CBTX, Inc. Reports Third Quarter Financial Results


HOUSTON, Dec. 14, 2017 (GLOBE NEWSWIRE) -- CBTX, Inc. (the “Company”) (NASDAQ:CBTX), the bank holding company for CommunityBank of Texas N.A., today announced the results for the quarter ended September 30, 2017. The Company reported net income of $10.0 million, or $0.45 per diluted share, for the quarter ended September 30, 2017, compared to $6.8 million, or $0.31 per diluted share, for the quarter ended September 30, 2016 and $8.7 million, or $0.39 per diluted share, for the quarter ended June 30, 2017.

Highlights 

  • Increased total deposits by $38.8 million to $2.6 billion compared to second quarter 2017.
  • Improved efficiency ratio of 60.7%, compared to 62.8% for second quarter 2017.
  • Credit measures remain strong.
  • Completed successful initial public offering on November 10, 2017.

CBTX, Inc. Chairman and Chief Executive Officer Robert R. Franklin Jr. commented, “We are very pleased to have recently completed our initial public offering of 2.76 million shares of our common stock, generating net proceeds of approximately $64.5 million. We are gratified for the strong investor support received during the IPO process and enthusiastic about the quality of our new shareholders.”

Operating Results:

Net Interest Income

  • Net interest income was $27.3 million for third quarter 2017, compared to $25.5 million for third quarter 2016 and $26.5 million for second quarter 2017. The increase in net interest income in third quarter 2017 from third quarter 2016 and second quarter 2017 was due to increased average interest-earning asset balances resulting from organic growth and increased average yields for our loan portfolio.
     
  • The average balance of total interest-earning assets was $2.7 billion at September 30, 2017, an increase of $61.9 million compared to September 30, 2016 and $46.1 million compared to June 30, 2017.
     
  • The yield on interest-earning assets was 4.32% for third quarter 2017 compared to 4.16% for third quarter 2016 and 4.32% for second quarter 2017. The increase from the prior year quarter is primarily due to an increase in loan yield.
     
  • The cost of interest-bearing liabilities, including borrowings, was 0.60% for third quarter 2017 compared to 0.57% for third quarter 2016 and 0.58% for second quarter 2017. The increase from the prior year and linked quarter is primarily due to higher rates on certificates of deposit.
     
  • The net interest margin was 3.98% for third quarter 2017 compared to 3.83% for third quarter 2016 and 3.99% for second quarter 2017.

Noninterest Income

  • Noninterest income increased $535 thousand for third quarter 2017, compared to third quarter 2016 and $560 thousand compared to second quarter 2017. The increase in the third quarter 2017 primarily reflects an increase in net gains on sale of assets due to settlement of a legal matter related to one of our branches and the sale of certain assets of our branches in Huffman and Deweyville.

Noninterest Expense

  • Total noninterest expense increased $987 thousand compared to third quarter 2016 and increased $158 thousand compared to second quarter 2017.
     
  • The increase in noninterest expense compared to third quarter 2016 is due primarily to increases of $832 thousand in salaries and employee benefits and $242 thousand in repossessed real estate and other asset expense.
     
  • The increase from the linked quarter is primarily related to increases of $530 thousand in salaries and employee benefits, $255 thousand in repossessed real estate and other asset expense, partially offset by a decrease of $242 thousand in advertising, marketing and business development expenses.     

Provision (Recapture) for Loan Losses 

  • Provision for loan loss was a recapture of $1.7 million for third quarter 2017, a decrease of $2.9 million and $960 thousand, respectively compared to a provision of $1.2 million for third quarter 2016 and a recovery of $694 thousand for second quarter 2017. The recaptures in third and second quarter 2017 are primarily the result of pay-offs of certain classified and problem loans, which resulted in a decrease in their related allowance for loan losses.
     
  • The allowance for loan losses was $23.8 million, or 1.08% of total loans, at September 30, 2017, compared to $27.1 million, or 1.25% of total loans at September 30, 2016 and compared to $25.2 million, or 1.15% of total loans, at June 30, 2017. These changes are primarily the result of the recaptures mentioned above.

Income Taxes

  • Income tax expense was $3.9 million for third quarter 2017, $3.0 million for third quarter 2016 and $3.2 million for second quarter 2017. The effective tax rates were 28.11% for third quarter 2017, 30.90% for third quarter 2016 and 26.76% for second quarter 2017. The lower tax rate in second quarter 2017 was due to true-ups and return to provision adjustments booked in that quarter.

Balance Sheet Highlights:

Loans

  • Total net loans were $2.2 million at September 30, 2017. Total net loans increased $33.5 million from September 30, 2016 to September 30, 2017, resulted from a $30.7 million increase in commercial and industrial loans, a $16.5 million increase in real estate loans and a $17.9 million decrease in other loans.
     
  • The increase in total net loans of $8.5 million from June 30, 2017 to September 30, 2017 resulted from a $13.8 million increase in commercial and industrial loans, a $532,000 decrease in real estate loans and a $6.1 million decrease in other loans.

Asset Quality

  • Nonperforming assets were $9.7 million, or 0.33% of total assets at September 30, 2017, $9.7 million, or 0.33% of total assets at June 30, 2017 and $13.9 million, or 0.47% of total assets at September 30, 2016.
     
  • Nonperforming loans were $8.6 million, or 0.39% of total loans at September 30, 2017, $8.3 million, or 0.38% of total loans at June 30, 2017 and $11.4 million, or 0.52% of total loans at September 30, 2016.
     
  • The decrease in nonperforming assets and loans from September 30, 2016 to September 30, 2017 was primarily due to pay-offs, charge-offs and improvements in overall asset quality.
     
  • Annualized net charge-offs (recoveries) to average loans was (0.04)% for third quarter 2017, 0.00% for second quarter 2017 and 0.16% for third quarter 2016. The recaptures in third quarter 2017 are primarily the result of pay-offs of certain classified and problem loans.

Deposits and Borrowings

  • Total deposits were $2.6 billion at September 30, 2017 compared to $2.5 billion at June 30, 2017 and $2.5 billion at September 30, 2016. The increase from the prior year is primarily due to organic growth.
     
  • Total borrowings (excluding junior subordinated debentures) were $26.6 million at September 30, 2017, $27.6 million at June 30, 2017 and $30.4 million at September 30, 2016. The decrease in borrowings is due to scheduled payments. In November 2017, we repaid the outstanding balance of $23.3 million in full and we entered into a loan agreement with Frost Bank providing for a $30 million revolving line of credit on December 13, 2017.

Capital

  • At September 30, 2017, we were well capitalized under regulatory guidelines. At September 30, 2017, our ratio of total shareholders’ equity to total assets was 12.75% and our tangible equity to total tangible assets was 10.10%. Tangible equity to total tangible assets is a non‑GAAP financial measure. See the table captioned “Non‑GAAP to GAAP Reconciliation.”

  • In November 2017, we completed our initial public offering of our common stock issuing 2,760,000 common shares at $26.00 per share.  Net proceeds are estimated to be $64.5 million.

About CBTX, Inc.

CBTX, Inc. is the bank holding company for CommunityBank of Texas, N.A., a $3.0 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 subsidiaries. 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 Final Prospectus filed pursuant to Rule 424(b)(4) and other reports and statements that the Company has filed with the SEC. If one or more events related to these or other risks or uncertainties materialize, or if the Company’s underlying assumptions prove to be incorrect, actual results may differ materially from what its anticipates. Accordingly, you should not place undue reliance on any such forward looking statements. Any forward-looking statement speaks only as of the date on which it is made, and the Company does not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for the Company to predict which will arise. In addition, the Company cannot assess the impact of each factor on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Copies of the SEC filings for the Company are available for download free of charge from www.communitybankoftx.com under the Investor Relations tab.

  
CBTX, INC. AND SUBSIDIARY 
Condensed Consolidated Balance Sheets (Unaudited)
 
(In thousands) 
  
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 
Balance Sheet Data (at period end):                 
                 
Loans, excluding loans held for sale $2,199,478  $2,192,443  $2,217,656  $2,154,885  $2,169,307  
Allowance for loan losses  (23,757)  (25,187)  (25,881)  (25,006)  (27,096) 
Loans, net  2,175,721   2,167,256   2,191,775   2,129,879   2,142,211  
                 
Cash and due from banks  54,117   58,124   52,669   53,000   54,524  
Interest‑bearing deposits at other financial institutions  294,461   249,049   219,686   329,103   324,768  
Total cash and cash Equivalents  348,578   307,173   272,355   382,103   379,292  
                 
Securities  217,660   220,330   219,978   205,978   179,701  
Premises and equipment, net  54,129   56,609   55,986   57,514   60,416  
Goodwill  80,950   80,950   80,950   80,950   80,950  
Other intangible assets, net  7,031   7,298   7,513   7,791   8,074  
Repossessed real estate and other assets  1,136   1,435   1,179   1,861   2,530  
Loans held for sale  466   559   675   613   727  
Other assets  104,167   99,267   84,137   84,833   82,721  
Total Assets $2,989,838  $2,940,877  $2,914,548  $2,951,522  $2,936,622  
                 
                 
Noninterest‑bearing deposits $1,051,755  $1,030,865  $993,839  $1,025,425  $1,025,429  
Interest‑bearing deposits  1,502,872   1,485,919   1,504,606   1,515,335   1,503,802  
Total deposits  2,554,627   2,516,784   2,498,445   2,540,760   2,529,231  
                 
Note payable  24,357   25,464   26,571   27,679   28,786  
Repurchase agreements  2,239   2,179   2,464   2,343   1,583  
Junior subordinated debt  6,726   6,726   6,726   6,726   6,726  
Other liabilities  20,768   17,760   16,699   16,377   17,778  
Total Liabilities  2,608,717   2,568,913   2,550,905   2,593,885   2,584,104  
                 
Shareholders’ Equity  381,121   371,964   363,643   357,637   352,518  
Total Liabilities and Shareholders’ Equity $2,989,838  $2,940,877  $2,914,548  $2,951,522  $2,936,622  
                      


CBTX, INC. AND SUBSIDIARY 
Condensed Consolidated Statements of Income (Unaudited) 
(In thousands) 
                       
  For the Three Months Ended Year-to-Date 
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 9/30/17 9/30/16 
INTEREST INCOME                      
Interest and fees on loans $27,129  $26,560  $25,953 $26,298 $26,121 $79,642  $77,425 
Securities  1,334   1,353   1,303  1,055  973  3,990   2,746 
Federal Funds and interest‑bearing deposits  1,106   813   742  658  601  2,661   1,769 
Total Interest Income  29,569   28,726   27,998  28,011  27,695  86,293   81,940 
INTEREST EXPENSE                      
Deposits  1,964   1,857   1,838  1,914  1,851  5,659   5,159 
Repurchase agreements  2   1   2  2  -  5   3 
Note payable  269   264   251  256  260  784   805 
Junior subordinated debt  83   79   74  72  67  236   194 
Total Interest Expense  2,318   2,201   2,165  2,244  2,178  6,684   6,161 
NET INTEREST INCOME  27,251   26,525   25,833  25,767  25,517  79,609   75,779 
PROVISION (RECAPTURE) FOR LOAN LOSS  (1,654)  (694)  960  650  1,225  (1,388)  3,925 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSS  28,905   27,219   24,873  25,117  24,292  80,997   71,854 
NONINTEREST INCOME                      
Deposit account service charges  1,395   1,517   1,500  1,591  1,695  4,412   4,947 
Net gain on sale of assets  828   339   364  1,282  107  1,531   640 
Card interchange fees  803   877   832  830  837  2,512   2,522 
Earnings on bank‑owned life insurance  459   335   326  276  339  1,120   1,016 
Other  601   458   426  421  573  1,485   2,224 
Total Noninterest Income  4,086   3,526   3,448  4,400  3,551  11,060   11,349 
NONINTEREST EXPENSE                      
Salaries and employee benefits  11,829   11,299   11,424  11,181  10,997  34,552   33,058 
Net occupancy expense  2,221   2,351   2,233  2,448  2,322  6,805   7,652 
Regulatory fees  458   621   610  606  546  1,689   1,694 
Data processing  662   651   642  623  621  1,955   1,861 
Printing, stationery and office  348   370   347  444  395  1,065   1,094 
Amortization of intangibles  267   271   278  283  290  816   884 
Professional and director fees  606   706   625  680  615  1,937   1,801 
Correspondent bank and customer related transaction expenses  67   78   74  77  82  219   243 
Loan processing costs  115   133   72  192  77  320   317 
Advertising, marketing and business development  266   508   179  219  173  953   570 
Repossessed real estate and other asset expense  340   85   118  99  98  543   219 
Security and protection expense  331   352   372  363  473  1,055   1,355 
Other expenses  1,507   1,434   1,453  1,423  1,341  4,394   4,116 
Total Noninterest Expense  19,017   18,859   18,427  18,638  18,030  56,303   54,864 
NET INCOME BEFORE INCOME TAX EXPENSE  13,974   11,886   9,894  10,879  9,813  35,754   28,339 
INCOME TAX EXPENSE  3,927   3,181   3,032  3,322  3,032  10,140   8,688 
NET INCOME $10,047  $8,705  $6,862 $7,557 $6,781 $25,614  $19,651 
                          


CBTX, INC. AND SUBSIDIARY 
Financial Highlights (Unaudited) 
(In thousands, except per share data and percentages) 
                       
  At or for the Three Months Ended Year-to-Date 
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 9/30/17 9/30/16 
Profitability:                      
Net income $10,047 $8,705 $6.862 $7,557 $6,781 $25,614 $19,651 
Basic earnings per share $0.46 $0.39 $0.31 $0.34 $0.31 $1.16 $0.89 
Diluted earnings per share $0.45 $0.39 $0.31 $0.34 $0.31 $1.16 $0.88 
                       
Return on average assets (1)  1.34% 1.20% 0.95% 1.02% 0.93% 1.17% 0.92%
Return on average shareholders’ Equity(1)   10.54% 9.46% 7.73% 8.47% 7.72% 9.25% 7.56%
Net interest margin – tax equivalent(1)  4.07% 4.08% 4.02% 3.87% 3.92% 4.05% 3.99%
Efficiency ratio(2)  60.69% 62.76% 62.93% 61.78% 62.03% 62.10% 62.97%
                       
                       
Liquidity and Capital Ratios:                      
Total shareholders’ equity to total assets  12.75% 12.65% 12.48% 12.12% 12.00% 12.75% 12.00%
Tangible equity to tangible assets(3)  10.10% 9.95% 9.74% 9.39% 9.25% 10.10% 9.25%
Common equity tier 1 capital Ratio  12.87% 12.00% 11.32% 11.52% 11.03% 12.87% 11.03%
Tier 1 leverage ratio  11.01% 10.39% 10.10% 9.78% 9.68% 11.01% 9.68%
Tier 1 risk‑based capital ratio  13.13% 12.26% 11.58% 11.78% 11.30% 13.13% 11.30%
Total risk‑based capital ratio  14.13% 13.33% 12.64% 12.85% 12.45% 14.13% 12.45%
                       
                       
Other Data:                      
Weighted average basic shares outstanding  22,063  22,062  22,062  21,933  21,871  22,062  22,067 
Weighted average diluted shares outstanding  22,138  22,148  22,162  22,007  21,993  22,144  22,205 
Common shares outstanding at period end  22,063  22,063  22,062  22,062  21,870  22,063  21,870 
Dividends per share $0.05 $0.05 $0.05 $0.05 $0.05 $0.15 $0.15 
Book value per share $17.27 $16.86 $16.48 $16.21 $16.12 $17.27 $16.12 
Tangible book value per share(3) $13.29 $12.86 $12.47 $12.19 $12.05 $13.29 $12.05 
Employees – full-time equivalent  464  472  479  479  475  464  475 

(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.”

  
CBTX, INC. AND SUBSIDIARY 
Net Interest Margin (Unaudited) 
(In thousands, except percentages) 
                          
  For the Three Months Ended  
  9/30/17 6/30/17 9/30/16 
(Dollars in thousands) Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
(1)
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
(1)
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
(1)
 
Assets                         
Interest‑earnings assets:                         
Total loans(2) $2,191,016  $27,129 4.91%$2,203,145  $26,560 4.84%$2,149,917  $26,121 4.83%
Securities (available for sale and held to maturity)  223,132   1,334 2.37% 220,903   1,353 2.46% 176,699   973 2.19%
Federal funds sold and other interest‑earning assets  284,334   927 1.29% 228,393   637 1.12% 309,939   431 0.55%
Nonmarketable equity securities  14,695   179 4.83% 14,691   176 4.81% 14,682   170 4.61%
Total interest‑earning assets  2,713,177  $29,569 4.32% 2,667,132  $28,726 4.32% 2,651,237  $27,695 4.16%
Allowance for loan losses  (25,316)       (26,439)       (26,957)      
Noninterest‑earnings assets  290,767        274,421        278,623       
Total assets $2,978,628       $2,915,114       $2,902,903       
Liabilities and Shareholders’ Equity                         
Interest‑bearing liabilities:                         
Interest‑bearing deposits $1,501,732  $1,964 0.52%$1,478,578  $1,857 0.50%$1,473,177  $1,851 0.50%
Repurchase agreements  2,404   2 0.33% 2,356   1 0.17% 1,478    %
Note payable  24,742   269 4.31% 25,841   264 4.10% 29,171   260 3.55%
Junior subordinated debt  10,826   83 3.04% 10,826   79 2.93% 10,826   67 2.46%
Total interest‑bearing liabilities  1,539,704  $2,318 0.60% 1,517,601  $2,201 0.58% 1,514,652  $2,178 0.57%
Noninterest‑bearing liabilities:                         
Noninterest‑bearing deposits  1,041,731        1,010,824        1,020,446       
Other liabilities  18,844        17,564        18,559       
Total noninterest‑bearing liabilities  1,060,575        1,028,388        1,039,005       
Shareholders’ equity  378,349        369,125        349,246       
Total liabilities and shareholders’ equity $2,978,628       $2,915,114       $2,902,903       
Net interest income    $27,251      $26,525      $25,517   
Net interest rate spread(3)       3.73%      3.74%      3.58%
Net interest margin(4)       3.98%      3.99%      3.83%
Net interest margin—tax equivalent(5)       4.07%      4.08%      3.92%

(1) Annualized.
(2) Includes average outstanding balances of loans held for sale of $1.0 million, $770 thousand and $1.0 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, 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 $1.1 million, $585 thousand and $1.1 million for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016, respectively, has been computed using a federal income tax rate of 35%.

  
CBTX, INC. AND SUBSIDIARY 
Net Interest Margin (Unaudited) 
(In thousands, except percentages) 
                  
  For the Nine Months Ended September 30, 
  2017 2016 
(Dollars in thousands) Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
(1)
 Average
Outstanding
Balance
 Interest
Earned/
Interest
Paid
 Average
Yield/
Rate
(1)
 
Assets                 
Interest‑earnings assets:                 
Total loans(2) $2,190,975  $79,642 4.86%$2,127,840  $77,425 4.86%
Securities (available for sale and held to maturity)  220,396   3,990 2.42% 161,643   2,746 2.27%
Federal funds sold and other interest‑earning assets  257,628   2,110 1.10% 297,283   1,239 0.56%
Nonmarketable equity securities  14,690   551 5.01% 14,684   530 4.82%
Total interest‑earning assets  2,683,689  $86,293 4.30% 2,601,450  $81,940 4.21%
Allowance for loan losses  (25,719)       (26,648)      
Noninterest‑earnings assets  280,139        278,191       
Total assets $2,938,109       $2,852,993       
Liabilities and Shareholders’ Equity                 
Interest‑bearing liabilities:                 
Interest‑bearing deposits $1,497,845  $5,659 0.51%$1,436,507  $5,159 0.48%
Repurchase agreements  2,409   5 0.28% 1,838   3 0.22%
Note payable  25,841   784 4.06% 30,147   805 3.57%
Junior subordinated debt  10,826   236 2.91% 10,826   194 2.39%
Total interest‑bearing liabilities  1,536,921  $6,684 0.58% 1,479,318  $6,161 0.56%
Noninterest‑bearing liabilities:                 
Noninterest‑bearing deposits  1,012,952        1,008,665       
Other liabilities  18,080        17,850       
Total noninterest‑bearing liabilities  1,031,032        1,026,515       
Shareholders’ equity  370,156        347,160       
Total liabilities and shareholders’ equity $2,938,109       $2,852,993       
Net interest income    $79,609      $75,779   
Net interest spread(3)       3.72%      3.65%
Net interest margin(4)       3.97%      3.89%
Net interest margin—tax equivalent(5)       4.05%      3.99%

(1) Annualized.
(2) Includes average outstanding balances of loans held for sale of $853 thousand and $1.0 million for the nine months ended September 30, 2017 and 2016, 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 $1.8 million and $1.8 million for the nine months ended September 30, 2017 and 2016, respectively, has been computed using a federal income tax rate of 35%.

  
CBTX, INC. AND SUBSIDIARY 
Yield Trend (Unaudited) 
            
  Three Months Ended  
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 
Yield Trend - Annualized:            
Interest‑earnings assets:           
Total loans 4.91%4.84%4.83%4.80%4.83%
Securities (available for sale and held to maturity) 2.37%2.46%2.43%2.18%2.19%
Federal funds sold and other interest‑earning assets 1.29%1.12%0.87%0.60%0.55%
Nonmarketable equity securities 4.83%4.81%5.33%4.66%4.61%
Total interest‑earning assets 4.32%4.32%4.26%4.11%4.16%
            
Interest‑bearing liabilities:           
Interest‑bearing deposits 0.52%0.50%0.49%0.50%0.50%
Repurchase agreements 0.33%0.17%0.33%0.18%%
Note payable 4.31%4.10%3.78%3.63%3.55%
Junior subordinated debt 3.04%2.93%2.77%2.65%2.46%
Total interest‑bearing liabilities 0.60%0.58%0.57%0.57%0.57%
            
Net interest spread(1) 3.73%3.74%3.69%3.54%3.58%
Net interest margin(2) 3.98%3.99%3.93%3.78%3.83%
Net interest margin—tax equivalent(3) 4.07%4.08%4.02%3.87%3.92%

(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 35%.

  
CBTX, INC. AND SUBSIDIARY 
Average Outstanding Balances (Unaudited) 
(In thousands) 
                 
  Three Months Ended  
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 
Average Outstanding Balances:                 
                 
Interest‑earnings assets:                
Total loans(1) $2,191,016  $2,203,145  $2,178,626  $2,179,862  $2,149,917  
Securities (available for sale and held to maturity)  223,132   220,903   217,086   192,938   176,699  
Federal funds sold and other interest‑earning assets  284,334   228,393   257,152   320,955   309,939  
Nonmarketable equity securities  14,695   14,691   14,685   14,683   14,682  
Total interest‑earning assets  2,713,177   2,667,132   2,667,549   2,708,438   2,651,237  
Allowance for loan losses  (25,316)  (26,439)  (25,419)  (27,357)  (26,957) 
Noninterest‑earnings assets  290,767   274,421   273,437   278,850   278,623  
Total assets $2,978,628  $2,915,114  $2,915,567  $2,959,931  $2,902,903  
                 
Interest‑bearing liabilities:                
Interest‑bearing deposits $1,501,732  $1,478,578  $1,513,348  $1,524,262  $1,473,177  
Repurchase agreements  2,404   2,356   2,468   2,155   1,478  
Note payable  24,742   25,841   26,965   28,064   29,171  
Junior subordinated debt  10,826   10,826   10,826   10,826   10,826  
Total interest‑bearing liabilities  1,539,704   1,517,601   1,553,607   1,565,307   1,514,652  
Noninterest‑bearing liabilities:                
Noninterest‑bearing deposits  1,041,731   1,010,824   985,690   1,015,577   1,020,446  
Other liabilities  18,844   17,564   16,421   24,139   18,559  
Total noninterest‑bearing liabilities  1,060,575   1,028,388   1,002,111   1,039,716   1,039,005  
Shareholders’ equity  378,349   369,125   359,849   354,908   349,246  
Total liabilities and shareholders’ equity $2,978,628  $2,915,114  $2,915,567  $2,959,931  $2,902,903  
                      

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

  
  
CBTX, INC. AND SUBSIDIARY 
Period End Balances (Unaudited) 
(In thousands, except percentages) 
                           
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 
                      
Loan Portfolio:                          
                           
Commercial and industrial $548,870  24.9%$535,116  24.4%$ 524,201  23.6%$ 511,554  23.7%$ 518,138  23.8%
                           
Real estate:                          
Commercial real estate  689,501  31.3% 690,044  31.4%  723,253  32.5%  697,794  32.3%  692,938  31.9%
Construction and development  424,489  19.3% 433,966  19.8%  522,508  23.5%  491,626  22.8%  486,127  22.3%
1-4 family residential  246,564  11.2% 240,073  10.9%  237,218  10.7%  236,882  11.0%  235,797  10.8%
Multi-family residential  211,219  9.6% 208,222  9.5%  124,246  5.6%  133,210  6.2%  140,403  6.5%
           %    %    %     
Consumer  42,772  1.9% 41,130  1.9%  41,326  1.9%  39,694  1.8%  38,682  1.8%
Agriculture  11,424  0.5% 10,650  0.4%  10,217  0.4%  11,106  0.5%  13,994  0.6%
Other  29,684  1.3% 38,237  1.7%  39,869  1.8%  38,180  1.7%  49,113  2.3%
Total gross loans  2,204,523  100.0% 2,197,438  100.0%  2,222,838  100.0%  2,160,046  100.0%  2,175,192  100.0%
Less deferred loan fees and unearned discounts  (4,579)    (4,436)     (4,507)     (4,548)     (5,158)   
Less allowance for loan loss  (23,757)    (25,187)     (25,881)     (25,006)     (27,096)   
Less loans held for sale  (466)    (559)     (675)     (613)     (727)   
Loans, net $2,175,721    $2,167,256    $ 2,191,775    $ 2,129,879    $ 2,142,211    
                           
Deposits:                          
                           
Interest-bearing demand deposits $340,627  13.3%$343,826  13.7% $355,235  14.2%% 359,560  14.2% $315,064  12.5%
Money market accounts  726,903  28.5% 698,546  27.7%  714,863  28.6%% 731,942  28.8%  760,835  30.1%
Savings accounts  88,613  3.5% 88,083  3.5%  88,360  3.5%% 85,927  3.4%  86,219  3.4%
Certificates and other deposits greater than $100,000  179,777  7.0% 182,143  7.2%  171,147  6.9%% 179,621  7.1%  182,193  7.2%
Certificates and other deposits less than $100,000  166,952  6.5% 173,321  6.9%  175,001  7.0%% 158,285  6.2%  159,491  6.3%
Total interest-bearing deposits  1,502,872  58.8% 1,485,919  59.0%  1,504,606  60.2%  1,515,335  59.7%  1,503,802  59.5%
Noninterest- bearing deposits  1,051,755  41.2% 1,030,865  41.0%  993,839  39.8%  1,025,425  40.3%  1,025,429  40.5%
Total deposits $2,554,627  100.0%$2,517,784  100.0% $2,498,445  100.0% $2,540,760  100.0%$ 2,529,231  100.0%
                                   


CBTX, INC. AND SUBSIDIARY 
Credit Quality (Unaudited) 
(In thousands) 
                 
  9/30/17 6/30/17 3/31/17 12/31/16 9/30/16 
Nonaccrual loans (at period end):                
Commercial and industrial $2,444 $2,348 $2,040 $2,318 $5,907 
Real estate:                
Commercial real estate  5,038  4,964  2,317  2,118  3,795 
Construction and development  265  362  414  458  565 
1-4 family residential  844  578  1,283  1,302  984 
Multi-family residential  1  3  5  7  9 
Consumer           
Agriculture      6  36  93 
Other           
Total nonaccrual loans $8,592 $8,255 $6,065 $6,239 $11,353 
                 
Nonperforming assets (at period end):                
Nonaccrual loans $8,592 $8,255 $6,065 $6,239  11,353 
Accruing loans 90 or more days past due           
Total nonperforming loans  8,592  8,255  6,065  6,239  11,353 
Foreclosed assets, including other real estate:                
Commercial real estate, construction and development, land and land development  729  1,018  1,179  1,078  1,699 
Residential real estate  407  417      29 
Other        783  802 
Total foreclosed assets  1,136  1,435  1,179  1,861  2,530 
Total nonperforming assets $9,728 $9.690 $7,244 $8,100 $13,883 
                 
Allowance for Loan Losses (at period end):                
Commercial and industrial $7,194 $8,466 $7,746 $6,409 $7,058 
Real estate:                
Commercial real estate  9,640  10,000  10,507  10,770  7,061 
Construction and development  3,364  3,313  4,145  4,598  4,889 
1-4 family residential  1,282  1,138  1,111  1,286  2,099 
Multi-family residential  1,360  1,341  800  916  955 
Consumer  626  599  615  353  348 
Agriculture  69  64  63  79  97 
Other  222  266  894  595  4,589 
Total allowance for loan losses $23,757 $25,187 $25,881 $25,006 $27,096 
                 
Credit Quality Ratios (at period end):                
Nonperforming assets to total assets  0.33% 0.33% 0.25% 0.27% 0.47%
Nonperforming loans to total loans  0.39% 0.38% 0.27% 0.29% 0.52%
Allowance for loan losses to nonperforming loans  276.50% 305.11% 426.73% 400.80% 238.67%
Allowance for loan losses to total loans  1.08% 1.15% 1.17% 1.16% 1.25%


CBTX, INC. AND SUBSIDIARY 
Allowance for Loan Losses (Unaudited) 
(In thousands) 
                       
  For the Three Months Ended Year-to-Date 
  9/30/17  6/30/17  3/31/17 12/31/16  9/30/16  9/30/17 9/30/16 
Analysis of Allowance for Loan Losses:                      
                       
Allowance for loan losses at beginning of period $25,187  $25,881  $25,006  $27,096  $26,716  $25,006  $25,315  
                       
Provision (recapture) for loan losses  (1,654)  (694)  960   650   1,225   (1,388)  3,925  
                       
Net charge-offs (recoveries):                      
Commercial and industrial  (205)  (66)  117   2,748   573   (154)  1,126  
Real estate:                      
Commercial real estate  (2)  (2)  (3)  (64)  (1)  (7)  545  
Construction and development                      
1-4 family residential  (2)  (8)  (2)  (1)  (2)  (12)  (2) 
Multi-family residential                      
Consumer  (4)  90   (27)  (2)  2   59   234  
Agriculture  (11)  (6)        273   (17)  241  
Other     (8)     59      (8)    
Total net charge-offs (recoveries)  (224)     85   2,740   845   (139)  2,144  
                       
Allowance for loan losses at end of period $23,757  $25,187  $25,881  $25,006  $27,096  $23,757  $27,096  
                       
Net charge‑offs (recoveries) to average loans - annualized  (0.04)% 0.00 % 0.02 % 0.50 % 0.16 % (0.01)% 0.13 %


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:

                 
  9/30/17  6/30/17  3/31/17 12/31/16 9/30/16 
Tangible Equity:                
Total shareholders’ equity $381,121 $371,964 $363,643 $357,637 $352,518 
Adjustments:                
Goodwill  80,950  80,950  80,950  80,950  80,950 
Other intangibles  7,031  7,298  7,513  7,791  8,074 
Tangible equity $293,140 $283,716 $275,180 $268,896 $263,494 
Tangible Assets:                
Total assets $2,989,838 $2,940,877 $2,914,548 $2,951,522 $2,936,622 
Adjustments:                
Goodwill  80,950  80,950  80,950  80,950  80,950 
Other intangibles  7,031  7,298  7,513  7,791  8,074 
Tangible assets $2,901,857 $2,852,629 $2,826,085 $2,862,781 $2,847,598 
                 
Common shares outstanding  22,063  22,063  22,062  22,062  21,870 
                 
Book value per share $17.27 $16.86 $16.48 $16.21 $16.12 
Tangible book value per share $13.29 $12.86 $12.47 $12.19 $12.05 
                 
Total shareholders’ equity to total assets  12.75% 12.65% 12.48% 12.12% 12.00%
Tangible equity to tangible assets  10.10% 9.95% 9.74% 9.39% 9.25%

Investor Relations:

James L. Sturgeon
281.325.5013
investors@CBoTX.com 

Media Contact:

Ashley Warren
713.210.7622
awarren@CBoTX.com 


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