101

235,438

234,014

231,262

228,061

Premises and equipment

61,732

50,729

50,243

50,875

51,183

Goodwill

80,950

80,950

80,950

80,950

80,950

Other intangible assets

4,303

4,496

4,700

4,938

5,106

Loans held for sale

1,763

-

882

1,463

-

Operating lease right-to-use asset

12,893

14,081

12,577

12,926

12,864

Other assets

128,901

128,421

116,993

110,261

112,774

Total assets

$

3,814,672

$

3,901,725

$

3,425,650

$

3,478,544

$

3,431,585

Noninterest-bearing deposits

$

1,460,983

$

1,513,748

$

1,195,541

$

1,184,861

$

1,196,720

Interest-bearing deposits

1,709,681

1,740,455

1,596,692

1,667,527

1,547,607

Total deposits

3,170,664

3,254,203

2,792,233

2,852,388

2,744,327

Federal Home Loan Bank advances

50,000

50,000

50,000

50,000

120,000

Repurchase agreements

2,153

2,500

1,415

485

1,208

Operating lease liabilities

15,759

16,983

15,356

15,704

15,513

Other liabilities

35,175

40,683

29,772

24,246

25,317

Total liabilities

3,273,751

3,364,369

2,888,776

2,942,823

2,906,365

Total shareholders’ equity

540,921

537,356

536,874

535,721

525,220

Total liabilities and shareholders’ equity

$

3,814,672

$

3,901,725

$

3,425,650

$

3,478,544

$

3,431,585

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CBTX, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Income

(In thousands)

Three Months Ended

Nine Months Ended

    

9/30/2020

    

6/30/2020

    

3/31/2020

    

12/31/2019

    

9/30/2019

    

9/30/2020

    

9/30/2019

Interest income

 

  

  

  

  

  

  

  

Interest and fees on loans

$

32,318

$

32,857

$

33,617

$

35,634

$

36,353

$

98,792

$

105,754

Securities

 

1,107

 

1,228

 

1,363

 

1,442

 

1,436

 

3,698

 

4,512

Other interest-earning assets

 

176

 

169

 

1,055

 

1,279

 

1,212

 

1,400

 

4,054

Equity investments

162

171

176

213

192

509

507

Total interest income

 

33,763

 

34,425

 

36,211

 

38,568

 

39,193

 

104,399

 

114,827

Interest expense

 

  

 

  

 

  

 

  

 

  

 

  

 

Deposits

 

1,831

 

2,022

 

3,766

 

4,463

 

4,130

 

7,619

 

11,536

Federal Home Loan Bank advances

221

240

221

316

483

682

1,070

Repurchase agreements

1

1

1

3

Note payable and junior subordinated debt

 

3

 

4

 

4

 

3

 

4

 

11

 

16

Total interest expense

 

2,055

 

2,267

 

3,991

 

4,782

 

4,618

 

8,313

 

12,625

Net interest income

 

31,708

 

32,158

 

32,220

 

33,786

 

34,575

 

96,086

 

102,202

Provision (recapture) for credit losses

 

Provision (recapture) for credit losses for loans

4,569

 

8,537

 

4,739

 

(148)

 

579

 

17,845

 

2,533

Provision (recapture) for credit losses for unfunded commitments

(461)

1,333

310

1,182

Total provision (recapture) for credit losses

4,108

9,870

5,049

(148)

579

19,027

2,533

Net interest income after provision (recapture) for credit losses

 

27,600

 

22,288

 

27,171

 

33,934

 

33,996

 

77,059

 

99,669

Noninterest income

 

  

 

  

 

  

 

  

 

  

 

  

 

Deposit account service charges

 

1,176

 

1,095

 

1,485

 

1,587

 

1,681

 

3,756

 

4,967

Card interchange fees

 

995

 

915

 

922

 

1,007

 

908

 

2,832

 

2,713

Earnings on bank-owned life insurance

 

1,187

 

412

 

416

 

430

 

430

 

2,015

 

4,581

Net gain on sales of assets

 

114

 

139

 

123

 

305

 

190

 

376

 

347

Other

 

551

 

348

 

1,381

 

388

 

906

 

2,280

 

2,303

Total noninterest income

 

4,023

 

2,909

 

4,327

 

3,717

 

4,115

 

11,259

 

14,911

Noninterest expense

 

  

 

  

 

  

 

  

 

  

 

  

 

Salaries and employee benefits

 

14,332

 

14,012

 

14,223

 

14,264

 

13,951

 

42,567

 

41,958

Occupancy expense

 

2,496

 

2,558

 

2,424

 

2,417

 

2,484

 

7,478

 

7,089

Professional and director fees

 

2,446

 

1,541

 

1,152

 

1,220

 

1,455

 

5,139

 

5,828

Data processing and software

1,525

1,292

1,222

1,074

1,121

4,039

3,361

Regulatory fees

 

471

 

476

 

103

 

84

 

144

 

1,050

 

1,054

Advertising, marketing and business development

 

429

 

269

 

364

 

452

 

407

 

1,062

 

1,379

Telephone and communications

486

392

419

506

434

1,297

1,268

Security and protection expense

 

299

 

351

 

374

 

364

 

410

 

1,024

 

1,100

Amortization of intangibles

 

198

 

230

 

221

 

216

 

221

 

649

 

678

Other expenses

 

1,176

 

1,374

 

1,587

 

1,513

 

1,418

 

4,137

 

4,318

Total noninterest expense

 

23,858

 

22,495

 

22,089

 

22,110

 

22,045

 

68,442

 

68,033

Net income before income tax expense

 

7,765

 

2,702

 

9,409

 

15,541

 

16,066

 

19,876

 

46,547

Income tax expense

 

1,344

 

539

 

1,868

 

2,905

 

2,990

 

3,751

 

8,666

Net income

$

6,421

$

2,163

$

7,541

$

12,636

$

13,076

$

16,125

$

37,881

8


CBTX, INC. AND SUBSIDIARY

Net Interest Margin

(In thousands, except percentages)

Three Months Ended

9/30/2020

6/30/2020

9/30/2019

Average

Interest

Average

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Assets

Interest-earning assets:

 

  

 

  

 

  

  

 

  

 

  

  

 

  

 

  

Total loans(2)

$

2,945,320

$

32,318

 

4.37%

$

2,908,204

$

32,857

 

4.54%

$

2,655,941

$

36,353

 

5.43%

Securities

 

236,015

 

1,107

 

1.87%

 

240,343

 

1,228

 

2.05%

 

234,525

 

1,436

 

2.41%

Other interest-earning assets

 

383,626

 

176

 

0.18%

 

378,405

 

169

 

0.18%

 

215,900

 

1,212

 

2.25%

Equity investments

 

15,334

 

162

 

4.20%

 

15,147

 

171

 

4.54%

 

16,154

 

192

 

4.72%

Total interest-earning assets

 

3,580,295

$

33,763

 

3.75%

 

3,542,099

$

34,425

 

3.91%

 

3,122,520

$

39,193

 

4.98%

Allowance for credit losses for loans

 

(40,135)

 

  

 

  

 

(31,443)

 

  

 

  

 

(25,422)

 

  

 

  

Noninterest-earning assets

 

326,590

 

  

 

  

 

305,821

 

  

 

  

 

296,861

 

  

 

  

Total assets

$

3,866,750

 

  

 

  

$

3,816,477

 

  

 

  

$

3,393,959

 

  

 

  

Liabilities and Shareholders’ Equity

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Interest-bearing liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Interest-bearing deposits

$

1,730,812

$

1,831

 

0.42%

$

1,687,991

$

2,022

 

0.48%

$

1,557,503

$

4,130

 

1.05%

Federal Home Loan Bank advances

 

50,000

 

221

 

1.76%

 

70,769

 

240

 

1.36%

 

83,804

 

483

 

2.29%

Repurchase agreements

2,230

2,101

1

0.19%

1,043

1

0.38%

Note payable and junior subordinated debt

 

 

3

 

 

 

4

 

 

 

4

 

Total interest-bearing liabilities

 

1,783,042

$

2,055

 

0.46%

 

1,760,861

$

2,267

 

0.52%

 

1,642,350

$

4,618

 

1.12%

Noninterest-bearing liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

Noninterest-bearing deposits

 

1,484,557

 

  

 

  

 

1,462,271

 

  

 

  

 

1,189,087

 

  

 

  

Other liabilities

 

55,386

 

  

 

  

 

49,958

 

  

 

  

 

39,775

 

  

 

  

Total noninterest-bearing liabilities

 

1,539,943

 

  

 

  

 

1,512,229

 

  

 

  

 

1,228,862

 

  

 

  

Shareholders’ equity

 

543,765

 

  

 

  

 

543,387

 

  

 

  

 

522,747

 

  

 

  

Total liabilities and shareholders’ equity

$

3,866,750

 

  

 

  

$

3,816,477

 

  

 

  

$

3,393,959

 

  

 

  

Net interest income

 

  

$

31,708

 

  

 

  

$

32,158

 

  

 

  

$

34,575

 

  

Net interest spread(3)

 

  

 

  

 

3.29%

 

  

 

  

 

3.39%

 

  

 

  

 

3.86%

Net interest margin(4)

 

  

 

  

 

3.52%

 

  

 

  

 

3.65%

 

  

 

  

 

4.39%

Net interest margin—tax equivalent(5)

 

  

 

  

 

3.55%

 

  

 

  

 

3.68%

 

  

 

  

 

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, $247,000 and $257,000 for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, respectively, were computed using a federal income tax rate of 21%.

9


CBTX, INC. AND SUBSIDIARY

Year to Date Net Interest Margin

(In thousands, except percentages)

Nine Months Ended September 30,

2020

2019

Average

Interest

Average

Average

Interest

Average

Outstanding

Earned/

Yield/

Outstanding

Earned/

Yield/

(Dollars in thousands)

Balance

Interest Paid

Rate(1)

Balance

Interest Paid

Rate(1)

Assets

Interest-earning assets:

 

 

  

 

  

  

 

  

 

  

Total loans(2)

$

2,829,767

$

98,792

 

4.66%

$

2,583,454

$

105,754

 

5.47%

Securities

 

236,756

 

3,698

 

2.09%

 

233,913

4,512

 

2.58%

Other interest-earning assets

 

359,134

 

1,400

 

0.52%

 

224,123

4,054

 

2.42%

Equity investments

 

14,716

 

509

 

4.62%

 

14,419

507

 

4.70%

Total interest-earning assets

 

3,440,373

$

104,399

 

4.05%

 

3,055,909

$

114,827

 

5.02%

Allowance for credit losses for loans

 

(32,499)

 

  

 

  

 

(24,762)

 

  

 

  

Noninterest-earning assets

 

309,778

 

  

 

  

 

299,648

 

  

 

  

Total assets

$

3,717,652

 

  

 

  

$

3,330,795

 

  

 

  

Liabilities and Shareholders’ Equity

 

  

 

  

 

  

 

  

 

  

 

  

Interest-bearing liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

Interest-bearing deposits

$

1,689,772

$

7,619

 

0.60%

$

1,538,793

$

11,536

 

1.00%

Federal Home Loan Bank advances

 

56,898

 

682

 

1.60%

 

59,121

 

1,070

 

2.42%

Repurchase agreements

1,700

1

0.08%

1,256

3

0.32%

Note payable and junior subordinated debt

 

 

11

 

 

 

16

 

Total interest-bearing liabilities

 

1,748,370

$

8,313

 

0.64%

 

1,599,170

$

12,625

 

1.06%

Noninterest-bearing liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

Noninterest-bearing deposits

 

1,377,594

 

  

 

  

 

1,186,985

 

  

 

  

Other liabilities

 

48,881

 

  

 

  

 

35,791

 

  

 

  

Total noninterest-bearing liabilities

 

1,426,475

 

  

 

  

 

1,222,776

 

  

 

  

Shareholders’ equity

 

542,807

 

  

 

  

 

508,849

 

  

 

  

Total liabilities and shareholders’ equity

$

3,717,652

 

  

 

  

$

3,330,795

 

  

 

  

Net interest income

 

  

$

96,086

 

  

 

  

$

102,202

 

  

Net interest spread(3)

 

  

 

  

 

3.41%

 

  

 

  

 

3.96%

Net interest margin(4)

 

  

 

  

 

3.73%

 

  

 

  

 

4.47%

Net interest margin—tax equivalent(5)

 

  

 

  

 

3.76%

 

  

 

  

 

4.51%


(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 $754,000 and $770,000 for the nine months ended September 30, 2020 and 2019, respectively, were computed using a federal income tax rate of 21%.

10


CBTX, INC. AND SUBSIDIARY

Rate/Volume Analysis

(In thousands)