0001558370-21-013647 | 10-Q | XBRL Viewer

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Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2021	Oct. 25, 2021
Document and Entity Information [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Sep. 30, 2021
Entity File Number	001-38280
Entity Registrant Name	CBTX, Inc.
Entity Incorporation, State or Country Code	TX
Entity Tax Identification Number	20-8339782
Entity Address, Address Line One	9 Greenway Plaza, Suite 110
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77046
City Area Code	713
Local Phone Number	210-7600
Title of 12(b) Security	Common stock, par value $0.01 per share
Trading Symbol	CBTX
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		24,579,599
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q3
Entity Central Index Key	0001473844
Amendment Flag	false

Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Assets:
Cash and due from banks	$ 50,642	$ 46,814
Interest-bearing deposits at other financial institutions	948,143	491,193
Total cash and cash equivalents	998,785	538,007
Securities	359,539	237,281
Equity investments	17,349	18,652
Loans held for sale	327	2,673
Loans, net of allowance for credit losses of $32,208 and $40,637 at September 30, 2021 and December 31, 2020, respectively	2,576,194	2,883,480
Premises and equipment, net of accumulated depreciation of $38,332 and $35,826 at September 30, 2021 and December 31, 2020, respectively	59,235	61,152
Goodwill	80,950	80,950
Other intangible assets, net of accumulated amortization of $17,166 and $16,607 at September 30, 2021 and December 31, 2020, respectively	3,702	4,171
Bank-owned life insurance	72,771	72,338
Operating lease right-to-use assets	11,527	13,285
Deferred tax assets, net	9,760	10,700
Other assets	18,980	26,528
Total assets	4,209,119	3,949,217
Liabilities:
Noninterest-bearing deposits	1,628,144	1,476,425
Interest-bearing deposits	1,903,491	1,825,369
Total deposits	3,531,635	3,301,794
Federal Home Loan Bank advances	50,000	50,000
Operating lease liabilities	14,556	16,447
Other liabilities	48,335	34,525
Total liabilities	3,644,526	3,402,766
Commitments and contingencies (Note 16)
Shareholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, no shares issued
Common stock, $0.01 par value, 90,000,000 shares authorized, 25,263,594 and 25,458,816 shares issued at September 30, 2021 and December 31, 2020, respectively; 24,419,638 and 24,612,828 shares outstanding at September 30, 2021 and December 31, 2020, respectively	253	255
Additional paid-in capital	335,226	339,334
Retained earnings	241,012	214,456
Treasury stock, at cost, 843,956 and 845,988 shares held at September 30, 2021 and December 31, 2020, respectively	(14,334)	(14,369)
Accumulated other comprehensive income, net of tax of $648 and $1,801 at September 30, 2021 and December 31, 2020, respectively	2,436	6,775
Total shareholders' equity	564,593	546,451
Total liabilities and shareholders' equity	$ 4,209,119	$ 3,949,217

Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Balance Sheets
Allowance for credit losses on loans	$ 32,208	$ 40,637
Premises and equipment, accumulated depreciation	38,332	35,826
Other intangible assets, accumulated amortization	$ 17,166	$ 16,607
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	90,000,000	90,000,000
Common stock, shares issued	25,263,594	25,458,816
Common stock, shares outstanding	24,419,638	24,612,828
Treasury stock, shares	843,956	845,988
Accumulated other comprehensive income, tax	$ 648	$ 1,801

Statements of Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Statements of Income - USD ($) $ in Thousands	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Interest income
Interest and fees on loans	$ 30,765	$ 32,318	$ 94,723	$ 98,792
Securities	1,435	1,107	3,940	3,698
Interest-bearing deposits at other financial institutions	340	176	740	1,400
Equity investments	157	162	461	509
Total interest income	32,697	33,763	99,864	104,399
Interest expense
Deposits	1,227	1,831	3,844	7,619
Federal Home Loan Bank advances	221	221	663	682
Other interest-bearing liabilities		3		12
Total interest expense	1,448	2,055	4,507	8,313
Net interest income	31,249	31,708	95,357	96,086
Provision (recapture) for credit losses:
Provision (recapture) for credit losses for loans	(5,057)	4,569	(8,961)	17,845
Provision (recapture) for credit losses for unfunded commitments	162	(461)	(605)	1,182
Total provision (recapture) for credit losses	(4,895)	4,108	(9,566)	19,027
Net interest income after provision (recapture) for credit losses	36,144	27,600	104,923	77,059
Noninterest income
Total noninterest income	5,562	4,023	12,164	11,259
Noninterest expense
Salaries and employee benefits	15,000	14,332	43,922	42,567
Occupancy expense	2,660	2,496	7,778	7,478
Professional and director fees	1,567	2,446	5,711	5,139
Data processing and software	1,629	1,525	4,866	4,039
Regulatory fees	478	471	1,535	1,050
Advertising, marketing and business development	493	429	1,288	1,062
Telephone and communications	516	486	1,529	1,297
Security and protection expense	425	299	1,352	1,024
Amortization of intangibles	182	198	559	649
Other expenses	1,422	1,176	4,314	4,137
Total noninterest expense	24,372	23,858	72,854	68,442
Net income before income tax expense	17,334	7,765	44,233	19,876
Income tax expense	2,913	1,344	8,090	3,751
Net income	$ 14,421	$ 6,421	$ 36,143	$ 16,125
Earnings per common share
Basic	$ 0.59	$ 0.26	$ 1.48	$ 0.65
Diluted	$ 0.59	$ 0.26	$ 1.47	$ 0.65
Deposit account service charges
Noninterest income
Revenue from Contract with Customer, Excluding Assessed Tax	$ 1,352	$ 1,176	$ 3,712	$ 3,756
Card interchange fees
Noninterest income
Revenue from Contract with Customer, Excluding Assessed Tax	1,048	995	3,119	2,832
Earnings on bank-owned life insurance
Noninterest income
Revenue Not from Contract with Customer, Excluding Interest Income	2,323	1,187	3,103	2,015
Net gain on sales of assets
Noninterest income
Revenue from Contract with Customer, Excluding Assessed Tax	360	114	918	376
Other.
Noninterest income
Revenue from Contract with Customer, Excluding Assessed Tax	$ 479	$ 551	$ 1,312	$ 2,280

Statements of Comprehensive Income - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Statements of Comprehensive Income - USD ($) $ in Thousands	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statements of Comprehensive Income
Net income	$ 14,421	$ 6,421	$ 36,143	$ 16,125
Change in unrealized gains (losses) on securities available for sale arising during the period	(3,446)	(327)	(5,493)	5,010
Reclassification adjustments for net realized gains included in net income				10
Change in related deferred income tax	723	69	1,154	(1,055)
Other comprehensive income (loss), net of tax	(2,723)	(258)	(4,339)	3,965
Total comprehensive income	$ 11,698	$ 6,163	$ 31,804	$ 20,090

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

- Definition

Amount after tax and reclassification adjustments of other comprehensive income (loss).

+ References

+ Details

Statements of Changes in Shareholders Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-in Capital	Retained Earnings Cumulative effect of accounting changes from adoption	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	Cumulative effect of accounting changes from adoption	Total
Beginning balance at Dec. 31, 2019	$ 258	$ 346,559		$ 201,080	$ (14,562)	$ 2,386		$ 535,721
Beginning balance, shares at Dec. 31, 2019	25,837,048				(857,346)
Net income				16,125				16,125
Dividends on common stock, $0.10 and $0.30 per share and $0.13 and $0.39 per share for the three and nine months ended September 30, 2020 and 2021, respectively				(7,480)				(7,480)
Stock-based compensation expense		1,691						1,691
Vesting of restricted stock, net of shares withheld for employee tax liabilities		(45)						(45)
Vesting of restricted stock, net of shares withheld for employee tax liabilities, shares	13,050
Exercise of stock options, net of shares withheld for employee tax liabilities		(10)			$ 43			33
Exercise of stock options, net of shares withheld for employee tax liabilities, shares					2,524
Shares repurchased	$ (2)	(6,042)						(6,044)
Shares repurchased, shares	(282,363)
Other comprehensive income (loss), net of tax						3,965		3,965
Ending balance at Sep. 30, 2020	$ 256	342,153		206,680	$ (14,519)	6,351		540,921
Ending balance, shares at Sep. 30, 2020	25,567,735				(854,822)
Beginning balance at Jun. 30, 2020	$ 256	342,256		202,754	$ (14,519)	6,609		537,356
Beginning balance, shares at Jun. 30, 2020	25,609,456				(854,822)
Net income				6,421				6,421
Dividends on common stock, $0.10 and $0.30 per share and $0.13 and $0.39 per share for the three and nine months ended September 30, 2020 and 2021, respectively				(2,495)				(2,495)
Stock-based compensation expense		582						582
Vesting of restricted stock, net of shares withheld for employee tax liabilities		(1)						(1)
Vesting of restricted stock, net of shares withheld for employee tax liabilities, shares	197
Shares repurchased		(684)						(684)
Shares repurchased, shares	(41,918)
Other comprehensive income (loss), net of tax						(258)		(258)
Ending balance at Sep. 30, 2020	$ 256	342,153		206,680	$ (14,519)	6,351		540,921
Ending balance, shares at Sep. 30, 2020	25,567,735				(854,822)
CECL implementation, net of deferred tax asset			$ (3,045)				$ (3,045)
Beginning balance at Dec. 31, 2020	$ 255	339,334		214,456	$ (14,369)	6,775		546,451
Beginning balance, shares at Dec. 31, 2020	25,458,816				(845,988)
Net income				36,143				36,143
Dividends on common stock, $0.10 and $0.30 per share and $0.13 and $0.39 per share for the three and nine months ended September 30, 2020 and 2021, respectively				(9,587)				(9,587)
Stock-based compensation expense		1,813						1,813
Vesting of restricted stock, net of shares withheld for employee tax liabilities		(87)						(87)
Vesting of restricted stock, net of shares withheld for employee tax liabilities, shares	18,997
Exercise of stock options, net of shares withheld for employee tax liabilities		(11)			$ 35			24
Exercise of stock options, net of shares withheld for employee tax liabilities, shares					2,032
Shares repurchased	$ (2)	(5,823)						(5,825)
Shares repurchased, shares	(214,219)
Other comprehensive income (loss), net of tax						(4,339)		(4,339)
Ending balance at Sep. 30, 2021	$ 253	335,226		241,012	$ (14,334)	2,436		564,593
Ending balance, shares at Sep. 30, 2021	25,263,594				(843,956)
Beginning balance at Jun. 30, 2021	$ 253	335,399		229,785	$ (14,369)	5,159		556,227
Beginning balance, shares at Jun. 30, 2021	25,296,385				(845,988)
Net income				14,421				14,421
Dividends on common stock, $0.10 and $0.30 per share and $0.13 and $0.39 per share for the three and nine months ended September 30, 2020 and 2021, respectively				(3,194)				(3,194)
Stock-based compensation expense		698						698
Vesting of restricted stock, net of shares withheld for employee tax liabilities		(3)						(3)
Vesting of restricted stock, net of shares withheld for employee tax liabilities, shares	339
Exercise of stock options, net of shares withheld for employee tax liabilities		(11)			$ 35			24
Exercise of stock options, net of shares withheld for employee tax liabilities, shares					2,032
Shares repurchased		(857)						(857)
Shares repurchased, shares	(33,130)
Other comprehensive income (loss), net of tax						(2,723)		(2,723)
Ending balance at Sep. 30, 2021	$ 253	$ 335,226		$ 241,012	$ (14,334)	$ 2,436		$ 564,593
Ending balance, shares at Sep. 30, 2021	25,263,594				(843,956)

Statements of Changes in Shareholders Equity (Parentheticals) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Statements of Changes in Shareholders Equity
Dividends on Common Stock	$ 0.13	$ 0.10	$ 0.39	$ 0.30

Statements of Cash Flows - USD ($)	9 Months Ended
Statements of Cash Flows - USD ($)	Sep. 30, 2021	Sep. 30, 2020
Cash flows from operating activities:
Net income	$ 36,143,000	$ 16,125,000
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Provision (recapture) for credit losses	(9,566,000)	19,027,000
Depreciation expense	2,602,000	2,341,000
Amortization of intangibles	559,000	649,000
Amortization of premiums on securities	1,181,000	1,357,000
Amortization of lease right-to-use assets	1,141,000	1,100,000
Accretion of lease liabilities	294,000	352,000
Earnings on bank-owned life insurance	(3,103,000)	(2,015,000)
Stock-based compensation expense	1,813,000	1,691,000
Deferred income tax provision	2,094,000	(4,885,000)
Net gain on sales of assets	(918,000)	(376,000)
Net (earnings) loss on securities	12,000	(44,000)
Change in operating assets and liabilities:
Loans held for sale	3,191,000	14,000
Other assets	8,061,000	(11,888,000)
Other liabilities	11,476,000	5,137,000
Total adjustments	18,837,000	12,460,000
Net cash provided by operating activities	54,980,000	28,585,000
Cash flows from investing activities:
Purchases of securities	(630,233,000)	(493,825,000)
Proceeds from sales, calls and maturities of securities	453,260,000	453,665,000
Principal repayments of securities	48,029,000	49,038,000
Net increase in loans		(325,302,000)
Net decrease in loans	312,736,000
Net purchases of loan participations	(208,000)	(775,000)
Proceeds from sales of Small Business Administration loans	3,719,000	769,000
Net return of capital (contributions) to equity investments	1,303,000	(1,822,000)
Redemptions of bank-owned life insurance	2,670,000	1,965,000
Net purchases of premises and equipment	(710,000)	(13,223,000)
Proceeds from sales of repossessed real estate and other assets	112,000
Net cash provided by (used) in investing activities	190,678,000	(329,510,000)
Cash flows from financing activities:
Net increase in noninterest-bearing deposits	151,719,000	276,122,000
Net increase in interest-bearing deposits	78,122,000	42,154,000
Net increase in securities sold under agreements to repurchase		1,668,000
Dividends paid on common stock	(8,833,000)	(7,455,000)
Payments to tax authorities for stock-based compensation	(87,000)	(45,000)
Proceeds from exercise of stock options	24,000	33,000
Repurchase of common stock	(5,825,000)	(6,044,000)
Net cash provided by financing activities	215,120,000	306,433,000
Net increase in cash, cash equivalents and restricted cash	460,778,000	5,508,000
Cash, cash equivalents and restricted cash, beginning	538,007,000	372,064,000
Cash, cash equivalents and restricted cash, ending	$ 998,785,000	$ 377,572,000

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations—CBTX, Inc., or the Company or CBTX, operates 35 branches, 19 in the Houston market area, 15 in the Beaumont/East Texas market area and one in Dallas, through its wholly-owned subsidiary, CommunityBank of Texas, N.A., or the Bank. The Bank provides relationship-driven commercial banking products and services primarily to small and mid-sized businesses and professionals with operations within the Bank’s markets.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP, but do not include all the information and footnotes required for complete consolidated financial statements. In management’s opinion, these interim unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair statement of the Company’s consolidated financial position at September 30, 2021 and December 31, 2020, consolidated results of operations and consolidated shareholders’ equity for the three and nine months ended September 30, 2021 and 2020 and consolidated cash flows for the nine months ended September 30, 2021 and 2020.

Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end and the results for the interim periods shown in this report are not necessarily indicative of results to be expected for the full year due in part to global economic and financial market conditions, interest rates, access to sources of liquidity, market competition and interruptions of business processes. These interim unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included within the Company’s Annual Report on Form 10-K.

Reclassification—Within interest expense for 2020, repurchase agreements and note payable and junior subordinated debt have been combined together under the caption “other interest-bearing liabilities”. These reclassifications were made to conform to the 2021 financial statement presentation in the condensed consolidated statements of income.

Share Repurchase Program—During the nine months ended September 30, 2021, 214,219 shares were repurchased under the Company’s share repurchase program at an average price of $27.19 per share. During the nine months ended September 30, 2020, 282,363 shares were repurchased at an average price of $21.41. Shares repurchased during 2021 and 2020 were retired and returned to the status of authorized but unissued shares.

Accounting Standards Recently Adopted—Accounting standards update, or ASU, 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate, or LIBOR, or another reference rate expected to be discontinued if certain criteria are met. LIBOR is used as an index rate for a majority of the Company’s interest-rate swaps and 8.8% of the Company’s loans as of September 30, 2021.

If reference rates are discontinued, the existing contracts will be modified to replace the discontinued rate with a replacement rate. For accounting purposes, such contract modifications would have to be evaluated to determine whether the modified contract is a new contract or a continuation of an existing contract. If they are considered new contracts, the previous contract would be extinguished resulting in the acceleration of previously deferred fees and costs. Under one of the optional expedients of ASU 2020-04, modifications of contracts within the scope of Topic 310, Receivables, and 470, Debt, will be accounted for by prospectively adjusting the effective interest rates and no such evaluation is required. When elected, the optional expedient for contract modifications must be applied consistently for all eligible contracts or eligible

transactions. The expedients and exceptions in this update are available to all entities starting March 12, 2020 through December 31, 2022. The Company began modifying LIBOR based loans during 2020 and applied the expedients and exceptions. The adoption of this ASU did not have a material effect on the Company, nor does the Company expect it to have a material effect in the future.

Cash Flow Reporting—Historically, the Bank has been required to maintain regulatory reserves with the Federal Reserve Bank of Dallas, or the Federal Reserve Bank. On March 15, 2020, the Board of Governors of the Federal Reserve System announced that it had reduced the required regulatory reserve balance to 0% effective on March 26, 2020 in reaction to the economic dislocation caused by the COVID-19 pandemic. As such, the Bank did not have any reserve requirement balances as of September 30, 2021 and December 31, 2020.

As of September 30, 2021 and December 31, 2020, the Company had $4.0 million and $8.4 million, respectively, in cash held as collateral on deposit with other financial institution counterparties related to interest rate swap transactions. Reserves maintained with the Federal Reserve Bank and cash held as collateral for interest rate swap transactions are considered restricted cash.

Supplemental disclosures of cash flow information were as follows for the periods indicated below:


	Nine Months Ended September 30,
(Dollars in thousands)	2021		2020
Supplemental disclosures of cash flow information:
Cash paid for taxes	$	4,559	$	9,207
Cash paid for interest		4,694		8,661
Supplemental disclosures of non-cash flow information:
Operating lease right-to-use asset increased (decreased) exchange for lease liabilities		(617)		1,067
Change in liability for dividends accrued		(755)		(25)

SECURITIES

9 Months Ended

Sep. 30, 2021

SECURITIES.

SECURITIES

NOTE 2: SECURITIES

The amortized cost, related gross unrealized gains and losses and fair values of investments in securities as of the dates shown below were as follows:


			Gross		Gross
	Amortized		Unrealized		Unrealized
(Dollars in thousands)	Cost		Gains		Losses		Fair Value
September 30, 2021
Debt securities available for sale:
State and municipal securities	$	151,939	$	3,566	$	(1,485)	$	154,020
U.S. Treasury securities		11,885		23		(1)		11,907
U.S. agency securities:
Callable debentures		3,000		9		—		3,009
Collateralized mortgage obligations		41,018		127		(520)		40,625
Mortgage-backed securities		147,433		2,390		(1,026)		148,797
Equity securities		1,187		—		(6)		1,181
Total	$	356,462	$	6,115	$	(3,038)	$	359,539
December 31, 2020
Debt securities available for sale:
State and municipal securities	$	88,741	$	4,296	$	—	$	93,037
U.S. agency securities:
Collateralized mortgage obligations		35,085		347		(30)		35,402
Mortgage-backed securities		103,686		3,963		—		107,649
Equity securities		1,176		17		—		1,193
Total	$	228,688	$	8,623	$	(30)	$	237,281

The amortized cost and estimated fair value of securities, by contractual maturities, as of the dates shown below were as follows:


(Dollars in thousands)	1 Year or Less		After 1 Year to 5 Years		After 5 Years to 10 Years		After 10 Years		Total
September 30, 2021
Amortized cost:
Debt securities available for sale:
State and municipal securities	$	884	$	—	$	12,774	$	138,281	$	151,939
U.S. Treasury securities		—		3,054		8,831		—		11,885
U.S. agency securities:
Callable debentures		—		—		3,000		—		3,000
Collateralized mortgage obligations		—		—		4,367		36,651		41,018
Mortgage-backed securities		—		1,113		2,201		144,119		147,433
Equity securities		1,187		—		—		—		1,187
Total	$	2,071	$	4,167	$	31,173	$	319,051	$	356,462
Fair value:
Debt securities available for sale:
State and municipal securities	$	886	$	—	$	13,375	$	139,759	$	154,020
U.S. Treasury securities		—		3,056		8,851		—		11,907
U.S. agency securities:
Callable debentures		—		—		3,009		—		3,009
Collateralized mortgage obligations		—		—		4,456		36,169		40,625
Mortgage-backed securities		—		1,174		2,307		145,316		148,797
Equity securities		1,181		—		—		—		1,181
Total	$	2,067	$	4,230	$	31,998	$	321,244	$	359,539


(Dollars in thousands)	1 Year or Less		After 1 Year to 5 Years		After 5 Years to 10 Years		After 10 Years		Total
December 31, 2020
Amortized cost:
Debt securities available for sale:
State and municipal securities	$	509	$	1,292	$	9,154	$	77,786	$	88,741
U.S. agency securities:
Collateralized mortgage obligations		—		—		4,910		30,175		35,085
Mortgage-backed securities		33		1,485		798		101,370		103,686
Equity securities		1,176		—		—		—		1,176
Total	$	1,718	$	2,777	$	14,862	$	209,331	$	228,688
Fair value:
Debt securities available for sale:
State and municipal securities	$	512	$	1,298	$	9,540	$	81,687	$	93,037
U.S. agency securities:
Collateralized mortgage obligations		—		—		5,075		30,327		35,402
Mortgage-backed securities		33		1,565		829		105,222		107,649
Equity securities		1,193		—		—		—		1,193
Total	$	1,738	$	2,863	$	15,444	$	217,236	$	237,281

Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

No securities were sold in the nine months ended September 30, 2021 and 2020. At September 30, 2021 and December 31, 2020, securities with a carrying amount of $25.0 million and $27.3 million, respectively, were pledged to secure public deposits and for other purposes required or permitted by law.

The Company considers qualitative factors in determining if an allowance for credit losses, or ACL, is necessary for those securities where the amortized cost basis exceeds the fair value. These factors include, among other things: (i) the extent to which the fair value was less than the amortized cost basis of the security and the length of time; (ii) the structure of the payments and likelihood that the issuer has the ability to make future payments; (iii) adverse conditions related to the security, industry or geographic area; (iv) changes in any credit ratings or financial conditions of the issuer; (v) failure by the issuer to make previous payments; and (vi) past events related to the security, current economic conditions and reasonable and supportable forecasts. Management did not believe that any of the securities the Company held at September 30, 2021 or December 31, 2020 were impaired due to credit quality. Accordingly no ACL was recorded in the Company’s condensed consolidated balance sheets at September 30, 2021 or during 2020.

Amortized costs, as defined by GAAP, include acquisition costs, applicable accrued interest and accretion or amortization of premiums and discounts. The Company made a policy election to exclude accrued interest from amortized costs in the determination of ACL. The Company continues its policy of reversing previously accrued interest when it has been deemed uncollectible. Accrued interest receivable for securities was $1.0 million and $1.2 million at September 30, 2021 and December 31, 2020, respectively, and is included in other assets in the condensed consolidated balance sheets.

The Company held 141 and 18 securities at September 30, 2021 and December 31, 2020, respectively, that were in a gross unrealized loss position. Securities with unrealized losses as of the dates shown below, aggregated by category and the length of time, were as follows:



	Less than Twelve Months				Twelve Months or More
			Gross				Gross
	Fair		Unrealized		Fair		Unrealized
(Dollars in thousands)	Value		Losses		Value		Losses
September 30, 2021
Debt securities available for sale:
State and municipal securities	$	70,242	$	(1,476)	$	254	$	(9)
U.S. Treasury securities		3,090		(1)		—		—
U.S. agency securities:
Collateralized mortgage obligations		30,564		(520)		19		—
Mortgage-backed securities		71,929		(1,026)		—		—
Equity securities		1,180		(6)		—		—
	$	177,005	$	(3,029)	$	273	$	(9)
December 31, 2020
Debt securities available for sale:
State and municipal securities	$	263	$	—	$	—	$	—
U.S. agency securities:
Collateralized mortgage obligations		6,913		(30)		—		—
Mortgage-backed securities		—		—		—		—
Equity securities		—		—		—		—
	$	7,176	$	(30)	$	—	$	—

EQUITY INVESTMENTS

9 Months Ended

Sep. 30, 2021

EQUITY INVESTMENTS

EQUITY INVESTMENTS

NOTE 3: EQUITY INVESTMENTS

The Company’s unconsolidated investments that are considered equity securities as they represent ownership interests, such as common or preferred stock, were as follows for the dates indicated below:


	September 30,		December 31,
(Dollars in thousands)	2021		2020
Federal Reserve Bank stock	$	9,271	$	9,271
Federal Home Loan Bank stock		3,961		5,941
The Independent Bankers Financial Corporation stock		141		141
Community Reinvestment Act investments		3,976		3,299
	$	17,349	$	18,652

Banks that are members of the Federal Home Loan Bank are required to maintain a stock investment in the Federal Home Loan Bank calculated as a percentage of aggregate outstanding mortgages, outstanding Federal Home Loan Bank advances and other financial instruments. As a member of the Federal Reserve, the Bank is required to annually subscribe to Federal Reserve Bank stock in specific ratios to the Bank’s equity. Although Federal Home Loan Bank and Federal Reserve Bank stock are considered equity securities, they do not have readily determinable fair values because ownership is restricted, and they lack a readily-available market. These investments can be sold back only at their par value of $100 per share and can only be sold to the Federal Home Loan Banks or the Federal Reserve Banks or to another member institution. In addition, the equity ownership rights are more limited than would be the case for a public company because of the oversight role exercised by regulators in the process of budgeting and approving dividends. As a result, these investments are carried at cost and evaluated for impairment.

The Company also holds an investment in the stock of The Independent Bankers Financial Corporation, which has limited marketability. As a result, this investment is carried at cost and evaluated for impairment.

The Company has investments in investment funds and limited partnerships that are qualified Community Reinvestment Act, or CRA, investments and investments under the Small Business Investment Company program of the Small Business Administration, or SBA. There are limited to no observable price changes in orderly transactions for identical investments or similar investments from the same issuers that are actively traded and, as a result, these investments are stated at cost. At September 30, 2021 and December 31, 2020, the Company had $3.7 million and $4.4 million, respectively, in callable outstanding unfunded commitments to these funds.

The Company’s equity investments are evaluated for impairment based on an assessment of qualitative indicators. Impairment indicators to be considered include, but are not limited to: (i) a significant deterioration in the earnings, performance, credit rating, asset quality or business prospects of the investee; (ii) a significant adverse change in the regulatory, economic or technological environment of the investee; (iii) a significant adverse change in the general market conditions of either the geographical area or the industry in which the investee operates; and (iv) a bona fide offer to purchase, an offer by the investee to sell, or completed auction process for the same or similar investment for an amount less than the carrying amount of the investment. There were no such qualitative indicators as of September 30, 2021.

LOANS

9 Months Ended

Sep. 30, 2021

LOANS

LOANS

NOTE 4: LOANS

Loans by loan class, or major loan category, as of the dates shown below were as follows:



(Dollars in thousands)	September 30, 2021			December 31, 2020
Commercial and industrial	$	596,251	22.8%	$	742,957	25.3%
Real estate:
Commercial real estate		1,029,137	39.3%		1,041,998	35.5%
Construction and development		393,541	15.0%		522,705	17.8%
1-4 family residential		204,151	7.8%		239,872	8.2%
Multi-family residential		285,852	10.9%		258,346	8.8%
Consumer		27,930	1.1%		33,884	1.1%
Agriculture		8,780	0.4%		8,670	0.3%
Other		71,915	2.7%		88,238	3.0%
Total gross loans		2,617,557	100.0%		2,936,670	100.0%
Less allowance for credit losses for loans		(32,208)			(40,637)
Less deferred loan fees and unearned discounts		(8,828)			(9,880)
Less loans held for sale		(327)			(2,673)
Loans, net	$	2,576,194		$	2,883,480

Accrued interest receivable for loans was $9.7 million and $12.1 million at September 30, 2021 and December 31, 2020, respectively, and was included in other assets in the condensed consolidated balance sheets.

From time to time, the Company will acquire and dispose of interests in loans under participation agreements with other financial institutions. Loan participations purchased and sold during the nine months ending September 30, 2021 and 2020, by loan class, were as follows:


	Participations		Participations
(Dollars in thousands)	Purchased		Sold
September 30, 2021
Commercial and industrial	$	—	$	1,336
Commercial real estate		—		375
Construction and development		—		22
Other		1,941		—
	$	1,941	$	1,733
September 30, 2020
Commercial and industrial		—		1,725
Commercial real estate		2,500		—

The Company participates in the SBA loan program. When advantageous, the Company will sell the guaranteed portions of these loans with servicing retained. SBA loans that were sold with servicing retained during the nine months ended September 30, 2021 and 2020, totaled $3.7 million and $769,000, respectively. The Company recognized gains on these sales of $436,000 and $63,000 for the nine months ended September 30, 2021 and 2020, respectively.

LOAN PERFORMANCE

9 Months Ended

Sep. 30, 2021

LOAN PERFORMANCE

LOAN PERFORMANCE

NOTE 5: LOAN PERFORMANCE

The following is an aging analysis of the Company’s past due loans, segregated by loan class, as of the dates shown below:


					90 Days or								90 Days
	30 to 59 Days		60 to 89 Days		Greater		Total		Total				Past Due and
(Dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current Loans		Total Loans		Still Accruing
September 30, 2021
Commercial and industrial	$	2,373	$	—	$	—	$	2,373	$	593,878	$	596,251	$	—
Real estate:
Commercial real estate		—		—		—		—		1,029,137		1,029,137		—
Construction and development		257		143		—		400		393,141		393,541		—
1-4 family residential		25		—		104		129		204,022		204,151		—
Multi-family residential		—		—		—		—		285,852		285,852		—
Consumer		100		—